MBA INTERNSHIP REPORT

Impact of COVID Pandemic and Recent External Factors:

A study on Bangladesh’s RMG Sector & Virtuous Fashion

Submitted to:
Ms. Anindita Saha Tumpa
Lecturer,
Department. of Business Administration
BGMEA University of Fashion & Technology

Submitted by:
Khalid Ahmed 201-047-4222

MBA in Apparel Merchandising (1 Year)

Batch – 201 Sec: 1

August 31, 2021

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 BGMEA UNIVERSITY OF FASHION & TECHNOLOGY

Internship Report
on

Impact of COVID Pandemic and Recent External Factors:

A study on Bangladesh’s RMG Sector & Virtuous Fashion

Submitted To
Ms. Anindita Saha Tumpa
Lecturer,
Department. of Business Administration
BGMEA University of Fashion & Technology

Submitted By
Khalid Ahmed
201-047-4222
Batch No: 201
MBA in Apparel Merchandising

August 31, 2021

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 Internship Report
on

Impact of COVID Pandemic and Recent External Factors:

A study on Bangladesh’s RMG Sector & Virtuous Fashion

August 31, 2021

Page | 3
 BGMEA UNIVERSITY OF FASHION & TECHNOLOGY

Internship Report
on

Impact of COVID Pandemic and Recent External Factors:

A study on Bangladesh’s RMG Sector & Virtuous Fashion

Submitted To
Ms. Anindita Saha Tumpa
Lecturer,
Department. of Business Administration
BGMEA University of Fashion & Technology

Submitted By
Khalid Ahmed
201-047-4222
Batch No: 201
MBA in Apparel Merchandising

August 31, 2021

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 Student Declaration

I Khalid Ahmed, a student of MBA in Apparel Merchandising of Batch 201, ID 201-047-4222 at the
Department of Business Administration of BGMEA University of Fashion & Technology (BUFT) do
hereby declare that the internship report on “Impact of COVID Pandemic and Recent External
Factors in Bangladesh’s RMG Sector” is a work done under the supervision of Ms. Anindita Saha
Tumpa, Lecturer, Department of Business Administration of BUFT.

I also declare that this report is an original work and no part of this report has been copied from
elsewhere. Furthermore, this report has not been published or submitted for being awarded any
degree, diploma or recognition earlier.

Name: Khalid Ahmed

Program: MBA in Apparel Merchandising
ID No: 201-047-4222
Batch No: 201
Section: 1
Department of Business Administration
BGMEA University of Fashion & Technology (BUFT)

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 Letter of Transmittal

August 31, 2021

To
Ms. Anindita Saha Tumpa
Lecturer
Dept. of Business Administration
BGMEA University of Fashion & Technology (BUFT)

Subject: Submission of Internship Report as a part of my MBA degree

Dear Mam,

I am pleased to submit this report entitled “Impact of COVID Pandemic and Recent
External Factors in Bangladesh’s RMG Sector” as a partial requirement of the MBA
degree.

My main incentive was to prepare this report according to your guidelines and incorporate
what I have learned in my MBA program along with situations encountered in my workplace.
I have tried my best to follow your guidelines in every aspect when preparing this report. I
have focused on the areas that I believe will be most interesting and relevant to make this
report.

I appreciate the opportunity that you have given me and thankful to you for your help
throughout in the making of this report. Kindly accept the report and hope that you will find
this report satisfactory.

Name: Khalid Ahmed

Program: MBA in Apparel Merchandising
ID No: 201-047-4222
Batch No: 201
Section: 1
Department of Business Administration
BGMEA University of Fashion & Technology (BUFT)

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 Official Certification

This is to certify that Khalid Ahmed, Program: MBA, Batch: 201, ID: 201-047-4222 has
completed his internship report on “Impact of COVID Pandemic and Recent External
Factors in Bangladesh’s RMG Sector” under my supervision as a part of partial fulfilment
of the requirements for the Degree of Master of Business Administration (MBA) in Apparel
Merchandising in the Department of Business Administration of BGMEA University of
Fashion & Technology. This report can be accepted for evaluation.

Anindita Saha Tumpa

Lecturer,
Department of Business Administration
BGMEA University of Fashion & Technology (BUFT)

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Internship Certificate from the Industry Supervisor

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 Acknowledgement

I wish to thank my supervisor for the internship program, Ms. Anindita Saha Tumpa,
Lecturer, Department of Business Administration, BGMEA University of Fashion &
Technology for her support and direction in completing this report. I was out of the country
for a considerable period due to my visa renewal and vaccination and faced issues related to
lockdown, quarantine and air tickets. I had a much delayed start to the report then I would
have liked and at one point thought of leaving it for next semester. Ms. Anindita however
motivated me to try and submit the report within the University’s given timeline.

Working on this report has taken me across a journey of extensive secondary research and
communication with people attached to the RMG industry. As a result, I have realized as to
just how vital this topic is for Bangladesh’s economy.

I also wish to thank office colleagues, industry resource persons and friends from the BUFT
MBA program who shared their industry knowledge throughout the course duration. I also
wish to thank my wife and child for giving me time at home to carry out my work after
coming from office and also my parents who have always encouraged me to pursue more
knowledge and degrees.

I also want to reserve special thanks to Md. Ataul Azim Ayaz, the Managing Director of my
organization, Virtuous Fashion, for motivating and assisting me with information and leads
for doing this report.

Lastly but actually first, I wish to thank Almighty God who has kept me and my family safe
from the pandemic and also help me avoid operation due to underlying health issues which
were diagnosed last year.

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 Executive Summary

This internship report “Impact of COVID Pandemic and Recent External Factors: A study on
Bangladesh’s RMG Sector & Virtuous Fashion” tries to bring to light the issues that have
impacted Bangladesh’s economy, the RMG sector in particular in recent times, share possible
alternative reasons for the news about the RMG sector and looks to propose areas of interest
which will help Bangladesh’s RMG sector.

Online secondary research papers were not touched upon extensively because most did not
include the recent changes over the last six months. The paper was done based on the primary
information gathered from places related to my work place at Virtuous Fashion and online
newspaper and business articles. After laying a brief introduction of the global Covid
pandemic, RMG sector of Bangladesh and the importance of cotton, it tries to detail out how
the Covid crisis impacted the RMG sector of Bangladesh in a sequential manner starting with
the lockdown in China and supply chain disruption to the revitalization of orders in the RMG
factories in Bangladesh. It then tries to do a critical analysis of some of the major impacts like
factory closures, unemployment, decline and resurgence of orders in the sector and all the
factors in these cases. It then covers two recent external factors the rising cotton prices and
shifting of orders from India, Myanmar and Cambodia.

In one of the section, the report briefly touches upon the problems Virtuous Fashion, a small
Bangladeshi buying house has faced and facing and how they are overcoming them.

In findings it reiterates the facts that we have to be very cautious moving ahead and should
not make assumptions based on data available, because many factors played a crucial role
which might be easily overlooked. In recommendations it offers suggestions and
opportunities to work in different areas which will help in the boosting of the RMG Sector
cut down on the risks it is countering.

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Table of Content

Sl. No. Topic Page No.

1.0 Introduction
1.1 Overview of Covid 19 Pandemic
1.2 Overview of RMG Sector in Bangladesh
1.3 Overview of Cotton’s Importance in Bangladesh’s RMG sector
1.4 Importance of the report topic and scope
1.4 Objectives
1.5 Research Methodology
2.0 Timeline - Impact of Covid-19 on RMG Sector of Bangladesh
2.1 Supply Chain Disruption – China Factor
2.2 Buyer Order Cancellations / Halting of Running Orders
2.3 Lockdown Scenario in Bangladesh and the RMG sector.
2.4 Operation Delay/Disruption of Local Service Providers for RMG Sector:
2.5 Government. & BGMEA Initiatives
2.6 Impact on Factories
2.7 Impact on Workers
2.8 Resurgence of RMG Sector
2.9 Spread of the Delta Variant
2.10 RMG orders from India, Cambodia, Vietnam diverted to Bangladesh
Alternate/Critical Analysis of Research Reports and News on the Covid
3.0
19 impact on the RMG sector
3.1 Improved Export Figures not necessarily very Optimistic
3.2 Conflicting data on Unemployment and Factories closing down.
3.3 Rising Cost of Materials with Supply Chain fluctuations
3.4 No drop in Cotton yarn prices though global cotton prices fell (1st half of 2020)
3.5 Lost orders are being revived and new orders are flowing in – The Catch
3.6 Recovery of the Global economy and Retail clothing Sector
3.7 Major Global Buyers have gone Bankrupt
3.8 China – US Standoff – how can BD benefit?
4.0 Cotton
Cotton Sources
Bangladesh’s Cotton Dependency

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 Effect of Rising Cotton Prices in Bangladesh’s RMG
5.0 Brief Overview of Virtuous Fashion
5.1 Services offered by Virtuous Fashion
5.2 Countering problems due to Pandemic and other factors
6.0 Growing Consumer Preference for Sustainable Clothing
7.0 Diversion of orders from other countries on Bangladesh’s RMG
Sector
8.0 Need for FTA’s as Bangladesh is promoted from the LDC list
9.0 Recommendations and Scope for Further Research
9.1 Increasing Local Cotton Production
9.2 Contract Farming & Leasing Agricultural Land in African
Countries for Cotton Cultivation
9.3 Investing in Domestic Banana Fiber production as a partial
substitute for Cotton
9.4 Diversifying Bangladesh’s RMG Export Market
9.5 Focus on Higher Value Products and Diversified Product Base
10.0 Conclusion
11.0 References
Appendix A - EPB RMG Export Data 2019-2020 and 2020-2021

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1.0 Introduction
The Covid 19 has been declared as a global pandemic affecting our world. No country has
been spared from the ill effects it has borne. It has till date claimed lives of over 4.5 million
people and having infected more than 210 million people worldwide. Some countries have
been able to stop the spread, some have been able to flatten the curve of spreading but it has
still placed the local and global economies at the point of total collapse. At one point different
countries were taking full lockdown measures but then gradually have started reopening their
economies as it would have spelled major catastrophe and was never a viable solution in the
long run. This Pandemic situation has shown that in the present age of globalization how
economies of all countries are dependent on each other. Thus even the countries that have
stormed the weather and have tackled the Covid situation in their respective countries are not
able to recover economically due to global impact it is having. And with new variants and
spread of Covid rising and the falling businesses are can’t predict what to expect.

Similarly the rising global cotton prices have shot up the cost of production in Bangladesh’s
RMG, with buyers unwilling to match the rise in prices in their order value. One also sees a
growing consumer preference towards sustainable clothing. There is a crying need for our
RMG sector to be more versatile to adapt to these changes.

1.1 COVID 19
The Covid-19 disease was first identified in Wuhan city of Hubei province of China on
December 2019. The WHO had declared it as a pandemic by January 2020. By then several
countries had already reported their first cases and by February and March nearly all
countries had reported cases and the number of cases were rising geometrically. The covid
virus is a corona virus similar to SARS and is highly contagious as it can be passed from
human to human through close contact and if an infected person coughs or sneezes. The
airborne droplets can then enter through the nose or mouth of others in the surrounding of the
infected person. The WHO has approved vaccines from several countries and vaccination
programs are being rolled out globally but many countries are lagging behind. Countries who
have successfully vaccinated their vulnerable age group and majority of the population have
been able to curb the spread and death tolls. However due to limitations in production
capacity and to reach all people we are still need 1-2 years before majority of the world
population can be vaccinated. The WHO and governments across the world have enforced

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strict measures and guidelines for preventing or slowing down the spread in the short term till
vaccine is readily available but some of these measures have taken drastic toll in the social
and economic activities.

1.2 RMG Sector of Bangladesh

Bangladesh is the second largest RMG exporter in the world and growth in the RMG exports
was set to increase over the coming years till the covid 19 pandemic affected the world.
Bangladesh currently has 433 spinning mills, 796 textile weaving mills, 246 dyeing and
finishing mills, and around a total 6,502 registered and 527 un-registered garment and textile
factories.
Approximately 4,621 BGMEA members employ 4.5 million workers at their garment
factories, of which 80 percent are women. The number of workers employed shoots up even
further if we consider all the companies related to the garments industry accessories,
spinning, knitting, weaving, dyeing, logistics, transport etc..
RMG’s importance to Bangladesh is no doubt more important than most other countries
given that it accounts for nearly 85% of Bangladesh’s export earnings and contributes over
13% to the GDP.

1.3 Importance of Cotton in Bangladesh’s RMG sector

Cotton is the most widely used natural fiber in the world. Its importance to Bangladesh is no
doubt more important than most other countries given that Bangladesh’s 85 percent exports
are dependent on readymade garments and nearly 80 percent of garments made in
Bangladesh are sourced from cotton; the rest are made from viscose, polyester and other
materials.
As per report, Bangladesh is set to become be the biggest importer of cotton by 2021.
Bangladesh is the second largest RMG exporter in the world and growth in the RMG exports
is set to increase over the coming years. The local cotton serves for less than 3% of the
market need and the remaining 97% are imported.
Cotton is the primary raw material to make yarn for fabric making for the RMG sector.
Cotton accounts for 65-70 percent of yarn cost. The cotton yarn cost for the fabric depends on
the type of fabric and processing it undergoes. Assuming that the most widely used fabrics
are 95/5 S/J cotton, cotton yarn will comprise around 80% of the fabric cost. Given that
Bangladesh’s RMG exports are concentrated on basic garment, fabric cost thus makes 70-

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80% of the cost of production. Thus we see that 30-45 percent of the total cost of our
exported items’ is directly dependent on Raw Cotton and its price. This makes cotton
selection one of the most important factors in making or breaking our status in remaining
competitive in the RMG segment.

1.4 Objectives
The Primary Objectives of this report are:

1. Understand the impact and consequences of the Covid 19 Pandemic in Bangladesh’s

RMG Sector

2. Understand the impact and consequences of external variables like rising cotton
prices, growing consumer preference towards sustainable apparels and temporary
shifting of order from other countries on Bangladesh’s RMG Sector

3. Recommend possible solutions and areas of further research to enhance the

competitiveness of Bangladesh’s RMG Sector based on the risks and problems faced
due to Covid, rising cotton prices and growing consumer preference towards
sustainable apparels

1.5 Importance of the report topic and scope

As emphasized earlier the RMG Sector is critical to Bangladesh in terms of its contribution
towards employment, GDP, foreign exchange earnings, women empowerment and supporting
growth of related businesses. This report topic touches on the recent external factors
impacting the RMG industry and gives recommendations and proposes areas of further
studies to maintain the sector’s global competitiveness.

The report’s scope includes:

 Provide brief insight into the impacts of Covid on Bangladesh’s RMG sector.
 Provide brief insight to external variables and its effect on Bangladesh’s RMG sector.
 Suggesting possible areas of further research and give recommendations for increase
growth and competitiveness of the this sector.

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1.6 Research Methodology:
The information for this report has been collected based on both primary and secondary data.
The primary data has been collected from our links available in various companies related to
the RMG industry; it includes
● 1 local buying office,
● 3 RMG factories,
● 2 printing factories for T-shirts
● 2 accessories companies for labels, hangtags, stickers and embroidery and
The contact person in most of the factories was not a high bearing official/owner but mid-
level management executive. The information was gathered informally through face to face
conversation or over telephone.

The secondary data have been taken from various research papers in online journals, and also
electronic newspaper & magazines, government and industrial data’s online sources and
websites offering statistical data.

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2.0 Timeline - Impact of Covid-19 on RMG Sector of Bangladesh

In this section we will go step by step how the COVID crisis unfolded in Bangladesh’s RMG
sector. The initial breakout of Covid in Wuhan, China did not seem to be of major concern
because it was thought of something like the SARS which could be dealt with. But with its
rapid spread and no sign of cure, there slowly seemed to be a panic in trying to control the
outbreak. By end January 2020, the WHO already declared it as a pandemic and China being
the epicenter and with most cases till then took drastic measures by imposing lockdown and
travel restrictions firstly in Wuhan in end January, then Hubei Province and then throughout
the country. This was task became slightly easy because there was a 3 week national holiday
to begin with in February which the government had later extended in certain areas to a much
longer period.

2.1 Supply Chain Disruption – China Factor

With the extended Chinese holiday season, the supply chain activities of the RMG
industries took a major hit. Import materials were not flowing in from China in previously
planned time. This was due to many factories being closed down or running at part
capacity in China. Similarly, with the cancellation of flight services from china, the air
freight services in high demand related to the supply. Air Shipments were taking double
the time due flights being overbooked and costs were also nearly double in most cases.
We must say luck was on our side because Bangladesh’s RMG sector generally plans
ahead for the Chinese new year holiday to ensure that March orders go smoothly. And as
for April and May orders we were able to notify buyers of the evolving situation and
possible delays due to the pandemic.

2.2 Buyer Order Cancellations / Halting of Running Orders

With Covid starting to take a serious threat in Europe in March and in USA in April,
major brands and retailers who had placed orders in Bangladesh, started cancelling
confirmed orders or told factories to hold production. New orders which were to be
confirmed were also delayed.

2.3 Lockdown Scenario in Bangladesh and the RMG sector.

With a rising no of cases starting to show in Bangladesh in April, the government
imposed a semi lockdown situation in the country in April-May. Only certain industries
like pharmaceuticals, food processing, distribution, healthcare, pharmacies and groceries

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 were allowed to operate fully in their physical premises. Export oriented companies
including the RMG sector and those associated with them were also allowed later to start
operating but in limited scale and then full-fledge in accordance with safety measure
guidelines to complete production of existing orders for exports. If this wasn’t done the
industry would have been shambles and government aid would not have been enough to
sustain the industry.

2.4 Operation Delay/Disruption of Local Service Providers for RMG Sector:

China by this time had opened up most of its factories, workers had returned to 80% level
or more and there were no problems with delayed shipment from our Chinese suppliers.
The lockdown situation and precautionary steps had however caused an unfavorable
situation at the CTG port, with lengthy delays in releasing goods from the port as it was
operating below full capacity. Similarly the bank working hours were shortened and the
documentation clearance from BGMEA & BKMEA authorities, like UD for imported
items were delayed by a couple of days because signatories were not always present.

2.5 Government. & BGMEA initiatives

To sustain the RMG sector which employs such a large workforce, the government
sanctioned stimulus package of 5,000 crore Taka to help factories for paying the workers’
wages. Similarly, safety guidelines were developed for RMG factories to operate safely in
the wake of the Covid situation. BGMEA and the Government have been trying to
negotiate with buyers to revive cancelled order and bring in orders.

2.6 Impact on Factories

During the crisis many small factories closed down as they didn’t have orders. The large
and medium factories operated by arranging loans from banks but they also downsized
their operation by reducing the no of lines due to reduced work order. The government
did sanction a relief package and offer low interest loans but that can allow for payment
of worker salaries for a month or two. Factories, buying offices had to take the drastic
measure if it were continue in operations. At least closing down or limiting operations
temporarily till things improve have given them the ability to again come back into
operation as halted orders were again revived and new orders had started flowing in from
June.

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2.7 Impact on Workers
As discussed above on the impact on Factories resulted in estimated 29,500 to 600,000
workers having lost their work or temporarily laid off without pay due to lack of orders.
Figures are varying in different sources and also depending on how they count loss of
work.

It is very easy to state the impact in ere numbers. But with the loss of work of each person
begins a story of struggle that has not been touched / covered in details by the media or
researchers. This may be due to the government censorship, for which there are justifiable
reasons.

2.8 Resurgence of RMG Sector

RMG Exports have recorded for August, providing a positive outlook for recovery.
Factories have been receiving new orders to keep their lines busy but they are still not up
to the pre-covid levels.

Bangladesh’s RMG sector is associated with the global economic recovery. If markets in
Europe, US and Canada recover and their spending on apparels return to normal we can
expect our orders to also improve.

2.9 Spread of the Delta Variant

Bangladesh government had imposed strict measures to control the spread of the delta
variant which severely affected its neighbor, India. It had imposed travel restrictions,
partial and full lockdown measures but kept on supporting the exported oriented garments
industry to fulfill the shipment and delivery dates.

2.10 RMG orders from India, Cambodia, Vietnam diverted to Bangladesh

Due to Bangladesh’s handling of the covid situation, it has gained confidence of foreign
buyers and the unfortunate circumstances in India, Cambodia and Vietnam have led to
some of the orders from those countries to be placed in Bangladesh.

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 3. Alternate/Critical Analysis of Research Reports and News on
the Covid 19 impact on the RMG sector

1. Improved Export Figures not necessarily very Optimistic

The EPB summary data of exports shows the cumulative data of exports for each financial
year. So by plotting the data in an excel sheet we can find individual month wise export data.
We have quoted other sources that have done this data processing and deduced their analysis
and shared the EPB data present in BGMEA website in our own presentation format

BANGLADESH'S RMG EXPORTS TO WORLD, Calendar Year 2019 & 2020

Value in Million US$

Month ALL COUNTRIES

Woven Growth Knit Growth Total (Woven+Knit) Growth
Year Rate (%) Year Rate (%) Rate (%)
2019 2020 2019 2020 2019 2020
January 1644.59 1625 -1.19 1487.98 1414.22 -4.96 3132.57 3039.22 -2.98
February 1556.41 1505.58 -3.27 1352.46 1278.7 -5.45 2908.87 2784.28 -4.28
March 1517.24 1200.37 -20.88 1307.83 1055.83 -19.27 2825.07 2256.2 -20.14
April 1255.21 194.55 -84.5 1284.07 180.12 -85.97 2539.28 374.67 -85.25
May 1645.67 622.16 -62.19 1597.51 608.38 -61.92 3243.18 1230.54 -62.06
June 1193.3 1075.31 -9.89 1206.09 1164.95 -3.41 2399.39 2240.26 -6.63
July 1632.32 1494.66 -8.43 1678.16 1750.28 4.3 3310.48 3244.94 -1.98
August 1163.32 1103.52 -5.14 1242.69 1364.5 9.8 2406.01 2468.02 2.58
Total: 11608.06 8821.15 -24% 11156.79 8816.98 -21% 22764.85 17638.13 -23%

Source: EPB via BGMEA website, modified by s to presented the data in calendar year for
our analysis)

In the article “Bangladesh exports rebound to record levels” by ECOTEXTILENEWS.com

on Aug 06, 2020 stated that EPB data of July 2020 RMG exports were at record levels of
US$ 3.91bn which was 0.59% higher than July last year.

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In another report “RMG export of August shows positive signs” by Textile Today.com.bd on
Sep 10, 2020 stated EPB data of August 2021 RMG exports were was 5.712bn compared to
2020’s August export of 5.716bn. It also noted that in the month on month comparison knit
exports grew at 6.64% and woven exports shrank at 7.06%.

July and August exports do show a positive but in both the articles they acknowledged that
previously cancelled or stalled orders were a probably the primary reason for the figures
being bloated given the poor performance in the previous months. As EPB data we see that
for in moths of Feb, March, April, May and June there were 4%, 20%, 85%, 62%, & 7%
when compared month on month with previous years data. The BGMEA also stated that as of
August it has been able to revive 80% of the cancelled orders.

In an October 27 article by the Daily Star “Tough times for the apparel industry: BGMEA
president”, the BGMEA President mentions that Bangladesh’s RMG exports for the current
fiscal year 2020-2021 fell by 1.64% year on year. Our competitors however fared better with
increased garment shipments between July and September from Vietnam by 10.54 percent,
from India by 2.2 percent and from Pakistan by 4.74 percent.

If we look into the EPB’s RMG export data we see that for the 6 months prior to the outbreak
of Covid19, the total RMG exports from July to December 2019 dropped by 18% from the
previous year. This shows that an underlying problem already existed in our RMG.
Bangladesh probably already started losing out on orders because they were not competitive
in the international market. This factor may have played more badly in the covid situation for
Bangladesh compared to its competitors in the RMG. We are deducing this based on the
better recovery of the RMG exports of other countries compared to Bangladesh for the new
fiscal year.

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Month ALL COUNTRIES
Woven Growth Knit Growth Total (Woven+Knit) Growth
Year Rate Year Rate Rate
(%) (%) (%)
2018/19 2019/20 2018/19 2019/20 2018/19 2019/20
July 1490.62 1632.32 9.51 1527.12 1678.16 9.89 3017.74 3310.48 9.7
August 1331.67 1163.32 -12.64 1385.75 1242.69 -10.32 2717.42 2406.01 -11.46
September 1162.53 1091.7 -6.09 1293.98 1249.37 -3.45 2456.51 2341.07 -4.7
October 1473.01 1151.69 -21.81 1668.41 1368.13 -18 3141.42 2519.82 -19.79
November 1422.31 1240.03 -12.82 1430.8 1271.28 -11.15 2853.11 2511.31 -11.98
December 1552.17 1539.16 -0.84 1346.54 1396.17 3.69 2898.71 2935.33 1.26
Total: 17244.73 14041.19 -18.58 16888.54 13908 -17.65 34133.27 27949.19 -18.12

Source: EPB via BGMEA website, modified by s to presented the data in calendar year for
our analysis)

2. Conflicting data on Unemployment and Factories closing down.

In an October 27 article by the Daily Star “Tough times for the apparel industry: BGMEA
president”, the BGMEA President mentions 59 garment factories have shutdown operations
and 25,900 workers laid off in the last seven months. The primary reason she associated the
case for the factories that were mostly small and medium sized enterprises was that could not
maintain compliance strictly and pay the worker wages under the revised wage structure.

The Bangladesh Institute of Labor Studies (BILS) in their report however mentioned that
nearly 325,000 workers have lost their jobs and 1900 factories were shut down. This
information was stated in Dhaka Tribune’s August 29 article “Study: 325,000 RMG workers
lost jobs due to pandemic”.

The BGMEA in their website have however countered on this report findings from BILS. We
feel BGMEA may be pressurized to display a positive outlook on the negative impact of
covid. It is also very much possible that BGMEA speaks on behalf of the factories registered
with them not taking into account the many small factories not registered with them.
Similarly, the data derived by the BILS may be misleading, because though many factories
were closed down during the lockdown and post-lockdown period, they had started opening
up once orders were pouring in.

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3. Rising Cost of Materials with Supply Chain fluctuations.

In regards to the supply chain disruption, prices of several items like chemical, dyes, paper
that were imported from China shot up when extended lockdown in china was announced.
Though there was stock in the local market, dealers of these items raised the prices. This
increased material cost was borne by the accessories manufacturers, printing factories, and
the RMG factories, cutting down on their profits. This data was collected from primary
sources mentioned in the reference section.

Similarly air freight costs from China had shot up leading to increased costs of importing raw
materials and accessories.

4. No drop in Cotton yarn prices though global cotton prices fell

The spinning mills buy stocks3-6 months in advance for their operations. So even though
global cotton prices fell from January, 2020, the cost of production for yarn remained high as
per higher prices of cotton which were purchased earlier. Information taken from primary
sources

5. Lost orders are being revived and new orders are flowing in – The Catch

As per www.ourtimebd.com’s August 21, 2020 article “Garment Industry to revive soon with
support of Government”, Bangladesh’s government has relentlessly tried to bring back orders
into the country. BGMEA mentioned that 80% of the cancelled export orders have already
been returned and are also themselves involved in negotiation and mediation with the buyers.
This positive however comes with concessions the RMG industry is having to make which
includes:

● Some buyers have extended time period for paying dues from 6 to 12 months
● Some buyers have forced RMG factories to give discounts
● Some buyers will take shipment next year, even though the orders are renewed
now.

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The new orders are flowing in but buyers have the upper hand in negotiations and are placing
orders at prices below their previous price range.

The government had already provided a Tk. 5,000 crore stimulus package earlier to the
export orientated RMG industry for payment of worker wages. The government in its case
wants to avoid a situation where many factories would prefer closing than doing orders which
will incur a loss. If factories are not interested in doing loss making orders and close down or
limit their operations, there will be massive unemployment situation which shake the
economy even harder. The government thus should consider raising the export incentive
given to RMG exporters to a level, where they will not sway away from doing the orders and
help ensure that maximum workers are retained and the economic crisis is diverted.

In the report, it was mentioned that most of the garment factories are operating at 80%
capacity and need further 30% more work orders to attain full capacity

6. Recovery of the Global economy and Retail clothing Sector

Assuming that orders will recover back to normal based on export statistics of July and
August is not justifiable due to reasons stated earlier. One more case against full recovery of
the sector is that though European and US retailers have opened up from May, they expect
that the clothing retail sectors will bounce back to 60-70% by the end of this year. We must
be very cautious because are only receiving fresh orders constituting only 60% of monthly
averages and the previous few moths data were inflated with orders that were on hold or
cancelled earlier.

7. Major Global Buyer’s have gone Bankrupt

The BGMEA and its lawyers are pursuing the case of many buyers like Debenhams closing
down its operations in Bangladesh and filing for bankruptcy. We are to receive payments in
hundreds of millions US dollars but factories and their suppliers are left stranded. EU are
creating funds as AID for the ailing RMG sector. Personally we don’t need aid but our
rightful payment for the shipments we have made.

8. China – US Standoff – how can BD benefit?

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After Covid outbreak, markets worldwide, including Europe and US are looking to move
away from their trade reliance on China. Bangladesh can utilize this opportunity to take
some share from the China but if it does not improve on its capabilities these order will
flow to Vietnam, India and other countries just waiting in the wings. Similarly, in order to
gain more influence China, India, USA, Japan etc will be focusing on increasing their
investments in Bangladesh in various projects including the RMG sector.

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4.0 Cotton

4.1 Cotton Sources

The below charts taken from USDA Statistics and Economic Research Dept. shows the
Leading Cotton producers and exporters in the world as of 2018-2019 season.

Interesting thing to note is that despite China and Turkey being major producers they do not
export, showing the domestic consumption is big. Similarly, India and Uzbekistan due to
their domestic textile industry are not front runners in the export like they are in cotton
production.

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4.2 Bangladesh’s Cotton Dependency
There are 430 spinning mills, 802 weaving mills, 244 dyeing and finishing mills, 32 denim
fabric mills, 22 home textile mills, and a total of 6,502 registered and 527 un-registered
garment factories. The primary raw materials for these factories are cotton, cotton yarn and
cotton fabric. Nearly 80 percent of garments made in Bangladesh are sourced from cotton;
the rest are made from viscose, polyester and other materials.

It has been forecasted that Bangladesh will become the leading cotton importer in the coming
years.

With the local cotton produce supplying less

than 3% of market need, the remaining 97%
requirement is fulfilled by importing raw cotton
from India, USA, Brazil, Turkmenistan,
Uzbekistan, and several African countries.
A positive aspect is Bangladesh has been able
to diversify its import source of cotton in recent
times with previously being heavily dependent
on India and Uzbekistan.

Fig. Bangladesh’s Partner Country’s Share of

Cotton Import by Quantity. Source: Bangladesh
Bank

Over the last 2 decades our cotton imports have increased by nearly 10 folds. Some experts
predict Bangladesh will become the top importer of cotton within a few years

Fig. Bangladesh’s Increasing Trend of Cotton Import (Source: GTA, USDA Official)

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Bangladesh is currently the 2nd largest importer of Cotton after China, followed by Vietnam,
Turkey, Indonesia, Pakistan and India.

2009 4000 1000 480 lb. Bales 5.26 % Marketing year (MY) 2019/2020 imports
2010 4250 1000 480 lb. Bales 6.25 % were forecasted to be 7.0 million bales
(1.5 million tons), a 2 percent increase
2011 3400 1000 480 lb. Bales -20.00 %
over Post's MY 2018/2019 import figure
2012 5000 1000 480 lb. Bales 47.06 % in the USDA report. The continued
2013 5300 1000 480 lb. Bales 6.00 % sluggish imports were the result of a
2014 5750 1000 480 lb. Bales 8.49 % drastic slowdown in the RMG industry in
the first half of MY 2019/2020.
2015 6375 1000 480 lb. Bales 10.87 %
2016 6800 1000 480 lb. Bales 6.67 % A recent report of the United States
2017 7600 1000 480 lb. Bales 11.76 % Department of Agriculture (USDA) says,
2018 7200 1000 480 lb. Bales -5.26 % in 2020-21 marketing year (MY),
Bangladesh’s raw cotton imports are
2019 6500 1000 480 lb. Bales -9.72 %
forecasted to rebound to 7 million bales.
2020 7100 1000 480 lb. Bales 9.23 %

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4.3 Effects of Rising Cotton Prices in Bangladesh’s RMG

Continuous rise in global cotton prices

from the last quarter of 2020 is
creating havoc in the RMG sector after
being already severely impacted by the
Covid pandemic. The BTMA data
shows a rise in cotton prices by

Industry insiders have mentioned

spinning mills have raised locally
produced yarn prices, on an average,
by over US $1.50 per kg.

In an article by The Financial Express

on March 23, 2021, The Bangladesh
Garment Buying House Association
(BGBA) said they were also facing difficulties in marketing locally made apparel items due
to the 'unusual' rise in local yarn prices BGBA president, Kazi Iftekhar Hossain mentioned
that the global garment trade has been mostly affected by the coronavirus outbreak. The
losing competitiveness of the local industry is yet another factor. It has become difficult to
retain the global RMG buyers due to the sustained rise in yarn prices. Moreover, buyers are
offering lower prices, asking for discounts, and deferring shipments and payments citing the
Covid-19. Despite all these, a good number of apparel makers are taking orders less than their
production cost mainly to continue their business and pay workers.

Spinning mills attributed the hike in cotton prices to rising demands for the item globally and
its supply crunch, and upward costs of other related logistics followed by the Covid-19
induced lockdown.
Bangladesh Textile Mills Association (BTMA) president Mohammad Ali Khokon said the
Covid-19 pandemic had affected not only the local RMG industry but also the primary textile
millers. Prices of yarn largely depend on cotton as the cotton price takes up more than 60 per
cent of the yarn production cost, he said.

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Moreover, the global cotton market was 'unstable and upward' during the last few months.
Besides, China has purchased a large quantity of cotton from the US and India, he said,
adding that the prices of cotton and yarn were higher in the cotton-producing countries like
India and Pakistan. The lockdown has pushed up the use of cotton-based garment items
especially the knitted ones, said Mohammad Ali Khokon, attributing the cotton price hike to
the demand and supply gap. According to BTMA, cotton was being traded on an average
US$ 0.60 to $0.85 per kg during June to December last year which now ranged between
$0.95 and $1.7 per kg in March this year. Echoing the president, BTMA secretary Monsoor
Ahmed explained that due to the Covid-19, cotton harvest had been affected while the
pandemic-induced lockdown had pushed up the related trade costs including logistics like
shipping and container charges. (Source: https://thefinancialexpress.com.bd/trade/high-
cotton-prices-worsen-bangladesh-apparel-makers-plight-1616472072)

Looking into the information published by Cotton Incorporated’s monthly newsletter of

August 2021, the values for the December NY/ICE’s cotton futures contract held between 88
and 90 cents/lb for much of July. In early August, futures resumed their climb and have
reached levels over 93 cents/lb. This indicates bad news for those hoping for cotton prices to
recede anytime soon. (Source: https://www.cottoninc.com/market-data/monthly-economic-
newsletter/ )

According to BTMA, some 425 spinners out of its total 1,461 members provide around 90
per cent yarn demand for knit and 35-40 per cent yarn demand for woven items exports. The
country annually spends US$ 3.5 to $4.0 billion in importing around 8.0 million bales of
cotton. It imports cotton mainly from African countries, India, Australia and the USA while
Brazil was added to the importing country list in recent years, according to BTMA

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5.0 Brief Overview of Virtuous Fashion
Virtuous Fashion, a buying agency in Bangladesh, based Mohakhali DOHS, started its
journey 2010. It now has with a partner network of 9 RMG factories working for clients
across Europe. It is focused primarily on knit products and has recently expanded operations
in woven wear and sweater.

It has working partners / buyers in Europe, which are mainly centered in Poland, Slovenia,
Slovakia, UK, Italy and the Czech Republic. It is offering men’s, women’s, boys’, girls’ and
kid’s product ranges.

5.1 Services offered by Virtuous Fashion

 Sourcing: Locating the manufacturing unit depending on the customer’s expectations

and requirements to the quality, fashion and price.
 Sampling: Arrange development/product samples to the clients at our own cost to
ensure meeting the requirements of order selections, color, fitting, fabric and style of
the seasons.
 Inspections/Factory evaluations: The quality assurance team can do inspection on the
customer’s behalf to confirm the quality or to have the correct status of running
orders. If customers require a social Audit to do by VIRTUOUS FASHION on any
factory, our audit team can also do an evaluation and send report.
 Order execution: Orders are closely monitored from the sampling stage till shipping.
The customers are kept fully informed on every stages of the production process.
There is strong belief in maintaining proactive approach to prevent unpredictable
problems that could cause delay in on-time delivery.
 Consumptions and Costing: Negotiate better prices with customer’s vendors across
the globe, and if necessary provide the consumptions of the fabric and other cost
breakdowns.

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  Paper patterns: Experienced pattern makers can generate, develop or grade patterns.
Customers can have copies for the dale styles, so that they can send the same to all
their different suppliers to achieve same fit and cuts.
 Compliance and Human rights: The factories working with us are in full compliance
with all safety and human rights requirements. The facilities are regularly monitored
and approved by ourselves or the nominated organizations and checked.
 Reporting: As the part of all multistage inspections, the execution of purchase order is
closely monitored and status/reports are sent by email every week to the clients in
order to view the production processes.
 Laboratory tests: All products are tested according to buyers’ specifications. Usually
in house tests are carried out or by a customer nominate third parties such as BV, ITS,
SGS etc. Documentation and shipping co-ordination:
 Collection and Checking of all Documents related to order processing, shipping, audit
and other documents as per customer’s requirements and instructions. The documents
are sent well in advance to the customers for possible corrections where necessary

5.2 Countering problems due to Pandemic and other factors

 Supply Chain disruptions

 Factory operations delay
 Missing out on date commitments
 Lower Buyer Prices
 Higher Factory Costs
 Order Cancellation
 Order Delay and Planning Problems
 Rising Cotton Prices
 Increased Freight Expenses
 Temporary Order Diversion from India, Myanmar, Vietnam and Cambodia fueling
higher Factory Prices
 Rising Bank charges
 Longer credit to buyers

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6.0 Recommendations and Scope for Further Research

Page | 33
7.0 Conclusion

The study undertaken in this report has shown the dying need for more detailed research to be
carried out and need for the government along with the RMG and textile industry to
formulate policies that will be beneficial for the country and overcome risks involved with
the Covid crisis and with the dependency on cotton imports.

It is evident given the impact of the RMG sector in Bangladesh’s economy; the Government
and BGMEA are trying to take all possible measures to avoid a possible collapse. The order
revivals are a sign of relief and optimism, so is the opening of clothing retail stores in US and
Europe. But we should still brace ourselves for tough time to come as fresh orders are only
60% of their previous monthly averages. With a possible second wave of Covid storm we
must be more prepared to deal with the risks.

The importance of the RMG and textile industry for Bangladesh has been mentioned in the
beginning. Considering that unlike other exporting countries, our garments products focused
primarily on cotton based products. Cotton thus constitutes a major portion of the costs in the
overall garment produced. In case of Bangladeshi RMG industry to remain competitive we
have to focus Cotton sourcing for lead time, quality and price.

Given the importance of Cotton in Bangladesh’s economy it is binding not only the
Government to create policies for safeguarding our RMG Industry but also on the industry
leaders, experts, academicians, economists, management level employees and students
pursuing education in this industry to continuously think of ideas and projects that will
protect Bangladesh’s interest in the international trade.

In times of global distress we must stand beside our business partners. It is not possible to
expect our buyers to continue their business operations without cutting down on costs. We
must support them in this regard by doing orders at reduced prices. Many factories will
consider the reduced price offered for new orders as not worth carrying out and will either go
for operation in limited scale or shut down. The government however in order for the greater
interest of the country and employment of its people must give incentives to factories to take
orders which may bring in no profit at all.
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Bangladesh’s RMG was already seeing negative growth even before Covid came, It must
now focus on gaining competitiveness to at least retain its market share if not improve. It
must improve productivity, reduce order lead time, improve sourcing, diversify its product
range, diversify its export market, otherwise, it risks losing out to more to Vietnam,
Cambodia, Myanmar, Ethiopia and India.

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8.0 REFERENCE

Primary Source:
RMG Factories:
1. AL- AMIN ATTIRES LTD, Sanarpar,Shiddirgonj,Narayangonj
2. Apparel 4 Ltd, Hemayetpur Notun Para, Savar
3. Rose Garden Apparels Ltd, Nayamati Road, Kutubpur, Fatullah, Narayanganj
Local Buying Office:
4. Virtuous Fashion, Mohakhali DOHS
Print Factory:
5. RM Print, Kazi bari mor, Mirpir-12
6. One Print, Hazir pukur, Mohammadpur
Accessory Supplier:
7. A&M Fashion Accessories,153/C, Khilgaon, Dhaka

Secondary Source
1. Trade Information, BGMEA retrieve from
https://www.bgmea.com.bd/home/pages/TradeInformation
2. EPB Statistics, retrieve from http://epb.gov.bd/site/view/epb_export_data/2019-2020/July-June
3. S. Glover, Aug 06, 2020 , “Bangladesh exports rebound to record levels” retrieve from
www.ecotextilenews.com
4. Staff Report, Sep 10, 2020 , “RMG export of August shows positive signs” retrieve from
www.textiletoday.com.bd
5. R.U. Mridha October 27, “Tough times for the apparel industry: BGMEA president”
retrieved from www.thedailystar.net
6. Tribune Report, August 29, 2020, “Study: 325,000 RMG workers lost jobs due to
pandemic” retrieved from www.dhakatribune.com
7. T.N. Ahmed, August 21, 2020, “Garment Industry to revive soon with support of
Government” retrieve from www.ourtimebd.com
8. LIGHTCASTLE ANALYTICS, June 30, 2020, “What cancellation means for Bangladesh
RMG Sector” retrieve from www.lightcastlebd.com

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 APPENDIX A

BANGLADESH'S RMG EXPORTS TO WORLD, FY 2019-20 & 2020-21

Value in Million US$

ALL COUNTRIES

Woven Knit
Month Growth Growth Total (Woven+Knit) Growth
Year Rate Year Rate Rate
(%) (%) (%)
2019/20 2020/21 2019/20 2020/21 2019/20 2020/21

July 1632.32 1494.66 -8.43 1678.16 1750.28 4.30 3310.48 3244.94 -1.98

August 1163.32 1103.52 -5.14 1242.69 1364.5 9.80 2406.01 2468.02 2.58

Total: 2795.64 2598.18 -7.06 2920.85 3114.78 6.64 5716.49 5712.96 -0.06

Source: EPB

BANGLADESH'S RMG EXPORTS TO WORLD, FY 2018-19 & 2019-20

Value in Million US$

ALL COUNTRIES

Woven Knit
Month Growth Growth Total (Woven+Knit) Growth
Year Rate Year Rate Rate
(%) (%) (%)
2018/19 2019/20 2018/19 2019/20 2018/19 2019/20

July 1490.62 1632.32 9.51 1527.12 1678.16 9.89 3017.74 3310.48 9.70

August 1331.67 1163.32 -12.64 1385.75 1242.69 -10.32 2717.42 2406.01 -11.46

September 1162.53 1091.70 -6.09 1293.98 1249.37 -3.45 2456.51 2341.07 -4.70

October 1473.01 1151.69 -21.81 1668.41 1368.13 -18.00 3141.42 2519.82 -19.79

November 1422.31 1240.03 -12.82 1430.80 1271.28 -11.15 2853.11 2511.31 -11.98

December 1552.17 1539.16 -0.84 1346.54 1396.17 3.69 2898.71 2935.33 1.26

January 1644.59 1625.00 -1.19 1487.98 1414.22 -4.96 3132.57 3039.22 -2.98

February 1556.41 1505.58 -3.27 1352.46 1278.70 -5.45 2908.87 2784.28 -4.28

March 1517.24 1200.37 -20.88 1307.83 1055.83 -19.27 2825.07 2256.20 -20.14

April 1255.21 194.55 -84.50 1284.07 180.12 -85.97 2539.28 374.67 -85.25

May 1645.67 622.16 -62.19 1597.51 608.38 -61.92 3243.18 1230.54 -62.06

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June 1193.30 1075.31 -9.89 1206.09 1164.95 -3.41 2399.39 2240.26 -6.63

Total: 17244.73 14041.19 -18.58 16888.54 13908.00 -17.65 34133.27 27949.19 -18.12

Source: EPB

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