Pandemic crushes Asia’s garment sector as big retailers cut orders

The coronavirus pandemic literally crushed Asia’s garment industry. Factory owners in Myanmar, Bangladesh, Thailand and Cambodia shut down thousands of factories and sent home workers with little or no pay.

As retail stores closed across Europe and the United States in March and April in response to the new coronavirus, many fashion brands and retailers cancelled orders for clothes, bags, and shoes worth billions of dollars from Asian garment factories, forcing them to close and lay off hundreds of thousands of workers.

After a public outcry, some Western companies agreed to pay for orders that have already been shipped or are in production. Others asked for discounts or have delayed payment, leaving suppliers struggling to stay afloat.

A few retailers are making new orders, but the long-term survival of Asia’s garment factories and the welfare of its laid-off workers are uncertain.

Following is a list of companies, the status of their orders with Asian garment makers and the companies’ comments on the situation.

Since the 1960s, Asia has grown into the world’s garment factory, sending about $670 billion worth of clothes, shoes and bags a year to Europe, the United States and richer Asian countries, according to the International Labour Organisation (ILO), a United Nations agency.

After non-essential stores were closed in many countries and people were told to stay at home to prevent further spread of the disease, international retailers from ASOS to New Look said they cancelled orders with garment makers.

Next temporarily closed all its stores in Britain in March due to the coronavirus. The company said in a statement it had only cancelled some orders and “endeavoured to be fair” to its suppliers.

Retailers generally place orders at least three months ahead of delivery and pay for the finished product when it is delivered. Initially most retailers cancelled all outstanding orders, but many adjusted their position in March and April after a public outcry, agreeing to pay for goods that had already been manufactured or were mid-production.

To finish pending orders, about half of Bangladesh’s 4,000 garment factories have reopened, according to garment manufacturer associations. About 150 of Myanmar’s 600 or so factories have shut down, while 200 out of 600 or so are closed in Cambodia.

Many factories that have reopened are struggling to enforce social distancing and good hygiene practices in often cramped conditions, two union officials told Reuters. “Most of the factories are not complying with the safety guidelines,” said Babul Akter, President of the Bangladesh Garment and Industrial Workers Federation, adding that dozens of garment workers had been infected with the virus. “Just placing hand-washing systems and checking temperatures at the entrances will not help. Inside the factories, when the workers work so closely, how will they maintain safe distancing?”

Some orders have been trickling back. Swedish fashion retailer H&M said it only paused orders for two weeks at the height of the virus outbreak. US-based Walmart, the world’s largest retailer, said it placed new orders with Asian manufacturers last month.

Despite the new orders, several garment manufacturers said the low volume of work on the books means many factories in Myanmar, Bangladesh and Cambodia will not be viable, which means many of the young women who make up the majority of the workforce will no longer have jobs. That leaves them torn between returning to families in the countryside, where there are few employment opportunities, or enduring life in the city in the hope that factories will reopen at full capacity.

The European Union (EU) has created a wage fund for workers in Myanmar worth 5 million euros ($5.3 million) to pay a portion of the salaries of the most vulnerable for three months. Myanmar has promised to cover 40% of the salaries of workers whose factories were closed on government orders until they pass inspections for preventing the spread of the coronavirus. More than 58,000 have been laid off, according to the country’s garment manufacturer association.

In Bangladesh, one million workers were furloughed or laid off by late March, according to the Penn State Center for Global Workers’ Rights, although some have since returned to work. About 75,000 have not been paid for March, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), which estimates tens of thousands more will not be paid wages owed to them.

The government has announced a $588 million aid package for its export sector to help pay employees. Garment manufacturers, which estimate they have lost almost $3 billion in exports since the start of April, said the funds are not enough. Foreign-owned firms and joint ventures are not eligible for payments.

Reuters