Nepal Textile Industries Association has decided to close down as Nepal government has failed to offer any stimulus package for the textile industry which is on a verge of collapse. According to the President of the association Shailendra Lal Pradhan, the textile sector was not listed among the 44 industries in the government decision that were allowed to open partially, even though it had been severely hit by the virus lockdown with 95 percent of the factories shuttered.

The association said the government's annual financial plan did not contain any relief measures for the textile industry despite the suffering brought about by the prolonged stay-at-home order. The government had proclaimed that the textile industry would get interest subsidies, but it did not happen. And now the budget statement says the electricity tariff exemption has been removed. A lot of money has been poured into the domestic textile industry. In 2014 alone, investors pumped in another Rs1.5 billion, encouraged by the government announcement that they would get a 70 percent value added tax refund.

However, all that investment has been jeopardised with the government withdrawing the VAT adjustment facility that fabric manufacturers have been getting for the past 20 years

Pressured by financial concerns, retailers across the US are rushing to open malls in the country. A new report from CBRE, the US commercial real estate services and investment firm, said these retailers could only pay around 10 per cent of their rents in April due to a dip in sales. Shopping centers anchored by grocery stores could also pay only 80 per cent of their normal rent payments.

Even with e-commerce options, these retailers saw a 8.7 per cent decline in sales in April as against sales in March. The estimate for total monthly sales for the retail trade and food services industry fell to $483 billion, effectively erasing three years of growth. Also, some retailers prioritized the retention of sales and management staff over making rental payments.

Simon Property Group, the largest operators of shopping malls and outlets in the US, has reopened 77 out of its 209 properties, more than a third of its portfolio, in 38 states after national closures in late March due to the pandemic. The company plans to open “approximately half” of its U.S. portfolio within the next week.

Similarly, Macerich, another large owner of malls, has also re-opened 13 of its 52 US properties in Texas, Colorado, Missouri, Iowa, Indiana and Arizona.

In order to protect its domestic upstream industry from a recent surge in imports, Indonesia exempted fabrics made in India and Vietnam and synthetic yarn and curtains made in South Korea and Hong Kong from new import tariffs imposed on some textile products from May this year till November 2022, according to the country’s finance ministry.

In 2019, the Indonesian government imposed temporary additional duties on imports of textiles and textile products up to 67.7 per cent, according to Vietnamese media reports.

Moody’s Investors Index had earlier warned that the US-China trade tensions could lead to an influx of Chinese yarn, fabrics and garments into Indonesia, potentially disrupting the stable levels of demand and supply in the country.

Due to the COVID-19 pandemic, the Bangladeshi apparel sector is likely to lose $5 billion revenue in 2019-20, says BGMEA president Rubina Huq. She revealed buyers have cancelled orders worth as much as $3.15 billion since the unfolding of the pandemic. This has led to factories running at only 55 per cent of their capacity with imported unused raw materials piling up in warehouses.

BGMEA estimates global consumption of clothes to fall by 65 per cent in future leading to 30 per cent slump in work orders. Due to this, factory owner may also have to lay off workers from th.is month.

However, the US’s move to cut its order from China by 52 per cent may make Bangladesh a good sourcing destination for apparel goods, views Huq, who heads the Mohammadi Group.

Therefore, to make the Bangladesh RMG industry and its supply chain sustainable, BGMEA urged manufacturers to focus on virtual marketplaces.

According to ICRA, the recent decision of Cabinet Committee on Economic Affairs (CCEA) approving an increase in the minimum support prices (MSPs) for kharif crops (including cotton) for the Cotton Year 2020-21 is likely to be unfavorable for the domestic spinning sector.

The CCEA recently hiked the MSP for the medium-staple variety by Rs 260 per quintal to Rs 5,515 per quintal, while that of long-staple variety by Rs 275/quintal to Rs 5,825/quintal, translating into an increase of 5 per cent over the level fixed for CYi2020.

According to Jayanta Roy, senior VP and group head, Icra Ratings, this move may heighten challenges for the domestic spinning companies, as this comes at a time when the COVID-19 pandemic has resulted in severe demand-side pressures in the international textile markets.

Though increased MSP, timely onset of monsoon and expectation of normal monsoons augur well for cotton sowing in India, cotton crop remains highly vulnerable to pest attacks, and output/yield expectations remain contingent on these. In this context, the locust swarm which has hit several parts of western and northern India including Rajasthan, pose a looming threat for the crops as these insects feed on a large variety of crops.

Bangladesh high commissioner to the UK Saida Muna Tasneem has urged the UK to create a global supply chain sustainability fund for post-COVID-19 socio-economic recovery of countries victimized by the British retailers including Bangladesh. The rise in number of unethical cancellations and non-payment for manufactured apparels by UK retailers is victimizing the Bangladesh RMG industry its 4.5 million workers.

Tasneem also urged the UK to ensure equitable and affordable access to vaccines and therapeutics manufactured by the UK and other developed countries for the most vulnerable countries including LDCs. She was addressing a ‘High Commissioners’ Virtual Conference’ organized by the UK FCO (Foreign and Commonwealth Office) Minister of State for South Asia, Commonwealth, the UN and the DFID, Lord Ahmad of Wimbledon this week. Tasneem was one of the eight speakers at the conference participated by more than 48 high commissioners of the Commonwealth, UK’s Joint Head of International Engagement of the HMG Coronavirus Taskforce Alastair King Smith and UK FCO High Officials including the Commonwealth Envoy, Philip Parham.

She also briefed the conference about the innovative and unprecedented initiatives undertaken by Bangladesh premier including a $11.50 billion COVID-19-response social safety emergency aid and incentive package for protecting livelihoods of the most vulnerable faction of the society.

British FCO Minister Lord Ahmad, who chaired the virtual conference, assured Tasneem of UK’s continued engagement and support to Bangladesh’s post-COVID-19 socio-economic and sustainable development recovery.

As mountains of apparel stock has piled up stores, distribution centers, warehouses and even shipping containers due to the COVID-19 lockdowns, retailers across the world are adopting innovative ways to get rid of it. Apparel chains including British high-street retailer Next and German sportswear brand Adidas have stashed away unsold basics, aiming to offer them next year instead. These retailers hope that easing lockdown measures will see shoppers return to stores, eager to unleash pent-up demand.

Many stores are likely to pursue a combination of holding sales as well as selling stock to off-price retailers. The mix will depend on consumer appetite, how much merchandise stores have to shift and how fast they must free up space for new collections. Some retailers are also likely to move their merchandise to online re-sale marketplaces that take a commission on sales, although that option is largely only open for high-end brands.

California-based luxury re-sale marketplace Tradesy opened a new business unit in April to deal with the jump in brands looking to sell stock they were stuck with after department stores canceled wholesale orders.

Some of the companies are also plotting a quick profit using re-sale websites. For instance, events company Luxury Experience & Co, plans to snap up merchandise at a discount, to then resell it at a higher price online at a site such as California-based Poshmark, which also makes money by taking a commission on sales.

The Bangladesh government has adopted a two-pronged strategy to save its devastated textile industry. The first is renegotiation of trade deals and second is petitioning international rights groups like International Labor Organization, Human Rights Watch, and the Worker Rights Consortium, and European Union trade committee.

The Coronavirus lockdown has completely devastated the Bangladesh textile industry as many European companies have cancelled orders. As per a report by Nikkei Asian Review, Japan’s premier financial newspaper, UK’s Edinburgh Woolen Mills Group, whose key brands include Peacocks, Jaeger, Bonmarche, and Austin Reed, has cancelled orders worth more than 30 million from nearly three dozen Bangladeshi factories. BGMEA has threatened to blacklist the group.

As orders from European countries like the United Kingdom, Germany, Italy, Spain- the major importers of Bangladeshi garments, get cancelled, more than 1,000 factories have been shut down and 3 million workers are out job, with their families facing poverty.

Like many other businesses, luxury fashion industry in Italy also came to a halt as factories across the country shut down due to lockdown from mid-March. Now, many of these factories have restarted with limited capacity in order to comply with social distancing guidelines of the government.

According to McKinsey, Italy holds over 40 per cent share of world’s luxury goods production which makes the ‘Made in Italy’ label, the centre of the luxury supply chain. However, this production system relies on a complex and fragile network of independent businesses which makes it extremely vulnerable to calamities like the present Coronavirus pandemic.

Also, these factories lack the deep pockets of the luxury brands they work with. They are also not in a position to invest in new technologies or experiment with e-commerce. Hence, some of them may either be shut down permanently or be consolidated and acquired by investors or larger luxury brands like LVMH and Kering.

Tapping available resources

In order to survive, these independent factories are tapping all available resources. Yet, the upcoming season might be tough for them, opines Stefano Canali, President and Chief Executive of family-owned menswear brand Canali. Committed to paying his factories and suppliers, Canali introduced some cost-saving measures like digital tools to create virtual showrooms and accelerate sample and prototype productions for future seasons.

Likewise, Boston-based direct-to-consumer footwear brand M Gemi cut-down production time and costs by using 3D technology and graphic design to render prototypes and adjust samples. However, many industry leaders like Marco Zanini, Milan-based independent designer and former creative director of Schiaparelli, believe the use of advanced technologies may render many smaller factories obsolete. More than old technologies, the hectic pace of fashion calendar is a bigger threat to the Italian fashion industry.

A renaissance of fashion

Many also believe that despite these challenges, the fashion industry in Italy may be witness a growing demand for different kind of fashion in future. As brands may focus on sustainable and ethically sourced materials and products in smaller quantities, these small and independent factories may grow in demand.

As consumers become more considerate with their luxury purchases, these manufacturers will be in an advantageous position marking their return to the luxury trend that followed the 2008 recession. As a recent McKinsey & Co survey of sourcing executives affirms, 60 per cent respondents expect their manufacturing clusters to expand in Central America and Eastern Europe to be closer to consumers in Western Europe and the US. Thus it will be a renaissance for these factories as orders will start pouring in and machines start. It will be a renaissance of sorts for these factories as orders will start pouring in again and Italy’s supply chain will stay intact in coming months.

Just how vast is the impact of COVID-19 on the global fashion industry can be gauged from the fact that McKinsey does not expect one third of global fashion players, such as brands and department stores, to survive the crisis. The impact is being felt all along the $2.5 trillion industry’s complex supply chains as instead of placing orders for their Spring ’21 collections, retailers are cancelling orders and deferring payments for orders already completed. For example UK fashion retailer Peacocks recently refused to pay for over 43,000 pairs of jeans shipped to the brand by Bangladeshi manufacturer Denim Expert.

Major shake outs in Southeast Asian countries

Along with Vietnam and Sri Lanka, Bangladesh has become the global production hub for much of the world’s clothing, accessories and footwear retailers who aimed to lower their production costs. In Bangladesh, garment industry makes up the lion’s share of the country’s export revenues, and employs more than four million people, the majority of whom are women. However, since the outbreak of the COVID-19 pandemic, the industry has laid off over half of its workforce in the country. Bangladeshi manufacturers have also lost out on more than $3 billion in payments for T-shirts, shoes and designer dresses already produced or sourced, reveals BGMEA.

Similarly, garment companies in Southeast Asia’s fastest-growing economy Vietnam, have started disappearing. The Vietnam Textile & Apparel Association estimates if the current lockdown lasts until June, Vietnamese textile and garment companies could lose more than $500 million in revenues. The country has already laid off about 600,000 of total 2.8 million workers in the sector.

In India, order cancellations shaved off almost a third off its benchmark cotton prices since the beginning of the year. Though it has rebounded slightly recently, the International Cotton Advisory Committee, forecasts 15-year low decline in the average cotton price for the upcoming 2020-21.

Commitment phobia grips retailers

Last year, McKinsey labeled the global fashion industry as one the rare economic success stories of the past decade. However, this success was a result of extreme consolidation by some of the world’s biggest retailers. In 2019, around 97 per cent profits in the fashion industry were generated by just 20 companies, including Inditex, the world’s largest clothing retailer, and sportswear retailer Nike.

Of these, H&M was one of the first global retailers to pay for all ordered goods, including those still in production. On the other hand, some retailers have been accused of acting too slowly. Primark, the UK high street retailer promised to pay garment workers in early April. However, wages account for only about 15 per cent of the £256 million (S$446.9 million) worth of orders that the company cancelled with Bangladeshi manufacturers.

To tide over the crisis, retailers are trying shorter lead times and boosting flexibility in the face of demand shocks. However, Paul Lister, Head of Ethical Trade, Primark, does not expect the pandemic to have an impact on where clothes are manufactured. Unless retailers pay for clothes already in production, manufacturers will have no business to save.