Year 2022 turned out to be one of exceptional challenge for the textile and apparel sector in Bangladesh and Pakistan. The challenge has started taking political overtones in Bangladesh as the country’s next general election is in 2023, adding pressure on the current government’s leadership as the main opposition rams into the electorate with the issues of inflation, high rates of unemployment and weakening of the economy. As Pakistan is in an internal political turmoil with no clear sight of the next election, the issue may not have become electioneering slogan but is hitting the fragile economy hard.

For Bangladesh all eggs in a basket

Bangladesh was the poster boy of an underdeveloped nation that dramatically turned its fate around by focusing on exports of RMG products worldwide, to the extent of displacing China as the number one exporter to Western markets. Such was its success in turning things around that its economy took off and it started the formal transition from being an underdeveloped to a developing nation. Well thought out investments were made to further strengthen their dominance in textile and apparel exports and Bangladesh was sitting pretty. Global buyers actually preferred relying on Bangladesh for an undisrupted supply during the pandemic-induced lockdown as it was one of the few nations that had its factories operating during Covid-19.

However, from mid-2022, things took a sharp turn and not in a good way. Bangladesh’s traditional export markets are experiencing a shift in purchase patterns of clothing – the prolonged war between Russian and Ukraine has had severe consequences in Europe and the UK. Devastating hike in energy prices as winter has set in, crippling mortgage and interest rates and overall high inflation in essential commodities. The early 2022 scenario that reflected the end of pandemic and saw enthusiasm in apparel purchase in the UK and the EU, has dropped significantly as consumers have deprioritized non-essentials.

As a spokesperson of the Bangladesh Garment Manufacturing Association (BGMEA) points out, clothing budgets in afflicted economies has been squeezed, leading to the slowing down or outright cancellation of orders to Bangladeshi apparel manufacturers. Some international retailers have asked for production to be delayed by at least three months or stop manufacturing all together. This has hit local manufacturers hard as they had already invested in fabric and on completion their inventories are rising, filing up warehouses with clothes that can’t be exported any more.

The beleaguered nation had a good run between June 2021 and 2022 as it exported RMG worth $42.6bn and textiles worth $2.6bn. The silver lining in this critical time is that it secured a $2.3bn credit facility from the IMF and another $1.3bn from its Resilience and Sustainability Facility, meant to help poorer countries address climate change and other long-term challenges. Of course, Bangladesh is not currently facing a liquidity crisis like Sri Lanka and Pakistan but its foreign exchange reserves are depleting against the strengthening dollar and the country is facing energy and essential commodity price crisis, leading to power outages affecting production as well as paying higher prices for raw material.

Bangladesh has realised that whilst it may be the second strongest exporter of apparel to the world, its vulnerability has been exposed because in the realm of textiles and apparels, any slight change in economies affects non-essential products first and the most.

Pakistan sees an addition to general woes

The thriving textile export sector in Pakistan is in the doldrums in this highly volatile and foreign exchange strapped economy, having experienced a major low for 17 months since May 2021. The sector experienced an 11 per cent drop in October this year with textile exports valued at $1.36 billion compared to September’s $ 1.53 billion. Year-on-year, the statistics show a 15.2 per cent drop from $1.6 billion in the same month last year.

The reason is the same as the one Bangladesh is facing but worsened due to extraordinary devaluation of the Pakistani currency, leading to very high energy and raw material costs. At this time, factories are closing one by one as they don’t have continuous supply of electricity to operate production lines, the energy bills are staggering, pushing up cost of production and the inability to source raw material as not only is it expensive but many banks are refusing to issue LCs to importers in the country.