Umpteen adversities like global demand fall, high cost of production and US dollar problems have forced closure of a good number of garment factories across Bangladesh, sources in the export industry said.
Besides, financial crisis fueled by sluggish global demand and banking complexities also weighed in to cause the factories to go bust since the beginning of the year 2023.
Most of such factories are small and medium in size. And a good number of those that export goods failed to survive owing to losses they incur because of the currency-exchange-rate gap, according to exporters.
Apparel exporters have found 2023 as a tough year for them, although some of them see a silver lining on the horizons about improvements in major economies in months.
"But, in the meantime, the latest incentives cut could deal a blow to the prospective rebound," says one industry-insider.
According to Industrial Police data, 134 textile and readymade garment factories under its jurisdiction have gone bust since January till December in the 2023 calendar year.
Of the closed units, 99 are members of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), 23 listed with Bangladesh Knitwear Manufactures and Exporters Association (BKMEA) and 12 are textile mills registered with Bangladesh Textile Mills Association (BTMA).
Apart from textile and apparel, six units under Bangladesh Export Processing Zones Authority (BEPZA) and a total of 303 non-RMG factories, mostly cottage industries, had to pull shutters down last year, according to the official count.
A total of 78,815 workers were employed in those units, while the 134 garment manufacturers accommodated 45,944 workers, the data showed. A total of 303 non-RMG units employed the rest of the workforce.
To save the situation, however, 214 new factories came up last year creating fresh employment for some 26,604 people, the data showed.
The IP data also reveal that about 18,000 workers were reemployed in factories that include 38 textile and ready-made garment (RMG) units that could reopen through navigating the headwinds.
Asked about the ordeals, Faruque Hassan, president of BGMEA, said most of the factories were closed down for lack of work orders and high cost of production.
"The year 2023 was not good as order flows declined due to global demand fall following high inflation and bank interest rates," he said, explaining that since end of 2022, there had been a flood of orders but, thereafter, orders started falling and buyers sold goods from their inventory.
Besides, rise in electricity price twice and a 178-percent raise in gas prices last year also pushed up the cost of production. And the latest wage hike put another pressure, the association chief mentions in listing the drags.
"Though there was growth in export earnings, these issues were the back foot for which makers received work orders below production cost to sustain buyers here in the country," Mr Hassan says about tricks of the trade in crisis time.
Mohammad Hatem, executive president of BKMEA, attributed much of the hardship to a yawning exchange gap between local-currency taka and the US dollar. "Small units failed to survive financial losses they counted because of the exchange-rate gap."
Talking to the FE writer, Fazlee Shamim Ehsan, vice president of BKMEA, said factories that are small in size, having 200 to 250 workers, mostly closed down because of short of work orders, and might reopen once they get orders.
"The number of new factories is very poor, and those new are mostly set up following partnership failure," he added.
He looks forward to April onward for the order situation to improve as buyers stocks are running out while order for next season and high-fashion winter goods would be placed with a projected recovery of importing countries' economies.
Echoing his view, Asif Ashraf, managing director of Urmi Group, says the situation might improve after the second half of 2024.
Order shortage still persists and factories received 15-to 30-percent less work orders last year compared to that in 2022.
"Severe gas shortage puts negative impact both on cost and delivery," he notes.
BTMA president Mohammad Ali Khokon at a recent press briefing said textile mills failed to utilise half the production capacity last year due to gas crisis and low work orders while in January they might use 40 per cent of their capacity.
Sector leaders have said some are shut as they could not open LCs and import raw materials due to dollar crisis while prices of their products plummeted.
They also noted small and medium units did not get bank finance.
According to official data, though RMG sustained a growth of 3.67 per cent in 2023 year on year to earn US$47.38 billion, the industry witnessed negative growth in the European Union, the UK and the United States.
Eurostate data showed Bangladesh recorded negative growth of 19.92 per cent to 16.26 billion euros during January-to-November period of 2023.
UK apparel imports from Bangladesh declined by 8.83 per cent to US$ 3.01 billion during January-to-October period of 2023, according to BGMEA.
OTEXA data showed that Bangladesh garment exports to the US-the single-largest market--declined by 24.91 per cent to US$6.79 billion during the first eleven months of 2023.
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