Apparel exports: resilience and potential challenges

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The Covid-19 pandemic has resulted in over 114 million infections and a staggering 2.5 million deaths worldwide. It has crippled health devices, deteriorated living requirements, and exacerbated inequality.

One area in which the pandemic was expected to have a devastating impact was on the subject of worldwide trade. But after a sharp drop in the initial half of 2020, global products trade is apparently on track for a reliable recovery. The UNCTAD just lately revised their forecasted decline in global products exports from 9 % to 5.6 per cent for 2020.

A similar pattern can be playing away in Bangladesh, where according to your estimates, total exports were down 33 per cent year-on-year in the first one half of 2020 but showed signs of a steady recovery towards the finish of the entire year. We also observe comparable patterns in the South Parts of asia.

Regarding the apparel industry, this restoration has been driven by three factors. After an initial decline popular from Western markets early last year, apparel buys partly recovered in the summertime. This allowed Bangladeshi producers to improve export shipments and recoup a few of their lost profits.

Second, the brief lockdown found in Bangladesh itself helped prevent significant do the job stoppages. Even through the lockdown, the BGMEA declared a reopening of factories from April 26 in 2020 to complete existing orders.

While the less stringent lockdown carried a public health risk, its impact on disease spread has been relatively minimal.

Our recent work points to a third explanation: having less supply chain disruptions. This was due to two main factors: a swift recovery in Chinese exports-the main source of Bangladesh's imported inputs-as very well as import diversion from Covid-impacted source countries.

The nimble operations of supply chains ensured that exporters were in a good position to provide when orders recovered.

Concerns about these disruptions had caused many analysts to argue that the current global supply chains expose organizations to excessive risk and so are no more "fit for purpose".

There were sober predictions supplying chains in the post-Covid world would be shorter and less geographically dispersed.

The resilience we document shows that global supply chains aren't as fragile as primarily feared and thus a major restructuring is perhaps not likely. This will be a relief to numerous countries like Bangladesh for whom links to these source chains have helped to advertise economic development.

Nonetheless, Covid-19 has highlighted countless trade policy issues for Bangladesh. Initial, it has again emphasised the dangers of its export concentration in apparel, a business that has suffered a number of the sharpest drops in client spending during the pandemic.

In line with the US Census's Regular Retail Trade Survey, outfits and clothing accessory retailers experienced a 51 % decrease in sales in March 2020.

This is not surprising given that lockdowns have resulted in people increasingly working at home with little need to splurge on new clothing.

The reliance on apparel also partly explains the many sharper decline in Bangladesh's overall exports in comparison to that of Vietnam, which is a sizable apparel exporter but has a a lot more diversified export basket.

By one measure, Bangladesh's exports are five circumstances as concentrated as that of Vietnam.

Thus, given how sensitive apparel demand is apparently to monetary downturns, lowering Bangladesh's export focus in that industry will be a significant way to diversify its hazards and crisis-evidence the country's exports later on.

The second policy challenge is the significant headwinds that tend waiting for you for Bangladesh's exports.

After the global financial meltdown of 2008/2009, the community experienced a prolonged amount of "slowbalisation", where trade growth slowed dramatically. Such a situation is probable over the next couple of years.

Indeed, after a difficult winter months in Europe and North America, development in apparel orders for the spring have already been disappointing and shows that the rate of restoration seen towards the end of 2020 will likely decelerate.

The past year has been a remarkably challenging one for Bangladesh's exports. Cancelled orders and reduced occupation had left both companies and personnel in a precarious position. While the near-term prospects appear much better than one would have expected at this time last year, there are yet significant challenges ahead.

But the resilience displayed in 2020-both among suppliers and workers-delivers a hopeful outlook for future years.

Reshad N Ahsan can be an associate professor of the section of economics of the University of Melbourne and Kazi Iqbal is the senior research fellow of Bangladesh Institute of Advancement Studies. 
Source: https://www.thedailystar.net

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