COVID-19 trajectory for Bangladesh RMG

Collected
The past global recession that started off in the first quarter of 2008 and tapered down around the middle of 2009, had put the global economy in a shock that saw corporate behemoths collapsing, unemployment rates shooting up, bourses crashing, interest levels going down to zero, and global trade reaching an unprecedented low. This began as a result of collapse of financial markets for the sub-prime mortgage rate meant for real estates in america and had a cascading effect on other financial loans and the global economy.

In 2020, the world economy is facing an identical, even a more serious downturn caused by the COVID-19 pandemic. The signs of distress already are visible atlanta divorce attorneys corner of the world, and the global community is bracing for the even worse to come.

Back in 2009, the global trade of goods was plunged by 12 per cent, and services trade by 9 %, based on the WTO. It is stated that 22 million jobs were lost, as per the estimates of the ILO. NASDAQ commodity data showed that crude oil prices came right down to a range folks $ 33 to $40 per barrel from the peak folks $147 a barrel within a few months, and cotton bales were sold below 60 US cents from the common range of 80 US cents a bale.

Now in April 2020, the locked-downed world is looking at the alarmingly bleak statistics published by global organisations. The ILO's initial estimate for global job loss stands at 25 million, as the WTO fears that the global trade of goods will drop by 13 to 32 %, depending on the severe nature and duration of the pandemic. As of April 20, 2020, crude oil prices have gone negative in the US market, quite an incomprehensible phenomenon. NASDAQ is showing cotton futures being sold around 50 US cents a bale.

Riding on low charges for oil and cotton, and sizable stimulus by the federal government, Bangladeshi exports rebounded within an impressive manner. Bangladesh recorded the highest ever twelve-monthly export growth around 24 per cent this year 2010 in comparison to 2009, according to trade statistics from the UN Comtrade database. According to many analysts, Bangladesh's quick rebound from this year's 2009 recession was because of the fact that Bangladesh produces basic apparel products, demand that remained stable even sometimes of recession. This strength in the capability for mass production of cheap basic apparels leveraged with low import payments for cotton and other recycleables, the ready-made garments industry of Bangladesh bounced back quickly in those days.

Because the basic parameters remain similar in 2020, because they were in 2009 2009, will the history of bouncing back be repeated in 2020 for Bangladesh RMG?

The likelihood of the annals of quickly bouncing back after post-COVID19 is slim.  Why?

The answer lies in the sudden erosion of social capital. The idea of social capital in the professional context can be explained as the networks of relationships among people and enterprises who live and work in the same professional value chain, enabling those industries to function effectively.

The social capital in the sort of mutual trust between Bangladeshi suppliers and a big number of the Western buyers is depleted by the latter's cancellation of orders and refusal to pay the agreed price for the finished goods. Based on the BGMEA, orders worth 3 billion US dollars were cancelled as of early April 2020. In the house front, because of cancelled orders and unfair prices offered, the payment of wages to the RMG personnel suffered heavily. The trust between your staff and employers of the RMG industry in Bangladesh got eroded too due to delay and irregularity in paying the wages.

This demands renegotiating the norms of future contracts between your buyers and manufacturers, and bring necessary reforms in today's standards of the 'Incoterms' - the universally accepted standards defining the responsibilities and obligations of the buyers and sellers in international trade.

In order to avoid future shocks due to failure to pay wages on time, employers may think about creating an emergency trust fund to cushion the cash requirements for wages, and such a fund can also be used as collateral for borrowing emergency funds from the banks.
Source: https://thefinancialexpress.com.bd

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