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4/27/2020

Economics of Supply Chains during Covid-19

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4.1 million Bangladesh garment workers. All of whom’s futures remain uncertain due to COVID-19. 

This pandemic brought economic instability, causing millions of workers in garment factories across Asia and elsewhere to find their jobs to be highly vulnerable. The impact of such is two-fold, as firstly, these workers, primarily women who are crucial in keeping their families out of poverty, are no longer financially secure. Due to the seasonal nature of fashion, many companies are liquidating unsold spring and summer items to discount retailers in order to mitigate a company deficit from occurring. Currently, more than one million Bangladesh workers have already been fired, a number due to rise as other nations such as Cambodia, India and Myanmar follow suit. The impact of this is on both the overall GDP of the nation, as the garment industry composes 16% of the nation’s GDP, along with the individual quality of life. In order for a large scale economy to function, it is imperative that constant transactions are happening; if purchasing power for the majority decreases, so does investment in the economy. Furthermore, according to the Bangladesh Garment Manufacturers and Exporters Association, fashion companies have canceled at least $3 billion in orders from garment factors, equivalent to a full month of exports based on prior data. In a larger context, the South Asian economy is disproportionately reliant on the apparel industry to sustain its economy. Garments make up roughly 80% of Bangladesh's exports as per Trading Economics and generated more than $30 billion in 2019 according to the country's Export Promotion Bureau. A primary concern in regards to fiscal policy is the lack of federal reserves within such nations, leaving government loans to be an uncertain mechanism to pay workers. 

However, the impact of unemployment extends beyond Bangladesh’s industry. Nations such as Cambodia, India and Myanmar play a crucial role in the overall supply chain as well. Many raw materials and human capital stem from such nations, and due to the internationally interconnected nature of the garment industry, this global shutdown holds the potential to devastate the general economy. It is imperative that, in these times, governments and financial institutions operate with a collaborative approach to ensure there are enough financial resources to keep supply chains solvent and workers employed. Initiatives such as fully funding loans for retailers or deferring tariff payments are two potential options for governments to implement. A recent statement by the International Organization of Employers indicates a collective approach to mitigate the loss of jobs and income and strengthen social protection within supply chains. 

It is imperative to understand that supply chain practices are an ever-changing equation, yet in upcoming times, governments and corporations must take proactive and reformative steps. To reduce the inherent inequalities built within supply chains while ensuring transparent regulations in the garment sector’s buying practices and labor relations, action must occur.

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    Shriya Shah, Head of Trade and Economics

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International Youth Politics Forum, Est. 2019
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