New ILO Report: The supply chain ripple effect– How COVID-19 is affecting garment workers and factories in Asia and the Pacific

The full report is available HERE. Key findings:

1. The garment industry in the Asia-Pacific region is particularly vulnerable to the adverse impact of COVID-19 because of the size of the industry present and the high stakes involved. Notably, garment workers (over 60 million in total, including 35 million women) accounted for 21.1% of the manufacturing employment in the region as of 2019. Over 60% of the world’s apparel exports currently come from the Asia-Pacific region.

2. The cumulative impacts of COVID-19 on garment supply chains have been both far-reaching and complex: 1) As of September 9, 2020, more than 31 million garment workers in the Asia Pacific region were still affected by factory closure (i.e., mandatory closures of non-essential workplaces). 2) The drop in consumer demand and the decline in retail sales in the primary apparel consumption markets across the world have affected garment workers in the Asia-Pacific region negatively. As of September 9, 2020, 49% of all jobs in the Asia-Pacific garment supply chains (29 million) were dependent on demand for garments from consumers living in countries with the most stringent lockdown measures in place. Another 31 million jobs (51%) depended on consumer demand that is based in countries with a medium level of lockdown measures in place. 3) COVID-19 has further caused supply chain disruptions and prevented imported inputs into garment production from arriving in time. The heavy reliance on textile raw material supply from China makes many apparel producing countries in South-East Asian countries highly vulnerable to shortages of inputs.

3. The world apparel trade has fallen in the first half of 2020 sharply. This includes a 26% YoY drop in the US, a 25% drop in the EU, and a 17% drop in Japan. However, the timing and magnitude of these import declines vary significantly — China’s exports started to drop first at the beginning of the year,2020. Then, the exports from Vietnam, Bangladesh, Indonesia, and India began to decrease also since February (a joint effect of the shortage of raw material + decreased import demand). Data further shows that the drop in world apparel trade has been more significant than other products in the first half of 2020.

4. Apparel suppliers in the Asia Pacific region have been struggling with order cancellations AND longer payment terms insisted on by Western fashion brands and retailers. Garment factories say that they don’t have the leverage to ‘push back’ against these changes to contract terms and buyer policies.

5. Thousands of garment factories in the Asia-Pacific region closed at least temporarily because of COVID-19, some of them indefinitely. For example, In Cambodia, approximately 15-25% of factories had no orders at the end of the June 2020. Likewise, around 60% of garment factories in Bangladesh reported closing for more than 3 weeks. Related, layoffs have been widespread. For example, according to Indonesia’s Ministry of Industry, approximately 30% of their apparel and footwear workforce had been laid-off by July 2020 (812,254 in total). In Cambodia, approximately 15% of their garment workers (more than 150,000 workers) were reported to have lost their jobs during the pandemic. Further, garment factories have been operating at reduced capacity during the pandemic. For example, in Bangladesh, as of July 2020, the proportion of workers returning to work after re-opening was only 57% of the pre-pandemic level. Similarly, in Vietnam, as of July 2020, the proportion of workers returning to work after re-opening was also just around 50% of the pre-pandemic level.

Related reading:

Author: Sheng Lu

Professor @ University of Delaware

10 thoughts on “New ILO Report: The supply chain ripple effect– How COVID-19 is affecting garment workers and factories in Asia and the Pacific”

  1. While not very surprising, it is very unfortunate for me to see that the garment industry is struggling so much. The amount of lay offs in the Asian Pacific region is upsetting because the industry makes up such a large part of the economy there and is the source of income for many citizens. The fact that only 57% of garment industry workers are back to work in Bangladesh is also disheartening. I am hopeful that as the world continues to recover and reopen, the garment industry will recover as well and more Asian Pacific people will be back to work.

  2. A big problem that I have noticed personally and from reading different articles is that since these retail companies and consumers are geographically far away from the places their clothing is made, they do not see first hand how their actions are affecting others. This is causing a lot of problems because retailers are not taking responsibility for the payments they owe which is causing a lot of workers to lose jobs and factories to go out of business. I wonder what would happen if retailers really paid attention and realized how big of an impact they are having on foreign markets and factories where they get their clothes from. I also think the effects of Covid are going to be very long lasting. As mentioned in the key notes, consumers have not been shopping as much since lock-downs in their countries were delayed compared to countries like China. Even though China has been able to get back on its feet sooner than countries like the U.S., it still has huge impacts on both countries. I wonder how things would have been different if globalization was not as prevalent in the fashion industry. I am curious to see what happens moving forward, even after the pandemic comes to an end. I think the effects will still be felt around the world.

    1. I noticed the same trend of many companies being far away geographically from the country they source from. To me, it seems like many companies are using the “out of sight, out of mind” logic so, like you said, since they can’t see these effects, it’s not on their priority list. In addition, many companies are suffering as well from the effects of COVID-19 so I would assume that many of these companies are just trying to keep their own heads above water making it harder to worry about the other parties they’re affecting. I still think this is an unacceptable and unethical business practice because I feel like if these companies are going to outsource their production, they need to take responsibility for the work done and pay the workers. I can’t help but wonder what would happen if U.S. companies weren’t paying U.S. factories for the work done. It seems to me that if fashion brands were producing their products domestically, or even within a FTA region, this would be a much bigger issue and the companies would have higher consequences for not paying the factories. COVID-19 has raised a lot of questions about the ethics and sustainability of globalization. Like you said, I’m also very curious to see what will happen with these brands moving forward once the pandemic is more under-control or over.

  3. It is sad and challenging to see how the garment industry is struggling, right now more than ever. With Western fashion brands and retailers, I feel as if they do not 100% know or understand exactly what goes into play in order for their products to be sourced and manufactured. They do not see first hand the experience that the workers and factory owners are going through. If they want to source their products from other countries outside of their regions, then they should also uphold their side of the agreement or deal and pay the workers, who are ultimately their workers too, for the products that they made for them no matter if they choose to cancel an order or not. US fashion brands and retailers in specific should educate themselves more on their own sourcing practices as well as the sourcing practices from where they are sourcing from and not decide on anything if their intention is to not pay or cancel orders.

  4. It is inherently concerning that retailers have either canceled sourcing orders or failed to pay their overseas manufacturers for the materials that they have already purchased to start producing their garments. I saw this firsthand when I worked at a small boutique this summer. The COVID-19 pandemic has hurt the apparel industry in Asia to a great extent, as these companies are left facing the financial burdens that US retailers and other large-scale fashion brands have placed onto them. US retailers should be held accountable for refusing to pay their overseas manufacturers, as it is selfish and unruly. Understandably, this is a concerning time, but it does not mean that it is only concerning for those retailers. Asian manufacturing companies are facing serious financial struggles, and it is important for there to be a compromise. Instead of failing to pay, I think an agreement should be made that the manufacturers could discount the price of the garments to the retailers, making it so that they still will want to buy and sell their product (even on sale so customers want to buy) and overall diminish the need for them to not pay at all. US retailers should place themselves into the shoes of overseas factories and educate themselves on the real effects they are causing rather than refusing to pay.

  5. I agree that is is not surprising that these effects are taking place amid the COVID-19 Pandemic, however it is devastating to see. It further shows that developed countries are using developing countries as a means to an end. Although many brands and retailers are claiming to obtain corporate social responsibility, many of their decisions do not keep suppliers at the center of their decision making. For example, many Western and European brands and retailers have refused to pay suppliers for garments that were already produced or in production when the outbreak started. As restrictions lightened, still so many people were affected. Fortunately, brands and retailers are aiming to adjust their sourcing strategies in the near future, however the need to support the lives of garment workers are increasingly important in present times. I believe brands and retailers should show more support and appreciation to their suppliers because at the end of the day, they are who make an idea come to life for the company. Knowing that their living situations are much more difficult, brands and retailers should do everything in their power to send aid to their suppliers and work with them to prevent any supply chain disruptions in the future. This is a wake up call for brands and retailers to own up to their responsibilities as a company and help to improve the human lives embedded in their supply chain.

    1. I think it is so important that you mentioned how vastly different the living conditions are in the apparel manufacturing countries vs the countries that the companies are based in. Just because some Western apparel companies are struggling due to the pandemic, their workers are still able to go home to a solid roof over their heads, livable wage, and disposable income. That is a luxury that these production countries do not have.

  6. With many countries entering new waves of the pandemic, I forsee these trends of order cancellation and decreasing demand to persist. Especially since the U.S. has an incoming shift in political power, which will alter the way the country will enfore COVID-19 restrictions, I think that longer payment terms, order cancellation, and other means of extending contractually-bound relationships will increase. Clearly, garment workers and factories in Asia received the adverse effects of Western companies actions during the first wave. Outsourcing has a lot of ethical and socially responsible detriments, and companies should only outsource their work if they can support all of their workers. Although factories operating at reduced capacity is a way of protecting garment workers health and safety, like Bangladesh only having factories at 57% capacity, these strides are not enough for garment workers wellbeing. Job insecurity during the pandemic hits underdeveloped nations harder, especially when those nations are so reliant on the garment industry for employment. In class, we discussed how globalized trade is shrinking due to the pandemic and regional supply chains are successfully keeping things running in the garment industry. Asian countries have one of the more efficient regional supply chains, so I hope that this helps these factories stay afloat during the continuing pandemic.

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