Bangla Apparel / State of Economy Analysis

Wireframe: The Bangladesh Crisis and its Discontents

Bangladesh's RMG Industry Will Face Challenges on Multiple Fronts

As of now brands and retailers that source from Bangladesh—and that have witnessed the industry’s sizeable safety and environmental investments—remain patient and committed. The long-term scenario, however, could be anyone's guess. texfash.com rounds up voices from across the globe.

Subir Ghosh

10 August 2024

6 minutes

Long Story, Cut Short

Internecine clashes within the industry have already broken out, and restoring tranquillity within the fraternity would be a tall order.
Every now and then, questions are asked whether Bangladesh—as an economy—has been laying too much emphasis on apparel, leaving other sectors in the lurch.
An overwhelming 84.58% of exports come from apparel manufacturing, and is unquestionably responsible for pulling millions directly and indirectly out of poverty. But it provides employment to only 4 million people of a population of 173.8 million.

Bangladesh's apparel industry will have its plate full for the coming months: it has to assuage those with misgivings, ameliorate internal squabbles, ramp up production to make up for lost orders, and develop a PR campaign that targets its own people as much as brands.

Circular approach Bangladesh's apparel industry will have its plate full for the coming months: it has to assuage those with misgivings, ameliorate internal squabbles, ramp up production to make up for lost orders, and develop a PR campaign that targets its own people as much as brands. Marcel Crozet / International Labour Organization

A semblance of sanity and order has returned to Bangladesh with an interim government taking charge in Dhaka, but the country's travails are far from over, and it could be a while before its readymade garments (RMG) industry is able to get its act together.

The fashion industry in the West—buyers of most of Bangladesh's RMG exports—have indicated that they won't hold it against the Bangladesh manufacturers for delayed or unfulfilled orders.

A company spokesperson for H&M—one of the biggest sourcing brands—has gone on record saying: “Most of the factories are gradually opening up again, and safety remains a priority. We have expressed to our suppliers that we would not seek any discount due to delays that might happen under the current circumstances. We continue assessing the situation daily.”

The volatile situation has diluted considerably, but arson and violence have been continuing. Yet, that is the least of the RMG industry's worries. Internecine clashes within the industry have already broken out, and restoring tranquillity within the fraternity would be a tall order.

Mostafiz Uddin, Founder-CEO of Bangladesh Apparel Exchange and a well-respected industry leader, took to LinkedIn on Friday: "In light of recent events in Bangladesh, the world’s attention is on us, and it’s crucial that we present an image of unity and resilience. Our garment industry, a pillar of Bangladesh's economy, is facing challenges that require us to come together and act responsibly...

"Now more than ever, we need to show solidarity and resolve any disputes internally. Our actions have implications far beyond our borders, affecting our relationships with international buyers and stakeholders who have stood by us."

In fact, there have been many from the Bangladesh apparel industry who have been making appeals—both calling for unity, as well as imploring Western brands to have faith.

The sense of apprehension is palpable and also understandable. After all, this is not a humanitarian crisis caused by, say, natural disasters like cyclones or floods. Appeals for empathy, as during the COVID-19 crisis, are unlikely to work to the same extent. It could be months before law and order becomes normal, and the next government (assuming the ensuing elections are free and fair) is able to ensure solidity. Till then, the country would be seen as a hotbed of instability.

Whether Bangladesh's apparel industry is able to tide over the crisis would depend on—what Mostafiz Uddin emphasised—unity and resilience. But not everything would be in their hands. As Luigi Caccia, Chairman of PureDenim, commented on Mostafiz's post: "Brands stay with Bangladesh only because you sell underpriced goods. They will use this moment to reduce the purchase price again. Your people are rebelling because they are forced to work under untenable economic conditions. Ask for more money and brands will disappear like snow in the sun. The rest is poetry."

This piquant situation would beg the question; can other countries fill in the gap resulting from lower volumes of apparel production in Bangladesh?

A possible contender is Sri Lanka. A report quoting the Joint Apparel Association Forum (JAAF) insisted that "Sri Lanka is poised to benefit from some apparel orders in the short term. The crisis in Bangladesh may prompt buyers to seek alternative sources to maintain their supply chains and meet critical deadlines." The JAAF Secretary-General, Yohan Lawrence, said: "Given Sri Lanka’s proven ability to adapt and our available capacity, we expect some foreign buyers to turn to Sri Lanka until the situation in Bangladesh stabilises." So far, there has not happened, and then again Sri Lanka itself is recovering from a protracted economic crisis that had brought about a bout of political unrest.

Another contender is India, but that country's problems and prospects have been dealt with earlier. [See: Indian Apparel Unlikely to Benefit from Bangla Crisis; Cross-Border Trade Remains at Standstill]

Eyes remain on Bangladesh

Bangladesh is an apparel powerhouse, and what happens in the second-largest garment exporting country has far-reaching effects on the global apparel industry.

The International Apparel Federation (IAF) has been watching events unfold in Bangladesh. IAF President Cem Altan, said in a statement: "Our industry is a people’s industry, and it stands to reason that at the moment the people in Bangladesh are reshaping their future. This greatly impacts the apparel industry. But the responsibility our industry bears towards the well-being of the many workers also means that in situations like this the system keeps a cool head and offers the necessary support. Currently, this means that brands and retailers that source from Bangladesh—and that have witnessed the industry’s sizeable safety and environmental investments—remain patient and committed.

"The sourcing community can play a role in fostering the stability in the country, and that is by simply not leaving at this pivotal moment. The support of the global apparel industry is a factor determining the speed with which transformation in Bangladesh unfolds and stability returns. This is the moment where the obvious need for collaboration and solidarity across the supply chain is on full display."

Calls for keeping a cool head have also come from others, including the Ethical Trading Initiative (ETI). In a statement, that came before the interim government was sworn in on Thursday, urged companies sourcing from or operating in Bangladesh to:

Engage with their suppliers to understand the impacts of the transition, factory closures and recent unrest.
Work with their suppliers to ensure that workers’ safety is prioritised, particularly where workers are expected to travel to and from work.
Adjust their expectations and purchasing practices to adapt to these exceptional circumstances.
Agree on order adjustments that are manageable and realistic, and in line with ETI’s recommended responsible purchasing practices.

But these are all mere statements and appeals, and are not legally or compulsively binding on anyone. Short-term orders can shift to countries which can deliver real fast to Western brands. Till then, fast fashion juggernauts like Shein and Temu (which themselves deliver fast) could benefit. The long-term scenario, however, could be anyone's guess.

Cem Altan

President

International Apparel Federation

But the responsibility our industry bears towards the well-being of the many workers also means that in situations like this the system keeps a cool head and offers the necessary support. Currently, this means that brands and retailers that source from Bangladesh--and that have witnessed the industry’s sizeable safety and environmental investments-- remain patient and committed.

A woman leading cattle in Khulna, Bangladesh. The agriculture sector, even though it provides employment to 45.33% of the population, remains largely ignored by policymakers.

Out of Focus A woman leading cattle in Khulna, Bangladesh. The agriculture sector, even though it provides employment to 45.33% of the population, remains largely ignored by policymakers. M Yousuf Tusha / WorldFish

Bangladesh's apparel predilection

Every now and then, questions are asked whether Bangladesh—as an economy—has been laying too much emphasis on apparel, leaving other sectors in the lurch.

The issue cropped up again in a New York Times report that argued that the dependency on apparel had been Sheikh Hasina Wazed's undoing:

The pandemic reduced global demand for textiles and apparel. At the same time, supply chain disruptions and Russia’s war on Ukraine sharply raised prices for imported food and fuel. With so little diversification in its economy, Bangladesh was unable to pull in enough revenue from other industries to help pay the bills.

As inflation soared, the Hasina government’s efforts to control it backfired. While trying to prop up the value of its weakening currency, Bangladesh spent down its foreign exchange reserves, which dropped so low that it was forced to seek a loan from the International Monetary Fund in 2022.

By the time garment exports bounced back after the pandemic, Bangladesh was mired in its short-term troubles — a situation that also highlighted underlying problems. Bangladesh collects very little in taxes, partly because of a lax bureaucracy and an unwillingness by many citizens to pay their taxes. Its tax-to-G.D.P. ratio, a measure of a government’s ability to fund its priorities, is one of the lowest in the world. That meant it could not count on tax revenue to pay its steep bills.

As allegations of corruption, nepotism and inefficiency pile up against Hasina and her disgraced Awami League party, there are already detractors who point out that the RMG industry has been the spoilt brat of the economy, and that other sectors have been allowed to fend for themselves to the extent that they cannot chip in and shoulder responsibility when any crisis hits the RMG sector.

This debate could become heated over the coming months. An overwhelming 84.58% of the country's exports come from the apparel manufacturing industry, and is unquestionably responsible for pulling millions directly and indirectly out of poverty. But it provides employment to only a minuscule 4 million people of a population of 173.8 million.

For all practical purposes, Bangladesh remains an agrarian economy. According to the 2023 Labour Force Survey, "Agriculture continues to be the chief source of employment—in 2022. In 2016–17, the sector accounted for 40.6% of employment. In 2022, that ratio increased to 45.33%—indicating that the country continues to be a largely agrarian society. The share of manufacturing in total employment declined from 20.4% in 2016–17 to 17.02%—raising questions about the nature of economic development in recent years."

Now, that's a question many are going to ask, possibly with a lot of hostility towards the RMG industry.

All said and done, Bangladesh's apparel industry will have its plate full for the coming months: it has to assuage those with misgivings, ameliorate internal squabbles, ramp up production to make up for lost orders, and develop a PR campaign that targets its own people as much as brands.

Mostafiz Uddin

Founder-CEO

Bangladesh Apparel Exchange

Our garment industry, a pillar of Bangladesh's economy, is facing challenges that require us to come together and act responsibly... Now more than ever, we need to show solidarity and resolve any disputes internally. Our actions have implications far beyond our borders, affecting our relationships with international buyers and stakeholders who have stood by us.

Subir Ghosh

SUBIR GHOSH is a Kolkata-based independent journalist-writer-researcher who writes about environment, corruption, crony capitalism, conflict, wildlife, and cinema. He is the author of two books, and has co-authored two more with others. He writes, edits, reports and designs. He is also a professionally trained and qualified photographer.

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