Bangladesh's recent political unrest, has tested the resilience of its garment industry, a cornerstone of the nation's economy. While some brands have shifted orders, a significant number, including major players like Adidas, H&M, and Inditex, have maintained their commitments to the country, highlighting the complex interplay of factors that influence sourcing decisions. This commitment to Bangladesh's garment industry comes as a relief to many, but challenges remain, and the long-term impact on the sector is yet to be fully understood.
Brands stay put, show their commitment
A recent survey by the Business and Human Rights Resource Centre (BHRRC) revealed 12 out of 20 global apparel buyers have not shifted their orders from Bangladesh despite the disruptions. These brands, including Adidas, ASDA, C&A, H&M, Inditex, Marks & Spencer, Next, Puma, PVH Corp, Tesco, Primark, and Walmart, have demonstrated a commitment to order stability, even in the face of challenges.
Several factors contribute to this steadfastness. Primarily, Bangladesh enjoys duty advantages with many countries and zones, making it a cost-competitive sourcing destination. For instance, the European Union's Everything But Arms (EBA) initiative grants duty-free access to Bangladeshi exports, excluding arms and ammunition. This preferential treatment has played a crucial role in attracting and retaining international brands.
In fact, C&A and Primark, two of the brands that maintained orders, have even offered financial and non-financial support to their suppliers in Bangladesh. C&A provided low-interest or no-interest financing and covered the cost of air shipments to mitigate delivery challenges. Primark extended production and delivery timelines, allowing suppliers to manage disruptions without facing penalties.
Challenges remain
However, the situation on the ground is not without challenges. While bigger brands have weathered the storm, smaller factories, particularly those reliant on orders from smaller buyers, have faced difficulties. The BHRRC's findings reveal that order placement has slowed down, potentially indicating a shift away from smaller factories. Additionally, airfare costs have soared, putting further strain on suppliers. Fazlee Shamim Ehsan, Executive President, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told the Financial Express that airfreight costs have skyrocketed from $2.50 per kg to $6.0-7.0 per kg. These increased costs are squeezing profit margins and creating further challenges for the industry.
The unrest has also had repercussions for workers, with reports of mandatory overtime, increased production targets, and delayed wage payments. Smaller factories, particularly vulnerable to order fluctuations, may struggle to recover from the disruptions. Some factories have struggled to pay wages on time, leading to worker agitation and demands for improved conditions.
The way forward
While Bangladesh's duty advantages have undoubtedly played a role in retaining brands, the country also needs to address underlying issues to ensure the long-term sustainability of its garment industry. This includes improving worker conditions, ensuring timely wage payments, and fostering a stable business environment.
The recent unrest serves as a reminder of the delicate balance between economic interests and social responsibilities. Brands, suppliers, and the government must work together to create a more resilient and equitable garment industry in Bangladesh, one that benefits both businesses and workers.
