Apparel Online Bangladesh Magazine December Issue 2018 | Page 17

COVER STORY – CHALLENGES FOR 2019
As per a Reuters news report, more
than 100 people were killed in clashes
ahead of the last general elections
with the unrest accompanied by
roadblocks pushing up transport
costs by 10 to 20 per cent, while
according to an economic update of
Asian Development Bank, Bangladesh
garment industry suffered a loss of
at least US $ 3.8 million in December
2014 due to order cancellations.
Hassan, adding, “In contrast to the
competitors, Bangladesh’s minimum
wage is going up as we are gradually
increasing workers’ wages.”
“As per my understanding, the
upcoming general elections would be
more or less peaceful. As the elections
have to be held within three months’ of
its declaration, political parties would
be busy campaigning, mobilising votes
and, preparing the grounds to put up
a good show,” maintained Khondaker
Golam Moazzem, Research Director
of Centre for Policy Dialogue (CPD)
speaking to Apparel Online. His
hopes, however, were dashed by the
pre-poll political skirmishes. Given the fact that RMG suppliers
are regularly under pressure from
the buyers to lower prices (as has
been projected by the latest Better
Buying Purchasing Practices Index
report, 55.4 per cent of suppliers
have been affected by high-pressure
cost negotiation strategies by the
buyers, which includes not paying
for samples, not paying on time and
not paying the full price as indicated
in the purchase orders, etc.), they
also have to take over the added
responsibility of sample development
apart from bearing the increased cost
of production, taking responsibility
of fabric sourcing and purchase. All
these, cumulatively make it even more
difficult for garment makers to survive
and sustain.
Adding to the political uncertainty is
the double whammy of minimum wage
increase, which also is expected to be
implemented from December 2018. As per industry insiders, the majority
of buyers do not pay for samples,
which sometimes costs up to
20 per cent of the FOB.
In 2013, the minimum wage of the
country was fixed at Taka 5,300
(US $ 69) per month, which was an
increase from Taka 3,000 (US $ 37),
adopted in 2010 and now it is Taka
8,000 (US $ 96). Despite worker
unions’ demand for Taka 12,020 (US $
142) and employers’ proposal to seal
the deal at Taka 6,360 (US $ 75), the
Government felt it feasible to strike
a balance between the two and settle
for Taka 8,000 as the new minimum
wage. Nonetheless, it has evoked
fear amongst the entrepreneurs who
are apprehending serious dent to
business and profitability as they are
already operating under wafer-thin
profit margins. Increasing overheads
and cost of raw materials are further
adding to their woes. It is worth mentioning here that
as per a report by Mark Anner,
Center Director, Penn State titled
‘Binding Power: The Sourcing
Squeeze, Workers’ Rights, and
Building Safety in Bangladesh Since
Rana Plaza’, hyper-competitive
structure of apparel global supply
chains has contributed to a buyer-
driven sourcing squeeze that has
pushed down prices. It further adds
that in case of Bangladesh, since Rana
Plaza, the price paid by lead firms to
supplier factories has declined by 13
per cent.
“The leverage of cheap labour is not
a solution to the Bangladesh apparel
industry, as it is going up continuously
due to rise in production cost, rise
in wages and investment for safety
improvement,” observed Senior Vice
President of Bangladesh Garment
Manufacturers and Exporters
Association (BGMEA) Faruque
Having somehow managed to
withstand the buyers’ pressure tactics
so far, the industry is now facing the
threat of large-scale business loss
from the European buyers’ platform
– Accord on Fire and Building Safety
in Bangladesh, which is reportedly
threatening to cut business ties
with more than 500 garment
manufacturing units.
As per media reports, the buyers’
platform has reportedly made clear
its intentions to cut ties with around
532 garment factories for their alleged
FA C T S
l
l

As per Better
Buying
Purchasing
Practices Index
report, 55.4 per
cent of suppliers
have been
affected by
high-pressure
cost negotiation
strategies by
the buyers,
which includes
not paying for
samples, not
paying on time
and not paying
the full price
as indicated in
the purchase
orders, etc.

European buyers’
platform – Accord
on Fire and
Building Safety
in Bangladesh –
has reportedly
made clear its
intentions to cut
ties with around
532 garment
factories for
their alleged
poor progress in
remediation, and
this number is
not insignificant
at all by any
standards!
poor progress in remediation, and
this number is not insignificant at
all by any standards! Naturally, the
business community is again at its
wits’ end apprehending a rather
uncertain future.
“We cannot accept this… This is
so sad,” maintained the aggrieved
Commerce Minister Tofail Ahmed
of the country, who appears rather
mindful of the consequences that
it would have for not only the
concerned factories but also the
apparel sector at large.
If no steps are taken, this would mean
the end of the road for the 532 RMG
factories as far as their eligibility to
supply to Accord’s signatory brands/
buyers is concerned.
“What progress has the Accord
made here in Bangladesh? After
five years, they could only handover
20 out of more than 1,600 factories
they have inspected so far,” shot
back Ahmed agitatedly, whose
concerns were reiterated by Shafiul
Islam Mohiuddin, President of
the Federation of Bangladesh
Chambers of Commerce and
Industry and an ex-President
of BGMEA.
“We have done a wonderful job,
but still we have to face the
reckless, authoritarian attitude
of their initiative. We condemn
them… The reality is very
crude and difficult. So, we are
requesting our buyers not to show
their muscle power,” underlined
Mohiuddin, who went on to add
that around 70 per cent of the
buyers are still giving low prices
despite improvements in quality,
workplace safety and labour rights
in the sector.
As the year comes to an end, all
these issues have now created a
very uncertain future for the industry.
Apparel Online, which has been
closely following the developments
(detailed information, many of which
have been published in the concerned
columns in this issue), feels if urgent
measures are not taken to address
the concern areas, Bangladesh
apparel industry may have to face the
consequences in near future.
www.apparelresources.com | December 2018 | Apparel Online Bangladesh
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