Sep 7, 2012
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Unrest threatens Bangladesh's key garment export

Sep 7, 2012

DHAKA - Bangladesh's $19 billion (11 billion pounds) garments industry attracts some of the world's biggest clothing brands because of low costs, but many retailers say unrest over pay and delayed shipping schedules are eroding that advantage.

Photo: Corbis

The killing of a labour activist and increasing publicity of unsanitary and unsafe working conditions at the country's 4,500 garment factories is also making some retailers worried about their reputation.

Bangladeshi factories make clothes for brands including Tesco (TESO.O), Wal-Mart (WMT.N), JC Penney (JCP.N), H&M (HMb.ST), Marks & Spencer (MKS.L), Kohl's (KSS.N) and Carrefour (CARR.PA). Wages are as low as $37 a month for some workers.

In June, more than 300 factories near the capital Dhaka were shut for almost a week until the government and factory owners promised to consider pay demands and persuaded them to return to work.

"Unrest in the readymade garment sector is a major concern for us," said a country manager of a large international wholesale customer, primarily located in the United States.

"We have calculated that a two-week work disruption in factories producing 1.5 million units of garments daily would lead up to $8 million losses," the manager said, speaking on condition of anonymity because he was not authorised to speak to media.

The garments manufacturing sector earned $19 billion in the year to June 2012, one of the impoverished nation's biggest industries. Bangladesh is the world's biggest exporter of clothing after China.

Readymade garments make up 80 percent of the country's $24 billion in annual exports. Consultancy firm McKinsey & Company has said Bangladesh can double its garments exports in the next 10 years.

But conditions in the industry are below standard. Besides scanty pay, working conditions and safety standards are poor, employees and some analysts say.

Nazma Begum, a worker at a factory at Ashulia, near Dhaka, said the main cause of unrest was low pay, which barely covered family costs.

"Now I get 4,200 taka ($51) per month which should be raised to at least 6,000 taka," she said. "I spend almost one-third of my wage for hiring a one room shelter while the prices of all daily necessaries are going gone up. Unless our pay is raised accordingly, there will be more unrest."

Salma Begum, 35, added: "I have three children and my husband is a rickshaw puller. Together we earn about 6,500 taka ($80) a month but still we are in debt, often borrowing from friends."

Bangladesh's 4 million garment workers are mostly women, who work 10-15 hours a day, six days a week.


Some factory owners employ thugs to put down protests.

In April, labour activist Aminul Islam was found murdered and his body bore signs of torture. No one has been arrested.

Human Rights Watch said the killing raised the possibility of government involvement because Islam had been detained and tortured by security officials in the past.

Officials dismissed the suggestion.

"If anyone blames the government for his death, it is unfortunate. Why should the government do it?" said Kamal Uddin Ahmed, additional secretary in the ministry of home affairs.

"However, we understand that until we could find the culprits, it might have some negative impact on readymade garment exports."

The U.S. ambassador to Bangladesh, Dan Mozena, said Islam's killing was "an issue of considerable concern".

"Many companies' representatives told me about their concerns about buying from Bangladesh," he told reporters in July, adding that their reputations were at stake because of concerns over workplace safety and a crackdown on labour activism.

"They told me they want to buy more from Bangladesh. But...these companies will not risk their reputation," the envoy said.

Swedish budget fashion firm Hennes & Mauritz (HMb.ST), which calls Bangladesh an important purchasing market, said it was worried but would not comment directly on the likelihood of pulling out of the country.

"We take the unrest seriously and continue to work to strengthen textile workers' rights," said Helena Helmerson at H&M's corporate social responsibility department in an e-mail.

"We believe trade contributes to social and economic development and that our presence in the country is positive."

The company said chief executive Karl-Johan Persson met Prime Minister Sheikh Hasina this week and called for increasing the minimum wage and also for annual wage reviews for workers in the country's textile industry.

"We want to see a stable market in which people are treated with respect, and where the workers are properly compensated by their employers," Persson later told reporters.


While no major garments retailer or wholesale manufacturer has moved out of Bangladesh, some may be inclined in that direction.

"We don't like violence, we want peace to carry out our business here," said Nam Ho Cho, managing director of Bangladesh-Korea joint venture company, Hyun Apparel Limited, which sells its products to the United States.

"Every time there is violence, buyers phone me and I have to cool them down by saying 'Don't worry, we will manage. Shipment schedules will be met.'"

A country manager for an international brand added: "If we shift our order elsewhere, like China or Sri Lanka, then we have to pay 25 cents more for per unit of bottom denim (pants).

"But if we consider the ultimate consequences of such unrest in Bangladesh, then the cost is higher than 25 cents. In that case we will look for other options, instead of Bangladesh."

Wages are fixed by factory owners, the government and unions. However, many factories do not keep to stipulated wages.

Despite calls to adjust wages in line with inflation, the government has said it had no immediate plan to review the wage structure -- rather it will make available cheaper food to the workers.

Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh, a leading think tank, said although garment factories had been successful in Bangladesh, there was a danger of buyers looking elsewhere.

"Wages have to rise, commensurate with productivity and inflation. There is also much to be done on improving working conditions. This is improving slowly, as more and more factories reach compliance standards," said Sattar.

(Additional reporting and writing by Anis Ahmed; Editing by Raju Gopalakrishnan)

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