Reasons why Bangladeshi apparel would thrive Rana Plaza collapse has given Bangladesh and it apparel sector a bad name. The companies, governments as well as the media seemed suddenly waking up to a “lone cause” of fixing Bangladesh. Rallies around the world immediately after the collapse have started rebuking Bangladesh’s apparel manufacturers. And that was the time when it seemed that the country’s garment sector is doomed and the manufacturers became worried. Well, immediately after that, the local and international media had reported that Bangladesh’s apparel exports rose 16.3 per cent in June to $2.7 billion on the year, boosted by stronger clothing sales, as the low- cost country retains its allure for cost-crunching global retailers despite deadly incidents. The reports also said duty-free access to western markets and low wages have helped make Bangladesh the world’s second-largest apparel exporter after China, with 60 per cent of clothes going to Europe and 23 per cent to the United States. After the collapse, according to Indian media, Delhi thought they would gain from Bangladesh disaster, but the business insiders say that wouldn’t happen. The reason is again the country’s low production costs, in particular its cheap labour. The World Bank says that Bangladesh’s closest competitor in terms of wage is Cambodia, where garment workers get around $61 per month, but that is still 50 per cent more than the Bangladeshi wages. Even China is hugely costlier than Bangladesh. The average monthly wage for a garment factory worker is about $43, whereas in China it’s more than a $100. The BBC reported that a recent report by the accounting firm said that, with increasing labour costs, rising inflation and a strengthening currency, China was losing its foothold as the world’s lowest cost manufacturer of consumer goods, and countries like Indonesia and Bangladesh had been the biggest winners. So, the apparel industry insiders say, China is likely to gradually move away from garments business. They say China’s aim now is to grab the electronics and IT markets. The local apparel market in China is so huge that it doesn’t need to depend on its exports. They are thinking of new exportables and the Chinese garment manufacturers have started investing in Bangladesh. Take a look at this quote by Arvind Singhal, chairman of India-based retail consultancy Technopak Advisors: “The reason Bangladesh went from zero to hero in the garment sector is because there is no country with such low labour and other costs.” “No buyer is in a hurry to move from Bangladesh because Western retailers are stressed about passing any retail price increases to customers. Currently, there is no substitute for Bangladesh, where manufacturers even risk operating from rickety structures to cap costs,” he added. Wal-Mart has stood by its Bangladesh production, saying it remains an important sourcing market. H&M also said its quest for alternative manufacturers was not at the expense of Bangladesh. The foreign buyers do understand the importance of Bangladesh. And having that in mind, 17 leading US and Canadian retailers, including Walmart and Gap, have unveiled a five-year plan to improve conditions in factories in Bangladesh that supply high street stores in the west. Before this, a coalition of more than 70 clothing makers and retailers unveiled their plan for improving working conditions in the Bangladeshi garment industry. The coalition implementation plan, known as the Accord on Fire and Building Safety in Bangladesh, calls for the signatories to open their Bangladeshi factories to workplace inspections so serious safety hazards and the need for urgent repairs can be identified. The process must be completed within nine months. Also under the plan, interim procedures will be developed for factories in need of immediate remediation. If a signatory company fails to live up to the agreement, the accord includes procedures for binding dispute resolution. On the other hand, the European Union has assured Bangladesh that it would not follow the US on the continuation of the Generalized System of Preferences (GSP) facilities as far as garments is concerned. All these are very positive signs for Bangladeshi apparel sector. The international pressure is very likely to increase the capacity of Bangladeshi producers for creating a bigger impact around the world. Yes, the factories that would have poor or no compliance are likely to go out of business, but the good and big factories with sound compliance are likely to get bigger. They would get more business and are likely to open up more good quality factories. Industry insiders think this change would benefit Bangladesh immensely, as the country hopes to take its apparel exports to $40b mark soon. On the other hand, Bangladeshi manufacturers have started looking for the new markets for their products; they have started to browse for opportunities in Russia, Asia and Latin America. These regions, they say, have bigger markets than that of USA and Europe. They say they would now become more business-mongering that they over the last decade. The BGMEA is currently considering all possibilities for creating a coordination body with the government in order to keep the state of the affairs going in this sector. Therefore, the overall picture isn’t bleak; rather, with all the international attention and local initiatives, the garment business of Bangladesh is likely to pick up. –
Posted on: Tue, 30 Jul 2013 07:10:48 +0000
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