The country’s economy feels the pinch of political unrest as businesses transport and all other aspects of daily life almost grind to a halt due to long spells of anti-government strikes and blockades. For the $20bn-apparel industry, which employs more than 44 lakh people and accounts for nearly 80% of the country’s total exports, the situation becomes worse as it is a fully export-oriented industry.
In the present situation, Md Atiqul Islam, president of the Bangladesh Garment Manufacturers and Exporters Association of Bangladesh (BGMEA), talks about the state of the readymade garments industry and a possible way out in an exclusive interview with Dhaka Tribune.
What is the impact of the ongoing spell of political unrest on the RMG industry?
No doubt the situation is serious. Unhealthy politics has made healthy factories sick. It means people will become jobless. The spinal cord of the RMG sector is about to break as it has already been hit hard by labour unrest, fire incidents and sabotages. It is now facing order cancellations and rising transport costs, which have skyrocketed by more than 30% due to expensive air shipment.
Exporters are failing to meet the lead time due to transport problems.
To rub salt to our wounds, some buyers are even imposing penalties in case of delayed shipments, and cutting prices of products by demanding discounts.
Many factories have stopped production as they are unable to bring imported raw materials from Chittagong port, and many exporters cannot afford shipment by air.
Small factory owners and newcomers will face bankruptcy if they fail to deliver goods and pay bank interests on time.
Also, the cost of production increased around five-folds in some cases during the blockades. Investment is at stake. Moreover, the taka has become stronger against the US dollar, making business costlier.
So, we are falling from the frying pan into the fire.
Are buyers abandoning Bangladesh?
You see, we owners and buyers recently had a meeting with the labour and employment minister. This is a clear message on how much we are concerned about the political unrest. Buyers have already started to look for new out-sourcing countries. This is very bad news for us.
Some buyers recently mailed me. They said there was nothing a buyer could do to protect his business from acts of terrorism, sabotage and political instability, other than reevaluating the risk factors of the production order to assess the practices in place, take out a world map and review it country by country, and most probably, redistribute the business.
If the political unrest lingers, what might happen?
Buyers will not come to Bangladesh as they cannot wait for long. Then, factories will be closed down … workers will become unemployed. Entrepreneurs will go bankrupt. Large number of unemployment means social unrest. The nation will slip into crisis.
How do you see the recent labour unrest and sabotage in factories?
If you look at the pattern of unrest in the apparel industry,you can see it occurs in a certain area. Some (people) are trying to fish in troubled water to ruin our industry. Some NGOs are instigating the innocent workers to serve someone’s interest. The government should take this into account seriously and immediately, and save us as well as the country’s economy.
Will Bangladesh lose its competitiveness after implementation of the new wage board for workers?
Of course, it will lose competitiveness. Production costs will rise by up to 40%, which might force 30% of factories to shut down. Buyers are reluctant to cut down on costs.
It is also true that we have been getting negative international attention since the Tazreen fire, Rana Plaza building collapse and Standard Group arson incidents, and it has just scaled up beyond tolerance.
Everybody needs to know that most of the manufacturers are having extreme difficulties with paying the increased wages, as most of the brands have not been agreeing to pay the upcharge.
Who will bail the sector? The government? The buyers? The banks?
What are you doing to come out of the present situation?
If you take a look at our recent activities, you will understand this. We have taken to the street. We will do business and politicians will do politics. Why should we form human chains? Why should we be on the streets?
Our requests and appeals have gone unheeded. This is very concerning for the nation. Politicians should bear in mind that if the economy collapses, they will fail to run the country. That is the reality.
What is a permanent solution for running business smoothly?
The bottom line is that political stability is a prerequisite for putting everything on track. Political unrest, strikes and the lack of ease in doing business are major concerns for entrepreneurs and buyers. If the supply chain is disrupted, pressure mounts every day.
It is high time for our politics to be cleaned up this has become urgent for now and the future.
The government, the opposition parties, suppliers and buyers must work together to realise the potential of Bangladesh’s RMG market.
Infrastructure constraint, including transportation and energy supply, is the single largest bottleneck hampering our garments industry. This issue will become even more important in the future, since buyers want to source more fashionable products with shorter lead times.