Bangladesh's readymade garment (RMG) manufacturers are facing increasing challenges due to lower prices set by global brands. RMG manufacturers warn that the price deduction could make it harder for them to maintain sustainability and comply with labour rights.
The manufacturers said that further price cuts could disrupt daily factory operations. Factories need to maintain sustainability to meet buyers' demands and stay competitive. If prices continue to drop, manufacturers will have to bear the full burden, which may lead them to operate at a loss.
Price reduction in US, EU markets
The RMG manufacturers said that the US buyers offer around 5%- 8% lower prices than previously, while the EU buyers offer 6%- 7% lower prices.
According to the Office of Textiles and Apparel (Otexa), from January to September 2024, the price of Bangladeshi-made cotton knit sweaters declined by 9.2% in the US market, Bangladesh's single largest export destination compared to the same period last year.
Moreover, the data also showed that the price of M/B cotton woven trousers fell by 8.4%, M/G cotton woven trousers declined by 4.8%, M/B cotton woven shirts declined by 4.7%, and the price of cotton knitted T-shirts plunged by 4.5% in the same period.
According to Eurostat, the European Union's statistical office, the price of cotton knit T-shirts declined by 8.36% in kg from January to August 2024 in the EU markets, the largest market for Bangladeshi shippers.
Eurostat also stated that the price of M/B cotton woven trousers declined by 7.24%, cotton knit sweaters declined by 6.13%, and W/G cotton woven trousers fell by 6.97% in the same period.
Impact on wages
Bangladesh fixed the minimum wages of RMG workers last year. The manufacturers also accepted the workers' 18-point demands during the post-uprising unrest in the RMG sector.
Mohiuddin Rubel, former director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and additional managing director of Denim Expert Ltd said that manufacturers are being pushed between a rock and a hard place.
“We don’t receive fair prices; while having to bear all production costs and pay workers' wages.
“This pressure has driven many out of business; some have even left the country. To survive, factories accept orders at meagre margins, often at discounted rates. Most are barely breaking even,” he added.
He also said that whenever the government fixed a new minimum wage, they were bound to comply with the recommended wages, even if it meant taking loans to pay wages and benefits.
“If price cuts continue, this will severely threaten our survival,” he added.
Blow to sustainability?
Industry insiders said that as the industry expanded, the cost of doing business increased proportionally.
Over the past five years, production costs have surged by a staggering 50%. This increase stems from a combination of factors: rising wages, escalating utility expenses, and a sharp uptick in raw material prices.
Bank interest rates have also gone up, while costs like airfreight have increased exorbitantly in recent months, and factories face a constant struggle to balance operational costs without compromising competitiveness.
Mohiuddin Rubel, said: “Without a price increase, sustainability practices in factories could be disrupted. We always try to meet the demands of the buyers to maintain competitiveness. However, if the price is being reduced from the buyers’ ends, it will force the manufacturers to operate at a loss,” he added.
Hamper green revolution?
Bangladesh is the leader in the USGBC Leed green certification with 230 factories. Nine of the top 10 factories are from Bangladesh, and the highest-rated and second-highest-rated factories are also from Bangladesh.
According to industry insiders, manufacturers with green factories do not get a higher price for having green factories but a priority in bargaining.
When asked if the lower price could affect the green transformation, Mohiuddin Rubel said that fair pricing could speed green transformation up and ultimately help buyers.
“I do not say the reducing price will hamper our green transformation, but fair prices would enable us to provide them with more eco-friendly and sustainably produced products,” he added.
SM Sourcing Ltd is one of the world’s highest-rated green factories. Talking to Dhaka Tribune, Mirza Shams Mahmud, the factory's managing director, said that setting up a green factory is initially costly but cost-effective in the long run.
“Reducing prices demotivates us but we have to go with it to ensure our commitment for the environment and zero-carbon footprint,” he added.
What the manufacturers want
Rubel said the government should take the initiative to reduce operating costs, particularly energy.
“We also bear responsibilities ourselves. We must stop accepting orders at unreasonably low prices. We need to end unhealthy competition within the industry—for example, if one factory accepts $1 per unit, another shouldn’t undercut them by offering $0.80,” he added.
He also said that such practices undermine better negotiation opportunities.
“At the same time, buyers need to change their mindset. We must challenge the assumption that Bangladesh should consistently deliver at lower costs. Buyers often place higher demands on Bangladesh but offer prices 10% lower than in Pakistan, India, or Vietnam. This tendency needs to change. Ultimately, we must ensure fair pricing for the sake of sustainability,” he added.