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What is the cost of being fair?

  • Published at 09:41 pm July 8th, 2019
What is the cost of being fair?
How much would you pay? Bigstock

It is time to start valuing ethically made apparel

Recent figures from the Office of the Textiles and Apparel (OTEXA) in the US have shed an important light on the prices received by garment manufacturers around the world. Perhaps surprisingly, the lowest paid are Chinese manufacturers who were received $2.35 per unit or per square metre equivalent (SME) in the US market in 2018. 

Ethiopian garment manufacturers were the next lowest, with manufacturers there receiving $2.45 per square metre. This latter figure is no great surprise -- Ethiopia is a relative newcomer to the market and there are rumours that apparel importers from there face logistical challenges getting the product out of the country; this is therefore reflected in relatively low unit prices.

More of a surprise, and disappointment, is that Bangladeshi exporters received just $2.79 per square metre and, while this figure showed that at least they are not at the bottom of the list, they have a long way to go. For instance, Turkish exporters were paid the highest prices at $7.38, Malaysian manufacturers fetched $5.37, Myanmar US$3.08, and Vietnam US$3.28. All above Bangladesh -- but why, and what can we, as an export-focused nation, do to address it?

A key thing to consider here is that these figures show that, in many ways, Bangladeshi garment manufacturers are still paying a heavy price for Rana Plaza. This becomes more apparent when one considers that unit prices for apparel imports to the US from Bangladesh actually fell by 7% between 2014 and 2018 and by 3.6% from Bangladesh to the EU over the same period.

The Rana Plaza tragedy occurred in 2013 and Bangladesh is still paying the price six years later. There is little to be gained in going over the rights and wrongs with this. This is a global market and, ultimately, the power dynamics of demand and supply will always hold sway and influence pricing.

Relatively low prices received by Bangladeshi garment manufacturers suggest that there is generally a glut of supply over demand -- this is very much a buyers’ market. Brands can drive a hard bargain on price because if one supplier won’t meet the desired unit rate, there is always another one that will.

How can we change this? 

One factor here is that Bangladesh needs to move on in terms of the products it supplies. Bangladesh has established itself as a global centre of excellence for the supply of various apparel staples -- which is a positive in many ways. 

But when there are so many companies competing in this one space, unit prices will invariably be impacted. The only way to change this picture is to evolve and innovate; to think about added value and look at ways to supply the market products which cannot be found elsewhere. Bangladesh suppliers need to think about where their niche lies.

Another factor is productivity. If you want to boost value, increase productivity -- any economist will tell you that. And if you want to boost productivity, you need to invest in research and development, training, technology, and innovation. Automation is also integral to that, as is the internet of things. Invest in all of the above and, while you might not increase unit prices, you will certainly increase margins, which is surely what the whole industry needs to be working towards.

The final two issues to consider are collaboration and factory safety and, in many ways, these two issues go hand in hand. Low-unit prices received by Bangladeshi suppliers are an industry-wide problem and, as such, need joined-up solutions. As an industry we need to be more aggressive in the way we negotiate prices with foreign buyers. We have a sophisticated industry, top class infrastructure, and robust logistics support. 

We also have the safest garment manufacturing industry in the world -- yes, that’s right. The safety improvements which have been made to the Bangladeshi garment industry since Rana Plaza have been discussed at length, so there is no need to go over those here. What should be pointed out though is that these improvements have come at a cost to manufacturers and there is no reason whatsoever why some of the cost of improvements in terms of how a product is produced should not be passed down the supply chain -- not all the costs, but a proportion.

When buyers purchase from Bangladesh now, the “Made in Bangladesh” stamp provides with it certain reassurances with regards to safety which you will not find from our competitors. This is a source of genuine added value.

Of course, Bangladesh still has some way to go in terms of safety but it is certainly further down the road in this area than many competitors.

Back, then, to this issue of collaboration.

Factory owners need to collaborate and unite by saying no to what they perceive to be unfair prices. And they need to agree as a whole to only sell their products for unit prices which allow them to produce in an ethical and sustainable manner. 

Individuals can talk about the need to agree a minimum price but talk only achieves so much. We all need to be singing from the same hymn sheet on this issue and perhaps an industry-wide directive needs to be issued by, for instance, the BGMEA. 

After all, it only needs one manufacturer to sell at a price below an agreed rate and the whole pack of cards comes crashing down. As an industry, we are only as strong as the weakest link in the chain. Sadly, at the moment, the weakest link is dictating prices for all of us.

Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). He can be reached at [email protected]