The Next Hot Spot
‘While China is starting to lose its attractiveness in this realm the sourcing caravan is moving on to the next hot spot,’ McKinsey’s Apparel, Fashion and Luxury Practice division reported in 2011. The ‘realm’ is the readymade garments industry and the ‘next hot spot’ is Bangladesh.
‘Bangladesh’s ready-made garments landscape: The challenge of growth’ is based on interviews with chief purchasing officers in European and US clothing companies, their Bangladeshi suppliers, and ‘extensive field work’. It outlines the recent growth of the Bangladeshi garments industry, ‘describes the hurdles that exist for buyers’, and suggests what the Bangladesh government, suppliers and buyers can do ‘to overcome the challenges of growth in Bangladesh’s sourcing market’.
The report describes an industry in transition. ‘Top line results’ are under pressure because of the financial crisis, and ‘the end of a 15-year long apparel sourcing deflation is squeezing the profitability of buyers’: i.e. the price of raw materials and wages in the Far East – in coastal China, in particular – are going up. The report expects wages in Bangladesh to go up by 30 per cent by 2014, but this doesn’t make it less attractive; Bangladesh has more factories and available workers (3.6 million out of a workforce of 74 million) than Indonesia, Vietnam or Cambodia. Bangladesh is one of 49 Least Developed Countries that pay no duty on exports to the EU. The single biggest importer of garments made in Bangladesh is Germany.
McKinsey lists the risks, according to Western brands, of getting clothes made in Bangladesh: 1. Infrastructure (it’s poor). 2. Compliance (with local safety standards, which need to improve, and the scrutiny of NGOs). 3. Performance (wages will go up and the workforce is unskilled). 4. Raw materials (they mostly have to be imported). 5. Economic and political instability (mainly the latter).
In 2012, more than 100 workers died in a fire in Ashulia, an industrial district to the north of Dhaka. Some of them died jumping out of the windows, unable to escape through the inadequate exits. Sheikh Hasina, the prime minister, was quick to mention arson aimed at undermining the garment industry (by agents of an enemy power?). No one has blamed ‘subversive activities’ for the collapse of the factory in Rana Plaza, in Savar – about 20 km north-west of Dhaka – on 24 April. Bodies are still being discovered in the rubble – 500 so far and the number keeps rising – and so are the labels of Western clothing companies. The top four storeys violated the local building codes and the foundations were poor. There are reports that cracks appeared in the walls the day before the building collapsed but workers were ordered to carry on. The factory’s owner, Mohammed Sohel Rana, went on the run but the Rapid Action Battalion caught him near the Indian border and flew him back to Dhaka in a helicopter.
The RAB is one of a number of security organisations implicated in the disappearance and murder of Aminul Islam, a union organiser in Ashulia whose tortured corpse was discovered in April 2012. Formed in 2004, the RAB is a paramilitary force that describes itself as an anti-crime and anti-terrorist unit – others have called it a death squad. It has received ‘human rights training’ from the British and US governments.
Retailers’ PR divisions have lined up to say how bad they feel about the deaths in Bangladesh, as if that’s going to change anything (though the companies involved certainly owe compensation). The EU is threatening to withdraw Bangladesh’s preferential trade arrangements; since Aminul Islam’s death, the AFL-CIO has been campaigning for a similar deal to end in the US. This would be ruinous for Bangladesh’s economy now that 80 per cent of its export income – and more than 10 per cent of GDP – comes from clothing. It would do nothing to stop the sourcing caravan moving to any of the other 48 countries on the EU list and new disasters occurring.
At the turn of the 20th century, jute was Bengal's only manufacturing industry; it was grown in the east and processed mainly in the west. Today, Bangladesh still grows 90 per cent of the world's raw jute (and India is still the largest producer of woven jute), but only 25,000 workers are employed in the mills. In the medium term, increasing the production of a biodegradable material and finding new uses for it might be a promising way to stop relying on the readymade garment industry. It wouldn’t solve the problem of poor working conditions, however, which are at least as bad in the jute mills as they are in the T-shirt factories.
There are regular general strikes throughout the country, but they are organised by each of the two main parties when the other is in power; there have been more stoppages related to the war crimes trials this year than there have been over pay and conditions. Independent trade unions (independent of the main political parties, that is) are strongly discouraged from organising; it’s hard to imagine this changing while 10 per cent of MPs are factory owners. Rather than pulling out of Bangladesh, Western retailers – and governments – would do better to support the rights of the workers where they’ve parked their caravan for now. But that would mean making smaller profits.