Bangladesh garment factories to western buyers: You can rely on us

The world’s second largest garment producer has been rocked in recent weeks by protests and instability triggered by anger over grim employment prospects. The turbulence followed large-scale wage protests last year that were marked by violence.

This time around, an industry body for the $38 billion clothing-export sector estimates the exporters have lost six days of production because of unrest that erupted in mid-July, though other factory owners say the loss is closer to twice that much time.

“It is not a massive body blow by any means," said Miran Ali, vice president of the Bangladesh Garment Manufacturers and Exporters Association.

On Sunday, deadly clashes killed at least 85 people, after weeks of tumultuous demonstrations that led the government to impose curfews and cut off the internet. Prime Minister Sheikh Hasina resigned and fled the country. Police have left their posts, and businesses associated with the old government were targeted by mobs.

Muhammad Yunus, a Nobel laureate and economist who pioneered microcredit, took charge of a caretaker government Thursday and appealed for calm. “We are one family," he said.

Congestion on roads and a minimal police presence mean some factory owners have decided to delay shipping finished clothes. A small number of factories were burned by arsonists during the turmoil.

With the situation now stabilizing, many factory owners say they have managed to get their factories back up and running, and workers have been eager to return to work and earn their paychecks.

With Yunus in charge “the global image of Bangladesh will be of a country that is being reformed," Ali said. “I’m expecting a net benefit."

But industry analysts say that the combination of recurring bouts of instability, higher wages and long-term problems—such as Bangladesh’s infrastructure being significantly worse than rivals like China and Vietnam—are gnawing at the country’s competitiveness.

Last October, hundreds of factories paused operations after a worker campaign for higher wages descended into violence. Garment workers eventually settled for a 55% rise in the minimum wage to around $113 a month—far less than worker advocates sought—but a significant boost nonetheless. In December, when the new minimum wage took effect, workers making clothing for Swedish giant H & M received a wage of $138, a 30% bump to what they received the month before, according to the company.

Bangladesh’s garment exports to the U.S., its top market, declined 11% in the first half of this year, compared with the first six months of 2023.

The 2024 Fashion Industry Benchmarking Study, a survey of about 30 major U.S. fashion companies, released in July found that 48% of major U.S. fashion companies intended to increase purchases from Bangladesh over the next two years, down from 58% in 2022.

Sheng Lu, a professor of apparel studies at the University of Delaware, said Bangladesh’s higher minimum wage and shifting consumer interest toward trendier items produced elsewhere had cut into the nation’s market share. Meanwhile, another low-cost rival, India, is gaining, thanks to its ability to produce its own fabric, which saves production time.

Bangladesh faces “some really tough situations right now," said Lu, who helped conduct the benchmarking study.

From late July into August, shipping clothing from Bangladesh was far from smooth. Government curfews forced ports to work with skeleton staff. Some ships waited for up to five days to load and unload at the Port of Chittagong.

Maersk this week said container movement continues to be slow, with fewer officials on site at the port.

Clothing brands are staying nimble. During an earnings call on Tuesday, Bracken Darrell, the chief executive of VF Corp, an American company that owns brands such as North Face and Vans, said it is facing some disruption in Bangladesh, where about 15% of its production is based. Darrell said he was fairly confident that the situation would improve, but he added that orders could be shifted elsewhere if necessary.

An H&M spokeswoman said that according to the company’s latest information, factories are gradually opening again. She said H & M, one of the biggest buyers of Bangladeshi garments, has told suppliers it wouldn’t seek to claim discounts on goods that are delayed, a typical practice in the industry.

The period between June and September is a crucial time in Bangladesh for the industry, as factories rush to fulfill orders for the back-to-school season and the December holidays.

A 2013 factory collapse at Rana Plaza killed more than 1,000 workers, putting the spotlight on poor working conditions and causing a wave of worker protests around Bangladesh. While safety conditions have improved markedly since then, brands continue to treat Bangladesh as a sensitive place from which to source, even as it has emerged as a top garment exporter.

A critical question for retailers is whether the political situation will remain calm.

The latest round of unrest, which came after elections in January that were boycotted by opposition parties, has seen some of the country’s deadliest violence in years. More than 300 people have been killed after clashes intensified around mid-July.

Anger is still simmering toward Hasina’s Awami League over its autocratic rule, while student protest leaders and political parties are likely to differ over the road map to elections. If the instability continues, said Lu, it “surely will raise concerns about sourcing from the country."