BGMEA president says around 30 percent of orders have shifted to other countries
Published : 06 Oct 2024, 04:07 AM
Last week, the five factories of Asrotex Group, an export-focused garment manufacturing company, could only achieve 19 percent of their production target. The ongoing worker unrest is making it impossible for them to fulfil the purchase orders they have for the next three months.
The Group’s Managing Director Asadul Islam expressed his helplessness to bdnews24.com, saying that if the situation continues like this, they may have to consider closing the factories entirely.
“The workers aren’t listening to us. We have to follow their demands. We’ve declared a three-day layoff, yet the workers are demanding wages for those days too,” he said.
Asadul referred to the workers' demands as "daylight robbery".
Asrotex, which employs around 21,000 workers, exports garments worth $15 to $16 million every month. However, in September, the workers only worked 16 out of the 26 scheduled working days.
He also said that they are now taking bank loans to pay the workers’ wages. "How long will the banks keep lending us money? We’re seriously thinking about closing down the factories. If this continues, we have no other option."
This situation isn't limited to Asrotex alone.
Many other large companies in the sector are facing the same fate due to worker unrest. Amid deteriorating law and order following the change in power, worker dissatisfaction, protests, strikes, and factory closures are raising serious concerns about the future of this sector, which contributes around 85 percent of the country’s export earnings.
With production plummeting, orders shifting to neighbouring countries, revenues shrinking, and dependence on bank loans increasing, many large companies in the garment sector are now facing the risk of permanent closure.
There are around 2,800 garment factories in the country directly involved in garment exports.
On Sept 12, due to the continuous worker unrest and unstable conditions, authorities declared an indefinite closure of 86 factories in the Ashulia industrial area and a general holiday for 133 factories.
On the same day, a government press conference revealed that more than 50 factories had been shut down indefinitely. Every day, numerous factories remain closed, leading to the cancellation of garment orders.
GOVERNMENT ACKNOWLEDGES 20% ORDER CANCELLATIONS
Amid worker unrest, approximately 15 to 20 percent of garment orders have been cancelled, Labour and Employment Advisor Asif Mahmud Shojib Bhuiyan said at a press conference on Sept 12.
However, Asadul Islam, the Asrotex Group MD, expressed a greater concern beyond the decline in orders. "If things continue like this, the entire industry won’t survive," he said.
Shovon Islam, Managing Director of Sparrow Group of Industries, echoed similar concerns. His group exports garments to 40 buyer companies across 20 countries.
Shovon told bdnews24.com, “Typically, buyers assume such problems will be resolved within 4-5 days, or at most a week. But more than a month has passed without any solution. We accepted the workers' 18 demands, but they keep adding more. It’s very disappointing.”
He warned that if the situation persists, the industry will face an "existential crisis".
“To be honest, orders don’t come overnight. Orders are booked three months in advance. But we are unable to produce. What’s the use of getting orders if we can't execute them?”
Shovon further added, “For 10-20 percent of the orders, buyers have already said they don’t need them anymore. Buyers are no longer negotiating new deals.”
He also noted that while the worker unrest initially started in Ashulia, it is now "spreading to various parts of the country”.
ORDERS SHIFTING TO OTHER COUNTRIES
This fiscal year has not been favourable for Bangladesh, starting with chaos, violence, and conflicts surrounding the quota reform movement in July, which eventually led to the imposition of curfews.
For the first time, the country faced a prolonged internet blackout, cutting off trade communication with the rest of the world, and resulting in a “crisis of confidence” in the global market.
When the Awami League government was ousted amid protests, Muhammad Yunus took charge, offering hope to garment industry stakeholders due to his strong ties with the Western world.
However, that optimism quickly faded as law and order deteriorated following the power transition.
Factories were attacked, and unrest returned to the sector over control of the jhoot, or fabric waste, business and extortion. Worker dissatisfaction added the “final nail in the coffin.” Competing countries are now capitalising on this, and buyers are shifting towards them.
BGMEA President Rafiqul Islam said that approximately 30 percent of garment orders have moved to other countries.
Sparrow Group’s Shovon echoed the same concern.
He explained, “When buyers say they don’t need the orders anymore, we understand that they’ve placed those orders in other countries.”
He shared that they lost an order for 17 million garments. “Even if each garment was priced at $4, just calculate the total value of all those garments. This order would have been split among 2-3 companies, but the entire order has already moved elsewhere.”
Discussions with industry leaders reveal that the cancelled orders are being redirected to Bangladesh’s competitor countries, including India, Vietnam, Sri Lanka, Indonesia, and Pakistan.
Advisor Asif Mahmud also mentioned this issue during the Sept 12 press conference. He said, “We have already received some information indicating this shift. This is a seasonal business. Products for the market need to be prepared three months in advance, and many of those orders are getting cancelled in various places. We are noticing that businesses from certain countries are actively lobbying and making efforts to secure these orders.”
HOW MUCH WILL EXPORTS DECLINE
A major garment exporter from Ashulia mentioned that a US company, which used to place orders for 10 million garments annually, is now moving its business to another country. US buyers have marked Ashulia as a “risky zone,” indicating their lack of confidence in the region.
Faisal Samad, managing director of Surma Garments Limited, shared that repeated worker protests and factory closures have caused them losses of around Tk 9 billion.
Ananta Garments is also facing significant losses. Due to factory closures, they missed shipping deadlines, and around 1 million garments are now stuck in backlog. To meet deadlines, they will have to resort to expensive air shipments.
Since production is being disrupted, orders are being cancelled, and shipments are not being completed on time, the impact on export earnings is direct and severe. There's growing concern that the situation in the third quarter of this fiscal year may be even worse.
In the 2022-23 fiscal year, Bangladesh earned $55.55 billion from exports, with $46.99 billion coming from garment exports alone – representing 84.58 percent of total export earnings.
The peak time for the garment sector is from January to March when sales of Bangladeshi products increase due to holidays and travel seasons in the US, Europe, and other Western countries.
To secure orders for this period, samples need to be sent before the August holidays. However, the unrest that started in July led to factory closures, disruptions in import-export operations, and internet blackouts, delaying or halting many sample shipments.
Exporters explain that the initial “trust crisis” among foreign buyers due to the communication blackout would have already taken a toll. Now, the worker unrest has further immobilised the sector.
Shovon Islam estimates that exports could decrease by up to $6 billion during the January-March period due to this situation.
Moreover, the 30 percent order cancellations mentioned by exporters suggest a similar decline in exports. If the current orders are not produced or shipped on time, the loss could be even greater.
HOW THE UNREST BEGAN
Amid the worker unrest in places like Gazipur and Ashulia, former BGMEA president Redwan Ahmed said during a "special general meeting" at BGMEA's Uttara office on the evening of Sept 23 that the issues initially stemmed from NASSA Group.
NASA Group's Chairman Nazrul Islam Mazumder is accused of embezzling "hundreds of billions of takas" during the Awami League government’s tenure.
Redwan said, "They are creating worker unrest by not paying wages. The problem could have been contained if addressed at the beginning. Now, Nazrul and others are spending millions to incite workers to vandalise and shut down factories, aiming to destroy both the government and the industry."
Imran from Patriot Group commented that the demands put forward under the guise of worker rights are "not actually the workers' demands".
BGMEA President Rafiqul Islam alleged that "various federations and international groups" have raised 18 demands in the name of workers.
At the meeting, members decided that there would be no discussions on increasing wages or offering a 10 percent annual increment at year-end.
Shovon Islam of Sparrow Group added that a group called “Chakri Chai”, or We Want Jobs, has emerged. "Around 200-300, sometimes even 1,000 people gather together. A few enter the factories asking for jobs, while others outside throw stones."
Shovon said, "In the last 40 years, I’ve never seen anything like this in the industry. Usually, a few people come seeking work, and if there's an opportunity, factory owners hire them."
However, raising the question of who is behind the Chakri Chai group, he added, "Surely, someone is funding them."
WHAT ARE THE WORKERS' LEADERS SAYING
Garment workers’ leader Nazma Akter refuted the claim that the demands are not from the workers, calling it "untrue”.
Speaking to bdnews24.com, she said: “What are the workers’ wages? How are they supposed to survive in the current high-cost market?”
However, she acknowledged that there are instances of "provocation" behind recent protests
She said, “During the previous government, politics seeped into every corner. Corruption exists, and workers have become entangled in various political agendas. Employers sometimes bribe workers to manage them, which is diverting the movement into other directions.”
Jolly Talukder, general secretary of the Garment Workers Trade Union Centre, highlighted the “legitimacy” of some of the workers' demands. “Several factories weren’t paying outstanding wages. A part of their protest is genuine.”
She also suggested that the involvement of owners associated with the previous government could be a reason behind some of the unrest. “Protests are more intense in factories connected to those with ties to the former government. Corruption, bribery, and the jhoot business are escalating the unrest,” she said.
Jolly called on the government to take action for the workers who have been injured or killed while participating in the Anti-discrimination Student Movement. “The first shot fired by this government was at the workers. There must be an investigation, and those responsible should be punished. If this sector remains unstable, it will harm the country and exports.
“Those associated with the previous government are trying to put the current government in a difficult position. So, the government must take strong measures to stabilize this sector.”
WORKERS' DEMANDS
In an effort to manage the current situation in the garment sector, a meeting was recently held at the Ministry of Labour and Employment, attended by worker and employer representatives. The meeting, chaired by Secretary AHM Shafiquzzaman, included representatives from various labour organisations and the BGMEA president, along with industry entrepreneurs.
During the meeting, the workers presented 18 key demands to the factory owners, which include:
>> Reconstitution of the Wage Board to reassess and adjust the minimum wage for workers
>> Immediate implementation of the 2023 government-declared minimum wage in factories where it has not yet been enforced
>> Reform of labour laws, including revisions to Section 27 and other provisions
>> Compensation equivalent to one month’s basic salary if a worker is released or terminated after completing five years of service
>> Payment of all outstanding wages immediately
>> Increased allowances for attendance bonuses (Tk 225), tiffin bills (Tk 50), and night shift bills (Tk 100) across all factories
>> Implementation of provident funds in all factories
>> Minimum 10 percent annual increment on salaries
>> Rationing system for workers
>> End the BGMEA-controlled biometric blacklisting and transfer control of the biometric list (fingerprint access system) to the government
>> Withdrawal of all politically motivated and harassment-related cases
>> Measures to stop monopolies in the jhoot business
>> Equal employment opportunities in factories, ensuring no discrimination between men and women.
>> Compensation and medical support for workers injured or killed during the “July Revolution”
>> Proper investigation and action for the welfare of those affected by the Rana Plaza and Tazreen Fashion disasters.
>> Establishment of day-care centres in all factories in accordance with labour laws.
>> End to unjust layoffs
>> Extension of maternity leave to 120 days for female workers.