For years, fashion companies insisted that suppliers comply with social standards, only to leave factories and their workers to their fate by cancelling orders during the coronavirus pandemic. More than a thousand clothing makers in Bangladesh are currently struggling through this bitter reality with their Western clients.
For many consumers, Bangladesh still evokes terrible memories of Rana Plaza - of a place where seemingly irresponsible factory owners and Western buyers produce cheaply by exploiting workers. In recent years, a great deal of commitment has gone into improving working conditions in Bangladesh, as public concern over the welfare of millions of workers who sew in these factories mounted. Mostafiz Uddin has contributed to the changing image of Bangladesh. He himself is a denim producer from Bangladesh, founder of the denim fair Bangladesh Denim Expo and above all a passionate, internationally respected activist looking to build a more ethical and sustainable clothing industry. However, his notoriety has not prevented him from having the same threatening experiences in the current coronavirus crisis that many other factories have dealt with.
Mr Mostafiz, what is the current situation of the clothing industry in Bangladesh?
In the wake of the Covid-19 pandemic, brands and retailers cancelled orders, which had already been produced or were at different stages of production. Some brands and retailers delayed payment for goods that were shipped to them by manufacturers and others demanded arbitrary discounts – all these behaviors of brands and retailers put the apparel factories in Bangladesh at death throes.
What does that mean exactly? How many companies and workers are affected?
According to the data of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), a total of 1150 garment factories in the country have had to cancel or suspend orders worth 3.18 billion US dollars, affecting around 2.28 million workers. As a result of order cancellations and suspensions, 100 garment factories in Bangladesh have been permanently closed.
Unfortunately, the situation has not improved since the worldwide pandemic outbreak in March. The government of Bangladesh provided an economic stimulus package of four billion Taka (ca. 42 million euros) from which the factories took out bank loans with 2 percent interest to pay the workers’ wages for the last three months. On one hand, the brands and retailers have still not received the orders or released payment and on the other hand, no new orders are coming into the factories, which puts the livelihoods of tens of thousands of workers at risk. The President of BGMEA recently expressed her worries that in this circumstance, the factories may have to lay off 50 percent of the workers this month.
Is there any kind of social system supporting workers in their lives?
About 4.1 million workers are employed in the apparel industry of Bangladesh, among which 70 percent are women. The employment in the sector has contributed to the empowerment of women and reduction of poverty in the country. Unfortunately, there is no social system supporting the lives of the workers if they lose their jobs, nor is there any safety net that exists globally to support the 60 million apparel workers employed across the world.
The global apparel industry represents a dynamic sector in global trade, offering the opportunity for development and employment to impoverished areas of the world. There is no safety net for the apparel industry, there is no global bailout from international governments for our sector, as there was for the banking institutions following the 2008 financial market collapse. The impact of the constriction in the industry will be universal and, it pains me to say, was felt most by the most fragile members of the apparel community – the workers, who rely on their salaries to survive and to provide for their immediate dependents.
As a denim manufacturer yourself, how is the situation at your company?
The Covid-19 pandemic has hit my factory Denim Expert Limited hard. The factory incurred orders cancellation/suspension worth about 10 million which has put it in a deep crisis. The first, most profound crisis is the question of how factories should pay workers’ salaries when orders from brands and retailers are cancelled? If workers do not receive their salaries at the expected time, this will directly impact their livelihood and that of their immediate dependents. Though the factory was closed for about a month as safety precaution against the Covid-19 spread, I provided full salaries to my workers and employees for the months of March and April, as well as festival bonuses for Eid-ul-Fitr (the festival of breaking the fast immediately after the month of fasting Ramadan) on May 25. I cannot throw my workers into the streets as they are dear to my heart. As long as I can arrange two square meals for my family, I will arrange the same for them. But I am also not sure how long I can survive!
What is the second crisis?
Secondly, the cancellations and postponements have a direct effect on the cash flow of the factory, which in turn limits our ability to pay the suppliers of fabrics, ingredients and raw materials from whom we have sourced our materials to produce our orders.
Thirdly, the bank is blocking factory accounts from opening new letters of credit (LC) as the previous LCs have not been settled with due to order cancellations and non-payments. If the factory cannot open new letters of credit for fabrics and other raw materials, they will fail to generate new orders with other customers.
Last but not least, factories are even struggling to pay their utility bills, which is causing embarrassment and deteriorating relationships with the concerned authorities.
You are a well-known person in the global denim industry, does this help at the moment?
I tried to mobilize my network in the outbreak of the pandemic to make everyone realize that during this crisis, collaboration and cooperation among buyers and manufacturers is more necessary than ever before, as buyers are affected by the pandemic in the same way as manufacturers. Through conversations with the global media, including yours, I also raised my voice against the ill-purchasing decisions of the brands and retailers that have put the manufacturers at death throes and jeopardized the lives and livelihoods of millions of workers. The pandemic has exposed the flaws and fragility of the system of the global apparel business. If the system is not changed for the benefits of all, any individual cannot survive. For this very reason, my reputation did not yield any help for me.
The same brands which demanded more Corporate Social Responsibility are now refusing to pay. What does this mean for your relationship with your customers?
Actually, this is the time to practice the sustainability that we have been preaching for so long. The main pillar for sustainability are the people. If the lives and livelihoods of the people (workers) are not secured, there is no meaning behind sustainability. It’s really unfortunate that brands and retailers have put aside the relationship and trust that has been built and grown over the years. They have not even thought about the workers who served them during this time.
Is it possible to sue the Western brands which are not paying or cancelling orders?
As I mentioned earlier, the current system of the global apparel industry is full of flaws. It’s a buyer-dominated industry where manufacturers have little to say. The industry supply chain, from cotton to cargo, is scattered across the world. But there is no global authority to which any party in the supply chain who has been harmed can appeal. The western law courts are unknown territory for manufacturers. They neither have the money nor networks to win in the legal battle against buyers.
Are you going to change your strategy? Do you think you have to change the way you are doing business?
The current payment system in the clothing industry requires a complete overhaul in order to learn from this pandemic situation. Previously, a manufacturer had to rely on an order from a customer to execute an order. Only on the basis of the sales contract does the manufacturer receive a loan to procure the necessary raw materials. But the shortcomings in the payment system were severely exposed after the pandemic, as customers could withhold payments or cancel orders due to the exceptional circumstances, and the manufacturers alone bore the financial risk without the security of a bank guarantee. That needs to change. The business between buyers and manufacturers should be done via letter of credits in the period after the Covid-era. With a bank guarantee, this system offers manufacturers some financial security in that they are guaranteed payment if the goods they produce meet customer requirements.
This article was originally published on FashionUnited.DE, translated and edited.
Photo Credit: Mostafiz Uddin / Denim Expert