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‘Additional tariff on Bangladeshi clothing may increase apparel price in global market’

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RMG Bangladesh
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The imposition of tariffs on Bangladeshi clothing, following its transition from the list of Least Developed Countries (LDC) status, has the potential to elevate apparel prices in the global market, Mohammad Adbur Razzaque, chairman of the Research and Policy Integration for Development (RAPID) Bangladesh, said on Sunday.

Razzaque underscored Bangladesh’s significant shares in the apparel markets of the European Union and the UK, standing at 22% and 18%, respectively.

He said, “Any disruption in Bangladesh’s garment exports could hinder the immediate increase in supply to the global market. Consequently, the imposition of tariffs on Bangladeshi products post-LDC graduation is anticipated to escalate clothing prices globally.”

Presenting a study paper titled “Can Bangladesh Absorb LDC Graduation-Induced Tariff Hikes? Evidence Using Product-specific Price Elasticities of Demand and Markups for Apparel Exports to Europe” at a seminar organiSed by RAPID in collaboration with the International Growth Center, Razzaque highlighted the dynamics of the situation.

He said, “Brands currently retain a portion of Bangladesh’s Ready-Made Garments’ (RMG) duty-free benefits as profit. If Bangladesh is required to pay duties after LDC graduation, brands may be compelled to reduce their profits, resulting in an increase in garment prices.”

Razzaque urged negotiations with the European Union to preserve existing benefits even after LDC graduation.

The study paper emphasised strategies such as increasing the export of high-value added products, fostering a robust backward linkage industry, and enhancing the export sector’s capacity to cope with the potential duty shock.

The paper also acknowledged the ease with which clothing products from Bangladesh are available in the world market. Importers can readily source these products from other countries, potentially leading to a decrease in demand for Bangladeshi products.

During the seminar, Sharifa Khan, Senior Secretary of the Economic Relations Division, Tapan Kanti Ghosh, Senior Secretary of the Ministry of Commerce, and Dr. Mostafa Abid Khan, advisor of the Bangladesh Trade and Tariff Commission, shared their insights on the matter.

Buyers concerned over RMG unrest, not placing new orders: BGMEA

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RMG Bangladesh
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The apex trade body also urged the government to provide adequate security to run the garment factories amid the ongoing unrest

Foreign buyers are concerned about the ongoing unrest in the readymade garments (RMG) sector and they are not placing new orders for the time being, said Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“The damage that has happened is that the buyers are holding orders. They will not be placing new orders if the situation continues,” he said in a press conference at the BGMEA office in the capital’s Uttara on Sunday (12 November). 

BGMEA President Faruque Hassan speaks at a press conference at the BGMEA office in the capital’s Uttara on Sunday (12 November). Photo: TBS

“We are trying to explain to them [buyers] that only 5% of factories are affected [by the unrest] and we are trying to find a solution.”

Faruque also said the new wage board should become effective before the election, so that the issue of polls does not come in between. 

“We will officially inform [the government], in this regard.”

The BGMEA president said 130 garment factories are closed as of Sunday.

Pointing out that new recruitments will create an additional burden on the factories, Faruque said, “If a factory has more work pressure, it will get the work done from other factories that have less work. 

“It will maintain a balance and the overcapacity that has been created will be mitigated somewhat.” 

However, the BGMEA president could not provide any information about the amount of financial loss due to the ongoing unrest.

BGMEA seeks adequate security for factories

The apex trade body also urged the government to provide adequate security to run the garment factories amid the ongoing unrest.

Speaking at the briefing, the BGMEA president said, “We urge the government to identify those who are conspiring against the industry and take necessary measures. We also request adequate security to ensure the smooth operation of our industries.”

He further said, “We have noticed that despite the increase in wages, various factories are being vandalised in the name of movement. Following the announcement of new wages, some unidentified people unleashed destruction inside several factories.”

Expressing deep concern, Faruque Hassan said it is disheartening to witness various subversive activities surrounding the country’s RMG industry, which is already grappling with the dual challenges of global pressures and financial strain.

He said the authorities can keep the factory shut to protect the industry and assets until the workers put an end to vandalism of factories as well as the law enforcement agencies ensure adequate security.

Senior leaders of the BGMEA were present at the press conference.

Over a hundred Ashulia factories closed indefinitely following workers’ unrest

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RMG Bangladesh
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Police arrested four workers in connection with vandalism during the protests

The overall situation in Ashulia remains calm as factory authorities shut down more than a hundred readymade garment factories for an indefinite period under Article 13/1 of the labour law.

The move comes after back-to-back workers’ protests demanding a hike in the minimum wage over the past three weeks.

Meanwhile, police arrested four individuals in five cases filed against 15 named and several unnamed in connection with vandalism during the protests, said Sarowar Alam, superintendent of Ashulia Industrial Police-1.

Two female workers in front of a Ha-Meem Group factory in Ashulia read the notice that says the factory will remain shut for an indefinite period of time. The photo was captured on Saturday, 11 November 2023. Photo: Noman Mahmud

All of those arrested are factory workers, he said. 

On Saturday, most of the RMG factories around Ashulia, including those of Envoy, Ha-Meem Group, Sharmin Group and Sterling Group, had “no vacancy” and factory closure notices hanging in front of the closed entrances. 

Most of the notices were signed on Thursday, the day the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) asked its members to halt all forms of recruitment at garment factories across the country following a meeting.

Many of the workers who did not know about the factory closures were returning home after seeing the notice in front of the factories in Ashulia’s Jamgora, Chaytala, Narsinghpur and Nischintapur areas. 

“From 30 October to 9 November, the factory workers entered the premises in the morning for attendance and left without joining work. They also conducted vandalism both inside and outside the factory premises, causing significant financial damage,” one of the notices hanging in front of Sharmin Group’s Sharaf Embroidery and Printing factory in Ashulia reads. 

The factory closure notice in front of a Sterling Group factory in Ashulia on Saturday, 11 November 2023. Photo: Noman Mahmud

The notice also says it is “not possible” to continue the company activities under such circumstances, and under Article 13/1 of the labour law, the factory will “remain closed for an indefinite period,” effective from 11 November.

It also mentioned that the factory will only reopen open the overall situation becomes favourable, and the dates will be conveyed to everyone concerned. 

Sarowar Alam said there are 1792 RMG factories in Ashulia, Savar and Dhamrai. 

“Around 130 factories are currently closed, and 100 of them are in Ashulia. Other factories are open,” he said.

Sarowar said they have deployed additional police personnel to maintain the overall security of the industrial zone. 

The empty and quiet Envoy Complex in Ashulia on Saturday, 11 November 2023. Photo: Noman Mahmud

Workers still persistent in their demand

Even though the factories shut down, workers are persistent in their demands for a minimum wage hike. 

“The owners may shut down and reopen the factories whenever they feel like. But our demand remains. We demand at least Tk17,000 for the helpers and Tk23,000 for the operators,” one of the workers of a Sharmin Group factory said. 

Another worker named Rifa said, “It is not possible to survive with a salary that was set five years ago. If you cannot increase the wage, reduce the commodity prices.”

The garments sector — the jewel in Bangladesh’s export crown, with exports reaching over $46.99 billion in the fiscal year 2023 — was ravaged by protests in recent weeks centring on a hike in the minimum wage.

On 30 October, at least two people were killed and about 40 injured in massive clashes between police and ready-made garment workers in several industrial areas in Ashulia, Savar, and Gazipur.

Following the weeklong clashes, the factory owners on 1 November agreed to pay higher minimum wages to garment workers than Tk10,400, which they proposed earlier.

Global fashion retailers to increase prices for Bangladesh-made clothes

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RMG Bangladesh
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Global fashion retailers including H&M and Gap are committed to raising purchase prices for Bangladesh-made clothing to help factories offset higher workers’ wages, a US-based association representing more than 1,000 brands said.

Bangladesh is the world’s biggest garments exporter after China. This week, after deadly protests between police and factory workers, the government mandated an almost 60 per cent raise to the minimum monthly wage to 12,500 taka ($113) from December, the first increase in five years.

Factory owners had said the wage hike, which comes ahead of a January general election, would eat into their profit margins by increasing costs 5-6 per cent. Labour accounts for 10-13 per cent of total manufacturing costs, industry estimates show.

Asked if they would raise purchase prices by the 5-6 per cent that costs will rise, Stephen Lamar, chief executive of the American Apparel & Footwear Association (AAFA), told Reuters: “Absolutely”.

“As we and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases,” Lamar said in an email.

“We also renew our pleas for the adoption of an annual minimum wage review mechanism so that Bangladeshi workers are not disadvantaged by changing macroeconomic conditions.”

Low wages have helped Bangladesh build its garment industry, which employs about 4 million people. Readymade garments are a mainstay of the economy, accounting for almost 16 per cent of GDP.

Even after the increase in minimum wage, which some workers said was too little, Bangladesh lags other regional garment manufacturing hubs such as Vietnam, where the average monthly wage is $275, and Cambodia, where it is $250, data from the International Labour Organization shows.

Last month, several members of the AAFA including Abercrombie & Fitch (ANF.N) and Lululemon (LULU.O), told Bangladesh Prime Minister Sheikh Hasina they wanted workers wages to rise, and to take into account inflation, which is currently at 9 per cent. Lamar also wrote to Hasina in July.

Retailers in the United States and Europe are the main buyers of Bangladesh-made clothes. Like most consumer goods retailers, fashion companies are grappling with high inventories and a slowing global economy, where shoppers in key markets are buying less as they feel the pinch.

($1 = 110.0000 taka)

BGMEA SEEKS POLICY SUPPORT TO TACKLE CHALLENGES IN APPAREL SECTOR

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RMG Bangladesh
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Global fashion factories in Bangladesh resigned to slimmer margins prior to wage hike

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RMG Bangladesh
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Realising the potential impact of a nearly 60 per cent government-mandated wage increase, several clothing factory owners in global fashion manufacturing hub Bangladesh are seeking assistance from clients, such as H&M, to share the burden, as they are mindful of the potential hindrance that reduced sales could pose to their efforts.

Following a week of deadly clashes between garment industry workers and police over pay, the government on Tuesday said the minimum wage would rise by 56.25 per cent to 12,500 taka ($114) a month from December 1, the first increase in five years, as per Reuters reports.

A panel of factory owners, union leaders and officials agreed to the increase unanimously, said Siddiqur Rahman, the owners’ representative. Low wages have helped Bangladesh become the world’s largest garment exporter after China, but soaring fuel and power prices have added to the spiralling cost of living for people in this developing South Asian nation.

Speaking to Reuters on Wednesday, Rahman said the wage hike – which comes ahead of a January general election – could be a “disaster” for an industry that accounts for almost 16 per cent of GDP and generates more than $40 billion a year in export receipts.

Bangladesh is home to more than 4,000 factories that supply global brands ranging from fast fashion retailers such as Zara-owner Inditex and Gap Inc. to the more upmarket Hugo Boss and Lululemon.

But like most makers of consumer goods, fashion retailers are grappling with high inventories and a slowing global economy, where shoppers in key markets are buying less as they feel the pinch. That has led to a 14 per cent drop in Bangladesh’s garment exports last month.

“The timing is not good,” said Fazlul Hoque, managing director of Plummy Fashions and former president of the Knitwear Manufacturers & Exporters Association, about the wage hike.

“The industry is already struggling, order flow is slow, energy supply is not adequate and the overall economic situation is not good. In such a time, a big hike in wages certainly will be tough… but for workers, I agree it is a legitimate demand.”

Hoque said the increase would add 5 to 6 per cent to overall costs, a rise he and other factory owners have asked their clients to help shoulder by agreeing to higher rates. Labour accounts for 10 per cent to 13 per cent of their total costs. He is not optimistic, however.

“In the past, we have seen that they increase only a bit, not enough to pay the extra cost,” Hoque said. “There might be exceptions, but there are thousands of buyers, and not everyone will agree to cover the whole amount. There is no legal enforcement on the buyers.”

Last month, several fashion brands, including Abercrombie & Fitch, Adidas, Gap, Hugo Boss, Levi Strauss, Lululemon, Puma, PVH and Under Armour told Prime Minister Sheikh Hasina in a letter that they were “committed to implementing responsible purchasing practices” to enable higher wages.

“We continue to recommend that the government of Bangladesh adopt an annual minimum wage review mechanism to keep up with changing macroeconomic factors,” the letter said. In addition to the wage increase, the government has said that workers would be given a 5 per cent annual increment.

Babul Akter, president of the Bangladesh Garment and Industrial Workers Federation, urged global brands to pay more, saying: “There could be some problems for the owners to cope with the increased salaries.”

But Abdus Salam Murshedy, managing director of the Envoy Group that sells to Walmart, Zara and American Eagle Outfitter among others, said buyers were unwilling to pay the “right price, the fair price” with major economies slowing and the wars in Ukraine and the Middle East raising geopolitical concerns.

“Words from buyers are fine but when they place orders, they say there are many other competing suppliers, so you better do this, do that,” said Murshedy, who is also a lawmaker from Hasina’s Awami League party.

“The industry needs to be able to pay for its costs. If there is no industry, where will the workers work?”

BGMEA instructs its members to refrain from recruiting new workers

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RMG Bangladesh
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Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has instructed its member factories to refrain from recruiting new workers amid ongoing unrest in the sector.

During a meeting at BGMEA’s office in the Uttara area in Dhaka on Thursday night, the factories were asked to display a banner, bearing the words ‘no recruitment’, at their gates, according to local newspapers.

The violence-hit factories were advised to file cases at nearby police stations with the submission of photos and videos as evidence. The trade body also asked its members to forward copies of the cases to its senior additional secretary.

The owners of the factories were instructed to follow Section 13(1) of the labour law if workers refrain from performing their duties. The section of the law includes a ‘no work, no pay’ provision.

Over the past two weeks, the garment workers have been agitating to press home their demand for a minimum wage of Tk 23,000. The unrest in the RMG hubs led to a temporary closure of many factories.

On Tuesday, the Minimum Wage Board formed by the government for the export-oriented industry framed new wage structure at its 6th meeting with the presence of sector stakeholders.

The board fixed garment workers’ minimum wage at Tk 12,500 on an increase of 56.25 per cent over the present monthly pay.

RMG buyers urged to raise prices commensurate with wage hike

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RMG Bangladesh
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The apparel apex body, BGMEA, has urged the global brands, retailers and their representatives in Bangladesh to adjust the prices of all goods to be shipped from December next commensurate with the wage hike announced on Tuesday.

On the following day, Bangladesh Garment Manufacturers and Exporters Association President Faruque Hassan in a letter to the buyers said, from now on, all the business negotiations and deals will have to adhere to the new wage policy.

The labour ministry set the new minimum wage at Tk 12,500 as the gross salary for grade seven workers, a 56.25-percent increase of the gross wage with a 63.41- percent rise in the basic wage.

The new minimum wages came at a time when the global economy is passing through an unprecedented time, along with the local economy, said Mr Hassan.

“The local RMG industry is feeling the heat of this crisis, especially with soaring inflation, as the cost of all our inputs like fuel, gas, electricity, transportation has increased significantly including.”

From the first of July this year, the Bangladesh Bank has increased the interest rates on loans, making trade and investment financing more costly.

The raise in the minimum wage, especially the 63.41 per cent hike in the basic wage, leads to higher benefits for the workers in terms of overtime, earned leave encashment, festival bonus and other allowances, he said.

The implementation of the new wage structure would exert a huge financial impact on the factories, he said, adding that this will be challenging for many of our factories to implement the new wage structure in the current economic and financial circumstances.

“However, ensuring decent living of the workers is also a top priority for us, as well as for global brands and retailers since we have accepted the new minimum wage, we will ensure implementation of it, and we need your support in terms of responsible purchasing practice,” the BGMEA president said.

In a letter to Prime Minister Sheikh Hasina earlier on October 13 last, a total of 15 US brands and retailers requested for a transparent minimum wage review that involves all stakeholders and that does not lead to any retaliation.

In the letter, they acknowledged that apparel brands and retailers sourcing in Bangladesh have a role to play in enabling the recommendations and added: “We are committed to implementing responsible purchasing practices to fulfill that role.”

The brands include Adidas, Gap Inc, Under Armour, Patagonia, Burton, Hugo Boss, Abercrombie & Fitch, Amer Sports, AEO Inc, Levi Strauss & Co, lululemon, SanMar, KMD Brands, PVH Corp and Puma.

US State Dept voices concern over violence against RMG workers

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RMG Bangladesh
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The US State Department has expressed concern about the deaths and ongoing “repression” of apparel workers and trade-union activists demonstrating for a review of the recently announced wage hikes.

The State Department also called on the government to ensure that workers are able to exercise their rights to freedom of association and collective bargaining “without fear of violence, reprisal or intimidation”.

Like in the previous days, ready-made garment workers on Thursday took to the streets over pay, leading to clashes with law enforcers.

After the death of a female apparel worker on Wednesday amid violent protests, the flaring-up agitations in Savar and Gazipur on Thursday also left production suspended as many factories opted for indefinite closure.

Issued on Wednesday, the State Department statement mentioned two labour deaths.  “We were saddened by the reported killing by police last week of Rasel Howlader, a 26-year-old factory worker and union member from Sommilito Garments Sramik Federation. Additionally, we mourn the loss of Imran Hossain, a 32-year-old worker who died in a fire set by protestors inside a Dhaka factory,” said the Department spokesperson, Matthew Miller.

Extending condolences to the victim families and the greater labour communities, Mr Miller added, “We are also concerned about the ongoing repression of workers and trade unionists. We call on the government of Bangladesh to protect workers’ right to peaceful protest and investigate allegations of false criminal charges against workers and labor leaders.”

The statement also commended the members of the private sector who have endorsed union proposals for a reasonable wage increase.

The United States urged the tripartite process to revisit the minimum wage decision to ensure that it addresses the growing economic pressures faced by workers and their families.

Meantime, labour unrest continued on Thursday, rejecting the new wage proposal and demanding a revision of the wage to Tk 23,000 as police and readymade garment workers were locked in fresh clashes at Ashulia and Gazipur industrial zones.

The clashes left one law enforcer and dozens of workers injured.

The workers rejected the RMG wage board’s proposal for a minimum salary of Tk 12,500. Following the demonstrations, more than 100 garment factories located in the apparel belt remained shuttered on Thursday.

Besides, a good number of units announced closure for an indefinite period in accordance with labour law provision 13 (1) — which stipulates ‘no work no pay’.

In the morning, several hundred RMG workers took positions on the streets at Gazipur and Ashulia garment belts, demanding Tk 23,000 as the minimum salary.

Industrial Police sources said that workers demonstrated on Dhaka-Tangail and Ashulia-Bypail highways in the morning. Workers at some Gazipur factories set fire to tyres on the Dhaka-Tangail highway.

Following this, workers and law enforcers were locked into chases and clashes. The workers later in the noon vandalised a factory named Tusuka in Konabari. Police used tear gas and sound grenades to disperse them.

Sources said workers in factories at Ashulia reported to their respective workplaces in the morning, while some factory workers observed a work abstention.

Later, authorities announced the closure of those factories for Thursday, and some of the workers gathered at Ashulia-Bypail road. Police dispersed them by using tear gas after workers threw bricks.

Following the announcement of the new minimum wage of Tk 12,500 by the labour ministry on November 07, hundreds of thousands of workers in different industrial zones demonstrated on Wednesday, when a female garment worker died in reported police firing.

In addition to police, some 44 Border Guard Bangladesh (BGB) platoons have been deployed at Ashulia, Savar, Mirpur, Gazipur, and other RMG hubs of the country, according to officials.

Several labour rights organisations announced protests, rejecting the new wage.

Taslima Akhter, coordinator of the Garments Workers’ Movement for Raising Wage, a platform of 11 organisations, issued a separate statement on Thursday condemning the attacks on workers, which have resulted in three deaths since October 23 and several hundred injuries.

She rejected the wages board’s minimum salary proposal and demanded Tk 25,000.

The platform is planning to organise a protest in front of the National Press Club in the city on November 10, demanding a Tk 25,000 minimum wage and justice for the three workers killed in the last two weeks of protests.

The Bangladesh Garment Workers Trade Union has also declared a protest on the same day, demanding a review of the wage.

Bangladesh urged to meet pledges on labour, human rights within timeframe

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RMG Bangladesh
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Expressing concern over the limited progress on the National Action Plan (NAP) on ensuring labour rights, the European Commission (EC) has requested Bangladesh to implement its pledges within the stipulated timeframe to enjoy the GSP-plus trade concession in the EU market.

“Some progress in the implementation of the NAP has been made … a significant increase in efforts is still needed,” it said in a recent letter, expressing concern over the lack of progress on key areas.

In fiscal year 2022-23, Bangladesh fetched from the EU market, the country’s largest export destination, US$ 25.23 billion, which was 45.42 per cent of the country’s total export earnings.

The EC communicated its concerns with the Bangladesh ministries of foreign affairs, commerce and labour, urging the country to put in place necessary measures to ensure full implementation of such actions.

The EC also cited that some actions will be due in the coming months and inquired about how progress can be made in areas where the deadlines have already passed.

To review the full status of the progress made so far, a high-level EC monitoring mission on Everything but Arms (EBA) and NAP is expected to visit Bangladesh on November 12-16, officials said.

According to the letter, Bangladesh has to comply with the human and labour rights issues as per the international standard, including implementation of the ongoing NAP, within the stipulated time frame to qualify for the GSP plus trade concession.

It adds that the full implementation of the NAP will be the key criteria in the assessment of a possible GSP plus application by Bangladesh from 2024.

The NAP covers broadly nine issues, including framing Bangladesh labour law in compliance with the ILO standards on freedom of association and collective bargaining, and eliminating child labour in all its forms by 2025.

Other issues include combating violence against workers, harassment, unfair labour practices, increasing the success rate of application for trade union registration (paper and online) to a minimum of 90 per cent and avoiding discretionary refusal of trade union registrations, according to a high official at the labour ministry.

The EC letter reads: “Recent proposed EU legislative initiatives, namely a proposal for a directive on corporate sustainability due diligence and a proposal to prohibit products made with forced labour on the EU market, also focus on international labour standards and decent work.”

In the event that any new accidents would occur, this could indicate a sub-optimal level of factory safety and, as a result, have a massive negative impact on consumer trust and supply chains in Europe, it adds.

The EC expected that a substantive, triangle and effective progress will be made on investigation of alleged cases of police violence and harassment against workers, ensuring a sufficient number of labour inspectors and moving swiftly to address child labour by the time of the upcoming monitoring mission to be held in Dhaka.

The upcoming mission would jointly discuss the next steps and further actions with regard to the NAP, EBA and GSP issues.

The commission has requested an update about the latest changes to the labour law recently agreed at the Cabinet level of Bangladesh.

The EC acknowledged that the steps adopted by Bangladesh were in the right direction, but said the proposed changes as a whole seem to fall markedly short of the reform foreseen in the NAP.

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