Bangladesh garment manufacturers and exporters, despite efforts by the country’s apex garment makers’ body – the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) to rein in the errant buyers, seem to be continuing to get a raw deal from the global buyers.
It has been estimated that since the global outbreak of coronavirus, retailers and brands have cancelled more than US $ 3 billion worth of work orders in Bangladesh, which have not only rendered thousands of garment workers losing out on their source of livelihood, but have also made the future of the industry, which is the driving force of Bangladesh’s economy, at the best, uncertain.
If some buyers have agreed to reinstate some volume of the cancelled orders under global pressure, the mounting demand for discounts and deferred payment terms have posed new challenges to the suppliers now.
Recently, British apparel retailer Edinburgh Woollen Mill (EWM), which reportedly cancelled work orders worth US $ 8.2 million placed with its various vendors in Bangladesh, came in for severe criticism from BGMEA for reneging from the payment terms and asking for discounts.
“We are blacklisting non-responsive buyers who are not only paying but also not responding to suppliers,” stated Dr. Rubana Huq, President, BGMEA. She wrote a letter to Philip Day, owner of EWM, requesting him to settle all outstanding dues as prescribed, failing which the retailer would be blacklisted and embargo will be placed on it and its agents.
The copies of the letter were also sent to Bangladesh High Commission in London, the Ministry of Commerce, the Bangladesh Export Processing Zones Authority (BEPZA), the Ministry of Foreign Affairs, Bangladesh Investment Development Authority and the country’s central bank, the Bangladesh Bank, which maintained that if EWM fails to pay up, the traders’ body will not issue any new Utilisation Declarations to its members for any order of EWM, including that of its associates and affiliates.
Further, the BGMEA also decided to work with international rights groups of the likes of International Labour Organisation (ILO) to engage with the buyers and ensure that they do not abandon their suppliers in such trying times.
However, such measures as of now do not seem to be able to get the desired results.
Even after the EWM incident, cases of buyers holding back payments and cancelling orders continue to surface regularly. In many cases, suppliers try to find a feasible way out, but in extreme cases where there’s no option to reach a solution with the buyers, suppliers are forced to seek legal recourse.
Recently, the parent company of Sears Holdings had been threatened with such a legal action after it allegedly refused to settle more than US $ 40 million of outstanding debt with its garment suppliers in Bangladesh.
Lawyers for 19 factory owners demanded that Transformco, a privately held company owned by American billionaire Eddie Lampert’s ESL Investments hedge fund, clear the due payment to suppliers amid claims that Transformco ‘willingly misrepresented’ its finances to convince suppliers to extend it credit.
According to the lawyers, more than US $ 21 million of their clients’ products have already been shipped and are being stored by Transformco’s carriers in the US ports.
“I sent the shipment worth US $ 6 million for Transformco, but the company suddenly called me for cancelling the order,” said Rakibul Alam Chowdhury, Managing Director, Combined Apparel, adding that more than two dozen Bangladeshi suppliers are in similar ‘deep trouble’ after Sears Holdings allegedly cancelled or withheld orders.
“Sears Holdings is not paying us,” Chowdhury claimed.
The suppliers have been informed by Transformco’s shippers that “the buyer has abandoned the cargo,” the lawyers wrote in a letter. And the carriers are now allegedly threatening to sell or destroy the goods.
They further claim that following Transformco’s acquisition of Sears in January 2019, the company’s executives, abetted by third-party sourcing agents such as Triburg Consultants and Li & Fung, “induced suppliers around the world to extend millions of dollars of trade credit.”
Li and Fung, in the meanwhile, has been in the headlines after the Hong Kong-based supply chain manager, which principally caters to brands from the USA and the European Union (EU), has reportedly retrenched 25 per cent of its workforce in Bangladesh and is said to be planning to curtail manpower in its Bangladesh office by 50 per cent by July.
Further, the company is said to be planning to cut its employee strength in Hong Kong by a massive 70 per cent, while it has also reportedly decided to do away with over 120 employees in India.
Meanwhile, Transformco, the lawyers added, has “now led the suppliers over a financial cliff that has jeopardised their businesses and impacted the jobs of thousands of their employees” who face “severe hardship and even starvation” due to what they call a “breach of contract.”Because of this, Transformco’s actions have “contributed to an evolving humanitarian disaster in Bangladesh and elsewhere in Asia,” the lawyers wrote.
It may be mentioned here that in early April, Transformco, which also owns Kmart, temporarily closed all Sears stores—but not distribution centres or customer care—in a bid to help slow the spread of the COVID-19 contagion, which had just begun gripping the nation. Kmart stores and Kmart Pharmacy locations remained open to provide essential products and services. As of 5 June, Sears has reopened 53 locations across the United States. Fewer than 190 Kmart and Sears stores remain after hundreds were shuttered over the past few years due to financial struggles.
After Sears, now it is being alleged by the UK campaign group Traidcraft Exchange that the supermarket giant Asda is creating a ‘climate of fear’ among garment manufacturers in south Asia, especially Bangladesh, as it pushes for delayed and discounted payments.
Traidcraft Exchange’s Fiona Gooch said, “Analysis of the retailers’ purchasing practices during the coronavirus pandemic has exposed Asda as being amongst the worst, despite being owned by the wealthiest family in the world, valued at US $ 130 billion. Asda stores remained open during the UK lockdown and so they are well able to pay for clothes – including school uniforms – they ordered earlier in the year.”
Fiona further added, “There is such a climate of fear, suppliers are afraid to speak out. Companies who have already made clothes for Asda’s George range have had orders cancelled, and some have been told to hold onto stock for as long as 9 months or more. Even then, Asda is demanding discounts of around 30 per cent on the agreed price. It means the suppliers are likely to make a loss and possibly go under – with the loss of thousands of jobs – but they don’t have any other options. They are desperate not to lose huge volume orders in future.”
Rubana backed Fiona’s claims, saying, “Many suppliers are feeling inhibited from sharing details in relation to the changes some buyers are forcing suppliers to accept, even though these suppliers have been subjected to extremely negative contract revisions.”
As per reports, the UK supermarkets experienced record sales in March and April as consumers stocked up at the start of the lockdown, with Asda recording sales growth of more than 15 per cent in March.
“It’s particularly poignant that women in Bangladesh who have been making school uniforms for families in the UK could soon be losing their jobs – meaning their own children could have to go without food and medical care, let alone be able to go to school. Asda and the other supermarkets have no excuse when it comes to this kind of bullying behaviour,” Fiona added.
When the UK high street was closed down in late March 2020, fashion retailers including Arcadia group brands, Edinburgh Woollen Mill brands and Sports Direct began cancelling orders, refusing to pay for already-manufactured stocks and demanding discounts from suppliers in India and Bangladesh.
“We’ve been campaigning to stop the UK fashion brands, which have some of the most abusive purchasing practices in the world, taking advantage of suppliers and workers. A month into the campaign, NEXT, Primark and Pentland have responded to some of our demands. Now we’re adding Asda and other businesses who were not affected by the closure of the high street to our campaign,” Fiona underlined.
The continuing trend of global buyers to push risks and costs down the supply chain that have impacted the Bangladesh readymade garment manufacturing sector and millions of workers dependent on it for livelihood, has once again exposed how garment makers still continue to suffer because of the buyers’ actions, which is completely uncalled for, more so when COVID-19 is exacting such a huge price in terms of economy and the lives lost.