The last few years have not been very good for the small and medium-sized garment manufacturing units. Compliance issues, remediation of which called for huge investments; falling margins and rising overheads; and not to mention, the significant rise in the minimum wage of garment workers, combined together, forced many small and medium players to bow out of the business for good.
As per media reports, within a period of only 6 months since April 2019, around 50 small and medium-sized garment factories have shut their operations, which has rendered around 50,000 workers jobless.
According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) then, with these closures, more than 200 such factories went out of business in 1 year. It must be noted here that according to industry insiders, there are more than 1,000 SME units in the garment sector, each employing between 500 and 2,000 workers.
If things were bad for SMEs last year, 2020 brought even bigger worries for them. Owing to COVID-19, when millions of businesses have been struggling to sustain and survive the world over, things have been pretty difficult not only for smaller players, but also for large groups and bigger factories, many of which had to struggle hard to keep afloat. In such a scenario, the status of the small and medium-sized players is pretty much imaginable.
According to media reports, small garment factories in Bangladesh are finding it tough to resume operations following the prolonged COVID-19-induced layoffs, even though work orders from international buyers are slowly making a comeback. The protracted countrywide shutdown imposed by the Government that suspended nearly all types of economic activities, public transportation and public gatherings had rendered all the factories to remain shut for the time being. Even after operations resumed, the Government directed all manufacturing plants to maintain strict social distancing and safety protocols. Already at their wits’ end, many SMEs were forced to shut their operations due to capital shortages. Complicating things further have been the so-called lack of consensus between factories and worker unions regarding the reopening of some factories, as these were able to clear workers’ wages and dues when they had suspended operations with the factory owners, pressing for work resumption, and the labour leaders demanding workers’ dues be cleared first.
However, speaking to media, Nazma Akter, President, Sommilito Garments Sramik Federation (a platform for garment workers), said trade unions had never wanted to ban the reopening of some factories; rather, they tried to be helpful towards businesses, but reportedly said that factories should clear dues before being allowed to reopen, as buyers have been coming to Bangladesh again with work orders now.
Meanwhile, certain units have not received work orders directly from international retailers or brands due to their poor compliance with regulations. As a result, most factories which have already resumed operations are relying on bigger units for work orders on a sub-contractual basis.
According to the BGMEA, around 300 small and medium garment factories were closed down due to coronavirus in the country.
Even though the Government had rolled out a bailout package to help garment makers ward off the adverse implications of the pandemic and help them pay workers’ wages, many small and medium-sized units were reportedly unable to avail this facility due to stringent conditions attached to the same.
“Most of those factories used to operate on a sub-contractual basis before they were closed,” Md. Rezwan Selim, Director, BGMEA, reportedly said. He mainly monitors the labour issues and factory closures.
Many factories that closed down are unable to resume operations at this point, said Selim.
Several factories that work directly with global buyers have not been able to escape, and the pandemic has led the buyers to renegotiate payment terms and ask for deferred payment options (of up to 210 days in some cases, instead of the regular 90 days) and significant discounts.
“Asking for 1 per cent discount is acceptable, but the rates international retailers and brands are demanding are totally absurd,” claimed Shams Mahmud, President, Dhaka Chamber of Commerce and Industry (DCCI), adding, “We normally do business at a very marginal profit, and so, if they demand such abnormal discounts, we will die out.”
It is also not possible for the Government to support factories for a prolonged period, said Ahsan H. Mansur, Executive Director, Policy Research Institute (PRI), while underlining that over the last 10-15 years, many factories have been shut down or sold to others for a host of reasons. Ahsan, who is advocating that the Government should help genuine factory owners while sub-contracting factories should not be brought under the VAT net or other tax hassles so that they can grow, expressed hopes that consolidation in the sector will come about, and soon.
The chances of consolidation nevertheless give hope that eventually things will change for the better for the industry, which would be able to satisfy all the compliance requirements and would reach the highest standards of production procedures to not only survive and sustain, but also flourish in the long run. And the ever-increasing number of green units further reinforces this hope.
According to media reports, 19 more factories have been certified as eco-friendly within 8 months of this year, with which the number of eco-friendly garment and textile factories has increased to 125.
Reportedly, about 500 more eco-friendly factories are currently underway.
Quoting the US Green Building Council (USGBC), the BGMEA said a total of 144 facilities in the country received the LEED (Leadership in Energy and Environmental Design) certificate as of 7 September. Of them, 41 were qualified as Platinum, 87 Gold, 14 Silver and 2 Certified. Of the 144, there are 125 garments and textile factories.
It may be mentioned here that a number of organisations around the world certify the eco-friendly establishments. Of them, the USGBC, established in 1993, issues the LEED certificate.
A project must ensure the highest standards at every stage from construction to production under the supervision of USGBC to receive the certificate. The certificate can also be sought once construction of a building is complete or an old structure is renovated. There are 110 points to fulfil nine conditions of the LEED certificate. There are four levels of qualification — Certified (40-49 points), Silver (50-59 points), Gold (60-79 points) and Platinum (above 80 points).
Amongst the factories that received the LEED certificate this year include EMS Apparels Ltd., Pacific Casual, Anwara Fashions, Karooni Knit Composite Ltd., the padding and home-wear unit of Debonair Group, Karupannya Rangpur Ltd., Mayble and Frank Fashions Ltd., Nippon Garments Industries, Avitex Dress Shirt and so on.
According to the entrepreneurs, the eco-friendly facilities generally cost 5 to 20 per cent more than the conventional ones, but the benefits are long term. Overall, the green factories can reduce electricity consumption by 24 to 50 per cent, water consumption by 40 per cent and carbon emissions by 33 to 39 per cent.
Further, the entrepreneurs consider that the higher the number of such factories in Bangladesh, the less the pressure on environment and also better the prospects of getting orders from global buyers, for majority of whom, eco-friendly manufacturing practices and sustainability are becoming very important subsequent to increased focus of the end-consumers on these issues.
Speaking to the media, SM Khaled of Snowtex Outerwear Limited said the low consumption of electricity and water at the eco-friendly factories reduces the production cost which eventually will help sustain businesses in the long run. Also, as many big brands and organisations are interested in including eco-friendly factories in their sourcing lists, he said, this makes it easier to attract them through these factories, which allows long-term booking from them.
So, even as the closure of small and medium-sized factories emerges as a major area of concern, prospects of consolidation and increasing number of compliant and green factories give hope that eventually everything will turn good for the industry.