How retailers respond to tragedy
Disney pulling out, but future unclear for those who plan to stay, like Joe Fresh, H& M, Walmart
Since a building collapse killed over 1,100 workers, low- cost Bangladesh has become one of the garment industry’s biggest liabilities.
NEW YORK — Bangladesh offers the global garment industry something unique: Millions of workers who quickly churn out huge amounts of well- made underwear, jeans and T- shirts for the lowest wages in the world.
But since a building collapse April 24 killed at least 1,100 garment workers in one of the deadliest industrial tragedies in history, the country has gone from one of the industry’s greatest assets to one of its biggest liabilities.
“The risk factors have jumped off the charts,” said Julie Hughes, president of the U. S. Association of Importers of Textiles and Apparel, a trade group that represents retailers who import garments. “This is worse than what anyone had imagined.”
Working conditions in Bangladesh’s garment industry long have been known to be grim, a result of government corruption, desperation for jobs and industry indifference. But the scale of this tragedy has raised alarm among executives and customers.
Shoppers angry
The Facebook pages of Joe Fresh, Mango and Benetton, a few of the brands whose clothing or production documents were found in the rubble of the collapsed building, are peppered with angry comments from shoppers. Some warn they’re going to shop elsewhere now.
Retailers are also facing street protests. In the U. S., university chapters of United Students Against Sweatshops are helping to stage demonstrations against Gap in more than a dozen cities including Seattle, Los Angeles and New York. The group plans to target other retailers it believes are not committed to stricter standards for Bangladeshi factories.
The rising death toll may force western brands to make a choice: Stay and work to improve conditions or leave and face higher costs, similar or worse worker conditions in other low- wage countries and criticism for abandoning a poor nation where per- capita income is just $ 1,940 per year.
Most retailers have vowed to stay and promised to work for change. Wal- Mart Stores and the Swedish retailer H& M, the top two producers of clothing in Bangladesh, have said they have no plans to leave. Other big chains such as The Children’s Place, Mango, J. C. Penney, Gap, Benetton and Sears have said the same.
The risk factors have jumped off the charts
JULIE HUGHES PRESIDENT, U. S. ASSOCIATION OF IMPORTERS OF TEXTILES AND APPAREL
“Today’s economy is global, and it is not a question of if a company like H& M should be present in developing countries,” said Anna Eriksson, an H& M spokeswoman. “It is a question of how we do it.”
But for some, the risk of being in Bangladesh has become too great. The Walt Disney Co. announced this month that it is stopping production of its branded goods in Bangladesh.
“These are complicated global issues, and there is no one- sizefitsall solution,” Bob Chapek, president of Disney Consumer Products, said in a statement.
Industry experts predict others will quietly reduce their dependence on the country.
“Almost everybody is going to cut back on what they are sourcing from Bangladesh,” Hughes said. “Not today, but by a year from now our imports are going to fall. The question is how much.”
World’s lowest wages
Of the major garment- manufacturing countries, Bangladesh’s working conditions pose the highest risk to brands, according to Maplecroft, a risk analysis firm based in Bath,
England. But Bangladesh ranks somewhat better than many low- cost countries on other labour issues, such as child labour and forced labour.
According to Maplecroft’s Labor Rights and Protection Index, which measures the overall risk of association with violations of labour rights, Bangladesh is the 17th- riskiest country in the world — and less risky than such garment- producing leaders as China, Pakistan, Indonesia and India.
Another reason it’s hard for retailers to leave is that Bangladesh is one of the few places in the world that has enough workers, manufacturing capacity and experience to provide what retailers demand: High volume, low prices, good quality and predictable service.
The garment industry in
Bangladesh is the third- biggest exporter of clothes in the world, after China and Italy. There are 5,000 factories in the country and 3.6 million garment workers. Manufacturers have easy access to cheap raw materials, and the country’s political situation has been relatively stable.
And its garment workers command the lowest wages — by far — in the world. The average worker in Bangladesh earns the equivalent of 24 cents US an
hour, compared with 45 cents in Cambodia, 52 cents in Pakistan, 53 cents in Vietnam and $ 1.26 in China, according to the Worker Rights Consortium, a worker advocacy group.
Labour costs
On Sunday a Bangladesh cabinet minister said the government plans to raise the minimum wage for garment workers, and a new minimum wage
board will issue recommendations within three months.
Between 15 and 25 per cent of the wholesale cost of a garment is for labour. Unlike raw material costs, which can vary, labour is the only major cost that retailers can control.
For decades, the global garment trade was controlled with a quota system called the Multi Fibre Arrangement that limited production from developing countries to protect higherwage workers in developed countries.
When the system ended in 2005, retailers flocked to Bangladesh because of its low wages. Manufacturers scrambled to increase the size of their factories.
The retail industry hasn’t released estimates on how much it would cost to upgrade Bangladeshi factories to western standards. But the Worker Rights Consortium puts the cost at $ 1.5 billion to $ 3 billion US. If the money was spent over five years, it would be 1.5 to three per cent of the $ 95 billion expected to be spent on clothes manufacturing over that time.
Put another way, it’s 10 cents added onto the cost of a T- shirt.