Buyers want to create panic to prolong the off-season to push their orders in a lowest possible price
Bangladesh government has increased workers minimum wage to 51% to ensure a better life for the workers at the end of last year. Implementation of the new wage and overall cost for remediation on safety work have increased production cost almost 20% in the last few years.
But the retailers and brands are not considering this issue while they place an order to buy products, rather, they are using tricky tactics to reduce the price through various mechanisms, which leading the situation to a worse position. Textile and Apparel owners sometimes get worried that lead them to reduce the price more and more.
Bangladesh is the second-largest apparel exporters after China. All the big brands place order here in a big volume that most of the RMG owners want. Though the volume base order never creates business without the good margin, however, sometimes owners are taking the order without margin just to continue the production line.
They think this will help at least to reduce loss, or this is better than having no order at all. Most of the big brands now understand the pulse of the Bangladeshi RMG owners and know how to handle them. Brands are now using some sort of mechanisms to create a panic situation and push to lower the price.
The observation of Textile Today is textile and apparel owners can handle the situation and get a fair price if they can catch the brand’s mechanism.
Mechanisms to create a panic situation:
- Off-season to push orders in a lowest possible price
As Bangladeshi apparel manufacturers have already made big production set up that needed continuous work to keep run the unit, so sometimes brands pick the situation for squeezing product price. The mechanism to create a panic situation generally seen in the off-seasons. Here big brands simply apply ‘Off-season order crisis’ to create pressure and to get good bargaining.
Sharif Zahir, Managing Director of Ananta Group said in this regard, “Bangladeshi garment exporters have been receiving some of the lowest prices in the world, whereas we have been spending millions of US dollars for strengthening workplace safety and for better compliance.”
In this situation, Bangladeshi RMG owners must realize the motives of the brands. So, if Bangladesh is not making garments for them, there are not many options for the brands to move orders overnight.
The truth is that globally there are not much big production units to do big volume except China. If Bangladesh is not making big volume of order then the panic situation and the crisis moment can be easily handled by the Bangladeshi manufacturers if they are out of panic for losing the order.
- Activities of ACCORD can create panic among the owners
Recently High Court asked Accord to conclude its activities by November 30, 2019. Before that ACCORD was scheduled to end its safety remediation work by June last year.
That means all the activities of ACCORD has to be closed by this timeline, so the existence of this organization will be no more. Because ACCORD was built only for ensuring the safety of Bangladeshi apparel factories. But the objective of ACCORD seems long-time stay in Bangladesh.
In a recent workshop, Rubana Huq, the President of BGMEA spoke about the current ambiguous activities of ACCORD and how Bangladeshi RMG factories are being affected by these. A representative of ACCORD named Stephen and other members of BGMEA were also present there.
“Despite trying our best, we are still not being able to progress properly because of ACCORD. The situation is getting worse day-by-day. They are inspecting a factory about 4-5 times. The faults that should’ve been found by them in the first attempt are coming out at 4th or 5th inspection. As a result, the measures that we could’ve taken earlier to solve their issues are being delayed by a great period,” said Rubana Huq.
- Rising old issue in daylight to create political pressure
Some issues of RMG factories in Bangladesh that are already resolved but repeatedly coming in daylight. Seems the issues are never going to end and some international groups are trying to put oil to keep it burning.
In December 2018, a new minimum wage of 8,000Tk (US$95) a month for Bangladesh’s garment workers went into effect.
Workers at dozens of factories took the streets in protest of the new minimum wage. In some places, law enforcement agency stroked on the violent workers to keep the situation under control. Later on, workers and owners are agreed on the new minimum wage.
Bangladeshi garment exporters have been receiving some of the lowest prices in the world, whereas we have been spending millions of US dollars for strengthening workplace safety and for better compliance.
But some NGO’s who work on labor rights, have a motive not to end the issue even after six months. They are demanding the withdrawal of unsubstantiated charges against the workers who were in protest.
In this regard, BGMEA President Rubana Huq said, ‘’this is a very unfortunate projection. We have formed a joint committee with IBC. And in the first meeting with them, after they submitted a list of 12000 workers to us, we immediately informed them that the list was incomplete as neither did it have the names of the worker’s factory wise nor did it have their ID numbers.”
- International media is putting oil in the flame
Recently some international media highlighted that Bangladesh to be the worse country in labor rights. They bring related news that apparently shows a worse situation of the Bangladeshi RMG workers but in-depth, the news is not much correct.
An international news media recently published news that Primark suspends several Bangladeshi factories due to the dismissal of jobs of some workers for the strike at the end of last year.
This news definitely has a negative impact on the Bangladeshi RMG sector. According to BGMEA there are 94 factories where Primark makes its garment that amounting one billion USD per year. Of them only four factories were alleged those terminated workers due to the strike for minimum wages.
People involved with the process confirmed that Primark has investigated three out of four alleged supplying units in February and they have suspended one.
The question is- why did they bring it up in August where Primark finished its investigation in February? This is nothing but just a mechanism to continue pressure for reducing the price from the Bangladeshi RMG owners.
- Turn manufacturers attention form US tariffs on China
Brands feel Bangladesh may ask the better price because of US tariffs on China and this may reduce their yearly revenue.
So, Buyer’s intention is to keep Bangladesh busy to other issues and make them feel panic of losing the order in the season. The tension may refrain Bangladeshi apparel makers not to ask the better price and fair price bargaining will never come in negotiation.
Commerce Minister Tipu Munshi sought assistance while meeting ILO’s Country Director Tuomo Poutiainen and said, “Bangladesh’s workers are now working in a safe and friendly workplace; getting fair prices for their labor. There has been a major overhaul on establishing their rights due to a cordial approach of the government and the factory owners.”
- Diplomatic pressure
The embassies have a big role to keep the pressure on the Bangladeshi RMG sector to remain cheap, though they have several demands that involve huge investment. Safety remediation, salary hike, and expense on sustainability even some time diplomatic pressure comes to the government to manage the sector.
The diplomatic pressure goes directly in favor of the brands where no single penny is asked from them to improve overall safety, human rights or sustainability for factories that are producing their products.
To overcome the outside pressure, the Bangladeshi manufacturers should grab more from the pie in non-traditional markets, Bangladesh has to concentrate on products development for those markets.
In this regard Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem told Textile Today, “The government should move for a free trade agreement and bilateral trade relations with non-traditional countries.”
In conclusion, considering the whole scenario Textile and Apparel owners need to improve their negotiation skills. Meantime Bangladesh government also has to be proactive enough to maintain the overall safety measure so that no outsider can play another governing role that can be harmful for the sector.