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RMG factory closure, needs to explore new market and diversified product

Hosne Ara Begum, a garment worker of Zaara Jeans and Knitwear Limited, lost her job on September as the factory owners decided to shut factory. She is one of the 25,000 workers, who lost their jobs due to the closure of factories in the last nearly seven months.

BD RMG opportunities in new markets

According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data, a total of 46 apparel factories were closed in the last six months. In those closed factories, a total of 25,453 workers were employed mostly women and they lost their jobs.

Why factories are shut down

Speaking to Textile Today, industry people have blamed price cut of apparel goods by the global retailers and brands and rise in production cost caused by new wage structure. On top of that, the compliance is another issue, which forced a good number of factories to shut as the owners could not bear the expenses of the installation of safety equipment.

So far, some 2,000 garment factories have spent $0.5 million on an average each for factory remediation as per the recommendations of the Accord and Alliance

“The RMG sector needs more attention and assistance from the government as Bangladesh is facing challenges while keeping its run in the global market,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Dr. Rubana Huq said.

realities of BD RMG
Figure: Present situation of BD RMG industry.

She said over 25 thousand workers lost their jobs while 46 RMG factories were shut since this February.

To overcome this situation, Rubana Huq emphasized on maintaining international price standards. The exporters must convince the global customers to give us a good price for our products, said the sector leader.

She mentioned the lower price as the most crucial reason behind the factory shutdowns.

Another major focus should be market study. The BGMEA president said their business policy should be set after studying and analyzing the global market, Rubana suggested.

She urged greater overall awareness of garment-importing nations which are likely to pay Bangladeshi exporters good price. In this regard, new markets should be explored constantly, and practice of deeper economic diplomacy should be fostered, Rubana added.

According to BGMEA, prices of garment items exported from Bangladesh fall by 1.61% over the last four years.

Per unit, prices fell 2.12 percent in fiscal 2016-17 compared to the previous year and it experienced another fall of 4.07 percent in fiscal 2017-18.

On top of that, small size factory is not getting work orders over the safety and compliance issue s, which is another reason, claimed factory owners.

As per the promises, the buyers were supposed to provide financial support to improve safety standard but they didn’t do so rather stop placing work orders or reduced, they said.

Meanwhile, the sector people are fearing more closure of factories as they are facing a crisis over the work orders, while the prices are lower than it had in the past.

With the lower prices, it is very tough to meet the expenses of products as the workers’ wages increased with the implementation of the new wage structure from December last year, they said. There is a very small margin with which a factory owner cannot bear the wages and has to count losses. And those who are unable to bear operation cost shutting factory down, they added

Exports showed negative sign

On top of that, the export earnings have marked a sharp downtrend in august, which is a great concern both for the government as well as the sector.

As per the Export Promotion Bureau data, the apparel sector, which accounts for 84% of national exports, witnessed an 11.46% decline to $2.41 billion in August, which was $2.72 billion in the same period a year ago.

As per the EPB data, knitwear products earned $1.24 billion, down by 10.32%, while woven goods fetched $1.16 billion, posting a 12.64% fall.

“Already the exports earnings from the apparel goods went down in June and August. So, without any delay, the stakeholders should come up with effective measures to stop factory closure,” Former BGMEA President Abdus Salam Murshedy told Textile Today.

For the betterment of small factory owners, there should be special policy and financial support as they will turn into big company otherwise new entrepreneurship would not be created, he added.

What the sector needs

ways to lift BD RMG

“Bangladesh economy is export dependent, where the apparel sector contributes a lot in terms of employment and exports earnings. The negative impact on the sector is a bad sign for the country’s economy,” former Caretaker Government Finance Advisor AB Mirza Azizul Islam told the Textile Today.

It’s high time to investigate why apparel makers are shutting factory as the continuation will lead to more unemployment in such a time when Bangladesh needs more jobs to attain economic development goals, said Islam.

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