Missed opportunities of RMG and 2014

 Published in: The Daily Star on January 13, 2014
Missed opportunities of RMG and 2014

WE were supposed to be doubling our exports by 2030. We were supposed to be hitting new highs without any hiccups. We were supposed to be the sector that would employ more people than we ourselves ever thought we could. Instead, at least 500 active factories have closed down; 1,000 factories of average level have shut shop and most of us are looking at our quantity projections from our customers trying to reconcile with lesser orders in 2014. Yes, the order projections have dropped almost to the tune of 25%. And we are all deluding ourselves saying that our customers are still not back from holidays and positive projections would follow in no time. No, they won’t. Exports to EU will take a serious hit this season. And instead of reporting routine raise in export volume, we will be facing a disaster together with our work force in 2014.
Western economy is supposed to bounce back this year. Corporate America is all poised to recover with a predicted 3% growth with Japan following with a 2%. Developing countries are all set to grow but apparently the performance gap between the developed and the developing countries will narrow with Turkey’s current account deficit, India’s limping infrastructure and China’s shadow banking surging by the day. And where will the garment manufacturing be in 2014?
The retail giant Macy’s is cutting 2,500 jobs this year; French La Redoute is cutting another 1,350; M&S has reported decline in general merchandise sales during third quarter of 2013. Yet, South Korea, Turkey, Vietnam, Indonesia and India recorded increased production by December of 2013. South Korea received better orders from the US, China continued to grow but with a fractional decrease in prices, while Vietnam’s activity increased at so far the fastest pace of 24%, while Taiwan reported the sharpest expansion in manufacturing with increased orders from China, the US and Japan. And let’s not forget India where export growth was recorded for yet another time in the last quarter of 2013 with Turkey reported increase in new export orders with the Purchasing Manager’s Index weighing at a 55.
Let’s look at two other lands, which could have soared in 2013/2014 and won’t: Cambodia and Bangladesh. A few days back, the government of Cambodia conducted a crackdown on the striking garment workers and the police and the military were seen brandishing metal pipes, knives, AK47 rifles, slingshots and batons. Four died and twenty-three were arrested. Now where did the workers go wrong? The workers had demanded for the minimum wage to be raised to $160 over the next five years in place of the current $80, with gradual increases set to $95 in 2014, $110 in 2015, $126 in 2016, $143 in 2017 and $160 in 2018. I was at the Freedom Park in Phnom Penh last week looking at an apparently calm landscape a day after the protest had taken place. However, the protests had begun in Veng Sreng Boulevard and had peaked in the Park in two days.
Strangely, the country was also celebrating the 35th Victory Day on January 7, 2013, which focused around the freedom from Khmer Rouge and the Pol Pot regime. While the Cambodian People’s Party erected billboards all over Phnom Penh and beyond, while official warnings were issued to the protesters and the opposition, I stood there on their ground and looked the big Asian irony of anarchy at the cost of economy. 435 garments factories out of 475 had closed down because of the unrest and workers were all leaving their workplace with heavy hearts.
Now, do we see similarities between Bangladesh and Cambodia? Yes, we do. Bangladesh today stands crippled by political obstinacy and economic insensitivities. The 22 blockades starting from November 2013 cost us at least 122 lives and the economy bled with 71 days of shutdowns the same year. Export figures conveyed a different tale towards the ending of 2013. Apparel exports were up to $9.65 billion in the period from July to November, up from $7.99 billion a year earlier — exceeding targets set at $9.20 billion. Within this, the Export Promotion Bureau reported woven garment exports growing by 21% to $4.75 billion during the five months, from $3.93 billionn last year; while knitwear exports grew by 20.48% to $4.90 billionn from $4.07 billion. Yet, at the very fag end of 2013, we saw global retailers cancelling orders valued at $3.77 million whereas a local estimate of the economy losing $200 million a day was announced.
Let’s not forget that 16 million people have been pulled out of poverty in Bangladesh since 2000, an average Bangladeshi lives four to five years longer than an Indian, and the number of people living on $1.25 a day has dropped by 33%. What then has happened to this country? Where have we missed opportunities? At an average, the garment industry loses production worth Tk.200 crores everyday, with the sector losing Tk.360 crores. Only losses on accessories have so far been over $100 million. Who’s listening? No one. While one side deems it justified for the sector to suffer in the name of cleansing history, the other swears by its code to revive justice in the country. Meanwhile, the RMG sector remains sandwiched in the process. As the political blindness continues, as a manufacturer, I would like to share with readers the level of a manufacturer’s panic at this point.
Orders beyond April haven’t come through at the pace one would expect. Customers have so far been very careful with placements of orders with the election season being taken into consideration. In spite of most of us thinking that we are reaching a point where customers are also getting used to the idea of doing business with Bangladesh under stressful conditions based on their knowledge of the sector being resilient in terms of competitiveness and focus, reality may not reflect the same.
In spite of the recent Cambodian protests putting a dent in their export sector, with India having no better working conditions to offer, with Pakistan being a state that can also offer no special advantage to the brands, and with Myanmar yet to grow its capacity, we may just be taking our export status as granted. It’s time to realise that, in all sincerity, while Bangladesh may still continue to be the preferred source for the brands and retailers, the burden of the Rana, Tazreen legacy looms heavy over our heads coupled with the election controversies, as a result of which customers are shying away from instant placements and capacity commitments.
2014 will not be a great year for garments for sure. The customers will not anymore be considering Bangladesh’s price factor as the single most important factor. Many of them will consider taking a hit in their margins and will also be increasing their retail prices. So, in general, the sourcing pattern may change and substantial business will flow to many of our more stable competitors in 2014.  From the point of view of the manufacturers, we have a huge load of complying with the 77% increase in minimum wages. We will need to brave hazardous roads with our export trucks that are hired at almost Tk.60,000-100,000 per trip. We will also need to empty their roofs for safety, along with cleaner aisles, cleaner basements, and  work towards better working conditions and better understanding of our workers’ needs. But what will happen to the warring political sides that pay no heed to the common man and are indifferent to the economy? Can we even dare and hope to hold them accountable for what we suffer?

The writer is Managing Director, Mohammadi Group.