The bleak bend of RMG

 Published in: The Daily Star on December 12, 2013
The bleak bend of RMG

The negotiations with garment buyers are much tougher now due to intense competition in the global apparel business. Photo: STAR

A day after Rana Plaza had collapsed, there were Indians predicting that their exports would definitely rise within 2013 itself. Yes, it has. India today is all set to achieve $17 billion in export earnings for 2013-14, with a 31 percent surge in October and the monthly exports reaching $1.19 billion in November, according to figures released by the nation’s Apparel Export Promotion Council (AEPC). This made India the sixth largest apparel supplier to the US with its exports to the EU rising in the last five months to the tune of $2.38 billion.
Does India have safer factories than us? No.
Does the labour rights scene in India fare better than in Bangladesh? No.
But they are certainly better when it comes to selling skills. They sell the concept of Shining India much better than how we sell our Sonar Bangla.
A simple example will clear my point: While India marches forward, in contrast, even after seven months, we ourselves are still asking questions like: “What is happening to our duty-free privileges to the EU” to none other than the EU commissioner in press conferences related to multiple issues. The EU commissioner naturally had a response which meant that Bangladesh has to improve or else it will lose its trade privileges.
A few weeks earlier, the EU commissioner had himself said that Bangladesh was improving in terms of workplace safety and labour standards. And a few weeks later, we put the words to his mouth and prompt him to threaten us, which possibly keeps the tension going.
Competitors are doing far better now. The manufacturing activity in China continued to improve in November, and according to figures released, the purchasing managers’ index, stands at 50.8 for the month. The prime gainer in the supply chain has been none other than Ethiopia with its African Growth and Opportunity Act, steadily attracting investments from Turkey, China, India and Europe. With so many foreign investments the country is all set to soar.
Sri Lankan apparel sales have also picked up as the country is tapping into the Chinese e-commerce opportunities. Myanmar has just started their SMART Myanmar project with European partners, which will enhance their capacity and skills. That’s something to be careful about. In about 10 years, Myanmar has the potential of becoming the next Bangladesh, the next apparel hub for the world. Let’s also not forget Vietnam, which has reached $13.26 billion in apparel export this year.
The scene of the global placement becomes clear when we study the itinerary of the retailers and the manufacturers. No one is travelling to Bangladesh this season. Flights are filled with manufacturers like us who are travelling to places, meeting up with customers and trying to explain in the most convincing manner that all’s well with the country. Trust me. The negotiations are much tougher than before and none wants to buy at an increased price. With 23 cents to 30 cents padded on top of the current price, customers are shying away with alternative placement ideas.
Customers with huge volumes are the only ones who are not looking for immediate exit, but the rest all are. A typical pattern of negotiation begins with: “Oh my God! We thought the increase was going to be a maximum of 7 cents. How have you come up with such an inflated figure?”
Typically every meeting that is meant to be wrapped up within one hour, is dragging on for the whole day, with the manufacturers sweating and not knowing whether to let go of the orders and walk away or whether it is worth sticking around. After all, the venues of the meetings are mostly Shanghai, Hong Kong, or India where the customer simply loves the hotel, the service and the readiness of the businessmen.
Moreover, in terms of pricing, in China price range continues to remain dicey. With the Chinese, one never knows for sure. One can never tell whether the Chinese vendor is hungry or disinterested. After all they don’t grow tummies like us overnight. And as for the Indians, they seem to be strategically attracting our customers with a deadly resolve of offering super competitive prices backed by their own vertical operations.

In brief, there are multiple challenges at our front and the negative coverage just continues to fuel the burning fire in the sector.
Truth is we started getting negative international attention ever since Tazreen fire, and with the Rana Plaza collapse it has just escalated beyond tolerance. When eleven people, including a six-year-old boy, dies during a cotton harvesting season in Uzbekistan, and when accounts of child and forced labour in that country are brought to surface, that barely makes a story.
When findings about Cambodia’s workforce suggest that child labour and unemployment remain major issues in the country with around 350,000 aged 12-17 years, 240,000 are working under hazardous conditions, and with nearly half of child labourers working more than 48 hours per week, that makes a report and does not create a media sensation. When 110 workers faint at a factory in Kandal in the third week of November, that also does not prompt a media eruption; it remains as just a report.
Yet, Bangladesh is continuing to make headlines globally. And the manufacturing community remains vulnerable to steady critique. While manufacturers need to carefully bridge with workers and ensure that nothing short of best is done to ensure full compliance, there are also ground realities that a manufacturer needs to deal with, which include audits and their charges.
With Accord and Alliance announcing their plans, so far audits are what the manufacturers have seen. We have only seen issues being raised, solutions being asked for and compliance bar going up by the minute. But who is to compensate for the factory upgrades? Frantic phone calls from fellow manufacturers indicate that all of us are having an extremely challenging time in terms of the wage increase. On top of that if there are no partners to invest in sustainable improvement projects, then whom are we going to run to?
So far only a few retailers and brands have agreed to pay the upcharges and the rest are all renegotiating and are retracting. This is the simple truth. Everyone needs to know that most of the manufacturers are having extreme difficulty with paying the salaries of the workers with increased wages as most of the brands have not been agreeing to pay the upcharge. Who will bail the sector? The government? The buyers? The banks? In this land of ours, do we dare seek any refuge in anyone else other than God?

The writer is the managing director of Mohammadi Group, a leading garment maker.