Winds of Change
Every time I travel, I get acutely conscious of my habit of praying in public places. This time, I was stopped by security twice and I ended up joking with a Pakistani man. The man looked at me and asked, “I have been their favourite for years because of my last name Khan, but why you?” I responded, “Well, they are just beginning to get fond of me.” While we exchanged pleasantries, a Swedish man, the third victim, looked at us and asked, “But why me? I am white and a devout Christian”. Khan and I chimed in at the same time and said: “Racial balance, you know.” The absurdities of our times are hitting us hard now. When people like me travel, lagging suitcases filled with products, trying to make fresh contacts, making better impressions and pitching business, the next moment often looks treacherously unclear.
After three years, the Rana Plaza memory lives on and haunts suppliers, buyers and unions. The direction of our business needs to be clear at a time when most of us are investing in new factories, remediating at huge costs, when the rest of the world is also getting to look more and more attractive by the minute. A quick tour of the global manufacturing will possibly shed more light on the subject.
Chinese clothing exports in January and February 2016 dropped 11.8 percent year-on-year to CNY157.05billion (US$ 24.1billion), and textile exports fell 9.3 percent to CNY100.5 billion (US$15.4 billion). Chinese manufacturers are shifting their manufacturing bases to Vietnam, Turkey, Cambodia and even Myanmar. This is just to lower costs. Apparently, the average salary in Cambodia is only one-fifth of what it is in China. Workers in Southeast Asia are skilled enough to challenge the Chinese workers. At the cost of paying low salaries, most of the Chinese exporters are providing “good service” to brands and claim to excel in work ethics and efficiency.
Similarly, Myanmar’s low wage garment sector is all set for fast growth. The country, for the first time has democratically elected its government after almost half a century. Reforms have been pledged so that Myanmar is more “saleable” as a country in line with the “highest international standards”, according to the current ruling party, the National League for Democracy (NLD). While the Americans may still renew its sanctions against Myanmar under the International Emergency Economic Powers Act (IEEPA) in May, the Europeans are as enthusiastic as possible as they lead their project of SMART Myanmar, an initiative that is funded by the European Union. As women run 90 percent of the readymade garment industry, as minimum wage has just been revised to US$2.97 per day, Myanmar is all set to look good and the old tales of child labour are now forgotten.
Bangladeshi manufacturers are often advised to invest in Africa, just because of the export to the US benefiting through the African Growth and Opportunity Act (AGOA) and to the EU through the EPA [Economic Partnership Agreement]. African manufacturers, I am told, are not shy of small quantities of orders and lead time is also not a problem for them. While RMG is not even a thrust sector in Bangladesh, Kenya has undertaken the Kenya Industrial Transformation Programme (KITP), launched last September (2015), through which the textile and clothing sector as a whole will have the critical attention of the government. New special economic zones are being built there with the promise of land, a shared wastewater management facility, along with energy subsidies from the government. Mauritius is also growing. For 2016, it is forecasting an increase of 5.37 percent.
But spring is not far behind for us in Bangladesh. McKinsey announced in their 2015 report that China’s dominance of global apparel manufacturing is undergoing change, with many brands forecasting decreasing orders to China. Many buyers are even considering Indonesia to be their hub, as many South Korean companies have offices in the US, and factories in Indonesia and Vietnam.
In the 2015 McKinsey survey, Bangladesh topped as one of the “up-and-coming” sourcing locations, with Vietnam, India, Myanmar and Turkey while Ethiopia is being counted in the top ten for the first time. With positive pressures on the factories in Bangladesh to remediate, brands may just look at Bangladesh as a source which balances compliance, cost and capacity.
Where do we go from here? I have been travelling and visiting customers for the last two weeks. During my cab, train and airplane rides, I have been praying publicly. With the barometer of business uncertainties rising, I need God more than ever in order to justify our recent, fresh investments in a business that seems to be cursed with accusations of apparent incorrectness and injustice. In spite of all my fears, the winds may just be changing in our favour as well. Almost all the brands are expressing interest in sourcing better value added products from Bangladesh. Instead of just looking at the basics that jump off our packed suitcases, most of them are taking an active interest in our samples that look mature.
Till date, out of the top 35 products that Bangladesh supplies to the world, it exports almost 5.7 billion dollars worth of t-shirts, trousers worth $6.8 billion, shirts worth $1.6 billion and pullovers worth $4.2 billion, while the maximum value added items namely jackets, suits, women’s dresses are all around $125 million in each product category. Therefore, while we travel, we gather hope when buyers choose more critical styles, giving us an opportunity to attempt for the better. At the same time, along with the improvement in areas of compliance and wage, brands are also getting ready to give Bangladesh a second chance to gain back the trust that it completely lost three years ago. It is perhaps Bangladesh’s turn to negotiate for better products, better prices and in turn, demanding more respect for an industry which has turned around in spite of the world having anticipated a total collapse.
So we go on. As I near the end of my trip after my last meeting tomorrow, I realise that I have given up on being a discreet Muslim. I have started chanting prayers in public, showering the train bogey, the plane seats and the cabbies with my “phoos”. After all, we are all living in dangerous times, aren’t we?