Bangladesh garment exporters say western brands not paying ‘ethical prices’

Big western fashion brands are not paying “ethical” prices for Bangladesh-made clothes, the country’s exporters’ association said, as protests over wages sparked factory closures in the world’s second-largest garment exporter.

The government last week announced a new monthly minimum wage of Tk12,500 ($113) for garment industry workers, up from Tk8,000 fixed in 2018.

Some workers’ unions rejected the sum, arguing that it was not enough to compensate for surging inflation. More than 100 factories have been closed due to protests in garment manufacturing hubs near Dhaka, the capital, over the past week, and four workers were killed in clashes between police and protesters.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, blamed western brands for the impasse, arguing that higher wages were not possible unless they paid Bangladeshi factories more.

“They are not doing ethical sourcing in Bangladesh,” said Hassan. “The cost of [financing] has gone up, the cost of production has gone up, the cost of gas has gone up. Now the wages have gone up.”

“We have to keep the factory running and that’s why we take orders even at a break-even price,” he added. “The buyers take advantage of that.”

The unrest has highlighted how elevated global inflation is straining a crucial supply chain, in which consumers have come to expect low prices thanks to reliably cheap labour in source countries such as Bangladesh.

H&M, Zara’s parent company Inditex and Walmart are among the largest buyers of Bangladesh-made clothing and the sector accounts for 85 per cent of the country’s exports, totalling an estimated $47bn in the last fiscal year, according to industry data.

The country’s garment sector, the world’s second-largest by value after China, has grown rapidly in recent years, but rising costs for staples from imported fuel to cotton have pushed Bangladesh into crisis. Foreign reserves have fallen about 20 per cent this year while inflation has nearly hit double digits, forcing authorities to take a multibillion-dollar IMF loan.

Living standards have fallen for many of the roughly 4mn Bangladeshi garment sector workers. While the minimum wage has risen 5 per cent annually since the 2018 revision, union representatives said that inflation meant workers were making less money than previously in real terms.

“Workers cannot survive in this current reality of inflation and price hikes,” said Taslima Akhter, president of the Bangladesh Garment Workers Solidarity movement. Her group is seeking a minimum wage of Tk25,000 and has continued protesting as it calls on the government to re-evaluate the new rate.

Akhter said blaming the western brands for workers’ hardship was only a “half-truth”.

“We cannot ignore the responsibility of brands,” she said. “But the main responsibility is the Bangladeshi [factory] owner and government.”

Miran Ali, a factory owner and vice-president of BGMEA, called the new minimum salary, which was unveiled following consultations with the industry and unions, “a realistic wage”.

“It’s simply impossible to call for a higher wage at this time, given all the other factors remaining as they are,” he said.

The BGMEA has asked members of the American Apparel & Footwear Association, an industry body that represents companies including Adidas and Gap, to raise purchase prices from December in line with the new wage to maintain factory owners’ margins.

In separate statements, the AAFA, H&M and Inditex said they were “committed” to improving wages but did not comment on whether they would increase prices. Inditex has previously said it would incorporate wage data into purchasing prices. Walmart did not respond to a request for comment.

The protests have taken on a fraught turn ahead of elections in January, when long-serving Prime Minister Sheikh Hasina will seek a record fifth term in office. The workers’ demonstrations have also become a rallying cry for the opposition, who are also holding street protests amid concerns that Sheikh Hasina will rig the vote in her favour.

Ruhul Kabir Rizvi, a leader of the rival Bangladesh Nationalist party, accused Sheikh Hasina of “destroying” the industry.

Police have cracked down, filing cases against thousands of demonstrators, and Sheikh Hasina last week warned those who disrupted production lines to accept the new wage or “return to their villages” without a job.

Ahsan Mansur, executive-director at the Policy Research Institute of Bangladesh think-tank, said the combination of an economic crisis, the opposition’s momentum and industrial action had created a “perfect storm” for Sheikh Hasina’s government.

He added that the extended factory shutdowns could hurt the economy by depriving it of much-needed foreign currency earnings.

“The people buying the product will always like to buy it at a lower price. They’ll exploit the situation,” he said. “The sellers are in a bind . . . If they don’t get a sales order they won’t be able to run their factories, so they’ll try to get whatever costs they can and still produce.”