RMG Industry Pays the Price For Political Instability: Reuters

Textile and Clothing (T&C) Industry provided the single most prominent boost in the economic development of Bangladesh. Formerly known as an agricultural country Bangladesh started earning 77% of its foreign currency from the readymade garments (RMG) industry. By 2013 this $22 billion industry has given work opportunity to 4 million people.

There has been a lot of speculation going on about the consequences of the damage the political situation has cost. For a country that literary survives on exporting clothes, loss in this sector has to be one of the most devastating consequence for the nation.

This industry that has global retailers like Wal-Mart in their client list has seen orders nearly cut in half in the last three months. This is the worst scenario in the history of the RMG sector in Bangladesh—according Bangladesh Garment Manufacturers & Exporters Association (BGMEA).

"December is usually a season when we are packed with orders to a point where we can't take any more but look at this year - it's a completely different story," said Muhammad Saiful Hoque, assistant general manager of Babylon Garments. This statement was made to a correspondent of Reuter.

Industry officials claim that this instability has created a larger void that the Rana Plaza tragedy. Rana Plaza was illegally built factory in which more than 1,100 workers were killed in a disaster that prompted calls for safer working conditions and more accountability on the part of the global retailers that buy Bangladesh's clothing exports.

One after other disruptions in the Bangladesh RMG industry will put a squeeze on the international retailing market. After a shutdown by striking garment workers in Cambodia, one of the big suppliers, Bangladesh’s export is the second highest in the world.

Garment orders are typically placed at least three months in advance.
"The impact won't be immediately felt but the delay in shipping finished orders will hurt the global retail market around June," said Shahidullah Azim, vice president of the BGMEA, which says up to $1 billion in orders are at risk in the coming weeks if the situation does not improve.

"The majority of the customers believe Bangladesh will not go dark, for example stop shipping,"-- Michael J. Silverstein, a senior partner with the Boston Consulting Group.

"Trucks are stuck on the roads for days and there is very little you can do about it other than somehow pay through the roof to get them going," AKH Group's Deputy Managing Director Abul Kashem said.

Some shipments are costing the company as much as 1 million taka ($13,000), compared with the 20,000-30,000 taka it usually takes to send the same truckloads, as transport costs have surged due to roadblocks across the country, Kashem said.

Most of the big player of the industry has seen cut of orders by 25%. The small companies, that the local companies outsource from has lost orders by 30%

Neighboring India has taken most of the orders that have been lost, while the rest have gone to Pakistan and China, according to data from the BGMEA.
"Rana Plaza dealt a heavy blow to the reputation of this country but that still didn't impact the confidence of buyers and inflow of orders the way the recent crisis has," said Babylon's Hoque.

The political instability and the destruction of lives and properties have a greater threat that is looming right behind the curtains. It is high time that the situation is handled; or else Bangladesh might just lose its prestigious history as well as collapse economically.

Remarks Source: Reuters