Bangladesh occupies a unique and important position in the global apparel production system. It is the world’s 2nd exporter of garments. Its garment industry is by far the largest industrial sector in the country, accounting for over 80% of Bangladesh’ export revenue. As a result, a mutual dependence has emerged between the garment industry in Bangladesh and the global apparel production system. All parties, meaning buyers, manufacturers, governments, labour unions and NGOs alike, have a big interests in a strong apparel industry in Bangladesh.
Following Rana Plaza the attention of the world naturally turned to prevention of such a terrible industrial disaster. Building and fire safety and compliance ruled the talk about Bangladesh. We see that recently the attention is broadening and the discussion is shifting from compliance only to the development of a higher value added industry. This is good because it draws attention to positive developments clearly visible in the Bangladesh garment industry now. And it is good because it draws attention to the most effective ways to improve competitiveness and at the same time improve labour and environmental conditions.
Investments in upgrading
Apart from a large amount of work on fire and building safety (with 63% of all safety issues reported or verified as fixed) the apparel industry in Bangladesh is clearly investing in upgrading. The Bangladeshi apparel industry has already been diversifying away into higher value added products such as swimwear, denim, formalwear and outerwear. And numerous factories have invested heavily to become model factories with Leed certification and world class working environments. The drive that is found in the Bangladeshi garment industry to grow and to improve is often exemplary.
IAF has been contributing to the industrial development in Bangladesh through a series of projects, including an EU funded project, the support of a large conference in Dhaka and the building of a unique training course. In this special edition newsletter, IAF would like to highlight the positive case of apparel industrial development in Bangladesh. It is important to look beyond Rana Plaza to keep a momentum of industrial improvement that goes much further than building safety. And it holds some interesting lessons that can probably be applied to other cases of industrial development in our industry in other countries.
- Competetiveness and working conditions are not two different subjects
There is a clear understanding by all parties that improvement of labour conditions cannot be seen in isolation from the competitive position of the Bangladeshi garment industry within the global apparel production system. In an assessement study commissioned by ILO Better Works and carried out by Tufts University researchers confirmed that improving social and environmental conditions requires a wholistic approach. Industry development, meaning improving the competitiveness of industry helps to improve working conditions and vice versa.
- Strong cooperation is required
In the apparel industry, many business improvement options require strong cooperation between at the very least buyers and manufacturers. Opportunities and threats are shared and so should be the burden of investing in improvement. Best results are achieved when all parties are working together in a constructive, result oriented approach. IAF uniquely unites associations representing buying brands and retailers and associations representing manufacturers. We strongly highlight the importance of buyer-supplier collaboration.
- Investing in long term relations
The larger the part of the industry that is competing mostly on price, the larger the part of the industry that is fully exposed to the relentless devaluation of clothing in its main market and the less room there is for investments in compliance and sustainability. A growing participation in supply chains relying less heavily on cost reduction and where winning the battle for the customer hinges on other elements such as timing, quality level and innovation is a good way to escape this low price trap. A supplier that is slightly more expensive, but that beats its competitors on speed and flexibility can get the order. Very importantly, for buyers operating in these higher value supply chains, there are greater incentives for longer term relations with manufacturers. These relations create room for mutual investments, and upward cycles of investment, costs reductions and value creation are reached.
- Investment oriented approach
But also in the low cost segments, buyers and manufacturers can shift to a longer term strategy, to a more investment oriented approach. Investments in productivity, energy efficiency and in personel improve profitability and compliance at the same time.
- Eurobang Fashion
The IAF started in 2014 with a project funded by the EU and carried out with its member association BKMEA. The project’s highlight was a buyer- supplier discussion session organized at BKMEA’s office. Initially the discussion followed the expected path: manufacturers complained that they were forced to invest in improvements without getting paid for it by the buyers. The buyers retorted that they could never get more money from consumers due to heavy competition. But the discussion took a more constructive turn when ways to escape the low cost trap were discussed. Buyers remarked they could pay more if manufacturers add more services such as fabric selection. Buying and selecting fabrics themselves is a necessary step for manufacturers to move up from the level of pure subcontracting and to offer additional services to buyers. A bigger role for manufacturers in fabric procurement can help save time and effort for buyers by improving supply chain efficiency, freeing financial space for better manufacturing prices. Buyers made clear that especially larger Bangladeshi manufacturers are often already expanding their value added services to their clients. It is often the SMEs, often actually both buyers and manufacturers that fail to get out of a cycle of low prices.
The positive tone of this session led IAF to work with the Embassy of the Kingdom of the Netherlands, Dhyana van der Pols of Nash International and BGMEA to develop the large conference on Sustainable Supply Chains in the Garment Sector (SSGS). The conference was held in Dhaka on September 29th. It led to some of the lessons described above. And it brought together major players in the development of the Bangladeshi apparel industry, such as Helena Helmerson, H&M’s production boss, President and Vice Presidents of BGMEA, the sourcing director of LCWaikiki, the ILO country director for Bangladesh and the head of corporate banking at BRAC bank. The conference was addressed also by such dignitaries as Lilianne Ploumen, Dutch Minister of Trade and Development; Mr. Tofail Ahhed, Bangladesh’s Minister of Commerce; and Mr. Shahidul Haque, Bangladesh’s Foreign Secretary. The positive news coming from the SSGS conference was that clearly buyers, manufacturers, financial institutions, institutions and NGOs all recognize the power of investments in the industry. And we see this recognition translated into reality. BGMEA’s growth plans are partly based on upgrading, not just on increasing volumes. Bangladesh boasts a growing number of absolute world class, Leed certified manufacturing plants and H&M, the single largest apparel buyer in Bangladesh invests in social dialogue training in the factories and supports collaborative action for living wages.
- Training course on collaborative sourcing
One of the deliverables of the SSGS conference is the creation of a training course on collaborative sourcing. IAF will be putting together an international consortium to build it. It will be a course teaching the commercial, financial, and legal aspects of collaborative sourcing methods in the apparel industry to both buyers and manufacturers simultaneously. The course is based on the assumption that an impediment to change is often a lack of knowledge. Without the proper knowledge, many buyers and suppliers will continue to do business as they have done, that is, generally with a focus on short term gains and on price negotiations. IAF believes such a unique training course will be an important tool for the further positive development of the apparel industry in Bangladesh and as such it will be able to serve as a good example for industrial development in other countries