Bangladesh: Brands & retailers refuse to increase prices with suppliers, despite public commitments to minimum wage hike
"RMG wages now up, where is buyers’ support?", 18 Dec 2023
A new wage structure – which hiked a readymade garment worker’s minimum salary by 56.25 per cent – came into effect on December 1 this year after a hard-fought battle, but brands and buyers are yet to increase product prices citing global economic crisis as an excuse.
Some buyers said they will not be able to hike product prices until June next year. It should be noted that due to the minimum wage hike, gross salary of RMG factory employees and staff has increased by at least 28 per cent. The situation has put most exporters’ backs to the wall.
Industry insiders are blaming the buyers for not keeping their commitment, made during RMG workers’ demonstrations. Exporters are staring at massive losses for at least the next seven-eight months, at a time when they are already in a crisis due to global economic headwinds.
A number of factory owners said at the moment they are trying to devise a plan to pay the workers’ salary and other dues on time. The overall situation is made complicated by the fact that the costs of utilities and transportation have gone up, along with bank interest rates.
Throughout the last two years, western brands, buyers and Bangladesh’s development partners have been pressuring the Bangladesh government to raise workers’ wages, and assuring that they will continue to support the manufacturers in the implementation of new wages.
Speaking to The Business Post, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan, “We already implemented the new wage structure and workers will get the salary from January.
“It is now the buyers’ responsibility to support us by increasing product prices. It is a commitment they have made.”
Adding he will write to the buyers and brands to increase product prices, Faruque said, “As far as I know, no buyers have increased the prices as yet. But our average wages have increased by at least 30 per cent, and we have to pay those figures from December.”
When asked why the EU brands are refusing to pay ethical prices to Bangladeshi apparel exporters despite the country raising workers’ wages significantly, GSP EU’s External Action Service Director Paola Pampaloni said, “We are not entering this discussion.
“It is for Bangladesh to agree on the prices and wages. What is important for us is that there is a process, a consensus around important elements which are very important for all the stakeholders.”...
Although most of the western buyers raised their voices in support of increasing workers’ wages, and stated that the RMG sector wages are not enough to cover the workers’ costs of living.
But now, after the wages have been hiked, buyers are saying that it will not be possible to increase product prices in the coming months as their business is not going well.
Accusing the buyers of having double standards, industry insiders claimed that the buyers never practice ethical buying and pay less to the Bangladeshi apparel manufacturers compared to its major competitors such as China, Vietnam and Cambodia.
An export-oriented apparel maker, who makes goods for the world’s top brands mostly in the US and EU, told The Business Post, “Buyers are yet to increase the product prices by a single penny despite our implementation of the new wages.
“Some of them even confirmed that it is not possible to raise prices before June next year.”
Adding that he is booking less orders to reduce losses, the RMG factory owner said, “I am still knocking the buyers’ doors to readjust the prices a little bit, but they did not agree. One buyer said they are likely to reconsider in the next order if they are able to release stocks this Christmas.
“That means we will have to face losses for the next one year.”
Another apparel maker said, “Only LPP increased prices a little bit in recent times, though that is not enough. The rest of the buyers clearly said they are not in a good position to increase product prices as the brands are facing huge losses due to the ongoing global economic crisis.”
A winter clothes manufacturer, who is making goods for EU nations, said, “Due to the new wage structure, our wages rose by at least 28 per cent. The new wages are already effective. But we are making goods against previous rates.
“I have already booked the next five months’ orders, but buyers have not increased the prices. I cannot say anything to the media or the BGMEA due to the buyers’ restrictions. This is not an isolated situation.”