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7 May 2023

Dhaka Tribune

Bangladesh: Brands accused of making profits while ‘workers suffer’, as garment factories report buyers demanding discounted prices amid global economic crisis

"Exporters: RMG industry suffers as buyers seek discounts", 7 May 2023

Readymade garment (RMG) exporters at a discussion said that global clothing retailers and brands were demanding up to 5% discounts from Bangladesh's apparel exporters adding extra pressure on suppliers who are reeling from the global economic crisis.

“Suppliers are being compelled to accept the lower prices since retailers will not continue placing orders with them if they don't agree to the new prices. Sometimes, the prices are lower than the production cost,” said Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

“Under the current cost of production situation, local manufacturers need a profit margin of 20-25% instead of the current 10-15%,” Hatem said.

"If the profit margin ranges between 20% and 25%, manufacturers can pay a living wage to workers. But the net profit goes down to 2% if the gross profit stands at 10-15%."

He said retailers and brands need to follow ethical and responsible business practices as local suppliers have spent billions of dollars to strengthen workplace safety in line with the recommendations of the Accord and the Alliance, the two factory inspection agencies backed by global buyers...

Abdullah Al Mamun, vice-president of the Bangladesh Textile Mills Association (BTMA), said despite paying a higher tariff for gas and power and spending heavily to establish the safest factories in line with global standards, local textile and garment suppliers are getting the lowest price from buyers.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA)... called on retailers and brands to follow ethical buying practices as many manufacturers have already gone bankrupt because they could not withstand the pressure of lowering prices.

He also warned that retaining last year's export earnings would be difficult this year because of the current downward trend of exports induced by the severe fallout of the Russia-Ukraine war.

According to Hassan, the first meeting of the new wage board for garment workers will be held on May 24, and the wage is expected to see a good raise.

Buyers need to play a major role to ensure the wage rise by increasing the prices of goods, he added.

Sirajul Islam Rony, workers' representative to the wage board, said garment exporters are getting one of the lowest prices from retailers and brands.

"Brands are making profits whereas workers are facing difficulties," he said, suggesting retailers follow ethical buying practices.