Blog: Bangladesh begins to feel wider impacts from Rana Plaza

Petah Marian | 5 July 2013

Last week, the US government took a stand against what it deemed as a lack of progress in improving safety in the Bangladesh apparel sector, and suspended the country's trade privileges.

While the US' Generalized System of Preferences (GSP) programme in Bangladesh does not include garments, mostly focusing on imports of tobacco, sports equipment, porcelain china and plastic products, the move is a symbolic one and emphasises the seriousness of US concerns over the country's factory safety.

US trade representative Michael Froman said the Obama administration is initiating new discussions with the Bangladeshi government to improve the worker rights environment so that GSP benefits can be restored.

This is another blow to an industry that is beginning to experience the wider impacts from the recent tragedies in the country. In particular, orders from key American and European buyers to Bangladesh garment manufacturers are said to have fallen after the Rana Plaza factory collapse.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) director Fazlul Hoque said the overall drop in garment orders is around 10% during this spring/summer compared to last year, although unnamed industry sources in local media have claimed the drop is 30-35%.

Meanwhile, Laos, which has its sights set on more than doubling its clothing exports by 2015, is facing serious problems finding and retaining workers. While the small landlocked South East Asian nation may not initially appeal to international buyers due to its lack of local textile materials and poorly educated workforce, its GSP access to Europe is making it increasingly attractive.

Many of the 100 or so garment exporters in Laos say they could expand considerably if only they could recruit and retain enough workers.

Sub-Saharan Africa is another region working to develop its clothing industry. It too faces a number of serious challenges, particularly around factories' foreign ownership. Large proportions of the clothing industries in Lesotho and Swaziland are mainly Taiwanese-owned, with the remainder of the industry owned by foreigners.

The continuation of much of this investment relies largely on the US's African Growth Opportunity Act (AGOA), which is set to end in 2015. If AGOA is not renewed in 2015 a large chunk of the industry will relocate elsewhere. Even if it is renewed, uncertainty about renewal and lead-time requirements will also encourage some to leave.

Nike recorded a jump in fourth quarter net profit, driven by higher sales and improved margins. The company said fourth quarter profit jumped 22% to US$668m, while revenue increased 7% to $6.7bn. The sportswear giant said it recorded gains across all product types and in every geography except Western Europe and Greater China.



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