Dhaka’s outlook darkens after garment factory collapse

Companies already struggling with domestic upheaval

Even before Bangladesh’s doomed Rana Plaza building collapsed this week killing at least 300 garment workers, the country’s $19bn clothing export industry was feeling the pressure of a worsening confrontation between Sheikh Hasina Wajed, prime minister, and her political enemies.

Since the beginning of February, Bangladesh has been virtually shut down for 33 days by strikes, protests and political violence pitting secular supporters of Ms Hasina’s Awami League against its bitter rivals from the Bangladesh Nationalist Party, and the Islamist Jamaat-e-Islami.

While garment factories supplying western brands try to operate normally despite the disruptions, the shutdown of transportation – including roads and ports – and government offices, including customs offices, has prevented the import of raw materials, and shipment of finished goods to reach their destinations in time.

Western buyers’ patience had already begun to fray. On Monday, the Bangladesh Garment Manufacturers and Exporters Association held a press conference to complain that it had lost $3bn in new orders, and seen $500m in existing orders relocated to neighbouring India since January, due to the unrest.

Many garment manufacturers believe the Rana Plaza tragedy, coupled with the threat of more disruptive political turmoil ahead, will prompt retailers like Walmart gradually to shift production away from Bangladesh, now the second-largest garment exporter in the world after China.

“The situation is becoming grave,” says Rubana Haq, managing director of the Mohammadi Group, a large manufacturer which supplies retailers like H&M, Zara, Walmart and Esprit. “We will start feeling the pressure from the buyers now.”

Western retailers cannot just abandon Bangladesh overnight, given its capacity, with more than 3.6m workers. But Mrs Haq expects local garment exports to contract by at least 10 per cent this year, and possibly more in the long term, as capacities grow elsewhere.

“We will suffer from a serious image deficit,” she says.

The Rana Plaza tragedy comes less than five months after at least 110 people were killed in a devastating fire at Tazreen Fashions, a factory supplying Walmart, albeit without its knowledge. The two disasters have together raised serious questions about the standards, and management practices, of Bangladesh’s garment industry.

This week, thousands of angry garment workers have taken to the streets to protest at poor industry conditions, and to demand the arrest of the Rana Plaza owner, and the owner of the factories inside. “

But the uncomfortable spotlight on working conditions also comes after three months of political turmoil, which has led to numerous delayed deliveries, and given buyers an excuse to slash payments to manufacturers by 5 to 25 per cent. “Buyers’ maximum tolerance is a two-week delay,” says Ms Haq. “After that, they are cancelling orders or imposing discounts.”

Ominously, the political violence is unlikely to abate any time soon. Bangladesh, which gained independence from Pakistan after a brutal war in 1971, remains divided between secular ethnic nationalists and Orthodox Muslims, who would have preferred to remain with Pakistan.

These simmering tensions have been reignited by a war-crimes tribunal that Ms Hasina’s government has established to try those accused of atrocities during the liberation war, mainly leaders of the Jamaat-e-Islami.

When the first conviction was issued in February, supporters of Ms Hasina’s Awami League took to the streets to demand the death penalty. However, Jamaat leaders, and their ally the BNP, argue the tribunal is overtly partisan, and that it is being used as a tool by Ms Hasina to destroy rivals in advance of forthcoming parliamentary elections.

Rival political groups have held protests, and counter protests about the convictions and subsequent sentencing, activists from the Jamaat youth wing have also been accused of vandalising train tracks, causing train derailments, and attacking police officers.

The political violence has already claimed at least 100 lives, and verdicts by the tribunal are expected in May and June, raising the spectre of further spasms of unrest.

Meanwhile, a new Islamic organisation, Hefajat-e-Islam, or protector of Islam, mobilised about 100,000 people for a demonstration in central Dhaka this month demanding a ban on women mixing freely with men and mandatory Islamic education – an agenda that critics say would amount to a “Talibanisation” of Bangladesh. The group has set a deadline of early May for its demands to be fulfilled or face the threat of more protests.

Ifty Islam, the managing partner of Dhaka-based boutique consultancy Asian Tigers Capital Partners, says the country appears to be descending into chaos, which could prompt a state of emergency or a military intervention.

“The deterioration of law and order is occurring at an increasingly rapid and alarming pace, with concurrent massive economic dislocations,” he wrote in a recent report. “A worrying new element in the political maelstrom is the nascent emergency of Islamic nationalism.”

All this forms a gloomy backdrop for Bangladesh’s garment industry, as it struggles to retain the confidence of its image-sensitive customers, after two high-profile disasters. Says Mrs Haq: “We will probably see a phase of violence until December. I’m not very optimistic.”

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