Image: Denim Expert Limited. Taken during an awareness programme about the virus and measures that can be taken to prevent its spread, arranged by the factory for all members of the Denim Expert Limited family.
As fashion retailers feel the consequences of the Covid-19 pandemic, many buyers have cancelled orders from their suppliers in Bangladesh. But what are the knock-on effects for garment workers and factory owners? Sustainable fashion journalist Sophie Benson speaks to Mostafiz Uddin, the founder of ethical-focused factory Denim Expert Ltd, to better understand how his industry is coping amid the current crisis.
Mostafiz Uddin founded Denim Expert Ltd in 2009 to further his dream of pushing the Bangladesh Ready Made Garment industry forward into a fairer, safer, more sustainable future. With a fully-integrated production line and building safety standards that far surpass the local benchmark, Uddin is dedicated to pioneering in his sector; the first contributor from Bangladesh to the Zero Discharge of Hazardous Chemicals Foundation and the first denim manufacturer in the country to join the UNFCCC for Climate Action.
But now, Uddin’s future is uncertain as the brands he supplies cancel orders and refuse to pay for products which have already been manufactured, tightening their belts in light of the Coronavirus outbreak.
To place an order, a brand’s buyers give a Letter of Credit (LC) to a manufacturer, and against this order, a factory buys and imports fabrics and raw materials out of their own budget. Once the goods have been made, they’re shipped, and the brand releases the money to the manufacturer upon receipt. But brands are now pulling the brakes on this last crucial step in the chain, leaving manufacturers in Bangladesh such as Uddin out of pocket and in a precarious financial position.
“Against the backdrop of Covid-19, brands and retailers are postponing the delivery of completed garments,” says Uddin. “Brands and retailers are telling manufacturers not to cut fabrics and process other materials which [we’ve] already imported for current orders, and some brands and retailers are delaying the release of their payments for goods which have already been shipped.”
Image: Denim Expert Ltd
In order to keep his employees safe, Uddin, who is also CEO and founder of the Bangladesh Apparel Exchange, took the decision to close his factory for 11 days between the 25th March and the 4th April. He had aimed to reopen on the 5th but, as the situation continues to escalate, he is now staying closed until at least the 14th of the month. Uddin continues to pay his 2000 staff their full salaries during the closure and hopes to reopen soon, but he may not have enough orders to stay afloat.
“I would never throw my workers out into the street, as they are my family,” Uddin says. “But I also do not know how long I can survive this. From a financial perspective, we can only afford to pay our workers and other bills for as long as we receive payments from buyers, because that is the only source of revenue for us.”
Uddin promises that as long as he can afford two square meals in a day, he’ll ensure his workers can do the same, but with boxes of unpaid-for product over-spilling from warehouses and blocking the walkways of his factory, he has no guarantees.
Image: Denim Expert Ltd
Bangladesh Prime Minister Sheikh Hasina announced a support package of Taka 50 billion (around £482 million) to support export-oriented industries last week but Uddin believes it falls far too short to offer any real help.
“The apparel industry will get Taka 40 billion. The support fund can only be used for helping to pay the wages of the employees. It will be used up within one month,” he says. “But what about the actual factories? These too will need a huge injection of money in order to pay their suppliers from whom they imported or bought fabrics and raw materials for confirmed orders.”
He also notes that factories also need to pay utility bills, office rent, land fees, and even repay loans taken out against LCs.
The apparel industry in Bangladesh employs 4.1 million people and accounts for 83% of the country’s export earnings. According to the Bangladesh Garment Manufacturers and Exporters Association, as of 10am local time on the 6th April, $3.02billion (£2.45billion) worth of orders have been cancelled due to Covid-19, affecting 2.19 million workers.
Image: Denim Expert Ltd
Because of such widespread impact, Uddin doesn’t worry just for the future of his own factory, but for the Bangladeshi RMG sector as a whole. “Millions of apparel workers are facing an extremely uncertain future. Secure work in the industry of the lifeline upon which they and their dependents rely,” he says. “If the situation doesn’t improve, the whole industry will collapse. Millions of workers will lose their jobs and their families will suffer from abject poverty.”
In order to avoid such a catastrophe, Uddin suggests a number of measures, including support from bodies such as the World Bank, IMF and IFC. He also implores brands to make full payments for goods already manufactured – as per their contract – as well as for goods currently in production, and those for which materials have already been bought.
“My question to the global community is, do they want Bangladesh to keep the garment industry alive for the next three to six months? To employ four million people?”, asks Uddin. “If they do, then they need to support Bangladesh factories now.”
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See Livia Firth’s editor’s letter on why the Eco-Age family are standing #EcoTogether during the current crisis.