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Translated by
Nicola Mira
Published
Oct 24, 2022
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BGMEA vice-president says Western brands won’t be able to source from Bangladesh if in debt with local producers

Translated by
Nicola Mira
Published
Oct 24, 2022

Miran Ali, head of the Misami Garment group and vice-president of the Bangladeshi garment manufacturers and exporters association (BGMEA), has seen from close up the impact of Covid-19 on manufacturing activity. And also that of the international political events - conflict in Ethiopia and Myanmar, tensions in Xinjiang - which in 2021 helped the Bangladeshi textile industry surpass its pre-Covid output levels. While in Paris, Ali spoke to FashionNetwork.com, analysing these events as well as the lessons learned from the Rana Plaza tragedy, nearly 10 years on. But, in the wake of the bankruptcy of French fashion retailer Camaïeu, Ali also delivered a warning to Western apparel brands: the doors to Bangladesh will now be legally closed to companies trying to revive their fortunes without first settling their debts with former local suppliers.


Miran Ali - BGMEA


FashionNetwork.com: You follow closely the status of Western apparel brands, your clients. What is your opinion of bankruptcies like that of Camaïeu?

Miran Ali: I have known Camaïeu for 20 years, it used to be a wonderful company. During the Covid pandemic, it experienced difficulties and was bought by FIB, a new company that took on most of the pre-existing staff. FIB’s business reputation was used as a commercial argument to convince manufacturers of [Camaïeu’s] solidity. The problems began when FIB asked to extend payment terms to 90 days. In principle, this isn’t an issue with a reliable trading partner. Inditex, for example, only works with 90-day payments. Our factories trusted Camaïeu. With hindsight, they shouldn’t have done so. Because now Camaïeu has gone bankrupt.

FNW: Are many Bangladeshi manufacturers currently experiencing financial problems?

MA: There are factories in Bangladesh sitting on at least $20 million worth of goods and materials that have been imported, processed and in some cases even shipped out to Camaïeu. We are currently figuring out how many companies are involved and what the volumes are. The Central Bank of Bangladesh does not offer any remedy in the case of bankrupt foreign clients. Besides, the state levies lower taxes on fabric imports when there is a commitment to exporting the finished product. Since the materials sourced for Camaïeu no longer have a client, local producers will be taxed for them.

Another problem is that EU law does not give enough flexibility to compensate suppliers, we are at the bottom of the priority list. Manufacturers from Bangladesh, Morocco and other countries will be facing huge financial difficulties, they will struggle to pay wages, without any recourse.

But I can promise you one thing: if Camaïeu, 60% of whose products are sourced in Bangladesh, will find a buyer, its new owners will have to pay its debts if they want to source in Bangladesh. Otherwise, the brand will never be able to source again from Bangladesh, and probably other countries too.

FNW: What means do you have at your disposal to ban a brand from sourcing in Bangladesh?

MA: It turns out that we have already been in a similar situation. A precedent was set. When the UK’s Edinburgh Woollen Mill (EWM) went bankrupt, its chief financial officer bought the company, and the former boss became a consultant. Despite the arrears owed to [Bangladeshi] manufacturers, these people got back in touch with them to place orders, and even asked for 80% discounts.

We went to court. And for the first time, we established as a legal principle that, while what is technically a new company may have been set up, if it wants to operate the same brands as before, as was the case for EWM with Peacock and Jaeger, no producer in Bangladesh will be allowed to export to these brands. Unless the company in question pays their arrears, and then receives a green light from the Bangladeshi courts.

We're going to do the same with Camaïeu. I wouldn’t call this a warning, but a reminder to all French and Western brands. Especially those that might be tempted to restructure their business and wipe the slate clean, hoping to be able to source from Bangladesh again without repercussions. Now that the entire supply chain is acting in unison, it won't be so easy for them. Notably also thanks to the creation of the Sustainable Terms of Trade Initiative (STTI).

FNW: What is the role of STTI, of which you are a spokesperson?
 
MA: STTI brings together 10 apparel-producing countries: China, Bangladesh, Pakistan, India, Cambodia, Vietnam, Myanmar, Indonesia, Morocco and Turkey. STTI is supported by the International Apparel Federation (IAF), which is funded by the German textile industry. STTI’s goal is to reset the balance of power in the apparel industry. We are a weird sector, in the sense that there are no long-term contracts and agreements between suppliers and buyers.

An individual supplier will always struggle when negotiating alone. A country can only negotiate up to the point where the national interest may be affected. But if countries stand united, we’ll be able to negotiate properly, in a fairer way, with brands and buyers. Given future European legislation on duty of care, it is all the more important that the EU no longer regards its trading partners as individual countries on which pressure can be applied, in some form or another. But as a bloc of countries with common interests.


Shutterstock


FNW: Supplier countries are coordinating their efforts while the global apparel sector is leaving the pandemic and its problems behind. How did your industry live through that period?

MA: Covid-19 posed a real existential threat to us. In March 2020, we witnessed the total shut-down of our industry. The majority of [apparel] brands refused to commit to placing further orders. But not all of them. Groups like H&M and ID Kids (Okaïdi) continued to place orders despite closing down their stores. This is what I call a true partnership. As suppliers, we will always remember it. But most companies said they were cancelling all orders, or that they’d get back to us at a later date.

Exceptionally, our government made a special provision, ensuring that textile workers (but not managers) were paid for three months. This posed a challenge, because payments were not to go through employers, but directly from banks to workers. It was therefore necessary to set up bank accounts for all textile workers in Bangladesh in just three weeks. It was a huge challenge for the country.

Orders-wise, the situation stabilised towards the end of April 2020, and some brands gradually came back. But then a roller coaster started, with further lockdowns in Europe at the end of 2020. In the first half of 2021, the sector see-sawed between optimism and pessimism. Then, in mid-2021, a convergence of events changed the textile market to our advantage.

FNW: Which events?

MA: The first was the civil war in Ethiopia, which wrecked a supplier region that, though small, was nevertheless growing. Then there was the coup in Myanmar, which led many brands to stop sourcing there, or at least to consider doing so. The third element was the ban on Xinjiang-sourced cotton. A ban that was enforced in the USA, but when you are an international group, if you buy from Xinjiang, you risk tainting your entire inventory. So the US ban also had an impact on European brands. Then, in the latter part of 2021, Vietnam failed to deal with Covid-19 properly. The southern part of the country was put in lockdown, and textile output fell by 70%.

All of these events meant that Bangladesh, Indonesia, Pakistan and Turkey became the only possible sources for a secure supply stream. Because, in footwear, if you don't source in Vietnam, you have to turn to Indonesia. If you need denim, you’re left with Bangladesh or Pakistan. As for Turkey, it was already benefiting from an exceptional currency situation, which currently makes it one of the fastest-growing exporting countries. For Bangladesh, the roller coaster ride still continues in 2022. Chiefly for logistical reasons, because delivery delays have a medium-term effect.

FNW: Is the 2021-22 shipping crisis penalising order deliveries for 2023?

MA: The slowdown in maritime freight traffic has snowballed. In 2022, major US ports have started to experience delays in docking ships ranging from 28 to 45 days. Some products arrived as planned for the Spring/Summer season, but others arrived too late. This caused an inventory management disaster. Brands had to cut their orders for summer 2023, because next year they will also have to sell summer 2022 products that arrived too late. And this is just an example, because there are other challenges in Europe.

FNW: Has the invasion of Ukraine impacted orders to Bangladesh too?

MA: Russia itself was a growing market for Bangladeshi textiles, worth almost $1 billion in exports for the country. But half of our exports to Russia were the result of European brands selling in that country: H&M, Decathlon, Zara, Bestseller and others. When these brands stopped trading in Russia, half of that market vanished for Bangladesh. The revenue downturn is limiting the brands’ ability to order products from us in the future. In addition, this has come at a time when their customers’ purchasing power is being impacted by the war.


The Bangladesh Denim Expo held in Dhaka in 2017 - Shutterstock


FNW: This chain of events occurred as Bangladesh was investing heavily in environmentally friendly factories. Have these plans been curtailed?

MA:  The first thing to bear in mind is that the long-term prosperity of the Bangladeshi textile industry will depend on our country’s competitiveness, especially with regards to sustainability issues. In this respect, we are more compliant than our main international competitors.

Our goal is to put a sustainable supply chain at our clients’ disposal, one they can be confident will not harm their reputation. We have the greenest factories in the world, and their number is growing. We have 57 companies certified as ‘platinum’ and 105 as ‘gold’, according to the US Green Building Council's classification.

FNW: In early 2020, BGMEA’s former president said in an interview that Bangladesh is dependent on cotton garments, on certain product categories, and orders from the West. How would you assess the situation now?

MA: North America, Western Europe and also Australia represent the core of our business. We are now looking to Japan and, beyond that, to China. But also, and more surprisingly, to India. Chiefly because it is attractive for international brands to manufacture products destined for the Indian market in Bangladesh.

We realised that one of the fastest-growing markets is athleisure, but Bangladesh used to be virtually non-existent in this segment. We are now making progress, thanks to groups like Decathlon, which sources a large part of its synthetic fabric items here. We used to work almost exclusively with cotton, and there hadn’t been enough investment in synthetic materials in the past. However, to remain competitive, we need to develop the capabilities to produce synthetic garments. Not all types, but at least some, to be able to respond to the orders we receive. Because the fashion market does rely on speed, and not on the materials you have available. And one way of being responsive is through logistics. Bangladesh will undergo a profound transformation in this field within five years.

FNW: New infrastructure to speed up deliveries to the West?

MA: A new airport terminal is being built, and it will include a logistics hub for imports and exports. This is important for our materials sourcing. Because, for the time being, air freight imports are extremely problematic for us.

Another key project is our deep-water port, which will become operational in 2025-26. Before reaching the West, ships from Shanghai and Singapore usually stop over in Colombo (Sri Lanka), where 80% of the cargo they take on board is made in Bangladesh. When we’ll have our own deep-water port on Sonadia Island, in south-eastern Bangladesh, this will become a priority landing. Our goods will travel faster, because container ships will no longer have to stop in Colombo before reaching Europe and America.


Shutterstock


FNW: In April, it will be ten years since the Rana Plaza collapse disaster. How are the consequences of this disaster reflected in your industry’s current practices?

MA: All of our actions stem from the lessons learned from the national catastrophe that was Rana Plaza. And I’m also hoping that these lessons may be beneficial not only to Bangladesh, but all industrial nations. Last June, our representatives travelled to Geneva to sign a new workers' compensation scheme with the International Labor Organization. Because we recognize that the compensation currently available to our workers in the event of accident or death is insufficient. Our goal is to offer better compensation for events that may occur inside factories as well as outside. It is a three-year pilot scheme led by apparel brands, which will then be financed by manufacturers.

The Rana Plaza disaster also had a long-term impact, with the creation of the ReadyMade Garment Sustainability Council (RSC) in Bangladesh. This body, which I’m in charge of, took over in 2020 from the Accord on Fire and Building Safety. RSC is a collective body bringing together apparel brands, trade unions and manufacturers. Unusual bedfellows, whose role is addressing the concerns manifested by workers and public opinion. RSC, which is more effective than the Accord was, has received a mandate by the Bangladeshi government to act on these issues. We must comply with local authority regulations as well as with the highest international standards. The IndustriALL trade union is keen for similar organisations to be created elsewhere, particularly in Pakistan and Morocco. In Bangladesh, the Rana Plaza disaster has rightly made site security and transparency essential features of our industry. We no longer want to run away from problems.

 

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