Global buyers should buy more from fiscally weak countries

Global brands and buyers should make sure that countries with fiscal constraints like Bangladesh get a minimum amount of orders required to sustain their business.

Such a redistributive approach of global fashion brands could help the apparel sector of sourcing countries create employment and stay afloat, says a new study on the country's apparel sector.

Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, presented the study report at a virtual event on Saturday. CPD Executive Director Dr Fahmida Khatun, its Joint Director Avra Bhattacharjee, and Programme Associate Tamim Ahmed were members of the research team.

The study entitled "Recovery of the Apparel Sector of Bangladesh from the Covid-19 Crisis: Is a Value Chain-based Solution Possible?" shows that brands and buyers had been over-focusing on a few large supplying countries which adversely affected poor supplying countries to get their normal market share in the Covid period.     

The study, jointly conducted by the Centre for Policy Dialogue, a private think tank in Bangladesh, and Southern Voice, a platform for think tank in Sri Lanka, recommends that a campaign be launched with major global brands and retailers, major supplying countries, trade bodies and international trade unions for ensuring fair distribution of orders for the countries with limited fiscal capacities.

It says that the governments of the major sourcing countries would undertake necessary official positions and would encourage their local brands and buyers to follow a distributive approach in the case of imports of apparels.

The report shows that among the top twenty apparel supplying countries, the market shares experienced significant changes between pre-Covid and Covid periods and the highest rise in market share was observed in China, followed by Vietnam.

Suggestion of regional response for assisting the supplier and the supply chain came from CPD Chairman Professor Rehman Sobhan who proposed a micro-insurance to ensure the security of workers. Such social insurance programmes would also require a collaborative approach from buyers, manufacturers and the government.

"We can certainly explore this interim micro solution, which is a special social insurance that includes an unemployment insurance programme for the garment sector."

Addressing the event as the chief guest, Commerce Minister Tipu Munshi said during the pandemic, the government has been doing its best to support the sector through stimulus packages in spite of limitations.

He also called for collective efforts from brands, buyers, manufacturers and the government.

 "A collaborative approach is required to recover the industry. Apparel buyers' coming forward to support workers is important." 

Workers' leaders and owners need to work together to face the crisis, he added.

In the medium-term, he suggested that Bangladesh should look for new markets through product diversification.

In conclusion, the moderator of the session, Professor Mustafizur Rahman, distinguished fellow at the CPD, stated that there is a wide group of stakeholders involved in the value chain process. "To sustain the initiatives by the buyers and avoid market failure, a collaborative approach is vital."

He also suggested taking such collaborative approaches through initiatives like the global entrepreneur compact.

Dr Moazzem said if Bangladesh fails to achieve a quick and smooth recovery, the crisis could affect the achievement of the sustainable development goals (SDGs).

"Fiscal constraints are a big obstacle to providing support...particularly for a developing country like Bangladesh," he added.

"The global crisis usually affects the actors of the value chain to different extent ….the effect is more robust for downstream of the supply chain."

 This effect is known as the bullwhip effect – sales declined to a large extent initially and a number of buyers became bankrupt.

During the crisis, both price and quantity of orders got affected, he said, adding the price effect was more rigorous for Sri Lanka.

Addressing the programme as special guest, Harry Verweij, ambassador of the Kingdom of the Netherlands, opined that in spite of the harm it has caused, the Covid-19 pandemic has opened up an opportunity to move towards a people and planet positive garments industry.

The government is taking various social safety programmes like the workers' welfare fund, mentioned KM Abdus Salam, secretary of the Ministry of Labour and Employment. He was present as a special guest at the event.

He stated that funds for such programmes are available, but a complete list of labours needs to be provided before their distribution.

Salam also opined that sudden retrenchment of labours could be stopped through stronger employment policies.

In response to a question from Professor Sobhan, Dr Rubana Huq, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and a guest of honour at the dialogue, said the apparel sector of Bangladesh could take an inward-looking approach.

"Bangladesh can focus on local demand, as there is a lack of global demand," said Rubana, adding that small and medium enterprises (SMEs) are financially challenged during this pandemic and that the credit programmes are not reaching out to these firms.

Ziaur Rahman, regional country manager of Bangladesh, Pakistan and Ethiopia H&M, remarked that buyers are committed towards a higher minimum wage of the labours and even contribute to insurance of the labours.

He further added that focus should be given on research and human resource development of the manufacturers.

Amirul Hoque Amin, president of National Garments Workers Federation (NGWF), said the apparel sector would not be able to recover alone. Global buyers and partners should play a key role in this regard, he added.

He also claimed that over two lakh workers who had been working directly or indirectly for global buyers have lost their jobs due to Covid-19.

Amirul Hoque Amin said Bangladeshi RMG workers are very low-wage labourers, as "overtime" is one of their key earning sources but this source of their income has disappeared now. That's why garments workers are facing challenges for their survival, he added.

BGMEA Vice President Arshad Jamal Dipu said there should be a sub-regional strategy, particularly involving Bangladesh, Pakistan and India, to overcome such a crisis.

If these three countries can work together in holding the price, problems could be resolved to a great extent.