Supply chain collapse, raw material price hike threaten RMG sector

Clifton Group, one of the largest apparel manufacturers in Chattogram, began its journey in 1985. The 100% export-oriented company employs around 16,000 workers at nine factories in Nasirabad, Kalurghat and EPZ areas. 

Eighty percent of Clifton's workers are women. The company's yearly turnover is $150 million, and it makes apparel for renowned brands such as Jockey, Tommy Hilfiger, Nautica, Columbia, Ted Baker, Schiesser, Hunke Moller, Sam's Club, Walmart, Kenneth Cole, Hema and Target. 

The most important feature of this conglomerate is its ability to operate mostly without bank loans. Clifton Group spends Tk2 crore annually in Corporate Social Responsibility (CSR) practices, and of that money, Tk30 lakh is spent on workers' welfare alone.

Md M Mohiuddin Chowdhury, who currently serves as Clifton Group's director and CEO, has been a Commercially Important Person (CIP) for almost 20 years and has earned numerous export trophies. The company has its origins in a family business.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) named Chowdhury as one of its directors in 2021.

In an interview, Chowdhury spoke with The Business Standard about how the Clifton Group has tackled the challenges of Covid-19 pandemic, what role the company has played in terms of workers' welfare and how it has supported the region amid this unprecedented crisis.

TBS: What challenges did Clifton Group face?

Md M Mohiuddin Chowdhury: The supply chain was disrupted after Covid-19 infections began spreading in China in December 2019. Our production dropped by 30% the same month; then it stopped entirely for a month after March.

In the five months following the first lockdown in 2020, our business slumped by 40% and the pandemic's onslaught delayed shipments across the globe.
The Covid second wave in February 2021 disrupted our supply chain yet again.  The price of raw materials used by the apparel industry, especially cotton, went up by 40% and supply was delayed due to container congestion at transshipment ports.

Because of such issues, the shipping cost for a 40-foot container went up to $5,000 from the usual $2200. Shipping agencies also became disinterested in transporting industrial salt. As companies could not place their orders for the next season, it created a shortage. 

Clifton Group suffered losses amounting to more than Tk50 crore because of the pandemic, and we will need at least five years to make a complete recovery. 
 
How did you tackle the challenges? 

Clifton Group operates its business mostly from its own funds. We are suffering from a crisis to some extent due to the disruption in the supply chain. 

The company has accepted Tk50 crore under the government's incentive package in a bid to overcome its troubles, as supply chain-related issues were born of specific circumstances.
 
What problems is the industry facing now?

The global economic downturn triggered by the Covid-19 pandemic has caused order volumes to drop, and it is a major crisis for the apparel industry.

Moreover, the collapse in the supply chain has created uncertainty over deliveries being made on time.

The cost of transporting raw materials and goods has increased too, and foreign buyers are not paying their dues correctly. The apparel industry is suffering from severe instability due to such issues, and the crisis will only get worse in the coming days.
 
What steps should be taken?

The government's incentive package is an effective measure to counter the impacts of the Covid-19 pandemic. But as this has proved to be a prolonged crisis, another incentive package is a demand of the times.

Besides, the process of unloading imported goods suffers from unwanted delays, and the apparel sector will greatly benefit if such issues are resolved. 
 
How did you ensure workers' welfare?

Despite suffering heavy losses amid the pandemic, we did not lay off any workers. Since Covid-19 hit Bangladesh, we have been supplying our workers and their families with masks, personal protective equipment (PPE) and sanitisers. 

When any worker becomes ill, we send him or her to isolation along with necessary financial support.
 
Did the Clifton Group provide any other support?

Apart from supporting its workers amid the pandemic, Clifton Group distributed 30 lakh masks to various government and non-government organizations at the grassroots level in Chattogram district and its upazilas.

The company spent around Tk4.5 crore for this purpose. Besides, we distributed 5,000 PPEs to Covid-19 frontlines and contributed to the humanitarian organisations "Shesh Bidayer Bandhu" and "Serve for Smile" – which helped bury dead bodies amid the pandemic.
 
What is the company's CSR contribution?

Clifton Group spends Tk2 crore annually in education and health sectors under Corporate Social Responsibility.  Of the money, around Tk30 lakh per year is spent on workers' family functions, illnesses or other emergency needs.

Under CSR practices, the company established a college in Abu Torab area of Mirsarai in the port city. The college – named after Clifton Group's Chairman Md M Kamal Uddin Chowdhury – is an MPO registered facility that offers Honours courses.

Bozlus Sobhan Chowdhury High School – named after my father – offers education to 350 children free of cost. Clifton Group covers all expenses of the students, including costs associated with school uniforms and learning supplies.

The company also operates the UCEP-Clifton-OPCA Technical School in Durgapur area of Mirsarai. The school was established for supplying skilled manpower to the Mirsarai Economic Zone, one of the largest economic zones in Bangladesh.

Clifton Group operates a hefzakhana and an orphanage too. It runs a healthcare facility that provides treatment and medicine to 80-100 people free of cost every day. The company supports a number of schools, colleges, madrasas, clubs and libraries.

Under the Bozlus Sobhan Chowdhury and Hosne Ara Memorial Trust, the company gives allowances to destitute communities, including the elderly, disabled and widows. The trust facilitates student scholarships, free distribution of textbooks, educational competitions and interest-free student loans. 
Clifton Group provides financial support and corrugated metal sheets to victims of natural disasters who have lost their homes. The company, in collaboration with the Bangladesh Lions Foundation, helps set up eye-camps and facilitates free cataract operations.
 
What are your plans as a BGMEA director?

I will coordinate with the government's stakeholder organisations in order to further develop business policies for the apparel industry, so that issues plaguing this sector can be resolved.

I will make a serious effort to further improve the ease of doing business here by coordinating with ports, customs houses, the Customs Bond Comissionarate, relevant customs department and shipping lines.

I will work towards tackling any unexpected issues faced by the garment factory owners, and make an effort to get RMG workers Covid-19 vaccines on a priority basis.
 
What are the problems in the export-import sector?

The readymade garment industry depends heavily on raw material imports. Severe container congestion at transshipment ports prevent us from getting the goods on time.

Moreover, after the goods arrive at Chattogram port, we face bureaucratic red tape during the unloading process, including in the examination of goods and the taxation process.

Due to such issues, businessmen and women have no idea when they will get their deliveries even after the goods arrive at Chattogram port. This in turn prevents the RMG factory owners from making deliveries to their foreign customers on time.

We sometimes deliver products through airways to meet deadlines, which causes financial losses.
 
Why are garment companies decreasing in Chattogram?

Infrastructure issues are one of the major reasons behind the declining number of garment companies in Chattogram. 

Two decades ago, foreign customers were disinterested in doing business in Chattogram due to myriad problems, such as no international flights to and from the port city, lack of adequate flights on domestic routes and less than optimal condition of the Dhaka-Chattogram highway.

Besides, Chattogram lagged behind Dhaka in the RMG sector as stakeholder organisations related to the industry are all based in the capital. This is why the number of garment factories kept increasing in Dhaka and its surrounding areas, while Chattogram fell behind due to a shortage of customers.

Chattogram, however, is witnessing the possibility of further development in its garment sector as some development projects have been launched in the port city. 

After the implementation of these projects, especially Garments Palli in Mirsarai Economic Zone, Bay Terminal at Chattogram port, Matarbari Deep Sea Port and Karnaphuli Tunnel, the garment industry will surely rebound here.

Why are workers' Eid bonuses a recurring issue?

No garment factory owner wants to deliberately cause trouble regarding the payment of workers' salaries and bonuses. Production drops during the month of Ramadan. Many workers also take cash during Eid instead of taking their earned leave.

It takes a lot of funds to fully pay the workers' salaries, bonuses and payments from other facilities, all of which causes financial problems for the owners. So, some garment factories face problems during that time.

The worldwide economic downturn has financially devastated the RMG industry. Garment factory owners managed to tackle the situation during this Eid-al-Fitr after getting special facilities for repaying their bank loans and with help from the government incentive.

But they will be in trouble during the next Eid-al-Adha.