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Exclusive: BGMEA on the State of the Garment Sector in Bangladesh

Bangladesh has been working to improve its image as a manufacturing locale, and though improvements may not be as immediate as the industry expects, major strides have been made.

The Rana Plaza building collapse in 2013 brought Bangladesh under intense scrutiny and cast a very unfavorable pall over the industry’s ready-made garment sector.

Since that tragedy, the compliance scenario shifted dramatically both in Bangladesh and the rest of the world as brands and retailers began to require more inspections, testing, assessments and transparency from the suppliers they do business with.

At a meeting at the Bangladesh Garment Manufacturers and Exporters Association’s (BGMEA) office in Dhaka earlier this year, leaders of the textile association told Sourcing Journal about the sector’s struggles and strides.

Quite honestly, BGMEA vice president Mahmud Hasan Khan said, “Some factories are in really bad shape because of their infrastructure. Some of them may have to quit maybe forever, maybe for some time.”

The average cost of remediation for factories in Bangladesh is $500,000, Khan said, and many factories simply don’t have the funds—or access to them—to make the improvements to things like structural integrity, electrical wiring and fire safety.

“Some people can afford to move to their own space, suspend their production for one year or two, cut down production to move and set up their own space,” Khan said. Those who don’t are the ones that face closure. “Some of the factories have money, some borrowing from bank, some have cut down their expansion, and some are waiting for funds from the IFC [International Finance Corporation], but only few factories have gotten funds from IFC. That’s one of the reasons remediation is slow.”

Bangladesh is battling a problem that began in the 1980s when factories started sprouting up in an unplanned way, and for the last 10 years, the country has been focused on making improvements.

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The country established a national building code in 2006, but because most factories were built before that, changes must be made in some cases to bring the factories up to the standards in the code.

Before this year, there were no companies in Bangladesh producing fire retardant doors, which only added to the cost of already pricey doors—of which factories need multiple to place throughout the facility—as they had to be imported from places like China and the UAE. Now Partex Furniture has gotten a UL certificate for the manufacture and sale of fire retardant doors.

Infrastructure has also been a problem in Bangladesh, as goods get tied up making their way from factory to port on congested roads that are few and far between. But as Khan explained, the government has approved work to widen main roads from two lanes to four over the next two years and to build a flyover on that road to accommodate additional traffic.

Beyond remediation, Bangladesh has its eye on reaching $50 billion in apparel and textile exports by 2021. To reach that goal, the country would have to grow its exports by 12 percent each year. By that time, Khan explained, the world apparel market may reach $650 billion on an export basis, and Bangladesh’s share would be 8 percent, up from its current 5 percent.

Looking just at its exports to the U.S., Bangladesh saw a slight 1.3% uptick in September over the same time last year, and its total exports in the year to September totaled $5.61 billion.

According to Khan, H&M does the most business in the country, and Inditex, C&A, Bestseller and VF are among the sector’s major customers.

To secure those customers and attract more, Bay Group is building a 65-acre special economic zone (SEZ) in Gazipur, the fifth of its kind in the country’s private sector.

Operation in the zone is slated to start in March 2017, according to the Bangladesh Economic Zones Authority, and once completed, the zone will create roughly 100,000 jobs. Plans to purchase an additional 40-acres of land at a later date are also in the works.

Little by little, the country is working to acquire the tools it needs to improve its factories and grow its garment sector.

“Our hope is that by the end of 2017 we would like to complete this remediation,” Khan said. “Some factories will have to quit this work. We will lose some very good entrepreneurs.”