Apparel makers’ agony

A Facebook video, where one of the top apparel makers of the country was seen breaking down in tears for failing to pay his workers, recently went viral.

Mostafiz Uddin, managing director of Denim Expert Ltd, said he had no money to pay wages. "The buyers have held up my money."

Later, Mostafiz shared his helplessness with The Business Standard.

He gave the examples of Arcadia Group and Peacock, two British retail giants, along with several brands such as Topshop, Dorothy Perkins and Miss Selfridge that wrote to him on April 9 – asking for 30 percent discounts on the products already shipped.

"They would otherwise withdraw the orders," said Mostafiz who today faces export hold-up of at least $4 million – an amount big enough to pay the festival bonus to his 1,900 workers for 24 years.

Yet he had to ask for money from friends to finally pay the annual Eid bonus to his workers.

"I have been doing business for a decade. But I have never failed to pay wages and bonuses. And I would not fail this time either. So, I borrowed from friends and families," said Mostafiz. "I was even ready to sell or mortgage my personal property.

When the BBC tried to reach Arcadia and Peacock, none of them agreed to talk. Later, Peacock in an email said it had contacted its suppliers and explained the present situation.

Mostafiz, who is globally known as a role model of sustainable business, is yet to receive money from exports he made in February.

"I have written letters to foreign embassies, including those of the US and the Netherlands in Dhaka, requesting them to help me get payments from the buyers in these countries. But there have been no results yet."

Like Mostafiz there are hundreds of apparel exporters in Bangladesh who are facing the same blow now.

Data from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) show a long list of a brand by brand, manufacturer by manufacturer tally of who cancelled or held-up orders and who lost how much.

But missing from the list are a million faces and those who are faceless. And they are at their wit's end today. Many are losing jobs and most of them are getting less than what they used to be paid, hardly anything to scrape by.

According to the BGMEA, orders worth $3 billion have either been cancelled or held up, meaning that local exporters could well lose over half of it or more than $1.5 billion.

The loss does not end here as exporters had to import materials that cost them at least half of the $3 billion. As they financed the cost by borrowing from banks, their accrued interest is piling up.

The buyers are multi-billion-dollar companies and they made hefty profits at the cost of cheap labour in Bangladesh. Even their revenues grew in the first quarter of this year.

Yet these buyers have been delaying payments and demanding hefty discounts on the products they ordered earlier.

The Swedish retail giant H&M that sourced apparel items worth over $3 billion from Bangladesh last year also backtracked from its earlier announcement of not cancelling any order.

A top apparel group faced order cancellations of 34,500 pieces of apparel items by H&M recently, said a BGMEA source.

The value of the cancellation order is peanuts for H&M, but it is a big sum for many factories here as the amount is equivalent to one month's wages for nearly 1,000 workers.

 The source said the factory also faced order cancellations from the American retailer Gap. But the factory owner is more concerned about future order hold-ups by H&M.

Are Western fashion retailers in such a bad condition that they could not pay for the goods they have received?

The first quarter data of some US apparel brands and retailers show mixed results.

For example, Walmart, a US retail giant, has reported an increase of $10.7 billion in revenue, or 8.6 percent, taking its total revenue to $134.6 billion for the first quarter.

Walmart US posted a 10.5 percent rise in net sales, to $88.7 million, while US companies' sales increased 10 percent in the quarter.

Walmart's US e-commerce sales grew 74 percent.

Net sales at Walmart International, meanwhile, were $29.8 billion, an increase of 3.4 percent. However, changes in currency rates negatively affected its net sales by approximately $1.3 billion.

At Target Corp's, a department store retailer, total sales grew by 10.8 percent in the three months up to May 2, reflecting comparable digital sales growth of 141 percent.

However, Urban Outfitters has announced a preliminary net loss of $138 million for the three months ending on 30 April.

Kohl's, another US department store retailer, has recorded a 43.5 percent drop in first-quarter net sales to $2.16 billion.

The brand management company Sequential Brands Group, Inc posted a drop in first-quarter net revenue, to $20.2 million from $25.5 million, in the prior-year quarter.

BGMEA President Rubana Huq has claimed that owners paid 98 percent of workers for March from their pockets despite not being paid by the brands.

"When multi-billion dollar companies in the Western countries are not paying us, we the manufacturers in the third world are being criticised for not paying a small percentage of workers."

Rubana Huq expects very tough times ahead as factories are threatened with closure and workers could end up losing jobs because of a lack of export orders.

After all, consumer appetite is very bad in the West now. The British Fashion Council and the Council of Fashion Designers of America have urged the global fashion industry to slow down and rethink the way they were working before Covid-19.

It is expected the global apparel market will lose $297 billion off its racks.

Eastern Bank Managing Director Ali Reza Iftekhar said, "Payments are being delayed as buyers and their banks are in a cash crisis because of declining demand and consumption."

"There has to be a balance between buyers and sellers for everybody's survival."

According to bankers, garment exporters have been facing extension and deferral of payments for the last few years. Many buyers extended the time by six months to pay suppliers against shipment. But a bank cannot give money to an exporter before it gets the proceeds.

As a banker, Ali Reza predicts that the third quarter could be worse than the second one.

A leading exporter's findings also indicate a grim time ahead.

"I am concerned about future orders. We will have no work in August and for autumn and winter," said AKM Rezaul Hasanat, chairman and managing director of Viyellatex Group, a leading exporter.

"Many factories may be closed down in the third quarter if the situation does not improve."

Bangladesh exported merchandise worth $40.53 billion in the fiscal year 2018-19. Of the amount, 84 percent came from the apparel sector. Over 4 million people, most of them women, are employed in this sector.