What led to closure of Opex Groups’ Kanchpur operation? Here’s what industry insiders say

Concentration of both capital-intensive and labour-intensive investments in one place, creating excessive capacity, and mismanagement in running factories are deemed by industry insiders as the major reasons that have culminated in the shutting down of all garment units of Opex Group at Kanchpur, Narayanganj.

Speaking to seven prominent entrepreneurs in the sector, The Business Standard has also identified a number of other potential reasons for the permanent closure of "one of the largest apparel factories in Asia".

These include recurrent workers agitations on various pretexts, risking the company by providing additional benefits to workers going beyond the labour law, the founder's failure to create a worthy successor to run his business, issues created with regard to Accord and Alliance visits to factories and the subsequent leaving of some buyers, and latest fall in work orders amid the coronavirus pandemic.

Day by day, the company's liabilities to banks were increasing while utility bills worth crores of taka remained unpaid, making most of the banks stop business with it.

A few months ago, Titas Gas authorities severed the gas connection to the Kanchpur unit of Opex Group for not clearing outstanding bills.

Besides, about a month ago, workers of the factories went on a hunger strike in front of the Sromo Bhaban in the capital's Bijoyanagar demanding payment of three to seven months' arrears.

Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told TBS that the organisation gave a loan of Tk3 crore to the factory owner last September to pay off debts.

Speculation was rife that the factories – plagued by debt and various other crises – would be closed down eventually.

Proving the speculation right, Opex and Sinha Textile Group, that once employed more than 40,000 workers in its Kanchpur factories and had an annual turnover of around $500 million, of which $300 million came from direct exports, shut down the factory operations on October 19, following a reduction in work orders and financial losses.

A notice signed by the group's Acting Director (administration) Banij Ali on October 18 said the group continued to run the factories by taking loans and selling the land, paying salary allowances and other expenses.

But the factory was severely hit by the Covid-19 pandemic as well as recent mayhem by its workers, workers' reluctance to work, and stopping its operation several times. This greatly hampered its ability to continue operation, the notice said, adding that now Opex's Kanchpur factory does not have the financial consistency to continue operations.

"In this situation, for the safety of the factory and all those associated with it, according to section 28 (ka) of the Bangladesh Labor Act, all the garment units of Kanchpur branch, including the garment and wash plant are declared permanently closed," it said.

The business conglomerate, however, has not announced the closure of its textile factories located in other areas of the capital including Mirpur. But industry insiders say it remains uncertain as to how long the factories will be able to operate under the current circumstances.

Despite repeated attempts, The Business Standard could not reach Anisur Rahman Sinha, chairman of Opex Group, over phone for his comment.

 A judder for the sector

When it was established in the 1990s, the Kanchpur apparel unit of Opex Group was the largest garment factory in the country.

The company began to see one success after another. The organisation continued to grow day by day and turned into a huge hub in the early 2000s. Until 2010, the factory was at its peak.

Although Opex Group has garment factories in Adamjee EPZ, Mirpur and another area of ​​Narayanganj, the unit adjacent to the Kanchpur Bridge had the highest number of workers.

Anisur Rahman Sinha continued to pour money into spinning and weaving in the very place, with an intention to produce yarn, fabrics and readymade clothes in one place after importing cotton only.

At its peak, the Kanchpur garment unit of Opex Group employed around 45,000 workers. But it went through gradual shrinking due to various crises over the years and had about 13,000 workers before its closure.

Speaking to stakeholders in the country's garment sector, it has been learned that the closure of the factory has given a major judder to the sector.

Entrepreneurs are carefully analysing the probable reasons that have led to the closure of such a major business venture owned by Anisur Rahman Sinha, former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and an entrepreneur with a clean image. They are also evaluating what lessons entrepreneurs may learn from this.

Pointing out that the concentration of investments and excess capacity was the major disadvantage for Opex Group's Kanchpur factory, entrepreneurs in the sector told TBS that with the capacity that the factory had it required a monthly work order to the tune of at least one crore pieces of clothes for smooth operation.

A BGMEA leader who is close to Anisur Rahman Sinha, seeking anonymity, told TBS that one of the biggest mistakes that Anisur Rahman made was that he concentrated both labour-intensive and capital-intensive investments in one place.

"Although the move was theoretically correct, it was not viable in the reality of Bangladesh's garment industry. As a result, workers could take to the streets on various pretexts and block the Dhaka-Chattogram highway – the lifeline of the country's economy and the Dhaka-Sylhet highway. Due to these reasons, his textile unit also remained closed.

"Amid such a situation, after the Tazreen Fashion and Rana Plaza incidents, Accord and Alliance started inspecting factories in the country. Anisur Rahman's disagreements with them put pressure on foreign brands not to do business with his companies."

Once one or two large buyers stopped doing business with the company, other buyers also started to follow suit, he said, adding, "And this is what dealt the biggest blow to Opex Group."

"The company had a huge capacity, but work orders were scanty. On the other hand, it had to expend Tk20 crore to Tk25 crore per month in workers' salaries and other spending. As a result, its liabilities to banks started to mount."

Again, unlike most other entrepreneurs in the country's apparel sector Anisur Rahman Sinha, who is now in his 80s, could not create a worthy heir to run his businesses. His only daughter lives in London. She occasionally comes to the country to look after the businesses but is yet to adapt.

His brother, Arifur Rahman Sinha owns Medler Apparels Ltd. He has investments in the power sector as well. He is busy looking after his own businesses, said the BGMEA leader.

 Non-cooperation from banks

All apparel exporters in the country have been getting increasingly high work orders for the last several months following the relations of Covid restrictions across the world. Many factories are even having to turn away buyers as they are already overwhelmed with orders while some others are completing orders with the help of sub-contractors.

Asked why Opex Group had to close its apparel factories while other factories are recouping from Covifd shocks, Mahmud Hasan Khan Babu, former vice-president of the BGMEA and managing director of Rising Group, told TBS, "Even if there are orders, they cannot be completed if banks do not open a back-to-back LC."

Banks were not helping the Opex Group, he said.

 What will happen to worker's unpaid salaries?

In their notice to announce closure of factories, the authorities assured of clearing workers' payment after consultation with all concerned including the Ministry of Labour and Employment, the BGMEA and workers.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told TBS that the owner of Opex Group was trying to sell his property. "I heard that he has gas land in Habiganj, Narayanganj, Kanchan and some other areas."

Shahidullah Azim of the BGMEA said they were trying to make sure workers get their dues quickly.

According to BGMEA sources, Opex Group owes about Tk90 crore to the workers of its closed garment factories. However, on condition of anonymity, a workers' leader told TBS that the amount was over Tk100 crore.

Discussions are going on about how the workers' dues will be cleared. "We will work on behalf of the BGMEA to resolve the issue," SM Mannan Kochi, senior vice-president of BGMEA, TBS.

Mentioning that closing down factories without clearing workers' dues was unjust, Joly Talukder, general secretary of Garments Worker Trade Union Centre, has demanded quick payment. Otherwise workers will be forced to take to the streets, she warned.

It is learned that the workers of the factories staged agitation in Narayanganj last Friday demanding payment. They are planning to hold a sit-in in front of the DC office in Narayanganj soon, sources said.

Lessons for entrepreneurs

A director of the BGMEA, on condition of being unnamed, told TBS that overcapacity poses a risk to a factory itself as well as for the entire sector.

"It is not right for me to try to eat so much, which can lead to indigestion later on."

Another former vice-president of the BGMEA said the decision to keep capital and labor intensive investments in the same place has proved to be wrong, at least in the context of Bangladesh.

"The location of the factory has also become important. If you cannot decide who will run the business in your absence, it will not be a wise decision to make the business bigger."