DHAKA: Bangladesh garment factory owners say they are soaking up much of the cost of nearly doubling wages as some global retailers balk at price hikes, leaving less money for safety improvements urged by apparel chains after last year’s Rana Plaza disaster.
The task of coping with a 79 per cent increase in the minimum monthly wage to $68, imposed last December at the urging of some retail chains, comes as competition intensifies among emerging markets producing garments for stores like Walmart and Zara. That is squeezing sales in Bangladesh’s main export industry.
At Dhaka-based clothing company Simco Group, one of the thousands of businesses the sector comprises, chairman Muzaffar Siddique said that before the wage increase his net profit margin was a little more than 2pc. Now he’s losing money on orders, and reckons four out of every five garment makers in the world’s second-biggest clothing exporter after China are in the same boat.
“I approached one of my Western buyers to raise prices, and the relevant company said, ‘It is your business and you have to manage it ... you cannot slip it to us’,” Muzaffar said. He declined to identify the Western buyer.
Rana Plaza was the deadliest of a series of workplace tragedies in Bangladesh’s garment business. Some Western retailers have lobbied for higher wages and better standards for workers - and also have warned investors there may be a price to pay in terms of reduced profit margins.
The Rana Plaza collapse, on April 24, 2013, focused attention on working conditions in Bangladesh. US and European retailers responded by forming groups to push for better safety standards and regular inspections.—Reuters