Unrest in Bangladesh and impact on global apparel supply chains

The devastating social and political unrest in Bangladesh has destabilised its apparel industry – the major breadwinner of the beleaguered nation. As the South Asian State is the third largest exporter of garments after China and Vietnam, the global apparel industry, including prominent fashion retail chains, would face disruptions until the situation in Dhaka reaches a state of normalcy. 

Four garment factories had been set on fire in Ashulia, on the outskirts of Dhaka, during the uprising against the Sheikh Hasina administration which resulted in the deaths of hundreds. The chaotic situation in the country since last June led to internet blackouts and curfews, hampering the economic activities of the country. Many international buyers had either cancelled orders or demanded compensation while others had insisted on the expensive air shipment of goods instead of the usual sea route, causing financial strains to manufacturers. 

According to media reports, major fashion brands like H & M and Zara could experience interruptions to their supply chains due to heavy reliance on the Bangladeshi garment industry to source their clothing needs. It is reported that H & M sources garments from more than 1,000 Bangladeshi factories while Zara’s key manufacturing clusters are located in India’s eastern neighbour. The garment industry, which generated $ 38.4 billion exports in 2023, was integral to the socio-economic progress of the crisis-hit State, and the sector accounts for a staggering 83% of the country’s total export earnings. It was the garment industry which propelled the hitherto poverty-stricken State, which was once described as a bottomless basket, to reach the lower-middle income status in 2015.

Low wages coupled with abundance of labour fuelled the growth of the country’s premier export industry, and Bangladesh’s youthful population (almost 28% of its 166 million population is between 15 and 29) induced foreign investments to aid the progress of the burgeoning sector which is critical to the livelihoods of Bengalis. Although the garment industry in Bangladesh is a success story, it has been in the spotlight over pay and working conditions, labour disputes as well as the safety of workers.

The infamous Rana Plaza collapse in 2013 is considered as the deadliest garment-factory disaster in history, which resulted in the loss of more than 1,000 innocent human lives when the eight-storey, unsafe building fell down. Labour right movements have often accused the employers for paying paltry wages to workers and there had been instances of trade unions launching strikes to demand higher pay.

Given the volatility in Bangladesh, retail fashion chains could be tempted to reduce dependence on the premier garment manufacturing hub to mitigate disturbances to supply chains. Such a development would result in manufacturing facilities in the strife-ridden nation being relocated to countries in the Asian region, benefitting Bangladesh’s competitors like India, Vietnam, Cambodia, and Indonesia.

Expectations that Sri Lanka could gain from any potential relocations from Bangladesh are unrealistic because the island’s apparel industry does not have the capacity to match the large volumes of its Asian counterpart. As the country has the highest energy cost in South Asia, the potential to attract foreign investments to a highly cost-competitive industry is quite limited. The pioneer apparel establishments in Sri Lanka – Brandix, MAS, and Hirdaramani – have large-scale manufacturing facilities in Bangladesh. In fact, MAS’ single largest manufacturing facility across the globe – MAS Sumantra – is based in Bangladesh. Many Sri Lankans occupy prominent managerial positions within the Bangladeshi garment industry and their contributions have been instrumental in the evolution of the industry to become a world leader in the global apparel landscape.

Meanwhile, President Wickremesinghe few days ago recalled with gratitude the assistance offered by Bangladesh to Sri Lanka during its time of need two years ago. As the 84-year-old Nobel laureate Muhammad Yunus takes over the interim government of Bangladesh, all Sri Lankans should hope for the swift recovery of their friendly neighbour.