In Bangladesh, amid a political crisis, mass strikes have erupted in factories producing jeans for major global brands like Hugi Boss, Calvin Klein, Wrangler, H&M, Target, Zara, Marks & Spencer. Protesters are blocking roads, attacking factories, and clashing with the police who are using tear gas, stun grenades, and rubber bullets. Hundreds of production facilities have already shut down, and unless the situation changes, the denim clothing supply worldwide may face disruptions in early 2024.
Bangladesh, a former British colony, holds the title of the most populous country globally, with 1,120 people per square kilometer and over 170 million inhabitants, predominantly Bengalis (98 percent). Pre-1971 independence, it was one of the world's poorest nations, as industries failed to flourish due to discriminatory government policies.
The turning point came in the 1970s when the country aimed to revive its shattered economy, focusing on the accelerated development of the textile industry, particularly Ready-made-Garments (RMG). Currently, this sector contributes to 81% of total export earnings and over 11% of GDP, employing more than 4 million people across 4,500 garment factories.
In the fiscal year 2022-2023 alone, Bangladesh earned over $55.5 billion from exports, with RMG accounting for $46.9 billion directly (a 10.27% year-on-year increase).
Major customers are typically from the "fast fashion" segment, with Canada, the United States, Belgium, France, Germany, Italy, Spain, and the United Kingdom being primary export destinations. Giant companies like Inditex, H&M, Walmart, Supreme, Armani Group, Tommy Hilfiger, and Hugo Boss rank among the top ten clients with production facilities in Bangladesh.
The republic's authorities had ambitious plans for the textile industry, targeting export revenues of $100 billion and an 8% annual industry growth by 2030. However, these grand plans are now in jeopardy.
The first blow to Bangladesh's factories was the COVID-19 pandemic, causing a loss of orders amounting to $1.5 billion. Another challenge arose as brands, facing the crisis, reduced the volume of purchased goods. Post-pandemic, while the situation improved, pre-existing sector issues persisted. Now, massive industrial strikes have exacerbated the problems, especially in the denim production sector, potentially leading to a global shortage of popular clothing from early 2024.
Protests erupted in two industrial centers near Dhaka at the end of October 2023. Workers in the textile industry, earning around $75 per month, demand a wage increase to at least $209, which is still less than the national average of $243. The government has not yet agreed to their demands, leading to clashes where protesters throw stones at the police and vandalize factories.
Workers from smaller companies, less well-off, also joined the protests, while those associated with global companies benefit from better working conditions per their contracts. Most garment industry employees in Bangladesh, primarily women, work long hours without child care benefits. Ayesha Akhter, head of the trade union at a denim factory in Dhaka, believes that improvements in working conditions can be achieved gradually.
The police have filed cases against 11,000 workers for attacking the Tusuka garment factory, causing damage not only to property but also to people. The scale of the protest remains contradictory, with law enforcement claiming the closure of 150 factories, while media reports suggest up to 300 closures.
The Bangladesh Association of Manufacturers and Exporters of Clothing offered a 25% salary increase, later increased by the authorities to 56% ($114 per month). However, the strikers demand more, citing rising prices and the need for decent payment. The new salary structure is expected to be implemented by the beginning of December.
The ongoing protests seemingly have not only economic roots. Prime Minister Sheikh Hasina suggests that workers may lose their jobs and be forced to return to their villages if they continue protesting. The upcoming January 2024 elections are catalysts for the protests, with the opposition leveraging public unrest to their advantage.
The protests coincide with demonstrations by opposition parties, marked by acts of violence. Sheikh Hasina, leading the country for four terms, faces allegations that some members of her government and ruling Awami League party deputies have direct ties to the clothing business.
The current wave of labor disputes in Bangladesh is poised to create significant challenges in the clothing market, given the "very serious tensions between trade unions and the production association," which is reluctant to meet the workers' demands.
Interestingly, some major customers like Puma and GAP are supportive of the salary increase. While global brands often export production to regions with lower labor costs, they also adhere to certain standards, including fair wages. The American Association, representing over 1,000 global brands, has announced plans to increase purchase prices for manufacturers in Bangladesh, aiming to support the country's workers.
Despite efforts to address the situation, it seems inevitable that the ongoing protests may lead to a rise in product prices. The extent of the price increase will depend on the agreements reached between the parties, but it's unlikely to surpass 5-10 percent.
Experts suggest that while events in Bangladesh could impact product supply, it's crucial not to overstate the potential scale of a shortage. The denim market operates globally, and any disruptions are expected to be balanced out. Consumers, despite the challenges in Bangladesh, should still have access to new jeans, even if their journey involves some hurdles. In the event of reduced supplies from Bangladesh, other countries like China, Vietnam, and India may step in to fill the gap.