Turmoil in Bangladesh's textile industry could lead to knock-on effects

150 factories are closed "indefinitely"

Bangladesh's "Dawn" website reported on the 14th that the country's garment workers held demonstrations and blocked part of the streets in Mirpur district of Dhaka, the capital, to demand an increase in the minimum wage. Demonstrations by garment workers in Bangladesh have been going on for weeks. At the wage council meeting on October 22, workers' representatives proposed raising the minimum wage to 20,393 Taka (1 Taka is about 0.065 yuan), while business owners were only willing to set the minimum wage at 10,400 Taka. The bitter dispute between labor and management led to a series of protests. Garment manufacturers closed about 150 factories "indefinitely" because of the strike, officials said.

Ms. Zhou, a Chinese enterprise person who knows the local situation, recently told the Global Times reporter that the protests of textile workers in Bangladesh this time cannot be counted as riots, because there is a wave of wage increases before every election in the country. Striking workers are relatively mild, generally do not attack factories, and the areas where strikes occur are basically concentrated in non-economic zones, export processing zones are less affected, and the overall security situation in Bangladesh is still under control.

Bangladesh is the world's second largest exporter of textiles and clothing, which plays an important role in promoting its economic growth, employment and foreign exchange earnings. According to data released by the National Bureau of Statistics, the textile industry accounted for more than 13% of Bangladesh's GDP in 2022. But many of Bangladesh's 4 million garment workers are struggling, especially the mostly female workers, who earn a minimum monthly salary of around 8,300 taka.

The cost advantage is diminishing

Factors such as low labor costs and government policy support for the textile industry have helped Bangladesh build a strong garment production line and supply chain, but the country's textile industry still faces many challenges. Mr. Li, a Chinese owner of a textile and garment business in Bangladesh, told the Global Times that labor costs in Bangladesh have risen in recent years, higher than in other South and Southeast Asian countries. If the wage increase agreement is reached, the labor cost advantage of Bangladesh's textile industry will be weakened. In the textile and apparel industry in Southeast Asia and South Asia, there is a certain "chain of contempt", with some countries considered to be high in the industrial value chain, while others are considered to be relatively low. Mr Lee believes that Bangladesh's textile industry mainly relies on low-cost Labour, but there are voices outside that the country has upgraded from a relatively low end to the middle end, and is in the middle of the "contempt chain".

In addition, Bangladesh's poor infrastructure and dependence on imports of many raw materials further drive up the cost of clothing production. Ms. Zhou told reporters that 95% of Bangladesh's textile industry cotton, 80% of weaving yarn and more than 70% of printing and dyeing grey cloth need to be imported, and the country's water and electricity supply, transportation and other infrastructure is weak, from Dhaka inland container terminal to send a 20-foot container to Chittagong, at least need to spend $250, take more than 30 hours.

A return to China is unlikely

Rising costs and worker protests could trigger an exodus of Bangladesh's textile industry, but Mr Lee thinks a return to China is less likely. If Bangladesh's textile industry runs into serious problems, other Southeast Asian and South Asian countries may become alternatives, and countries such as Vietnam, Cambodia and India are also competitive in textile manufacturing. The trend of globalization and the diversification strategy of supply chains may cause international brands to disperse to other regions and choose more stable production bases.

Huang Dongri, a researcher at the China Foundation for International Studies, said in an interview with the Global Times that the labor-intensive industries represented by the textile industry are not very likely to return to China at present. An important factor for Chinese textile enterprises to relocate to Southeast Asia and South Asia is to avoid the trade war between the United States and China. Huang Dongri believes that the trade stick of the United States is still brandishing on China's head, and at present, these sticks have not really hit the Southeast Asian and South Asian countries to undertake Chinese enterprises, so the export of textiles to the United States, from these regions, is still a relatively safe way.

Although labor costs are rising in countries such as Vietnam and Bangladesh, in fact, cost is not the primary factor for Chinese enterprises to consider when investing. Huang Dongri told reporters that after contacting a large number of Chinese manufacturing companies investing in Southeast Asia, Chinese entrepreneurs said that the proficiency of Southeast Asian workers, responsibility, and other aspects are far less than Chinese workers, "spending 300 dollars to hire a Vietnamese worker, may be far less than spending 500 dollars to hire a Chinese worker, or even two Vietnamese workers are not as good as a Chinese worker."

(Source: Global Times)