Buyers' price pressure hits RMG profitability
The profitability of Bangladesh's readymade garments (RMG) is now hit hard by the persistent pressure from international buyers to lower the item's price, say industry insiders.
Such pressure also undermines efforts to improve the sector's working conditions, they said.
When garment factory owners struggle to raise workers' wages and sometimes they delay in paying them their dues because of the rise in operational costs and global competition, a denial of fair prices of RMG products by major portion of the foreign buyers has made the situation worse for the industry.
Many RMG owners also point to the fact that the wages issue leads to frequent labour unrests, which result in the loss of productivity and global competitiveness.
Meanwhile, in a letter sent to the head of government early last month by a group of 16 international buyers mounted its pressure to review the minimum wages of Bangladesh's RMG workers, according to the leader of the trade body for the apparel sector.
“But this letter didn't mention a single word on the necessity of the price-hike of apparels so that owners can go for pay-hike of workers,” said Abdus Salam Murshedy, the president of Bangladesh Garment Manufacturers and Exporters Association.
In this context, Murshedy pointed his finger at the higher cost of doing business. He said such cost rose around 25 percent last year, but the clothing item prices remained either unchanged or declined because of the recession and intense competition globally.
Erratic gas and power supply, higher freight charges, hike in yarn prices, implementation of minimum wages for workers, higher costs of transport and capital machinery are the factors that led to the rise in the cost of doing business.
Faruque Hassan, owner of Shafi Processing, a local garment factory, points his finger at the exorbitant airfreight charge of $4.30 a kg.
Ghulam Faruque, chairman of SQ Group, a local garment factory, suggested the PMO ask buyers to increase the prices of per unit of garment products so that the owners can go for workers' pay-hike.