Fatal fire sends negative signals to garment buyers
The fire at Tazreen Fashions in Ashulia will send a negative signal to international buyers, who are targeting Bangladesh as the next major source of garment items after China, exporters and analysts said yesterday.
The tragedy struck the nation's most important sector as leading apparel buyers were shifting their focus to Bangladesh and other Asian countries, with labour wages rising in China .
Some of the leading buyers have already raised concern about the safety of workers who make the clothing items for them.
Even the owner of Tazreen Fashions Ltd, where the fire incident took place on Saturday night, is in fear that his foreign buyers may leave him.
Delwar Hossain, managing director of Tuba Group that owns Tazreen Fashions, said he met the officials of Li & Fung, one of his international buyers, which showed its sympathy to him.
â€œOther buyers are yet to communicate with me. But I am concerned that my business with them will be hampered,â€ he said.
Li & Fung, whose clients include Walmart Stores Inc and Target Corp, said it is in contact with the owner of Tazreen Fashions, which has made apparel items for the company. The Hong Kong-based outsourcer said it will conduct its own investigation, according to a Bloomberg report.
Dr Victor K Fung, chairman of Li & Fung, in a message sent to International Chamber of Commerce, said: "We are very distressed and saddened by the deaths of so many workers and wish to express our deepest condolences to the families of the victims."
A Swedish buyer, who did not want to be named, said growth in the readymade garment sector of Bangladesh will be hampered due to the fire incident in the Ashulia-based factory.
Readymade garments contribute more than 10 percent to Bangladesh's gross domestic product and about 80 percent to the nation's exports, mainly to the US and EU markets.
The exporters and analysts said the foreign buyers are sensitive about labour issues including fire safety and other compliances.
They said the buyers will now think twice before placing orders with Bangladeshi factories after the fire incident that took lives of more than 100 people.
Even many will think to exclude Bangladesh from their outsourcing list or will shift to Vietnam or Cambodia, they said.
Documents posted on the Tuba Group's website included a letter from Walmart's ethical sourcing department for the US and Canada informing Tazreen Fashions that a May 2011 audit had found it to be a "high risk" factory.
Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), said the incident took place at a time when international buyers are targeting Bangladesh, Vietnam and Cambodia as the alternative sources of garments after China.
â€œBangladesh is still on their radar screen, while Bangladeshi manufacturers are also trying to tap the opportunity, despite having infrastructural problems,â€ he said.
But the Ashulia incident will leave impacts in two ways -- country wise and at the factory level, he said.
â€œThe buyers may be discouraged to outsource from Bangladesh, and they may not continue their business with the particular factories,â€ he said.
The buyers may also want to do business with the factories that are fully compliant, especially with workers' safety.
â€œThose who will continue the business will be more cautious now about the workers' safety and other compliance issues," Rahman said.
On the other hand, he said, the compliant factories will not be able to increase their production capacity overnight to meet the buyers' demand.
â€œUltimately, it will put a negative impact on the country's total exports,â€ he said, adding that it will be difficult to bring back a buyer once it leaves the country.
The impact of the latest incident would be worst if no steps are taken through investigation.
â€œIt will put an adverse impact on our clothing business if we do not address the weaknesses after this incident,â€ he said.
Anwar-ul Alam Chowdhury, a former president of Bangladesh Garment Manufacturers and Exporters Association, said the clothing industry will be hit hard by the fire incident.
â€œAlthough we are yet to receive responses from the buyers, I can say they will not come here any more if such incidents continue to happen,â€ he said.
"Why will they think much about Bangladesh, which contributes only $20 billion to the $450-billion market globally," he questioned. â€œThey will not take the risk,â€ said Chowdhury, also managing director of Argon Denims.
Zaid Bakht, a research director of Bangladesh Institute of Development Studies, said the buyers may not abandon Bangladesh, but they will be stricter on compliance issues.
â€œThey will create extensive pressure on our garment factories to be more compliant on labour issues including safety, as they will receive pressures from their customers as well,â€ he said.
â€œIt's desirable. The progress Bangladesh has made so far in labour and other compliance issues was mainly because of the immense pressure from the buyers,â€ he said. â€œCollective efforts from the political level to individual stage are needed to build awareness of the compliance issues.â€