When contracts have no meaning | The Daily Star
12:00 AM, April 27, 2020 / LAST MODIFIED: 12:52 AM, April 27, 2020

When contracts have no meaning

What does a "contract" actually mean? I am sure many garment factory owners have been pondering over this issue these past few weeks. Here's a simple definition of a contract: "A written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law."

A great many of my fellow compatriots have contracts with many of the world's leading apparel brands. Some are for major apparel orders, some are just for small orders, but all fulfil the basic definition of a contract.

But here's the thing: many of these contracts have been rendered utterly meaningless these past few weeks. It turns out that such contracts might as well not have existed in some cases, so little intention does one party have of fulfilling their side of the contract.

This is not to say that these contracts would not be upheld in a court of law; in many cases, it is highly likely they would have. But how many garment factories do you seriously think are going to sue their brand partners in the West for cancelling and refusing to pay for orders? How many would have the courage to go down this route, in the knowledge that their reputation would forever be tarnished among potential clients? How many would even have the money to go down this route?

I say all of this not to, once again, reopen the arguments around brands cancelling contracts. Brands will always look after their own interests first and it would be naïve to expect otherwise. The whole world is going through a process of upheaval, the likes of which we have not seen since the Second World War.

My point is, after all of this is done, after business has returned to normal—a new normal, one might guess—Bangladesh's RMG sector needs to seriously consider the issue of contracts and purchasing practices generally. We simply cannot go on like this. What is the point of our industry having so many millions of dollars' worth of purchase orders with brands if, when push comes to shove, these contracts, these purchase orders, count for absolutely nothing? They are not worth the paper they are written on.

This is no way for an industry to operate in the 21st century. Bangladesh's economy is almost 90 percent dependent on garment exports for its income. And yet, as we are seeing right now, this industry is built on sand and made of straw.

Also consider this: a few brands, including the world's two largest retailers, H&M and Inditex, have announced they will now pay for wholly or partially completed (cancelled) garment orders on agreed terms. We are grateful for that, and we must hope that other brands follow their lead. But the respective decisions taken by Inditex and H&M were something that garment factory owners had very little control over—and that is my worry.

The point is that the garment industry cannot continue on a "wing and a prayer" like this. We surely need to have some say in our own destiny; our survival cannot be in the lap of the gods.

This means getting a grip in the issue of purchasing practices once and for all. It means working together, collaboratively, as an industry to ensure we are singing from the same hymn sheet as regards pricing and contract negotiations. It means all of us, collectively, standing our ground with regard to our buyers, saying "these are our terms of business, take them or leave them." This might mean 50 percent payment for orders upfront, 50 percent on completion. This is commonplace in other industries, so why should garment production be so different?

There are those who will say that these are unprecedented times and that it was inevitable that some factories would suffer as brands pulled orders. Yes, there is truth in that. But it is the scale of what has taken place in terms of brands simply turning their backs on orders which has shocked our industry to its core. The fact that brands are willing to treat RMG suppliers in this way, and on such a scale, tells me something. It tells me the power imbalance between brand and supplier has gone too far. It tells me that, for some brands, these contracts mean very little; they are just pieces of paper to be followed or ignored as they see fit.

Yes, these are unprecedented times, but this power imbalance has been around long before now. Where contracts are concerned, the cards are always stacked massively in favour of the buyers, and always have been.

With what we have seen these past few weeks, where brands have cancelled and walked away from orders, it is time for all of us to draw a line in the sand and say: enough! We can't keep doing business in this way. What happened to being partners to brands? Brands want business security, they want to plan for the future. But so do we as suppliers. We all want to play our part in building modern, robust supply chain. But we cannot do that if the basic currency which underpins all of our industry—contracts—is proved to be without meaning when push comes to shove.

 

Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). Email: mostafiz@denimexpert.com

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