Workers Who Make the World’s Clothes Are Facing Abject Poverty
(Bloomberg) -- Rozina Begum is worried that she and her husband and two children will starve. On March 25, a manager of Ultimate Fashions Ltd. in the Ashulia garment district on the outskirts of Bangladesh’s capital Dhaka, summoned her and some 300 other workers at the plant and told them to finish what they were working on and go home.
“I asked the manager, ‘why are you doing this to us?’ We were told there would be no production from tomorrow. The man didn’t say anything else,” Rozina said by phone, confined to her tiny home. “I can’t go out looking for a new job. I just have to wait for the shutdown to end.” Even then, she doesn’t know if she will get her job back.
Rozina is one of millions of people who are on the lowest rung of a global supply chain that has been shattered by the coronavirus. In an industry that connects some of the wealthiest and poorest people in the world, from the luxury brand stores in New York and Paris down through the wholesalers, shippers, cotton growers, textile makers and garment manufacturers, they are among those most affected by the pandemic-induced global slump.
The fallout has been especially damaging in countries with some of the world’s poorest workers, from Pakistan to Cambodia, Indonesia and Vietnam. Many had benefited from the migration of low-cost jobs from China as wages in the world’s second-biggest economy rose and factories moved to higher-value production. Now, some in the industry fear that part of that work may move back to China, where factories are already restarting and shops are beginning to reopen.
“There’s no good story for us,” Rubana Huq, president of Bangladesh Garment Manufacturers and Exporters Association, said in an interview. “China will end up being both the supplier and the consumer. Brands are now turning to their shops that are reopening in China.”
Huq said she’s concerned retailers in Europe and America, the two key markets for Bangladesh, will switch to suppliers in China and sell to Chinese customers as that country restarts business. U.S. retail sales fell by a record 8.7% in March from the previous month, led by a 50.5% plunge at clothing stores and a 26.8% decline at furniture and home furnishing stores. And forecasts suggest that figures for April will be worse.
Even in China, the world’s top textile exporter, the situation isn’t much better yet. While more textile mills are resuming operations, the number of overseas orders being canceled is still increasing, according to a survey by China National Textile and Apparel Council. A survey of 166 textile mills in the first week of April showed that 70% of reported overseas orders are at less than half of their normal level.
In Vietnam, where an estimated 78% of the country’s textile and garment workers have had their jobs suspended or hours cut due to the pandemic, some firms have switched to making fabric face masks for export. Even so, industry group Vinatex says that the nation’s textile sector could lose $465 million if the crisis continues into May.
The crisis boiled over in Pakistan’s commercial hub of Karachi in April, when dozens of workers protested in front of a factory gate for a denim maker. Tariq Khaskheli, a political activist who led the protest, said police baton-charged the protesters.
“Our only demand is that the workers get their jobs back,” he said. “How would they feed their children? The government has issued clear instructions that no workers should be laid off during the lockdown but they fired hundreds.”
Among those dismissed was 21-year-old student Waleed Ahmed Farooqui, who relied on the earnings to pay his university fees and support his family of seven because his father, a driver, no longer has enough work. “What else can we do? If this lockdown continues and I can’t get another job, I will have to go out and beg on the streets,” he said.
Nowhere in Asia is more reliant on the garment trade than Bangladesh, where the industry has driven economic growth in the past decade. More than 80% of the country’s export earnings coming from ready-made garments and the majority of workers in the factories are women, according to the Bangladesh Garment Manufacturers and Exporters Association, which represents companies that employ 4 million workers.
The country has more than 7,000 garment factories as well as hundreds of spinning, weaving and dyeing mills, the U.S. Department of Agriculture said in a report last year.
More than 1,100 of those factories reported canceled orders worth $3.17 billion in export sales as of April 20, affecting 2.27 million workers, said Huq. Almost all the “brands” and retailers had declared force majeure, canceling orders outright even with fabric on the cutting table, she said. The cancellations sent shockwaves through the banking industry, and now textile companies can’t get credit.
“We are literally pleading with all brands to come up with some plan for a relief,” that would involve paying for in-progress projects and other orders, Huq said, who made a plea in a video posted on the website of the International Cotton Advisory Committee in Washington.
On April 8, the STAR network, an umbrella group representing garment makers from Bangladesh, Cambodia, Myanmar, Pakistan and Vietnam, published a joint statement calling on global brands, retailers and traders to honor the terms of their contracts and not to renegotiate payments or cancel orders, but to support the millions of workers and their families who supply the market.
“It is time for global businesses to uphold and honor their commitment to labor rights, social responsibility and sustainable supply chains,” the group said.
Rozina, the jobless worker in Dhaka, said she was paid 8,000 taka ($94) in salary for her work in March but was deprived of 17 hours overtime pay. Her husband, a rickshaw driver who was sitting next to her during the phone interview, said he waits for hours in the street for passengers that never come. With the capital under lockdown since March 26, the roads are almost empty. Rozina said the little she had saved is fast depleting and they are running out of food. The family cannot even return to their village because of the lockdown.
Rajesh Sethi, managing director of Ultimate Fashions, said, “It’s not only us who are facing” this crisis. Everybody is going through the same thing.” He declined to speak on job losses and worker payments. His company has had $2.37 million worth of orders suspended or canceled since the disease outbreak, according to the garment exporters’ association.
Central banks such as the U.S. Federal Reserve are taking unprecedented steps to halt worsening economic conditions and contracting credit, but that’s more difficult in emerging markets, where authorities have fewer options and often have to rely on foreign aid in a crisis.
The pain includes the garment industry’s suppliers, the cotton growers, ginners, spinners and weavers that supply the raw materials for T-shirts, jeans and dresses.
“There is no trade happening in the local cotton market. Most of the textile mills and ginning factories are closed,” said Naseem Usman, chairman of the Karachi Cotton Brokers Forum. “The interest on their bank loans is ballooning while they can’t operate. Who will buy cotton when the textile millers themselves are shut?”
Cotton prices tumbled about 23% this year in New York, touching the lowest level since 2009 earlier this month. Growing stockpiles mean the pain for growers from India to China and the U.S. could extend well beyond the recovery from the virus. The U.S. Department of Agriculture estimates global inventories will rise to 91.2 million bales, the most since 2014 and the equivalent of 82% of annual demand.
“Global manufacturing capacity may require several years to rebuild,” said Jon Devine, an economist with Cary, North Carolina-based researcher Cotton Inc.
In South Korea, Seoul-based textile manufacturer Shinsung J&T Co., which has a factory in China, is facing “complete disaster,” said Olive Lee, financial manager at Shinsung, which supplies companies including U.S. brands. “Buyers in the U.S. are either holding or canceling orders and we are not getting paid for the orders that have been completed. The big fear is that we don’t know when this will end.”
Lee said Korean government measures to support small and medium businesses are too little and loans being offered by banks don’t help, asking instead for tax cuts or support for salary payments. “Cutting our employees’ income is the last resort but this is something that we may have to do,” she said.
For many who toiled in the factories that turn the fabric into clothes, there’s no help at all.
“It is going to put the workers in abject poverty,” Huq said.
©2020 Bloomberg L.P.