Analysis: Bangladesh clothing factories face squeeze if safety push blocked

Esprit Holdings

21/11/2018 14:36

* Accord set up in 2013 to check factories after deaths
    * Bangladesh High Court rules Accord must close on Nov. 30
    * Government says Accord no longer needed
    * 500 factories could be face bar over safety
    * Hard for Western retailers to move elsewhere

    By Emma Thomasson and Ruma Paul
    BERLIN/DHAKA, Nov 21 (Reuters) - A group set up to improve
safety in Bangladesh's garment industry after the Rana Plaza
disaster in 2013 is warning global fashion firms that they will
have to stop sourcing from some factories if the watchdog is
forced to close next week.
    The threat to the apparel sector, which accounts for the
bulk of Bangladesh's exports, comes at a precarious time for the
country ahead of a bitterly contested election in December, when
Prime Minister Sheikh Hasina is seeking another term.
    "The consequences of a closure of the Accord liaison office
in Bangladesh will be significant, immediate, and damaging,"
said Joris Oldenziel, the deputy director of the Accord on Fire
and Building Safety in Bangladesh.
    More than 200 firms - including the world's top fashion
retailers like Zara-owner Inditex  ITX.MC  and H&M  HMb.ST  -
signed the legally-binding, five-year Accord after at least
1,100 people were killed when the Rana Plaza complex collapsed.
    Bangladesh's government had agreed to allow the body an
extension to complete remaining safety fixes and help build up a
national regulatory body to take over the Accord's work.
However, the High Court ordered it to close on Nov. 30    
    "The premature shut down of the Accord, leaving workers in
unsafe circumstances, would jeopardize the brands’ ability to
source from a safe industry," Oldenziel told Reuters.
    Low wages have helped Bangladesh build the world's
second-largest garment industry after China, with 4,000
factories employing about 4 million workers. The sector exports
more than $30 billion worth of clothes a year, mainly to the
United States and Europe.
    Fashion group Esprit  0330.HK , which produces about a third
of its garments in Bangladesh, has written to its factories in
the country to say that the closure of the Accord's office in
Dhaka will undermine the reputation of the textile industry.
    "Activism in key market countries could make the Bangladesh
brand toxic to consumers in spite of the tremendous improvements
that we have achieved in recent years," Luis Gonzaga, Esprit's
head of global supply, said in the letter to suppliers.
    
    FACTORIES AT RISK
    The Accord has inspected more than 2,000 factories in
Bangladesh and helped draw up plans to fix 150,000 structural
and fire hazards. Some 90 percent of those issues have since
been addressed, although many that remain are major problems.
    The Bangladeshi High Court has ordered the Accord's Dhaka
office to close due to a complaint from a factory owner who was
prevented from working with Accord brands after he was accused
of falsifying test results on concrete strength in his building.
    The Accord will keep operating from the Netherlands and
remains legally binding on its member companies, but it has
warned signatories they may have to stop sourcing from about 500
factories with safety problems if it can no longer inspect them.
    The Accord and its signatory firms, along with European
politicians and campaign groups, have been lobbying the
Bangladesh government for help to lift the court order, but with
little effect so far.
    "We don’t need them anymore," said Bangladesh’s Commerce
Minister Tofail Ahmed, adding that the government is capable of
monitoring factories itself and noting that there is no such
international oversight in countries like China or India.
    However, many experts and campaigners say the Bangladesh
regulatory body is not yet ready to take over. Some question
whether it will ever be effective given endemic corruption in a
country where many politicians also own garment factories.
    "If they go, Bangladesh’s garment industry will go back to
square one. Workers’ rights and safety will not be protected,"
said Babul Akhter, president of the Bangladesh Garment and
Industrial Workers Federation.
    Paul Barrett, deputy director for the Center for Business
and Human Rights at the NYU Stern School of Business, said
threats by retailers to move elsewhere might not be credible.
    "I don't think the big Western brands want to leave. They've
committed themselves to improving safety," he said. "Various
brands are exploring Ethiopia but there isn't the capacity to
rival what goes on in Bangladesh."
    Sweden's H&M, one of the biggest buyers of garments in
Bangladesh and the first Accord signatory, said it will keep up
efforts to improve factory safety but will not pull out if the
Accord has to close in Dhaka.
    "We believe any sudden withdrawal from the Bangladesh market
would negatively impact the livelihood of the families that
depend on the textile industry," a spokesman said.

 (Additional reporting by Zeba Siddiqui in Dhaka; Anna Ringstrom
in Stockholm; Editing by Toby Chopra)
 ((+49 30 2888 5081; Reuters Messaging:
emma.thomasson.thomsonreuters.com@reuters.net))