Some global fashion brands ready to pay higher prices for Bangladesh-made garments

The American Apparel & Footwear Association (AAFA), which represents over 1,000 brands, has said that various international fashion labels and retailers, including H&M and Gap, have pledged they will accept to pay higher prices for made-in-Bangladesh garments, to help local factories offset wage increases.

Bangladesh is the world’s largest apparel exporter after China. This week, after demonstrations caused deadly clashes between police and factory workers, the Bangladeshi government has imposed a nearly 60% increase in the garment workers’ minimum monthly wage, to BDT12,500 ($113) starting in December, the first increase in five years.

Factory owners have said that the wage increase, which comes ahead of the January general election, would cut into their profit margins, increasing costs by 5-6%. According to industry estimates, labour costs account for 10-13% of total manufacturing costs.

When asked if AAFA members would be willing to pay 5-6% more for their purchases to compensate for the wage increase, Stephen Lamar, AAFA’s managing director, told Reuters: “Of course.”
“As we and our members have repeatedly said, we are committed to adopting responsible purchasing practices to support wage increases,” Lamar further stated in a letter.

“We are also renewing our call for the adoption of an annual minimum-wage review mechanism, so that Bangladeshi workers will not be adversely affected by changing macroeconomic conditions,” he added.

Low wages have helped Bangladesh expand its apparel industry, which employs about 4 million people. Garment production is a mainstay of the country’s economy, accounting for nearly 16% of GDP.

Even after the forthcoming minimum wage increase, which some workers have deemed insufficient, Bangladesh will still lag behind other Asian garment manufacturing countries such as Vietnam, where the average monthly wage is $275, and Cambodia, where it is $250, according to International Labour Organization data.

Last month, several AAFA members, including Abercrombie & Fitch and Lululemon, told Bangladesh’s Prime Minister Sheikh Hasina that they were keen for workers’ wages to rise, and for inflation, which currently stands at 9% in the country, to be taken into account. Lamar too had written to Hasina, in July.

US and European fashion retailers are the main buyers of garments made in Bangladesh. Like most consumer goods retailers, fashion chains are having to deal with high inventory levels and a slowdown in the global economy, as crisis-bitten consumers in key markets are reducing their expenditure.