Bangladesh’s Fast Fashion Industry Faces Turmoil Amid Political Upheaval September 6, 2024

Bangladesh has long been the beating heart of the global fast fashion industry, supplying brands like H&M, Zara, and Gap. Over three decades, the country’s garment sector transformed it from one of the poorest nations into a lower-middle-income economy. Today, the $55 billion industry accounts for 80% of Bangladesh’s export earnings. 

However, the political unrest that toppled Prime Minister Sheikh Hasina in August 2024 has thrown the industry into uncertainty. Amid widespread protests and deadly violence, factories were set ablaze, internet blackouts disrupted operations, and many international brands have begun reconsidering their reliance on Bangladesh. 

Political Chaos Hits Garment Exports 

At least four garment factories were burned during the upheaval, and 60 more outside Dhaka are expected to close due to worker protests over wages and conditions. Manufacturers now face added challenges as global brands look to alternative sourcing options in countries like Vietnam. 

“Recent events will impact the confidence level of brands,” said Mohiuddin Rubel, a director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). “Should put all eggs in one basket?” 

The drop in confidence could see a 10-20% reduction in exports this year, warns Kyaw Sein Thai, a supplier with offices in both Bangladesh and the US. For a country so reliant on garment exports, this would be a major blow. 

Underlying Economic Problems Exposed 

Even before political upheaval, Bangladesh’s garment industry was struggling. Scandals around child labour, deadly factory accidents, and the impact of the COVID-19 pandemic had already damaged its reputation. On top of this, soaring inflation drove up manufacturing costs, while demand slowed globally, shrinking profit margins and depleting foreign currency reserves. 

Beyond the garment sector, Bangladesh’s broader economy faces severe challenges. Decades of unchecked spending on massive infrastructure projects drained the government’s finances. Cronyism within the financial system has weakened banks, leaving them vulnerable to defaulting loans issued to politically connected businessmen. 

Ahsan Mansur, the new central bank governor, admits that reforming the financial system will be difficult and slow. “We are in a difficult spot, and we need more financial support, including another IMF bailout,” Mansur told BBC. 

A Workforce in Crisis 

The protests that ousted Sheikh Hasina were driven by widespread frustration, especially among young Bangladeshis who saw few job opportunities in a stagnant economy. While the garment industry has created millions of jobs, wages have not kept up with the rising cost of living. Many workers say earn less than half the national minimum wage, forcing them to take loans just to feed their families. 

“We will settle for nothing less than a doubling,” said Maria, a union leader representing garment workers. 

But student protesters want more. With high unemployment rates among young graduates, many argue that the education system fails to equip them with the skills needed for available jobs. 

“We just get a degree, but we don’t get the right skills,” said Mohammad Zaidul, one of the protesters. 

A Path Forward: Diversification and Reform 

Bangladesh’s reliance on its garment sector has reached its limits, according to Dr Fahmida Khatun of the Centre for Policy Dialogue. “No country can survive long-term based on only one sector,” she said. “Diversification is critical to meet aspirations of educated youth.” 

An abandoned technology park outside Dhaka, inaugurated in 2015 as part of an initiative to create higher-paid jobs, now stands as a symbol of the previous administration’s economic failures. “Bangladesh has been investing in physical infrastructure, but not in human infrastructure,” said Russel T Ahmed, a software entrepreneur. 

The interim government led by Nobel Peace Prize winner Muhammad Yunus has vowed to bring comprehensive economic reforms. Yunus, known for his pioneering work in microfinance, faces a formidable task: revitalizing the economy, ensuring fair elections, and breaking the grip of vested interests on policy-making. 

With Bangladesh facing a complex set of challenges – from a weakening global economy to deteriorating relations with India and the impacts of climate change – stakes are high. Yunus has promised reforms, but delivering on these promises will require not just time, but a national effort to rebuild the country’s institutions and restore confidence in its future.