March 2013 Source looks at growing pressures on garment makers


Walmart “to reduce reliance on Bangladesh” as stability fears grow

Walmart, Women’s Wear Daily, reported “has a strategy to gradually wind down its sourcing from” Bangladesh. The company’s reaction to the story showed no enthusiasm for the country. The story appeared as local garment makers worried about the damage political strikes were doing to Bangladesh’s already frayed reputation for unreliability and to the expense of manufacturing there, and about the resultant squeeze on companies’ liquidity. Garment makers also undermined their credibility with buyers by continuing to blame outside agitators for anything going amiss, and for continuing to campaign against unions. Its government made unrealistic promises about relocating factories, and Western brands continued to stay out of activists’ preferred fire safety programme.

Asian minimum wages still rising – but growing efforts to avoid paying them

Cambodia’s government set a 21% minimum wage increase, and said formal reviews would now be annual. Workers in Laos claimed they were not receiving the new minimum, and the Malaysian government allowed factories to postpone paying its new minimum to foreign workers till the end of the year. Workers in India staged the largest general strike in the country’s history over a list of demands including a universal minimum wage. The strike achieved nothing but public inconvenience. Indonesian factory owners still worry about the effect of higher minimums on factory viability

Rising cotton prices hint at a new speculative bubble

Cotton prices rose in the first few months of 2013 faster than any other commodity, becoming hedge funds’ favourite speculation, in spite of evidence that production continues to outpaced supply. This is fuelled by Chinese attempts to improve farmer income, which is responsible for relatively high prices being paid by Chinese spinners and weavers, though there are now rumours China will start selling its stocks. Vietnamese garment makers worry about rising raw material prices too. Media massively exaggerate Ito Yokado’s shift away from China

Abscondance strategies differ widely

In Bangladesh and Pakistan, the country’s Export Zones authorities reportedly ensured wages were paid to staff left penniless by absconding factory owners. In Cambodia, the government paid outstanding wage bills at one closed factory, while Walmart and H&M strong-armed suppliers to compensate abandoned workers at another. Chinese public opinion continues to fret about the possibility of other factories absconding. No-one has copied China’s hard line on tough prison sentences for absconding

China’s new rulers give pollution top priority as India closes more dye works

China’s new Prime Minster said he would fight pollution problems “without mercy and with iron fist”., as trade association China National Textile and Apparel Council, warned that companies failing to keep up with growing environmental rules “will be phased out.” India closes hundreds of polluting dye works.

Financial pressures hit Chinese, Bangladeshi and Thai garment makers

Chinese factories complain of cash flow problems as costs rise, some banks think they can’t lend money to textile and garment businesses and interest costs rise faster than any other input. Some Thai banks are limiting advances for garment and textile businesses, while Bangladeshi garment makers want more money than banks can lend

World biting off more trade initiatives than it can chew?

US officials warn budget cuts will reduce America’s ability to negotiate new trade deals: Obama wants fast-track authority to get TPP through Congress – but there’s no sign Congress will give him it, and Central American opposition’s building up. Japan now wants deals with Korea, China and the US. China wants a deal with Europe, while Europe wants a deal with the US and much of SE Asia – but can’t conclude talks it started with Canada and India in 2007 or ratify an agreement with Colombia it agreed last year.

Development programmes vary widely

Multinational textile firms plan huge investments in Indonesia and Cambodia sees more new garment plants than ever before. But foreign firms aren’t investing in Indian shops or factories, no-one can agree how many factories have closed in Sri Lanka and Costa Rican factories are shrinking fast. Global production data shows the “onshoring” phenomenon still media myth as rich country garment production falls

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