Apparel Sourcing Intelligence - Worldwide

Lessons of 2013: 3 Political fragility kills jobs – and resists prediction

No forecasting technique seems able to spot which country’s industry will be ravaged next by political fragility. Few were surprised by December 22 stories that political self-indulgence by Bangladeshi politicians’ self-indulgence threatened to bankrupt hundreds of Bangladeshi garment factories. But hardly anyone seemed to forecast the economic chaos likely in Thailand after the first fatality on December 29 amid growing political unrest.

Near-simultaneous stories appeared on December 22 that Bangladesh’s garment exports in November were 22% up on 2012 – and that two months’ intimidation of service workers by Opposition politicians made bankruptcy likely for hundreds of garment makers, with consequent destitution for hundreds of thousands of workers: factory owners were also announcing on December 22 that they were stopping hiring new workers

Notwithstanding  a year of repeated tragedies and violence, and claims from elsewhere in Asia that garment orders were being moved elsewhere, immense efforts  by Bangladesh workers, buyers, factory owners and worldwide wellwishers kept  the country’s garment exports growing through the twelve months following the 2012 Tazreen fire.

But  industry spokesmen  claimed a “hartal” ( a programme of intimidation  to force businesses to close) called by Opposition politicians  in the last few weeks of 2013 had seized up transport, making production impossible, and consequently forced a potential lethal liquidity crisis on around 500 apparel plants.

The hartal was completely unconnected with the issues of safety, salaries and working conditions which had preoccupied the worldwide garment industry for the previous year. It was another ploy in the run up to the January 5 elections – and most expect the ruling Awami League will win, but without legitimacy because the Opposition is boycotting the polls and looks likely to continue disrupting the economy for months afterwards.

None of this will surprise followers of Bangladeshi politics: indeed a few weeks earlier, the Economist Intelligence Unit (EIU) had ranked Bangladesh alongside Syria and Sudan among the 20 countries at “very high risk” of   serious social unrest during 2014.

social risk

Unsurprisingly, the EIU also put into the 45 countries at “high risk” of unrest Cambodia, where Opposition leader Sam Rainsy battened onto an unpopular garment wage settlement on December 24 to call for a national strike – a call which by December 28 was leading to riots.

But it put Thailand, alongside the UK, France and Holland, into the 60 countries in its “medium risk” group – and published its assessment as protesters started surrounding the house of the beleaguered prime minister Yingluck Shinawatra. By December 28, the ensuing protests claimed their first killing.

With 40% of the world’s population due to vote during 2014 in national elections, the likelihood of more destabilising violence during the year looks high in some of the countries going to the polls, such as Bangladesh, South Africa, Brazil, Indonesia and India.  Few expect much disruption from European Parliament elections – though there is a serious likelihood parties opposing the very existence of the EU may make up the largest single block of votes, which probably makes ratification of any new trade deals practically impossible.

Who knows what might follow if Scotland votes to secede from the UK? Few, though, expect many heroic decisions by US politicians in a year with midterm Congressional elections.

Some of the worst violence this winter so far has been in countries where no elections were formally planned, such as Cambodia, Turkey, Ukraine, Egypt and Thailand. And countries in the EIU’s list of “least” or “very low” likelihood of disruption, like Japan and Singapore, have seen unprecedented levels of street protest recently.

Practically every country named so far is essential to either the world’s production or retail of apparel. Sometimes – as in Cambodia – there is a close link between garment workers’ grievances and the national unrest. Other times – as in Thailand – the cause of the unrest is wholly irrelevant to the industry, but the unrest may make normal flow of workers, goods and funds impossible, and disrupt garment exports this time round as much as it did a few years ago.

Bizarrely, in Egypt, the violence around Christmas was provoked by the military government’s arrest of the former Prime Minister for ignoring a court order to renationalise the privatised Tanta Flax and Oils textile company. Yet, as throughout the other unrest associated with Egypt’s Arab Spring, Egypt’s garment exports have been almost entirely unaffected by the unrest, which has almost completely paralysed the country’s old-style upstream textile plants.

In Turkey – which in summer saw its first widespread textile and garment strike for over a decade – unrest in Istanbul has scarcely touched the garment industry. And, while political tensions risk destroying the garment industry in Bangladesh and Cambodia, recent elections in Honduras (where systematic, lethal,  violence is almost as hard-wired a part of politics as in Bangladesh) have been as violent as predicted – but have done nothing to disrupt trade.

This winter, with a few screamingly obvious exceptions like Bangladesh, it has been as impossible to forecast which countries unrest will hit next as it has to forecast whose garment industry will be affected by the unrest.

Third party forecasters like the EIU have acquired an indifferent reputation for their ability to forecast disruption. Worse, for many in this industry, no-one has yet developed a way of forecasting disruption to garment trading

However difficult accurate forecasting might be, though, the risk of social and economic disruption, caused largely by political fragility, underlies the garment trade in many countries important to garments’ manufacture or retail. At Clothesource, we’ve been trying for two years to devise tool businesses can use to measures their exposure to that risk.

So far we’ve not succeeded. But businesses selling their own, more generalised, tools haven’t succeeded any better.

We’d like to boast that we’re just more honest about the problem