Many RMG workers may lose jobs as brands press for price cut: Study
Millions of RMG workers in exporting countries including Bangladesh could lose jobs as global brands (buyers) are demanding price cuts and delaying payments to suppliers at a time suppliers are desperate for orders to survive and rebound.
At this time major brands are asking suppliers or exporters to cut their average price to make apparels about 12 per cent cheaper than last year, the latest research on the market situation by the Center for Global Workers' Rights (CGWR) at Penn State University found, describing such practices as "leveraging desperation" of exporters.
In a survey of 75 factories in 15 countries including Bangladesh suppliers said they had to wait an average of 77 days for payment, compared to 43 days before the pandemic, raising fears of further factory closures in an industry employing 60 million people worldwide, the report said quoting Reuters.
"We are seeing a dramatic squeeze on price, reduced orders and late payment," said Mark Anner, author of the study in the CGWR report. This will affect the small and medium suppliers first." Fashion companies cancelled orders worth billions of dollars earlier this year as COVID-19 shuttered supply stores worldwide.
It also caused workers wage losses of up to $5.8 billion; according to pressure group Clean Clothes Campaign. Garment producers in many countries including Cambodia, Ethiopia, Guatemala, India, Mexico, Peru and Vietnam have already laid off 10 percent of their workers and may have to cut another 35 percent of their labour force if order continue to fall.
"If this figure holds true for the entire industry globally, millions of garment workers could be out of work," CGWR cautioned. Moreover manufacturers and labour rights groups fear a second crisis is brewing on the supply side.
They said it is true some orders that were earlier cancelled or suspended this year were being restored, along with new orders, but they are less than the number of firms competing for contracts.
"Buyers are taking advantage of this," CGWR report said pointing to an "emerging second crisis" for exporters after they lost billions in cancelled and unpaid orders earlier in the year.
"It's a little hard to see right away the gravity of the (second) crisis because the new order volume is being mixed with the pay up of old orders that were pent up. It's hiding the new crisis, which is the decline in order value," the report said.
More than half of manufacturers surveyed said they would have to close factories if the "sourcing squeeze" continues. At least five garment manufacturers in Bangladesh - which hosts more than half of the 75 suppliers surveyed in the study said.
They said they had been forced to cut their prices by 5 per cent to 15 per cent. A factory owner and director of Bangladesh Garment Manufacturers and Exporters Association, said order volumes had risen since September but prices had fallen.
"There isn't much room to negotiate with brands. They prevailed saying if we don't agree to price cut, they can go to other suppliers," he said adding the industry could recover if the second wave of COVID-19 did not hit sales.