Global brands pledge to pay more for Bangladeshi RMG after wage hike 

Global fashion brands and retailers, such as G-Star Raw, H&M, and Gap, have pledged to purchase Bangladeshi apparel at higher prices to offset the recent labour wage increase.

G-Star Raw and H&M regional operations managers discussed their position on the matter with The Business Standard at the two-day-long 15th Bangladesh Denim Expo 2023 at the International Convention City Bashundhara in Dhaka on Thursday.

Stephen Lamar, chief executive officer (CEO) of the American Apparel & Footwear Association (AAFA) — a US-based association representing more than 1,000 brands, also mentioned that they will offset the additional cost Bangladeshi apparel makers have to face due to the labour wage hike, according to a Reuters report. 

Last month, several members of the AAFA sent a letter to Bangladesh Prime Minister Sheikh Hasina, requesting her to raise workers' wages considering the current high inflation.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has also urged all brands and retailers to adjust prices of all goods to be shipped from December to cover the increment in wage component.

Asked if AAFA would raise purchase prices by 5-6% in line with the production cost rise, Stephen Lamar told Reuters: "Absolutely."

"As we [AAFA] and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases," Lamar said in the report.

Speaking to TBS, Dutch fashion brand G-Star Raw Regional Operations Manager Shafiur Rahman said, "We are committed to offsetting any additional cost of our suppliers as they are essential to us to maintain a smooth supply chain."

Mentioning that as a brand, G-Star Raw always takes care of its suppliers and their workers, he said, "When raw materials prices went high, we paid all of our suppliers for that additional cost burden and we will do the same for the wage hike."

Shafiur Rahman added that G-Star Raw takes at least three years to develop relationships with its suppliers before bringing them into its supply chain. This is why the company takes such good care of its suppliers.

Ziaur Rahman, regional head of H&M Group for Bangladesh, Pakistan and Ethiopia, also affirmed the brand's commitment to pay in accordance with the new wage structure.

"We want to state that H&M Group respects the [wage restructuring] process," he said, urging all stakeholders concerned to reach a consensus that supports the new minimum wage.

New wage structure to drive up costs, but by how much?

When asked at the Denim Expo how high the costs of apparel would go due to the wage hike, Navidul Huq, director of BGMEA and managing director of MG Knit Flair Ltd, said after the new wage structure comes into effect, the minimum CM (cutting and making) cost of apparels will increase by about 7-10% based on the type of products.

However, several Bangladeshi apparel makers, seeking anonymity, alleged that some European and US buyers are trying to offer lower prices than the current Freight-on Board (FOB) prices, despite knowing very well that labour wages have been hiked.

Interestingly, these buyers are members of Action, Collaboration, Transformation (ACT) — a platform of 19 international apparel brands and retailers and the IndustriALL Global Union — who earlier sent a letter to the BGMEA president, saying they are in favour of wage hikes, said local apparel makers.

A leading Denim garment manufacturer told TBS that some buyers are even reducing purchase prices, counting currency devaluation in Bangladesh and cash incentives given by the Bangladesh government.

The BGMEA, in a letter sent to all brands, retailers and buyers on 8 November, urged an adjustment in prices in line with the new wage policy.

In the letter, the BGMEA president said the RMG industry in Bangladesh is feeling the heat of this crisis, especially the fact that with soaring inflation all input costs have increased significantly, including fuel, gas, electricity and transportation. 

Since July this year, the Bangladesh Bank has increased interest rates, which has made trade and investment finance costlier, he said.

"However, ensuring a decent living for the workers also is a top priority for us, as well as for global brands and retailers. Since we have accepted the new minimum wage, we will ensure implementation of it, and we need your support in terms of responsible purchasing practice," reads the letter.