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Tuesday, September 2, 2014

Monday, February 4, 2013
Business

Garment subcontracts avoidable? Far from it

Exporters say they need to give work to outsiders to meet tight deadline

Poor road infrastructure, political unrest and pressure to meet the deadline force many garment exporters to resort to subcontracts, industry people said.

Of the 3,500-odd active garment factories, at least 500 run purely on a subcontract basis, according to Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

The remaining 3,000-odd factories also produce garments on subcontracts when they have no orders of their own.

Also, there are several hundred non-BGMEA factories engaged in subcontract activities.

“We cannot keep our factories idle. It's a labour-intensive industry and the operating cost is very high,” said Mahmud Hasan Khan, managing director of Rising Group of Industries.

Khan said buyers want their products to reach on time, and they are least bothered about Bangladesh's poor infrastructure conditions and political unrest.

“There is nothing wrong in subcontracts. It is contributing to export growth,” said Nasir Uddin Chowdhury, acting president of the BGMEA.

Chowdhury, who owns five factories, said three of his factories work directly on orders, while the rest two produce garments for those three factories.

“Buyers should not cancel the orders [subcontracts] if an accident occurs in a factory,” he said. The issue of subcontract came in the spotlight after the recent fire incidents at Tazreen Fashions and Smart Export Garment Ltd.

Tazreen was manufacturing garments for the US retail giant Wal-Mart under a subcontract from a local firm, at the time of fire on November 24 last year that killed at least 112 workers.

After the incident, Wal-Mart cancelled its entire order worth nearly $5 million (Tk 40 crore) with the local firm.

Smart Export was executing orders on a subcontract for brands -- Bershka and Lefties -- owned by the Spanish retail giant Inditex when a fire struck on January 26. Inditex has since announced that it would not take the Smart-manufactured items.

Generally, exporters get 45 to 60 days if all materials are to be sourced locally, to fulfil an order, and 90 to 120 days if the materials need to be imported.

“Often, we resort to subcontracts at 20-30 percent higher costs to meet the deadlines of the buyers,” said Iqbal Hossain, another exporter.

The poor condition of the Dhaka-Chittagong highway and political unrest eat up a good portion of the time exporters get from buyers, he said.

Hossain also said all factories, except the composite ones, work on a subcontract basis. There are around 10 composite factories in the country's woven sector.

However, Anwar-ul-Alam Chowdhury Parvez, former president of the BGMEA, said the trend towards subcontracting is on the wane. “Still, many factories rely on subcontracts.”

Parvez, however, said the factories having bond licences need to get the BGMEA approval before delegating orders on subcontracts.

Conversely, a factory cannot take up subcontracting work without a bond licence. However, more than 1,000 factories of BGMEA members do not have any bond licence.

sajjad@thedailystar.net

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