RMG closures hit Bangladesh hard, 100 units pull shutters in 2024

Jago News Desk Published: 15 January 2025, 01:00 PM
RMG closures hit Bangladesh hard, 100 units pull shutters in 2024
A closed down garment factory in Bangladesh. – AFP File Photo

Bangladesh, long a global leader in garment manufacturing, faces an economic reckoning as factory closures escalate. The once-thriving sector is grappling with plummeting demand, supply chain disruptions, and financial instability, casting a shadow over the nation’s economy.

On January 2, workers at four Keya Group factories in Gazipur were informed that their jobs would end on May 1. These plants, part of one of Bangladesh's major apparel conglomerates, are closing due to "market instability, inadequate raw materials, and insufficient work orders." This announcement left thousands of workers—many already unpaid for months—staring at an uncertain future.

Keya Group’s woes are emblematic of a broader crisis. More than 100 factories, spanning garments, knitwear, and textiles, shut down or ceased operations in 2024. This wave of closures has left tens of thousands unemployed, with many living hand-to-mouth.

Economic decline hits hard

The closures come as Bangladesh’s economy spirals. Gross domestic product (GDP) growth fell to 1.8% in the July-September 2024 period, a stark drop from over 6% in the previous year. The manufacturing sector, once a growth driver, expanded by just 1.4%, down from 10% a year earlier.

The unemployment toll is staggering. According to the Quarterly Labour Force Survey, 176,000 additional people were unemployed in July-September 2024 compared to the same period in 2023, bringing the total to 2.66 million.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, warns that the crisis in manufacturing reflects deeper macroeconomic issues. "With slower GDP growth, factories produce less and then find themselves with too many workers," he said.

A banking and supply chain crisis

Bangladesh’s banking sector, beset by mismanagement and dwindling foreign reserves, has compounded the problem. Factories struggle to access credit, and importers face delays due to foreign exchange shortages. This has disrupted raw material supplies, forcing many factories to scale back or halt operations.

High-profile defaults have also shaken confidence. Major conglomerates like Beximco Group and S Alam Group, whose owners were close allies of the ousted Sheikh Hasina government, are accused of mismanagement and financial improprieties. Beximco’s December layoffs affected 40,000 workers, and its outstanding loans exceed $4 billion.

Workers bear the brunt

For factory workers, the impact is immediate and devastating. "They live hand-to-mouth. Job loss means they starve as they don't have money to buy food," said Kalpona Akter, executive director of the Bangladesh Center for Workers Solidarity.

Labor unrest is growing. Workers demand higher wages amid rising inflation, but many factory owners cannot meet these demands. Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers & Exporters Association, said foreign buyers’ delayed payments and banks' reluctance to lend have created insurmountable challenges for smaller factories.

Calls for government intervention

Industry leaders are urging the government to step in. On Sunday, a delegation led by Anwar-Ul Alam Chowdhury of the Bangladesh Chamber of Industries met with central bank Governor Ahsan H. Mansur to request immediate relief.

Their demands include, relaxed loan classification rules, faster cash incentive disbursement, long-term financing options, and lower interest rates for manufacturers.

Without these measures, the sector risks further collapse, threatening Bangladesh's role as a global garment hub.

Outlook remains grim

As the situation unfolds, experts warn of escalating social and economic consequences. “We are heading towards a socially alarming situation,” said Moazzem. If factory closures and unemployment persist, the fallout could extend beyond the garment sector, destabilizing Bangladesh’s broader economy.

The question now is whether swift policy action can arrest this downward spiral before it inflicts lasting damage.

Source: Nikkei Asia