Might soaring Bangladesh exports have partly caused its tragedies?

Is there another, and rarely commented on, way in which retailer practices have contributed to the spate of garment factory catastrophes in South Asia over the past year?

It would be unrealistic and cynical to attribute the pace at which Bangladesh apparel exports have soared since the Tazreen fire in November to publicity for low prices the country has been receiving: however cynical an observer might be, garment orders cannot be switched on that quickly. In the first six months of Bangladesh’s current financial year (July-December), apparel exports (in US dollars) were up 8.5%, but  growth has been in double digits ever since, and hit 20.7% in June.

In our view, there is a link though. That link (which applies to the Ali Enterprise fire in Pakistan as well) is the little-discussed, but difficult to understand, decision by management on the spot to order work to continue amid evidence of a likely imminent disaster.

Universally, commentators in the West have attributed those decisions to “greed” and those condemnations have gone unchallenged. But observers at the Razzak Plaza building on June 27 saw factory workers beating a TV reporter up for reporting it was unsafe: engineers that day confirmed it was dangerous and the building, and the factories within it, remains closed. So why do people, in a city with a long history of factory accidents, treat evidence of more unsafe buildings so lightly?

One reason, of course, is that if you’re very poor, there’s always going to be a temptation to run risks. Personally, I can’t imagine being in a factory like Rana Plaza, after seeing a TV programme the previous day about how unsafe it was, and working there nonetheless.  Or, in a city with a long history of factory fires, accepting a foreman’s claim that a fire warning was a false alarm. But I’ve never lived on $38 a month.  

There’s a similar motivation on the part of management. It’s now clear that a contributory factor in the current disasters has been the awful coincidence over the past year of booming orders, an uncertain Western retail environment and a massive collapse in public order in Pakistan’s and Bangladesh’s biggest cities.

There’s a horrible commercial risk in being a garment manufacturer these days. You get the order from Walmark or whoever and you think you’re going to make money. You buy the raw material they tell you to – and there’s a guarantee you’ll get the full price for the finished garments within so many days of your delivering those garments to a ship or truck at the time specified in the contract. But if, between getting the order and shipping the goods, production is disrupted by power outages, raw material being delayed en route or access to your factory blocked by violent rioters (in other words if you’re a normal Dhaka or Karachi factory), you’ll be left with a huge pile of unsellable garments and a whopping fabric bill you’re going to struggle to pay.

Sometimes, the Western retailer will allow a shipment delay. But if he’s worried sales aren’t going to be as rosy as he expected six months ago, he won’t – or he’ll fine the factory so much it might have been better for the manufacturer if the order had been cancelled.

Now there are hundreds of things that can delay production. Hundreds of reasons why factory owners get neurotic about getting a whopping debit note. And hundreds of reasons why an owner might want to subcontract production elsewhere – whatever a customer’s book of rules might say. Hundreds of reasons, too, why a manager in a garment factory might, idiotically, choose to assume an alarm bell is ringing because the alarm’s not working properly.

Most of those reasons have nothing to do with greed: but they’ve got a lot to do with a manager’s terror a faulty alarm is going to bankrupt him – because that’s what will happen if he stops production for a day on an already massively delayed job. By some estimates, it was impossible to work in most Bangladesh factories in the first three months of this year for fully one-third of the working days available.

Now none of that excuses lethal decisions. But it explains why factories can make stupider decisions when they’re busy than when they’re not. And it also means that Western buyers wanting to stop the cycle of deaths in South Asia have to try to break the cycle of orders often not being able to start production until so close to the delivery date that corners are cut. And it reminds buyers that a political climate assuring public order is just as important a factor in evaluating a factory as low prices or decent transport infrastructure.

There are times too much work CAN be bad for business.