The war started by the US and Israel against Iran may be over for the time being, but Bangladesh is still suffering from an acute energy crisis. Especially in the garment industry of the country, its impact is the most.
The country’s spinning, knitting and dyeing factories use huge amounts of gas and petrochemicals. And about 95 percent of Bangladesh’s oil and gas comes from the Gulf region. The increased cost of fuel has put severe pressure on businesses. On June 6, major apparel exporter Al-Muslim Group laid off around 1,900 workers from its knitwear and denim factories in Dhaka.
Bangladesh’s garment industry employs more than 4 million people, most of whom are women. They make clothes for western brands like Zara and H&M. About 4 crore people, about 25 percent of the country’s total population, are dependent on this industry. Last year, 80 percent of Bangladesh’s total export earnings came from the garment sector, which is about 13 percent of the country’s gross domestic product (GDP). After China, Bangladesh is the largest garment exporter in the world.
Last May, the government shut down electricity supply for an average of two hours a day in Dhaka and surrounding areas. In Chittagong, the country’s second largest city, power outages sometimes last up to eight hours a day. Some factory owners rely on diesel-powered generators to keep production going. But in this skill-intensive industry, says Abeel Bin Amin of the Bangladesh Ethical Trading Initiative, ‘even the 10-15 minutes it takes to start a generator can cause huge losses.’ Production fell by nearly 30 percent between February and May last year.
Global brands are also placing fewer orders due to production delays, transport disruptions and a tendency for consumers in Western countries to buy less clothing. Abdullah Hill Naqib, the owner of a jacket factory in Dhaka, said that since the start of the war, his factory’s orders have decreased by about 20 percent. According to Bangladesh Commerce Ministry data, garment exports fell for the tenth consecutive month in May; It has decreased by 8 percent compared to the same period of the previous year.
The cost of raw materials has also increased due to the increase in the price of fuel oil. Petrochemicals are used in everything from synthetic fibers, dyes, finishing chemicals, plastic buttons and chains and together account for about 65 percent of the total cost of manufacturing a garment. About 30 percent of the clothing produced in Bangladesh is made of polyester fiber and yarn, which is produced from naphtha. Naphtha prices have risen by about one-third since the start of the war. In addition, the country’s clothing industry is fragmented; While there are some integrated textile mills, most factories complete only one step of the production process. According to Abdullah Hill Naqib, his transportation costs have increased by about 30 percent.
In May, Bangladesh’s central bank announced a Tk 600 billion stimulus package for distressed businesses, with the largest portion earmarked for the garment industry. However, the interest rate on these loans is around 7 percent, which is difficult for the already financially stressed institutions to afford.
Despite the increase in production costs during the pandemic, major international brands refused to pay higher prices for garments made in Bangladesh. The situation is the same this time too. At least 9,500 workers are believed to have lost their jobs in about 80 factories since January this year. As in 2023 and 2024, there is a risk of renewed labor unrest and unrest.
On June 7, Samli Khatun came to work at the Cortex Apparels factory in Madhavpur and saw a layoff notice hanging on the factory gate. He said, ‘It will be very difficult for me to find another job. My opportunities as a woman are also limited. Maybe I should go back to the village.’
