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The majority of Bangladesh's export-oriented garment factories not affiliated with any of the apex trade bodies in the sector ship products to non-traditional markets mainly because of less compliance requirements from buyers.
Industry insiders say most of these "non-member" units sub-contract their work, a practice that allegedly lacks oversight nationally and internationally, thus posing risks of various kinds, including underpayments, safety concerns, and abuses.
According to Mapped in Bangladesh (MiB), an open apparel registry, some 836 export-oriented factories are not registered with either Bangladesh Garment Manufacturers and Exporters Association (BGMEA) or Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
"But these units export over 80 per cent of their total production. They play a significant role in the industry yet are often overlooked," it says.Some 63.56 per cent or 525 non-member units found by MiB export their products to non-traditional markets.
MiB - the supply chain disclosure effort of the first-ever digital map of Bangladesh's readymade garment (RMG) industry - recently revealed there are a total of 3,555 export-oriented RMG factories across the country. It came up with the number after physical visits, as well as two years of verification and validation of the units.
Of the 3,555 factories, some 2,720 are associated with BGMEA and BKMEA as of December 2024, according to the digital map.
Former BKMEA president Fazlul Hoque, however, disagreed with the number of non-member units and argued it would not be as high as 836.
But he admitted that many factories are not affiliated with either BGMEA or BKMEA, and they mostly export to "non-traditional" buyers, who sell apparels in markets like the United Arab Emirates (UAE), Saudi Arabia, Malaysia, the Philippines, and some African countries.
"These buyers do not need compliance. They need bulk goods and low prices," he told The Financial Express.
Hoque also said the exporters supply to these markets as they are competitive. "They may not be competitive anymore if they have to comply with so many regulations and requirements."
The authorities would have to decide whether these markets should be kept accessible to such exporters as there are risk factors, he said, explaining that if an incident happens, it would affect the overall industry as a whole.
Hoque believes there should be a minimum of compliance standards for such small factories so that they can survive and do business, while other compliance issues should also be maintained with required support.
Meantime, Bangladesh's garment exports to the non-traditional markets, except for the EU, the US, the UK, and Canada, witnessed a 6.42 per cent growth to $3.96 billion during the July-January period of FY25, according to Export Promotion Bureau (EPB) data.
The country earned $11.81 billion from exports to the EU, $4.47 billion to the US, $2.55 billion to the UK, and $750.98 million to Canada during this period.
Exports to the non-traditional markets, including Japan, Australia, India, Russia, Korea, China, Mexico, Turkey, South Africa, Chile, and Brazil, increased significantly to $6.09 billion in FY24, which was $3.90 billion in the fiscal year 2014-15.
Garment exports were only $1.87 billion to the non-traditional markets in the fiscal year 2010-11.
When asked, former BGMEA president Faruque Hassan said the non-member units should be brought under some regulations and also made members of either BGMEA or BKMEA or Bangladesh Textile Mills Association (BTMA).
Even if they are small, they have to be brought under a minimum of regulations so that they could be provided with various forms of support, he said. "That would help them receive different types of government support, such as incentives and better prices from buyers."
"If they are not regulated, none can support them in case of an anomaly. They would suffer the most as RMG is always under the spotlight," he noted.
Hassan also said if there is no regulation, it is also difficult to address allegations of non-compliance, child labour, non-payment of wages, and violations of other lawful benefits.
The apparel leader, however, claimed there is no child labour in the export-oriented factories, mostly the registered ones.
A recent study titled "Modern slavery and child labour in Bangladesh's garment sector: Documenting risks and informing solutions" revealed that human rights risks, including child labour, underpayments, safety concerns, and abuse, were notably higher in the subcontracted factories linked to exporters, who in turn sell to international buyers, than the exporting factories themselves.
The Rights Lab at the University of Nottingham, one of the world's largest groups of modern slavery researchers, and GoodWeave, a non-profit organisation, jointly conducted the study published last month in a side session at the Organisation for Economic Co-operation and Development (OECD).
"These risks were higher in Chattogram compared to Dhaka as the RMG sector in Chattogram is characterised by a lack of oversight from both governmental and non-governmental organisations (NGOs), which has led to a rise in subcontracted factories," the study said.
Cheap labour in Bangladesh, combined with an abundant labour force and a light regulatory framework, has led to a supply chain largely driven by the demand for low prices and fast production times from international corporations, it said.
This dynamic has encouraged the widespread practice of indirect sourcing, which means many workers are employed in factories that indirectly supply to foreign brands, often through larger factories or agents, it further said.
Subcontracting plays a significant role in maintaining overall production levels in Bangladesh, enabling bigger factories to efficiently handle sudden and increased orders during peak seasons, added the report.
RMG factories work directly with brands or as subcontractors for other units or a combination of both, the study said.
"When large formal factories face overwhelmingly large or simultaneous orders, they subcontract part or all the production to relatively low-cost small-scale factories, middlemen, or unregistered production units," it said.
Most of the time, these units do not produce the whole finished garments. Instead, large formal factories outsource specific tasks that typically involve either large-scale processes requiring special equipment, such as dyeing, or manual tasks, such as sewing labels, embroidery, or attaching buttons, the study noted.
"These indirect (subcontracted) factories face minimal oversight and often operate under very tight margins. The lack of regulation significantly increases the risk of exploitation or safety violations, making workers more vulnerable to labour rights abuses," it said.
Depending on seasonal demand, mixed-contract factories may receive an influx of orders, leading them to subcontract some of the work out, it also said.
"Often it is only the blue relationship lines which are visible to buyers, with subcontracting of any kind remaining undisclosed or inaccessible, posing greater risks to workers with no access to grievance or accountability mechanisms," according to the study.
In terms of signing written agreements, 53 per cent of the surveyed workers in subcontracted factories in Dhaka and 58 per cent in Chattogram reported having one, it said.
Overall, most survey respondents in both greater Dhaka and Chattogram reported having a written agreement. However, 45 per cent of workers in subcontracted factories reported not having one, compared to only 7.0 per cent in export-oriented factories, the study said.
"This demonstrates that the lack of formal agreements is more closely related to the subcontracting nature of work than to the factory's location," it added.
When asked, Centre for Policy Dialogue (CPD) Research Director Dr Khondaker Golam Moazzem said a new trend, in addition to seasonal and subcontracting, has emerged in various countries like Russia, South Africa, and those in South America.
That trend is e-commerce, which requires no membership or compliance, he said.
"The due diligence aims to ensure traceability in the global garment supply chain, and the big units have no or fewer challenges. However, the sub-contracting and non-member factories would face rather bigger issues like human rights and others," Dr Moazzem said.
He suggested bringing the non-member units under a minimum of standards so that rights issues as well as safety ones are addressed.