The garment industry in Bangladesh is the nation’s core engine to the economy, bringing in $47 billion last year out of around $55 billion in annual export earnings. Further, shallow ports in the South Asian country means that even without geopolitical disruptions, the country required more time to deliver on orders.
Shipping companies have already increased 40% to 50% of their charges for transporting containers from Bangladesh to Europe and America. But those prices are set to rise by another 20% to 25% soon. Already operating on thin margins after hiking wages by 56% in January, Bangladeshi garment makers will be dealt another devastating blow by the freight price surges. Some are losing business.
Shovon Islam’s Sparrow Group makes clothes for top fashion brands like Banana Republic, J.Crew and Marks & Spencer. In the last week, he said he lost orders for 150,000 pieces worth several million dollars from a top U.S. buyer who ultimately shifted to an Indonesian buyer offering a shorter lead time to supply.
“We are given one of the cheapest rates by the buyers as we require 15-20 days more than other major garment-making nations. So, in terms of lead time, we always operate on knife edge and the slightest disruption in supply-chain affects us in a huge way,” Islam explained. “This Red Sea conflict will probably affect Bangladesh more than the Ukraine-Russia war.”
