More than 300 new apparel factories were set up in the last two years while 450 factories were closed down in Bangladesh. Of the total new factories, new entrepreneurs established some 137 while the rest emerged as part of expansion of the existing ones, said the association of the readymade garment (RMG) in Bangladesh. It said that non-compliance, western retailers’ audit, minimum wage increase and political turmoil had negative impact on orders, resulting in the shutdown of the factories on one hand. On the other hand, the new factories were set up maintaining safety and compliance requirements despite odds that especially emerged after the Tazreen fire and Rana Plaza building collapse.
The new factories created employment for about 180,000 workers whereas about 250,000 workers may have lost their job due to the factory closure, as said by the RMG association. Majority of the new factories are set up at Gazipur, Valuka and Mymensingh though some factories have also been established in Magura, Jessore, Nilphamari, Habiganj and Sylhet districts.
The number of members declined from 5,876 to 4,222 for the period of 2002 to 2014 at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Analysts, however, say these closures or bankruptcies may well be a natural phenomena, usually caused by a number of interrelated factors such as lack of expertise, efficiency and operational incapabilities in a competitive business environment. Such environment may have just begun emerging in Bangladesh since consumers started creating pressure on retailers and policy makers demanding legal, social, environmental and human rights of the workers at the factories, where their clothes are made.
Former EU diplomat and Wall-Street professional Mr. Kauser Bhuiyan said, “Closure of some factories after decades of growth in number of factories in Bangladesh is rather a natural phenomena in a competitive business environment”. He predicts further reduction of number of factories through bankruptcy, consolidation and merger & acquisition causing a much needed “Creative Destruction”, explaining it as a process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one.
Creative Destruction is unavoidable in order to compete the global suppliers, which can be achieved by increasing expertise, efficiency and operational capabilities of the entrepreneurs through technical upgrade, financial discipline and entrepreneurial mindset on one hand and new investments and infrastructure development on the other, Mr. Bhuiyan added.