Bangladesh wage unrest threatens peak-season export orders

By Tom Whitfield

Hundreds of Bangladesh garment factories suspended production after Saturday protests over pay, just as manufacturers were preparing spring collections for H&M, Associated British Foods-owned Primark and Walmart.

The stoppages hit a sector that employs 4 million people and generates more than 80% of Bangladesh’s export earnings and about 10% of its GDP. Low wages and duty-free access to key Western markets helped make the country the world’s second-largest apparel exporter after China. The margin for error is slim.

Protests began in industrial areas around capital Dhaka. Workers clashed with police, who used tear gas and sound grenades.

At Sparrow Group, whose clients include Inditex’s Zara, Gap and Marks and Spencer, production halted on Monday after a crowd attacked the factory. CCTV footage showed people throwing bricks and stones, smashing windows and damaging exterior walls while trying to force open the main gates.

More than 5,000 workers were evacuated safely. Responsibility for the attack remained unclear.

Sparrow head Shovon Islam said: “This is the industry’s busiest season.” Sparrow had major shipments scheduled for November. Islam said the disruption was extremely damaging, hampered production at the worst possible time and had all his buyers concerned.

Garment executives said worried clients had already called about shipments. Earlier disruption came from severe fuel and power shortages linked to the Middle East war and the 2024 mass anti-government protests.

What does the unrest change for brands and sourcing teams?

It turns a wage negotiation into a delivery and unit-cost problem. Brands must now reassess factory prices, lead times and continuity rather than treating labor costs as fixed.

Workers are seeking a minimum monthly wage of 30,000 taka ($243), a 140% increase from 12,500 taka ($100), which more than doubles the current base pay. The last increase came in 2023, when wages rose more than 56%; earlier raises ranged from 50% to 77%.

The government formed a wage board on Sunday. Abdur Rahman Tarafder, secretary of the Ministry of Labour and Employment, said the board would weigh inflation, economic conditions, living costs and export performance before making a recommendation. The board had yet to announce one.

The American Apparel & Footwear Association, which includes top US companies in the sector, called the board a critical opportunity to set a fair wage that allows workers to support themselves and their families. It also called for an annual review process.

A raise comparable with past increases could take Bangladesh’s minimum wage above India’s, according to industry officials. India, the world’s fourth-largest textile exporter, typically pays garment-sector workers 13,000 rupees to 15,000 rupees a month ($137), while China and Vietnam pay roughly twice Bangladesh rates, based on 2024 International Labour Organization data.

India is also becoming a stronger competitor, supported by its own cotton and yarn industries and government incentives, said M. Mohiuddin Chowdhury, chief executive of Clifton Group, a garment company in the port city of Chittagong.

Bangladesh retains duty-free and quota-free access to the EU, Britain and Canada. India now has a free trade deal with Britain, the second-largest destination for Bangladeshi garments.

In the financial year ended June 30, Bangladesh’s garment export earnings fell 1.65% from a year earlier to $38.70 billion. Earnings rebounded 6.1% in July-September, reaching $10.58 billion.

Clifton Group accepted an American buyer’s request for a 3-cent reduction per piece on a knitwear order after Indian manufacturers offered lower prices, according to Chowdhury. He said the company had no alternative. Over the past year, logistics costs rose 5% to 7%, reflecting higher fuel, electricity, shipping and freight expenses.

Chowdhury said: “Costs are rising from all sides, but buyers are still pushing for lower prices.”

With margins often limited to 2% to 3%, factories have little room to absorb additional costs. Labour already represents about 10% to 13% of industry costs, so prolonged disruption could threaten jobs and factory viability.

University of Dhaka economics professor Selim Raihan said buyers valued reliability: a slightly cheaper supplier can become more expensive when orders run late, quality becomes inconsistent or unrest repeatedly interrupts production.

For brands, the binding constraint is now the November delivery calendar: if factories cannot pass a higher wage through without missing dates, the 2% to 3% margin structure leaves no room for both labour costs and buyer price cuts.