The Economist Report
Getting angry Photograph: Getty Images
The WAR that America and Israel launched on Iran may be over, but Bangladesh remains desperately short of power. Its garment factories, especially, have been running low on it. The country’s spinning, knitting and dyeing mills guzzle gas and petrochemicals—and around 95% of Bangladesh’s oil and gas comes from the Gulf. Rising costs are squeezing the businesses. On June 6th Al-Muslim Group, a large clothing exporter, sacked nearly 1,900 people from its knitwear and denim factories in Dhaka, the capital.
Chart: The Economist
Over 4m Bangladeshis, mostly women, work in the industry, making clothes for Western brands like Zara and H&M. Around 40m people—25% of the population—depend on it. Clothing made up four-fifths of Bangladesh’s export earnings last year, and 13% of GDP. Only China exports more clothes than Bangladesh.
But the sector was already under stress. The student-led uprising that toppled Sheikh Hasina Wajed in 2024 also sapped buyers’ confidence in Bangladesh as a reliable partner, explains Mehdi Mahbub, an industry analyst. When Bangladeshis took to the streets, many garment factories went idle. Five were set on fire. Some of the senior Awami League figures who were thrown in prison also owned garment factories. Over the past three years more than 400 of them have shut down.
In May the government was cutting power for two hours a day on average in and around Dhaka. In Chattogram, the second city, blackouts lasted as long as eight hours a day. Some factory owners have turned to diesel-powered generators to keep output up. But for an industry tailored towards efficiency, “even the 10-15 minutes needed to turn them on can be costly”, says Abil Bin Amin of Bangladesh’s Ethical Trading Initiative. Production fell nearly 30% between February and May.
Global brands are placing fewer orders, deterred by production delays, shipping disruptions and gloomy Western shoppers who have stopped buying so many clothes. Abdullah Hil Nakib, who owns a jacket factory in Dhaka, says that orders for his wares have dropped by a fifth since the war started. In May clothing exports fell for a tenth consecutive month, tumbling by 8% year on year, according to Bangladesh’s Ministry of Commerce.
Pricier oil has pushed up the cost of materials. Synthetic fibres, dyes and finishing chemicals, plastic buttons and zips make up around 65% of the cost of a garment, and all use petrochemicals. In Bangladesh, around 30% of garments are made using polyester fibre and thread, products derived from naphtha, a petrochemical that is now roughly a third more expensive than before the war. And the industry is highly fragmented. Vertically integrated textile mills do exist in Bangladesh, but most factories handle just one part of the production chain. Mr Nakib estimates he is paying 30% more for transport.
Bangladesh’s central bank introduced a 600bn taka ($5bn) stimulus package for ailing businesses in May, earmarking the largest share for garment factories. But recipients pay around 7% interest on the loans, tough for those already hemmed in.
When costs rose during the pandemic, the big brands showed they were unwilling to pay more for clothes made in Bangladesh. This time, at least 9,500 workers, at some 80 factories, are reckoned to have lost their jobs since January. More disorder of the sort seen in 2023 and 2024 is feared.
Samoli Khatun arrived for work at Coretex Apparels in Madhabpur on June 7th to find a layoff notice on the factory gates. “It will be very hard for me to find another job, and, as a woman, my options are limited. I may have to return to my village.” ■
