Bangladesh’s ready-made garment (RMG) industry, a major revenue earner for the nation, is dealing with a new phase of anxiety: “possible” economic sanctions by the country’s Western partners.
The threat of sanctions from the US arose once Dhaka announced January 7 for national elections in what is likely to be another seemingly one-sided vote. The United States and European Union collectively account for more than 80 percent of Bangladesh’s multibillion-dollar apparel sales, and any sanction on the RMG industry would put a severe dent in its already beleaguered economy, said analysts.
Those concerns were further boosted in early December when a key garment supplier to the US was warned of sanctions in a letter of credit (LC) from a foreign garment buyer. An LC is issued by financial institutions or similar parties to guarantee payment to sellers of goods and services after appropriate documentations are presented. It helps avoid risk by having intermediate buyer and seller banks that ensure proper payment.
According to the LC, a copy of the Western buyer stated: “We will not process transactions involving any country, region or party sanctioned by the UN, US, EU, UK. We are not liable for any delay, non-performance, or/ disclosure of information for sanction-based causes.”
If the clause is imposed, the garment manufacturer in Bangladesh would likely incur massive losses as the buyer wouldn’t be liable to make any payment for the orders placed with that apparel producer.
But industry leaders and government officials have dismissed the threat as a “rumor” and “antigovernment” propaganda and say no such economic sanction can be imposed, especially on the garment sector, as it is a fully compliant industry and abides by all the international labor laws.
An office bearer of the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) said that the LC came from a particular buyer and was not a statutory order or notice by any specific country or country.
He said the association had contacted the buyer, and the issue was sorted out. It was just a cautionary clause inserted by the bank that prepared the LC on behalf of the buyers and not the buyer’s condition. He said this does not indicate that any country plans to impose some sanctions on our industry.