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Garment Manufacturing Still Going Strong in Asia Despite Safety Concerns 

Joey Wong 

 

7/16/2014 

While safety issues in Bangladesh and Cambodia’s garment-manufacturing industries have raised concerns, cost savings and taxes will still drive business, according to Grassroots℠ Research analyst Joey Wong.
The May 2013 factory-collapse accident in Bangladesh triggered increased public attention on social supply-chain compliance in the Asian garment-manufacturing industry. Following the February 2014 strikes by garment workers in Cambodia, GrassrootsSM Research was commissioned to examine the impact of these two events on the sourcing strategies of international retailers.

Grassroots talked with 63 sources, including sourcing managers and auditors at global fashion retailers and independent sourcing agents, as well as NGO¹ and social auditing firm representatives. We found that social compliance is one of the top three criteria for global fashion brands when selecting OEM² partners.

The Bangladesh and Cambodia incidents have increased demand for factory audits and, to some extent, the demand for social supply-chain training, including training programs related to working conditions and occupational health and safety. In addition, brand owners’ interest in having production bases in Cambodia and Bangladesh has not been significantly affected, given the labour cost advantage and tax benefits in these countries. Overall, the industry is expected to increase efforts to improve the labour and social compliance situation.

“I find the report helpful in the sense that we see a high commitment to Bangladesh as a sourcing country despite a challenging environment,” explains Hong Kong-based Allianz Global Investors ESG³ Research Analyst Henrike Kulmann. “Also, the complexity of retail supply chains and increasing demand for audits is likely to help testing and inspection companies.”


¹ Non-governmental organization
² Original equipment manufacturer
³ Environmental, social and governance

The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.

 

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AGI-2014-06-19-9901 

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