Sanctions threat looms over Bangladesh’s garment sector ahead of elections

Dhaka, Bangladesh — Weeks after turbulent wage-hike protests and subsequent factory closures, Bangladesh’s ready-made garment (RMG) industry, a key revenue earner for the nation, is dealing with a new phase of anxiety: “possible” economic sanctions by the country’s Western partners.

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 essentially helps in avoiding risk by having intermediate buyer and seller banks that ensure proper payment.

According to the LC, a copy of which was obtained by Al Jazeera, 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.”

Should the clause kick in, 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.

Both industry leaders and government officials have dismissed the threat as a “rumour” 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 labour laws.

Faruqe Hassan, President of 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 countries”.

“From BGMEA, we have already contacted the buyer and the issue was sorted out. It was just a cautionary clause inserted by the bank who prepared the LC on behalf of the buyers,” Hassan told Al Jazeera, “It doesn’t mean that any country is planning to impose some sanctions on our industry.”

Aljazeera