Deadly Dhaka attack could stymie garment industry reforms

Dive Brief:

An attack at a popular Dhaka cafe Friday that killed 20 hostages, including many foreigners, could be detrimental to the country’s $26 billion garment industry, analysts told Reuters.
While it’s unclear whether the attack was carried out by local extremists or those affiliated with the terrorist group Islamic State, also known as ISIS or ISIL, fears about the violence are keeping retail and manufacturing officials away from the country and could lead many to reconsider sourcing their goods there.
Cutbacks in sourcing could also impede efforts to improve working conditions in the industry, which has been in focus after a deadly factory fire and collapse there in 2013.

Dive Insight:

Violent incidents in Bangladesh last year already caused fear among foreigners in the country and earlier led the United States and Canada to ask their diplomats and citizens to restrict their movements to and within the country. In those cases, Bangladesh government officials denied that the killings are the work of ISIS, but said they were worried that they will hurt the garment business and the image of the country.

After the attack on Friday, Japanese retailer Uniqlo banned all non-essential travel to the country and told its employees based in Dhaka to not leave their houses "until further notice." Many retailers source from Bangladesh, including Uniqlo, Marks and Spencer, and Gap.

The problem underscores the complexity of having factories overseas. The garment industry, despite the low wages and sometimes dangerous working conditions, is an important source of employment for workers in Bangladesh—second only to China in its manufacture of clothing for Western retailers and reliant on apparel factories for more than 80% of its exports and some 4 million jobs. Many retailers have already begun to move their manufacture to other countries, including Myanmar and Vietnam.

"It's a tipping point for the country and the garment industry," Sarah Labowitz, co-director of the Center for Business and Human Rights at the NYU Stern School of Business in New York, told Reuters. "The risk is that buyers will cut their reliance on the country, that they don't focus so much on worker standards there, which would be a setback for the industry."