RMG supply chain plagued by graft

The supply chain of the garment industry, the country's biggest export earner, is plagued by irregularities and corruption for which global apparel buyers are also responsible, according to a report of Transparency International Bangladesh.

The anti-corruption watchdog detected anomalies at 16 stages -- from order placement to shipment -- in the apparel supply chain.

According to the TIB, irregularities and corruption at different stages of the chain have become almost a custom in some cases. And various stakeholders, including factory owners, buyers, auditors and inspectors, are involved in it.

The TIB yesterday released the report that exposed corruption in the supply chain of the garment industry.

"We are habituated to blaming our factory owners, exporters and government employees. But buyers, who are buying and making profits, are no less responsible for irregularities," TIB Executive Director Dr Iftekharuzzaman said at a press conference at the TIB head office in the capital.

The TIB prepared the report based on information gathered from November 2014 to April last year through interviews of stakeholders, including buyers and global brands or their agents, garment factory owners and exporters, workers, compliance auditors, factory inspectors, merchandisers, shipping agents and bankers.

The TIB conducted the study jointly with Transparency International, Germany.

The TIB said this is a qualitative study through which it could detect the stages of corruption in the supply chain of garment industry. It didn't quantify the amounts of illegal transactions that take place in the supply chain.

"Sometimes such corruption is coercive, and sometimes it is done through collusion between different parties," said TIB Senior Programme Manager (research and policy) Shahzada M Akram, presenting the findings.

The study found that buyers occasionally take various strategies to cancel orders.

Those include imposing new compliance conditions on suppliers, manipulating compliance reports, raising false allegations and cancelling orders at will.

Iftekharuzzaman said buyers sometimes hold local factories hostage for making a quick buck, using their business and financial power. Some of them place orders to non-compliant factories to buy goods at low prices.

Though buyers' representatives or agents monitor the entire production process to ensure product quality, a section of buyers, at times, raises false allegations about product quality after shipments reach the destinations, said the TIB.

Sometimes, buyers threaten exporters with cancelling the order and sending back the shipment. In these cases, buyers basically blackmail the production units to get discounts on goods, said the TIB.

On occasions, buyers cancel orders fearing fall in product demand in their markets. At times, it is done with the intention to buy stock lot, according to the report.

The TIB found that a section of buyers manipulates compliance reports on supplier factories when they are not interested in taking delivery of goods. They contact auditors or inspection firms, seeking to manipulate reports to show the suppliers haven't met all conditions. This makes it easier for buyers to cancel orders.

"This is abuse of business power. They have such a tendency. We have to resist it," said Iftekharuzzaman.

The TIB divided the supply chain of the garment industry into three stages -- order placement, production and supply -- and said anomaly starts with bribing compliance auditors for preparing reports in line with the buyers' requirements. 

Small factories offer bribes to merchandisers to get orders as they don't have contacts with large buyers or proper documents. Besides, owners or managers of some factories enter into contracts with merchandisers to pay commission on the value of orders, it said.

According to the TIB, there is prevalence of bribes for influencing purchase decisions of buyers or agents.

Sometimes, merchandisers force garment factories to buy accessories from specific sellers. Moreover, factory owners import duty-free raw materials in quantity higher than the amount required, and sell the unused materials in the domestic market.

There are also allegations of violation of labour rights, it said.

To reduce irregularities in the supply chain of the garment sector, the TIB put forward a set of recommendations that include sudden inspection of factories.

It also advised the buyers to formulate a "Moral Code of Conduct” for themselves.

The TIB proposed that the government should issue a specific identification number for each factory to check anomalies.