It has only been a month and a half since his installation, but Mahmud Hasan Khan, new president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), is on a mission to both make the organization more accountable to its members and the country more vital to buyers in the business.
Already, Khan has cut member fees by a quarter and put plans in place to navigate the tariff storm. And before his two-year tenure wraps, he’s determined to strengthen Bangladesh’s position as a global sourcing hub, focusing, in particular, on sustainability in all its forms.
Here, Khan sits down with HGI to outline his vision for the next chapter of Bangladesh apparel.
HGI: What is your overarching aim for manufacturing in Bangladesh under your leadership?
Mahmud Hasan Khan: First of all, we’d like to make our association more accountable to members. Secondly, we don’t want to involve ourselves as an organization in the politics. We want to interact with the government to make business-friendly policy, but the BGMEA office cannot be used for any political purpose. Third, we would like to make our industry sustainable. We don’t want to see that our membership grows every year but then a similar number (or more) members are eliminated from the industry. So, we’d like to motivate and educate our members that we have to have a sustainable industry.
We would also like to grow our industry in terms of value addition and retention. We are not only focused on volume. And, given the tariff issue and labor law reformation, we’d like to grow in a sustainable way.
HGI: What will that sustainable growth look like?
MHK: Look, sustainability is a big thing. Yes, there are the individual components to sustainability, like product sustainability. But Bangladesh has among the largest number of LEED-certified factories—there are almost 245 and every month it’s increasing. At the same time, they have to be sustainable in terms of financial management. If you cannot manage your finance properly, then the factory will not sustain. We’d like to grow in a sustainable manner in terms of product, in terms of infrastructure, in terms of finance, in terms of value addition.
“We’d like to grow in a sustainable manner in terms of product, in terms of infrastructure, in terms of finance, in terms of value addition.”
—Mahmud Hasan Khan, BGMEA
HGI: Speaking of financial management, how have BGMEA members been faring in light of the working capital strain?
MHK: It is a matter of smart mathematics. The factory owner should know their cost per minute (CPM) and be able to calculate what the earnings per minute (EPM) should be. This is a global, competitive industry, so if factories approach their buyers to get higher EPM and they don’t accept it, then they have to increase their efficiency. If our efficiency level is low, then we cannot make money, even if we get a higher price for product. Two or three different things have to move together. We have to minimize CPM and we have to have good negotiating power to get higher EPM. And then to make these two components successful, we have to have certain efficiency level so that we can make money.
HGI: Do you feel brands are doing enough to truly partner with suppliers, investing where needed and being willing to share risk, too?
MHK: There is a lot of room for improvement in the buyer-supplier relationship. And this is not necessarily always a problem from the brand or always a problem from the manufacturer. We have to have regular interaction for things to improve. We are holding a Brand Forum in August here in Bangladesh to discuss current business challenges as well as potential changes to payment terms. One thing on the agenda is codes of conduct. Different brands are following different codes of conduct in terms of social compliance. That has to be unified. We can agree to adopt the highest one, but everybody has to follow one code of conduct in terms of social compliance. These are the kinds of things we would like to discuss with them, and hopefully they will understand this is for a mutual benefit.
HGI: Do you think a willingness from brands to pay more for product and sustainability is part of the solution?
MHK: Bangladesh is doing this business, but India, Pakistan, Vietnam, Cambodia and, of course, China are doing the same business. Buyers normally do their cost calculations based on landed duty paid (LDP), in some areas we may be competitive, but in others we may not be. In terms of labor cost, for example, we are much more competitive than China, but in terms of efficiency, in terms of other infrastructure, we are poorer. So, I don’t think brands will give us extra money if they can get a cheaper price in Vietnam or China or in India, and I personally do not expect that. We have to compete. We have to be competitive. Bangladesh has been doing this business 40 to 45, years. Tomorrow, some country may start to do business with a cheaper offer but that does not mean the buyers will run away from Bangladesh to those countries, because they’d like to get a reliable source.
In terms of sustainability, some buyers may have some allocation of budget but I don’t feel that they are giving the extra money for sustainability. Of course, the advantage is that if we have a good factory, a sustainable or green factory, buyers give preference to placing orders. That is the advantage.
HGI: What sets your approach apart from that of previous BGMEA leadership?
MHK: We’d like to be more accountable and more transparent—that does not mean they were not accountable or they were not transparent before, but this is our agenda. From the very beginning, what we did in the first meeting was reduce the service charges of BGMEA members by 25 percent. This is just reducing the cost of doing business; this is symbolic because BGMEA should not be a profit-making organization.
We are also reducing our operational cost here at BGMEA and, more importantly, we are issuing Utilization Declaration, and based on that instrument, BGMEA members are releasing goods from the port faster.
Then we’d like to give some sort of support from BGMEA so that members’ businesses can be sustainable. In BGMEA, there are three different tiers of factory: top tier, mid tier and low tier. The low tier factories, they are struggling in terms of getting the right price, so we are planning to give them some technological support to give them more to negotiate on. In the near future, they may have to move from their existing location to a better location. This does not mean everybody has to have a very big factory, but it has to be a compliant factory.
These are a few examples of what we’re doing. It has only been one and a half months. In the near future definitely we will do more.
HGI: Do you see room for stronger enforcement or incentive mechanisms around compliance and sustainability goals?
MHK: This is a continuous process; it’s not matter of enforcement. If it is a matter of incorporating the law then, of course, everybody has to follow that. Number one, we have to have our individual interest. Number two is the sector interest and we can motivate our members, we can give them guidelines, but we cannot enforce. If some individual companies do not want to follow advice for best practices, they’ll be automatically out of business. That is the reality.
HGI: What do you hope your legacy will be at the end of your term as BGMEA president?
MHK: I want to prove that we have given enough time to make this industry stronger with more value addition. And then we’d like to make this industry individually sustainable. We don’t want to see hundreds of factories eliminated from this industry and then, day by day, it is reducing the membership. So, we’ll work sincerely, give time, and hopefully solve members’ problems, as well as make the right policies which will move this industry forward.
