Dozen garment exporters lose millions as UK retailer busts
Mushir Ahmed | Sunday, 15 March 2009
At least a dozen Bangladeshi garment companies lost millions of dollars after a top retailer in Britain went bankrupt, in a chilling reminder of the devastation unleashed by the global economic crisis.
Woolworths, an apparel retailer with more than 800 stores in the United Kingdom, became one of the first victims of the economic meltdown in November last year when it was declared insolvent.
The sudden liquidation by half a century old company with sales over a billion dollar rattled its suppliers across the globe including some of its trusted ones in Bangladesh, whose exports were stuck up in the ports and in the sea.
Shanin Group in Dhaka was the worst victim of the bankruptcy as it lost some US$3.0 million dollars, with most of its shipments set to be auctioned off in an English port on Sunday.
As soon as the company made the shipment of kidswear, Woolworths collapsed on a massive 385 million pound debt, leaving its suppliers' deliveries piled up in the ports.
Shanin chief Faruq told the FE that he did not get any payment despite three months of frantic shuttling between London and Dhaka.
"On March 15 they are going to put my stocks on auction. The shipping company CGM has even forced me to pay the freight, which should have been borne by Woolworths," he said by phone from London.
"We did not know that this was going to happen even a day before the company became bankrupt. We thought it was too big to fall," Faruq said.
Inter Stoss, another garment company owned by member of parliament Shariar Alam has lost nearly one million dollars after Woolworths went bust.
"We spent a lot of energy to extract some of the dues. But we failed to get a single pound," he said, adding parts of his exports were auctioned off in an English port last month.
"Bankruptcy laws in England are lenient for the liquidated companies. Woolworths have to pay a meagre 600,000 pounds to its all its suppliers, meaning my company would get only a few thousands against total dues worth 800,000 dollars."
Alam said: "So devastating the global meltdown has been that in the recent days even big insurance companies don't insure our shipments destined for top global retailers.
The Bangladesh Garments Manufacturers and Exporters Association (BGMEA) don't have exact data how many garment exporters have been affected by the Woolworths' demise.
But the Shanin chief Faruq and outgoing BGMEA chief Anwar-ul Alam Chowdhury, who is aware of the trouble, said the number would be over a dozen with total loss around $20 million.
Analysts said the bankruptcy and the subsequent loss of millions of dollars by small Bangladeshi manufacturers were stark reminder of how cataclysmic a western economic recession could be for export-oriented countries like Bangladesh.
"It's impossible to get back the money. But there are lessons to be learnt from this debacle," said a top garment manufacturer.
"The main lesson is: Don't put all your eggs in a single basket," he said, adding the companies should "think twice" before striking deals with smaller retailers.
Central bank governor Salehuddin Ahmed had also warned exporters to know the financial health of the buyers before making any shipments.
"I have been to some of the worst affected countries including England and the situation out there is very bad," said the exporter.
"You never know whether a top retailer like Tesco or Carrefour, which import several hundred dollars worth of garments a year from Bangladesh -- would bankrupt tomorrow. So look before you leap," he said.
Woolworths, an apparel retailer with more than 800 stores in the United Kingdom, became one of the first victims of the economic meltdown in November last year when it was declared insolvent.
The sudden liquidation by half a century old company with sales over a billion dollar rattled its suppliers across the globe including some of its trusted ones in Bangladesh, whose exports were stuck up in the ports and in the sea.
Shanin Group in Dhaka was the worst victim of the bankruptcy as it lost some US$3.0 million dollars, with most of its shipments set to be auctioned off in an English port on Sunday.
As soon as the company made the shipment of kidswear, Woolworths collapsed on a massive 385 million pound debt, leaving its suppliers' deliveries piled up in the ports.
Shanin chief Faruq told the FE that he did not get any payment despite three months of frantic shuttling between London and Dhaka.
"On March 15 they are going to put my stocks on auction. The shipping company CGM has even forced me to pay the freight, which should have been borne by Woolworths," he said by phone from London.
"We did not know that this was going to happen even a day before the company became bankrupt. We thought it was too big to fall," Faruq said.
Inter Stoss, another garment company owned by member of parliament Shariar Alam has lost nearly one million dollars after Woolworths went bust.
"We spent a lot of energy to extract some of the dues. But we failed to get a single pound," he said, adding parts of his exports were auctioned off in an English port last month.
"Bankruptcy laws in England are lenient for the liquidated companies. Woolworths have to pay a meagre 600,000 pounds to its all its suppliers, meaning my company would get only a few thousands against total dues worth 800,000 dollars."
Alam said: "So devastating the global meltdown has been that in the recent days even big insurance companies don't insure our shipments destined for top global retailers.
The Bangladesh Garments Manufacturers and Exporters Association (BGMEA) don't have exact data how many garment exporters have been affected by the Woolworths' demise.
But the Shanin chief Faruq and outgoing BGMEA chief Anwar-ul Alam Chowdhury, who is aware of the trouble, said the number would be over a dozen with total loss around $20 million.
Analysts said the bankruptcy and the subsequent loss of millions of dollars by small Bangladeshi manufacturers were stark reminder of how cataclysmic a western economic recession could be for export-oriented countries like Bangladesh.
"It's impossible to get back the money. But there are lessons to be learnt from this debacle," said a top garment manufacturer.
"The main lesson is: Don't put all your eggs in a single basket," he said, adding the companies should "think twice" before striking deals with smaller retailers.
Central bank governor Salehuddin Ahmed had also warned exporters to know the financial health of the buyers before making any shipments.
"I have been to some of the worst affected countries including England and the situation out there is very bad," said the exporter.
"You never know whether a top retailer like Tesco or Carrefour, which import several hundred dollars worth of garments a year from Bangladesh -- would bankrupt tomorrow. So look before you leap," he said.