Political Risk Report

Case Study: Bangladesh Protests and Implications for

the Garment Sector

Indian Forum for Public Diplomacy

August-September 2024

Alessia Mazuelos, Shlok Mehta, Kamakshi Bahri

1
World in brief: August 2, 2024. Morning Star Online. [Link]
 Table of Contents

1. Primary Questions
2. Crisis Brief: Terrain Analysis
3. Impact Assessment
a. International Buyers' Response to the Wage Hike
b. Due Diligence and Labour Rights Monitoring
c. Global Economic Uncertainties
d. Limited Access to the Global Market?
e. Proximity with Neighbours
4. Facts and Figures
5. Political Risk Management and Planning
a. Governmental and International Response
i. Suppression of Labor Rights Activists
ii. Violation of International Labor Standards
iii. Hostile Environment for Labor Advocacy
iv. Trade Diplomacy
b. Corporate Response and Stakeholder Analysis
i. Global Brands Response (H&M, Mango,C&A, Inditex)
ii. Key Findings/Analysis of Response
iii. Stakeholder Analysis Matrix

6. Conclusions: Recommendations and Projections

a. Scenario Analysis
i. Best-case Scenario: Restoration of Stability and Economic Recovery
ii. Worst-case Scenario: Prolonged Instability and Economic Crisis
iii. Most likely Scenario: Gradual Recovery with Ongoing Challenges
b. Business Intelligence
i. Market Outlook: Supply Chain Adjustments and Long-Term Economic Impact
ii. Strategic Recommendations: For Businesses, Investors, and Policy
Recommendations
c. Projections and Strategic Outlook
i. Short-Term Projections: Economic Impact and Political Climate
ii. Medium to Long-Term Projections: Industry Evolution, Regional and Global
Impacts
 Primary Questions

This political risk report will resolve the following questions:

1. What is the political risk of the Bangladesh protests for the country, region and world?
2. What are the implications in the economic sector? How is the present socio-political scenario in
Bangladesh impacting on the Garment sector?
This report will address these key questions related to the ongoing protests in Bangladesh by analysing
their potential political risks at both national and international levels. It will explore the economic
ramifications, with a particular focus on how the current socio-political climate is affecting the garment
industry. The report begins with a detailed overview of the protests, including their origins, timeline, and
the sequence of events that have unfolded. It then examines the primary affected areas within the
Bangladeshi society and economy, detailing the broader regional and global political and economic
implications. Moreover, the analysis includes an assessment of political risk management and planning
from the initial governmental and international response to the protests, offering insights into the
progression of internal tensions and economic effects of the crisis. Additionally, the report focuses on a
stakeholder analysis that highlights the impact on the garment sector, supported by an examination of the
corporate response with data visualisation and econometric modelling. The concluding section will
project the potential actions of the new Bangladeshi government in managing the protests and predict the
economic outlook for the coming months. The report will also provide strategic business intelligence
recommendations for managing and mitigating the economic consequences, particularly in the garment
sector.
 Crisis Brief: Terrain Analysis
Kamakshi Bahri

● Overview of the Rana Plaza disaster: On April 24, 2013, the Rana Plaza building, housing
garment factories, collapsed, killing over 1,100 workers and injuring thousands. This disaster
exposed the hazardous conditions in Bangladesh’s garment sector, triggering global scrutiny and
efforts to improve labour standards. Despite efforts like the Accord on Fire and Building Safety
signed by over 200 international brands, including H&M and Zara, and the Alliance for
Bangladesh Worker Safety signed by major U.S. retailers like Walmart and Gap, unrest has
persisted due to low wages and poor working conditions.
● Labour Unrest: Garment workers in Dhaka protested for higher wages in 2018, with initial
government repression leading to violent clashes. Eventually, the minimum wage was raised from
5,300 taka ($63) to 8,000 taka ($95)2, but workers’ demands for higher pay remained unmet, and
the continued dissatisfaction fueled ongoing instability in the sector.
● Political Repression: The 2018 Digital Security Act under Sheikh Hasina's government marked a
severe crackdown on political dissent and freedom of speech, targeting journalists, critics, and
political opponents. Despite government efforts to mediate labour disputes through the National
Tripartite Consultative Council (TCC) and a Ready-Made Garment (RMG)-specific TCC, labour
instability and tensions remained high.
● Recent Protests and Political Fallout: In 2024, university students launched protests against job
quotas for the relatives of 1971 independence war veterans. Frustration over perceived unfair
public sector employment opportunities quickly expanded into widespread demonstrations against
government corruption, economic mismanagement, and political repression.
● Implications for the Garment Sector: The sector faces heightened risks due to political
instability, labour unrest, and potential disruptions in production and supply chains. Ongoing
protests and government crackdowns could deter foreign investment and impact Bangladesh’s
reputation as a stable sourcing destination.
● The Fall of Hasina’s Government: By mid-2024, these student-led protests grew into a
broad-based challenge against PM Hasina’s 15-year rule and this movement drew in workers and
young professionals with economic frustrations and corruption allegations. The government
response included curfews and internet blackouts, such as the Cyber Security Act3 which
heightened government control over dissent and suppressed freedom of expression, aggravating
public anger. As protests escalated, clashes between protesters and law enforcement led to
overwhelming pressure on Hasina’s government, culminating in her resignation and exile in
August 2024 amid widespread unrest, economic dissatisfaction, and labour turmoil.

2
“Bangladesh: Widespread Garment Worker Protests over Minimum Wage Increase; Leads to Mass Dismissals -
Business & Human Rights Resource Centre.” 2018. [Link]. September 27, 2018.
[Link]
m-wage-increase-leads-to-mass-dismissals/.
3
“Restore Freedom of Expression in Bangladesh & Repeal CSA.” 2024. Amnesty International. August 8, 2024.
[Link]
on-in-bangladesh-and-repeal-cyber-security-act/.
 Impact Assessment
Kamakshi Bahri

The recent minimum wage crisis in Bangladesh's garment sector underscores deep-seated issues
in the global fashion industry's labour practices. Following the announcement of a new minimum wage on
November 7, 2023, set at BDT 12,500 (US$113), protests have erupted as this amount falls significantly
short of the BDT 23,000 (US$208)4 demanded by workers, and even further below the BDT 33,368
(US$302) calculated by the Bangladesh Institute of Labour Studies as a living wage. Although the wage
increase represents an improvement, it remains insufficient to meet workers’ basic needs, leading to
ongoing unrest characterised by violent demonstrations, mass arrests, and poor conditions for detained
workers highlighting the fragile state of labour relations in the country.

International Buyers' Response to the Wage Hike

● Following the minimum wage announcement in November 2023, Bangladesh’s top international
buyers, such as H&M, Gap Inc., Inditex, Mango and Primark, adjusted their pricing to reflect
increased labour costs, renegotiating their supplier prices and incorporating higher wages into
their calculations. However, some brands such as BESTSELLER, Next, H&M and Inditex itemised
wages within their pricing structures to ensure wages for pre-existing orders were accordingly
adjusted.
● Some brands have been less transparent about their pricing adjustments, raising concerns that
suppliers might be forced to absorb the financial burden, potentially failing to meet the new wage
requirements.
● Advocacy groups argue that brands have significant influence over wage negotiations. By not
reviewing contracts to accommodate the wage hike, they are putting suppliers at risk, since many
factories are struggling to pay higher wages without increased payments from brands, as
highlighted by BGMEA (Bangladesh Garment Manufacturers and Exporters Association)
president Faruque Hassan..
● The lack of clear commitment from major buyers like Walmart, Inditex, and Lidl, coupled with
non-committal statements from brands like H&M and C&A, exacerbates the pressure on
Bangladeshi suppliers and creates an unsustainable situation for suppliers, who may be forced to
cut costs in critical areas, such as worker safety or benefits.
● BGMEA reports show rising material costs and decreasing payments from brands, putting
suppliers into an untenable situation. Without proactive support from international brands, the
unrest among workers demanding livable wages is likely to escalate.

Due Diligence & Labor Rights Monitoring

4
“Disastrous Outcome on Wages Made Worse by the Price Workers Are Paying for Speaking out - Worker Rights
Consortium.” 2023. [Link]. November 22, 2023.
[Link]
ying-for-speaking-out/.

‌
 ● In light of the November 2023 wage protests in Bangladesh, ACT (Action, Collaboration,
Transformation) member brands have expressed strong support for a higher minimum wage,
emphasising the need for this increase to cover workers’ basic needs and provide some
discretionary income. BESTSELLER, H&M, Tesco, C&A, Next, Inditex, and Primark signal
a long-term commitment to improving wage conditions across the supply chain. Among these,
C&A, H&M, and Primark have been actively addressing worker grievances from supplier
factories involved in the protests, andH&M has gone beyond the minimum wage requirement,
ensuring suppliers in the Dhaka EPZ (Export Processing Zone) exceed the new wage threshold.
● ACT brands stress the need for systematic wage reviews to counteract inflation, referencing the
International Labour Organization's (ILO) Recommendation 1355. advocating for systematic
reviews that account for inflation and productivity increases, ensuring predictability and smooth
wage adjustments over time.
● Although wage increases aim to enhance workers' earnings, rising inflation and living costs
quickly erode their impact. ACT brands advocate for regular wage reviews to maintain
purchasing power, underscoring the need for a dynamic wage-setting process.

Global Economic Uncertainty

● The Asia Floor Wage Alliance estimates a living wage at BDT 51,000 (US$462), highlighting
how far the current wage falls from what is necessary for workers to meet basic needs. This
disparity raises concerns about the sustainability of the wage increase, especially in an
environment where rising inflation continues to erode purchasing power6.
● The price-squeezing practices of international fashion brands exacerbate this issue. For instance,
many brands, while supporting higher wages in theory, do not raise the prices they pay to local
suppliers. This pressure on suppliers often forces them to absorb additional costs without support,
as seen during the COVID-19 pandemic, when brands cancelled billions of dollars in orders,
leaving suppliers in financial disarray. The post-pandemic reality has not improved, with
suppliers still reporting pressure to lower production costs to meet buyer demands, and factories
are desperate, trying to grab orders to survive."7
● Bangladesh, as the world’s second-largest apparel exporter in 2023 contributing 6.8% of global
garment exports8, plays a vital role in the global garment industry due to its affordable labour and
strong manufacturing base.
● Ongoing political instability is undermining these advantages. According to a report by the
Bangladesh Garment Manufacturers and Exporters Association (BGMEA), production
disruptions and increased costs due to energy shortages have negatively impacted the sector’s

5
The Editor. 2024. “A Turning Point for Global Apparel Supply Chains.” [Link]. Fibre2Fashion.
August 14, 2024.
[Link]
[Link].
6
“Is Your Brand Paying Its Share to Reduce Bangladesh Workers’ Wage Despair?” 2019. Clean Clothes Campaign.
2019. [Link]
7
Ibid 5
8
World Fashion Exchange. 2023. “10 Key Statistics on Bangladesh’s Growing Textile and Clothing.” WFX.
February 6, 2023. [Link]
 reliability and competitiveness. This instability is making Bangladesh a less attractive option for
global buyers who prioritise consistent and dependable supply chains9

Limited Access to the Global Market

● In response, many buyers are actively seeking alternative sourcing options in nations such as
India, Vietnam, and Sri Lanka. This shift could significantly alter the global supply chain
dynamics, impacting Bangladesh's position in the global market. As buyers diversify their
sourcing strategies, Bangladesh may experience a decline in its market share within the global
apparel industry. Countries like India, Vietnam, and Sri Lanka, which offer competitive
production capabilities and a more stable environment, are likely to benefit from this shift. These
nations could attract increased orders, investments in their manufacturing sectors, and a larger
share of the global apparel market.
● For Bangladesh, this transition presents a considerable challenge. Historically, the country has
been a key player in the industry due to its cost-effective labour force and robust manufacturing
infrastructure. However, the current crises are undermining these advantages, making Bangladesh
a less appealing option for global buyers.
● The above trends and the shift to alternative supply chains impel companies to adopt a
‘Bangladesh-plus-one strategy’, similar to the ‘China plus-one’. This way, businesses would
avoid the risks of over-relying on one country and deploy multiple sourcing. - making the market
fragmented and geographically dispersed.
● Furthermore, the crisis may increase costs for manufacturers and retailers as they invest in new
supply chains, potentially raising apparel prices for consumers, while also reshaping global
supply chains and reducing Bangladesh's dominance, creating opportunities for other countries to
gain market share.

Proximity with Neighbours

● Sheikh Hasina’s resignation is seen as a major setback for India, threatening trade, security, and
connectivity that have flourished under her leadership.
● A potential return of the BNP under Khaleda Zia raises concerns about India's influence,
especially regarding the treatment of Hindu minorities in Bangladesh.
● Hasina's departure may shift Bangladesh's foreign policy, reducing India's leverage and possibly
creating opportunities for Pakistan and China to increase their influence.
● The $13 billion annual trade relationship and future free trade agreements could face disruptions,
adding to India's concerns over maintaining stable ties with its eastern neighbour.
● Rising concerns over attacks on Hindu minorities may fuel political tensions in India, with
potential domestic consequences.

9
Rahman, Md 2020. “Global Journal of Management and Business Research: B Economics and Commerce
Suggested Strategy for Bangladesh Garment Manufacturers and Exporters Association (BGMEA) during and Post
Covid-19 to Protect the Industry from Massive Loss Suggested Strategy for Bangladesh Garment Manufacturers and
Exporters Association (BGMEA) during and Post Covid-19 to Protect the Industry from Massive Loss.”
[Link]

‌
 Facts & Figures (Shlok Mehta)

Figure 1: Bangladesh's Job Quota System: A Catalyst for Student Protests and Demands for Reform
The image highlights Bangladesh's job quota system, where more than half of civil service posts are
reserved for specific groups. This includes 30% for children and grandchildren of
freedom fighters from the 1971 War of Independence, 10% each for women, backward districts, and
minorities. Only 44% of jobs are allocated based on merit. This system sparked widespread protests,
especially by students, who demanded reforms due to concerns over limited opportunities for merit-based
candidates, perceived inefficiencies, and growing unemployment among graduates.

Figure 2: Bangladesh’s Export value of apparel 2013-22 and the target for 2030
Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA)
Explanation: While apparel exports have grown significantly, worker wages have not kept pace with the
sector's expansion or inflation rates. The stark contrast between booming exports and limited wage
increases is one of the primary drivers of the ongoing [Link] the apparel industry is growing
rapidly, the protests underscore the need for a more balanced approach, where workers’ economic
well-being is aligned with the industry's financial success.

Figure 3: Minimum wage for garment workers & election year

Source: UNESCAP
Explanation: The graph underscores the link between political cycles and wage adjustments, highlighting
how garment workers' wage demands have consistently outstripped government offers. This growing
disparity, combined with the election, is likely fueling the protests, as workers push for a wage that meets
the rising cost of living

Figure 4: Regression Equation: Comparison of GDP per capita with worker’s average monthly wage
Sources: IMF, World Economic Outlook Database (GDP data), JETRO (wage data)
Explanation: Bangladesh is highlighted below the regression line, meaning its workers' average monthly
wage is lower than what would be predicted given its GDP per capita. Compared to other countries with
similar or lower GDP per capita (such as India, Vietnam, and the Philippines), Bangladesh’s wages are
relatively suppressed. The graph reflects economic factors underlying Bangladesh’s worker protests,
where workers demand better wages in line with the country's improving GDP.

Political Risk Management and Planning

Governmental and International Response

Kamakshi Bahri

This section analyses the governmental interventions and global engagement in addressing the challenges
Bangladesh’s garment sector faces. It highlights the economic and diplomatic implications, focusing on
the potential strain on Bangladesh's global trade relationships and the need for future engagement to
stabilise and strengthen these agreements.

Suppression of labour rights activities

● The recent escalation of labour rights activists and garment workers in Bangladesh represents a
profound and troubling issue within the global context of labour rights. This repression,
characterised by the systematic arrest and harassment of individuals advocating for better
working conditions and fair wages, poses a multifaceted problem with significant implications. At
its core, the crackdown undermines the fundamental rights of workers to organise and advocate
for their well-being.
● The suppression of labour rights activists not only hinders their ability to address the poor
working conditions and inadequate wages prevalent in Bangladesh’s garment industry but also
creates a pervasive climate of fear and intimidation. Such a climate stiffens advocacy efforts and
prevents the mobilisation of collective action, which is essential for achieving meaningful reforms
 in labour conditions. The repression is also a blatant violation of international labour standards
and human rights principles. According to global human rights organisations such as Amnesty
International and Human Rights Watch, the Bangladeshi government’s actions breach
fundamental rights enshrined in international conventions.

Violation of International Labor Standards

● The repression is also a blatant violation of international labour standards and human rights
principles. These violations impact not only workers but also global brands, which face scrutiny
of their supply chains. This has intensified the need for these brands to address labour practices,
highlighting the interconnectedness of labour standards.

Hostile Environment for Labor Advocacy

● Reports from Amnesty International reveal a harsh environment for labour advocates in
Bangladesh, with over 70 labour rights advocates detained since January 2024, with many of
these arrests criticised as politically motivated rather than based on legitimate legal grounds. In
conjunction with these arrests, Human Rights Watch documents at least 12 violent raids on labour
organisations, which have resulted in over 25 injuries among activists and workers. This
widespread intimidation, which includes harassment and surveillance, has drawn international
condemnation, as highlighted by ILO, describing how more than 30 activists have been subjected
to this by government authorities
● These aggressive tactics illustrate the severity of the government’s response to labour advocacy.
Furthermore, the ILO highlights that more than 30 activists have been subjected to harassment,
including threats and extensive surveillance by government authorities. This widespread
intimidation has created a hostile environment for labour advocates. In response, the international
community has strongly condemned these actions.
● A Joint Statement by Human Rights Organizations, issued in July 2024 and supported by over 40
groups, calls for an immediate end to the crackdown and underscores global pressure on the
Bangladeshi government to uphold labour rights. The impact of this repression is also evident in
the labour sector. The Clean Clothes Campaign reports a 45% decrease in labour strikes and
protests during the first half of 2024 compared to the previous year, reflecting the chilling effect
of the government's actions on workers' willingness to organise and advocate for improved
conditions.

Trade diplomacy
● Bangladesh has signed bilateral trade agreements with 29 countries, including major partners like
the US, China, India, and the UK. Additionally, the country participates in several regional trade
agreements, such as the South Asian Free Trade Area (SAFTA), the Asia-Pacific Trade
Agreement (APTA), and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation (BIMSTEC). Once the government stabilises, there will be a need to reinvigorate
these treaties to restore and enhance the focus on Bangladesh's RMG sector.
● Political instability in Bangladesh and increasing EU scrutiny pose significant economic risks to
the country’s garment sector, which makes up 93% of Bangladesh's exports to the EU (worth
USD 25 billion). The EU, accounting for 48% of total exports, is a crucial trading partner. Human
rights concerns and recent EU resolutions may jeopardise Bangladesh's ability to secure GSP+
 privileges after 2026, potentially imposing tariffs of up to 12%. This would make Bangladeshi
garments less competitive, threatening orders and jobs in the sector.
● The European Parliament's resolution on Bangladesh's human rights violations raises concerns
over the future of its GSP privileges, risking tariff-free access to the EU market. Losing GSP+
status could lead to a 10-12% price increase for Bangladeshi garments, making it harder to
compete with countries like Vietnam and Sri Lanka and potentially leading to significant order
losses. The loss of GSP+ would raise costs, reduce export demand, and potentially lead to a
decline in overall economic growth for the country.

Corporate Response & Stakeholder Analysis (Shlok Mehta)

This section explores how various companies responded to the protests in Bangladesh, focusing on
corporate responsibility and stakeholder engagement. Companies such as H&M, Next, and Inditex,
reported factoring the increased minimum wage into their pricing strategies, while ensuring compliance
through audits and grievance mechanisms.

H&M Primark C&A

Exceeded legal wage Implemented the new minimum Established a Fairness Channel
requirements at supplier wage immediately and for workers to report grievances,
factories in the Dhaka EPZ and conducted regular checks for conducted regular audits and
provided transparency on wage compliance. As a founding spot checks to assess wage
practices. H&M has enforced a member of ACT, it promotes payment and support suppliers
strict code of conduct, acting living wages and responsible in implementing the minimum
against suppliers who violate purchasing practices. wage, and prompted workers to
policies. join trade unions that support
their right to organise and
protest.
 Next Inditex GAP

Integrated wage increases into Ensures fair wages by including Actively engaged in advocacy
pricing, with minimal impact them as itemised costs and for worker rights through the
due to falling commodity prices maintains open communication American Apparel and Footwear
and favourable exchange with suppliers and dialogue Association (AAFA) and
[Link] teams conduct between workers and trade collaborated with other brands to
unannounced audits to ensure unions. Inditex participates in call for the government of
wage compliance. Next the ACT Bangladesh Interim Bangladesh to consult with
participates in initiatives like Dispute Resolution Mechanism labour stakeholders in the
ACT to promote living wages to address worker grievances. wage-setting process and to
and protect worker rights. prevent retaliation against
workers and union
representatives.

Mango ASDA

Closely monitored wage Monitored the wage situation,

compliance and demanded working with trade organisations
actions from its Bangladeshi and suppliers while conducting a
suppliers, providing compliance program that
accountability measures for the includes checks on payroll to
minimum wage increases. ensure workers are paid in line
with requirements.

Key Findings from Corporate Response :

● Lack of Transparency: No information was provided on how brands adjust prices to

accommodate wage increases, raising concerns about suppliers bearing the financial burden.
● Due Diligence and Employee Empowerment in Supply Chains: Companies claim due diligence
but lack evidence of effective enforcement. Further research is needed to determine the extent of
worker empowerment in raising concerns.
● Adaptive strategies: Businesses are diversifying strategies to manage wage hikes, with some
investing in automation to boost efficiency. There’s also a growing focus on sustainable and
ethical sourcing to maintain brand reputation

STAKEHOLDER’S ANALYSIS MATRIX (Shlok Mehta)

STAKEHOLDER INTERESTS POWER INFLUENCE POTENTIAL
 IMPACT OF STRIKE

Garment Workers Higher wages, Low High Prolonged strike,

improved (individually), potential for further
working High protests and unrest
conditions, (collectively)
better benefits

Garment Maintain Moderate High Reduced production,

Manufacturers profitability, increased costs,
competitiveness potential closure of
factories

Global Brands Ethical sourcing, High High Brand damage,

good reputation, increased costs,
cost-effective potential consumer
production backlash

Govt of Economic High High Influence the outcome

Bangladesh stability, social through policies and
harmony, labour regulations
rights

Trade Unions Advocate for Moderate Moderate Organise protests,

workers' rights, negotiate wage
negotiate with agreements
stakeholders

Civil Society Org. Raise Low Low Mobilise public

awareness, opinion, pressure
support workers, stakeholders
advocate for
policy reforms

Consumers Ethical and Low High Indirectly influence

sustainable industry through
fashion, purchasing decisions
affordable prices
 Conclusions: Recommendations and Projections

Alessia Mazuelos

Scenario Analysis

Best-case Scenario: Restoration of Stability and Economic Recovery

● In the best-case scenario for Bangladesh’s economic recovery, the nation rapidly restores
domestic political stability by addressing the root cause of the civil unrest and ensuring a peaceful
transition to democratic governance.10 Interim Prime Minister Yunus focuses on restoring political
trust, which leads to the revitalisation of industrial activity, most notably in the garment sector,
responsible for 85% of the country’s exports.11 The recovery of this sector is crucial to halting
economic decline, regaining international confidence, and reaffirming Bangladesh’s strategic role
in global supply chains.
● As economic reforms advance and political stability is upheld, The international financial
community regains trust in Bangladesh as economic reforms progress and political stability is
maintained. Bangladesh reestablishes its regional influence and strengthens ties with
neighbouring countries, stakeholders, and global investors. Effective management of the garment
sector’s recovery helps avert an economic crisis as a short-term risk, mitigating potential
disruptions in the global markets.12
● To achieve this scenario, the interim government must rebuild democratic institutions, engage
dialogue with protesters, and restore confidence in governance. Reforms in labour laws,
protection of workers’ rights, and ensuring a transparent political environment are critical for
creating long-term resilience, avoiding further protests, and securing Bangladesh’s position in the
international economic landscape.

Worst-Case Scenario: Prolonged Instability and Economic Crisis

● In the worst-case scenario, prolonged disruptions and instability in Bangladesh would result in
severe economic consequences, particularly for the critical RMG sector.13 Extended disruptions
could lead to widespread job losses and deepen economic hardships, as the garment industry
would be severely affected, negatively impacting a significant portion of export earnings.
● Following the ousting of Prime Minister Sheikh Hasina and the failure of interim Prime Minister
Yunus to restore political governance, the crisis would worsen. The collapse of political structures
could lead to further deterioration in export revenues and remittances, further destabilising the

10
Rishi S. Pranav 2024. “Bangladesh’s Political Instability: Is the Global Fashion Industry at Risk Again?”
Linkedin. [Link]
11
EAF Editors 2024. “Bangladesh gets a political reset, but big economic challenges remain” East Asia Forum.
[Link]
Statement Asia 2024. “Bangladesh: The Long Road Ahead” Crisis Group.
[Link]
12
Ibid.
13
Adegeest, Don-Alvin, 2024 .”Bangladesh unrest threatens global apparel supply chain” Fashion United.
[Link]
 economy in Bangladesh.14 Persistent protests and sociopolitical unrest would trigger indefinite
shutdowns of garment factories, crippling production capabilities and pushing Bangladesh’s
economy toward the brink of collapse.
● With garment factories shuttered indefinitely, the ongoing uncertainty would not only halt
production but “exacerbate the industry’s existing problems,” severely damaging Bangladesh’s
economic backbone.15 The combination of halted exports and deteriorating investor confidence
would accelerate the country’s economic decline.

Most Likely Scenario: Gradual Recovery with Ongoing Challenges

● A slow and fragile recovery is the most likely scenario for Bangladesh, as it continues to grapple
with both political and economic instability. The situation in Dhaka remains “precarious for the
foreseeable future,” with businesses wary of ongoing risks for their assets and personnel.16
Despite some progress, unrest persists, undermining national and international security, which
threatens the country’s economic stability and social welfare.
● Investor confidence in Bangladesh remains weak, especially as doubts grow about the country’s
ability to remain a reliable production source. The garment industry, “one of the world’s largest
apparent exporters,” faces significant challenges in recovering from the brink of collapse due to
the ongoing political instability.17 While there are signs of recovery, the economic and political
systems remain fragile.
● The future outlook depends heavily on whether political violence subsides, as a reduction in
unrest could alleviate policy, fiscal and external pressures. However, experts warn that economic
growth, tax revenues, and inflation will be negatively impacted, with potential damage to RMG
exports and remittance inflows.18 Foreign firms have already begun reducing orders from
Bangladesh outsourcing from neighbouring manufacturers, further threatening its economic
foundation. While recovery is expected, the ongoing challenges will slow it down, and it is
dependent on restoring and maintaining political stability.

Business Intelligence

Market Outlook: Supply Chain Adjustments and Long-Term Economic Impact

● The ongoing political instability in Bangladesh, fueled by student protests and political unrest, is
forcing global fashion brands like H&M, Primark, and Zara to reassess their supply chain

14
Hasan Ali, Sk. 2024. “How Bangladesh’s interim leaders can turn the country’s troubled economy around” The
Conversation.
[Link]
98
15
Allende, Mariana. 2024. “Bangladesh Turmoil May Disrupt H&M, Zara for Holidays” Mexico Business.
[Link]
16
EIU Update. 2024. “Risks around sectarian violence are growing in Bangladesh” Economist Intelligence Unit.
[Link]
17
Rishi S. Pranav 2024. “Bangladesh’s Political Instability: Is the Global Fashion Industry at Risk Again?”
Linkedin. [Link]
18
Fitch Wire. 2024. “Uncertainty Remains Heightened in Bangladesh amid Political Transition” Fitch Ratings.
[Link]
sition-15-08-2024
 strategies. The most likely response to the uncertainty is a diversification of sourcing, with major
retailers seeking alternatives to reduce their reliance on an uncertain and unstable Bangladesh.
● This shift is driven by the increasing risks associated with the garment sector’s disrupted supply
chains, shortages and production halts leading to potential for long-term financial and market
instability.19 For example, the prolonged unrest has already risked trade through major port
Chattogram, severely impacting imports, exports, and the transportation of goods.20 Political
uncertainty has also led to a potential outflow of foreign capital, further hindering global
corporate investment in Bangladesh.21
● As the garment industry accounts for approximately 83% of Bangladesh’s export revenue, it
remains highly vulnerable to the current turmoil. Already under pressure from the COVID-19
pandemic recovery, it now faces another crisis that jeopardises both its national economy and the
global fashion supply chain.22 Supply chains have already been disrupted due to the recent
protests in Bangladesh, leading to inflationary pressures disproportionately affecting both
corporations and consumers, many from low-income households.23
● Beyond Bangladesh, the effects of this political crisis are likely to be felt across global markets.
The economic ramifications of Bangladesh’s instability could disrupt business operations far
beyond its borders, particularly in industries dependent on timely garment production.24

Strategic Recommendations: For Businesses, Investors, and Policy Recommendations

● In light of the ongoing turmoil, businesses and investors must stay vigilant regarding the evolving
risks in Bangladesh, particularly in the garment sector. The current political crisis, combined with
“pressures from global economic fluctuations, sustainability demands, competition from
emerging markets” and rising labour costs, poses a serious threat to Bangladesh’s role in the
global supply chain.25 Around $4 billion worth of orders and an additional 800 million euros

19
Hasan Ali, Sk. 2024. “How Bangladesh’s interim leaders can turn the country’s troubled economy around” The
Conversation.
[Link]
98
20
Illius, Shamsuddin. 2024. “Businesses worried as fresh clashes cripple trade, goods transportation” The Business
Standard.
[Link]
21
Akiyama, Fumito. 2024. “Bangladesh crisis leaves global markets bracing for economic impact” Nikkei Asia.
[Link]
22
Rishi S. Pranav 2024. “Bangladesh’s Political Instability: Is the Global Fashion Industry at Risk Again?”
Linkedin. [Link]
23
Hasan Ali, Sk. 2024. “How Bangladesh’s interim leaders can turn the country’s troubled economy around” The
Conversation.
[Link]
98
24
Bahree, Megha 2024. “Bangladesh economy under pressure amid ‘uncharted’ political turmoil” Aljazeera
[Link]
l
25
Allende, Mariana. 2024. “Bangladesh Turmoil May Disrupt H&M, Zara for Holidays” Mexico Business.
[Link]
 worth has been reported as economic losses by industry associations displaying the worrisome
magnitude of the effects of the civil unrest and political crisis.26
● With the severe threat the escalating crisis has posed on the garment industry, major brands such
as H&M, Zara, and GAP may need to shift production to other countries to mitigate these risks,
and further disruptions could lead to billions lost orders and substantial economic damage
especially during holiday season.27 Nobel laureate Muhammad Yunus, leading the interim
government, faces the challenge of stabilising governance and restoring investor confidence by
“liberalising trade, relaxing investment regulations and removing structural barriers” like limited
access to finance.28
● For businesses operating in Bangladesh, immediate steps should include diversifying sourcing
strategies, increasing supply chain transparency, and preparing contingency plans to mitigate
further disruptions. With a Business Environmental Risk score of low E international business
insecurity prevails in front of the uncertainty of Bangladesh’s near future.29 After all, businesses
are still viewing the recent events in Bangladesh ‘with unprecedented nature’ and given the scale
of the crisis, restoring the country’s appeal as an investment destination will require a swift and
long-term agenda to mitigate the “social, economic, and political grievances.”30
● In light of the ongoing challenges in Bangladesh, businesses must take proactive measures to
enhance resilience. To foster innovation and infrastructure development, it is essential to enhance
public-private partnerships and implement supportive policies. The government should introduce
specific actions, such as providing grants or subsidies for research and development in sustainable
practices and technology adoption. Additionally, allocating funds to improve logistics and
transportation networks is vital for creating efficient supply chains.
● Targeted financial assistance should be offered to struggling garment manufacturers to help them
adapt to rising costs and maintain operations. Tax incentives for companies investing in
sustainable technologies and practices can encourage a shift towards environmentally friendly
production methods. Furthermore, implementing training programs in collaboration with industry
stakeholders will equip the workforce with the necessary skills for advanced manufacturing
technologies.

Projections and Strategic Outlook

26
Adegeest, Don-Alvin, 2024 .”Bangladesh unrest threatens global apparel supply chain” Fashion United.
[Link]
27
Allende, Mariana. 2024. “Bangladesh Turmoil May Disrupt H&M, Zara for Holidays” Mexico Business.
[Link]
28
Hasan Ali, Sk. 2024. “How Bangladesh’s interim leaders can turn the country’s troubled economy around” The
Conversation.
[Link]
98
29
Country News 2024. “Bangladesh: Mass student unrest raises instability and could be a threat to the government”
Credendo.
[Link]
rnment
30
Bahree, Megha 2024. “Bangladesh economy under pressure amid ‘uncharted’ political turmoil” Aljazeera
[Link]
l; OHCHR 2024. “Preliminary Analysis of Recent Protests and Unrest” United Nations
[Link]
Short-Term Projections: Economic Impact and Political Climate

● The ongoing political unrest in Bangladesh will have immediate and significant economic
consequences. The country’s GDP growth, which had consistently ranged between 6% and 8%, is
now forecasted to drop below 6% for this year and the next due to the violent protests
repercussions.31 The sociopolitical turmoil has also spiked inflation and damaged trade and these
are expected to continue until the crisis has settled down and Bangladesh has gotten closer to full
recovery.32
● While most garment factories, a key pillar of Bangladesh’s economy, have reopened after brief
closures and curfews, the future remains uncertain. Concerns over post-closure effects and
disruptions persist, with companies redirecting their production away from Bangladesh to
neighbouring countries like India for the remainder of the year and garment workers sharing the
impact of this crisis as detrimental to their livelihoods since most of the Bangladesh garment
sector was “just starting to recover from past economic hardships.”33 This crisis highlights the
fragility of Bangladesh’s political and economic systems, emphasising on the urgent need for
greater transparency and inclusive economic policies to prevent further deterioration in front of a
political risk of this magnitude.34

Medium to Long-Term Projections: Industry Evolution, Regional, and Global Impacts

● In the medium to long-term, Bangladesh’s resilience in the garment industry for its economic
growth, built on low wages and labour exploitation, will face increasing challenges.35 Although
the textile sector has been the driving force behind Bangladesh’s fortune, the country has
struggled to diversify its economy beyond garment manufacturing.36
● The current macroeconomic crisis will be difficult to resolve, with Bangladesh needing to also
find ways to return to the high growth rates seen before COVID-19 and “as a key player in the
global garment supply chain” the political and economic risk posed by Bangladesh on the global
fashion industry is concerningly big.37 For major retailers such as H&M, Zara and Primark, if the
interim government does not address measures to stabilise Bangladesh its status as a key player
will quickly dissolve.

31
EAF Editors 2024. “Bangladesh gets a political reset, but big economic challenges remain” East Asia Forum.
[Link]
32
Hasan Ali, Sk. 2024. “How Bangladesh’s interim leaders can turn the country’s troubled economy around” The
Conversation.
[Link]
98; Bahree, Megha 2024. “Bangladesh economy under pressure amid ‘uncharted’ political turmoil” Aljazeera
[Link]
l
33
Ibid; Rishi S. Pranav 2024. “Bangladesh’s Political Instability: Is the Global Fashion Industry at Risk Again?”
Linkedin. [Link]
34
Ibid.
35
EAF Editors 2024. “Bangladesh gets a political reset, but big economic challenges remain” East Asia Forum.
[Link]
36
Ibid.
37
Ibid; Rishi S. Pranav 2024. “Bangladesh’s Political Instability: Is the Global Fashion Industry at Risk Again?”
Linkedin. [Link]
 ● For Indian investors and companies, largely of the textile sector, Prime Minister Yunus must put
an end to the growing anti-Hindu violence in Bangladesh potentially straining political and
economic relations with Bangladesh’s most important commercial partner, India.38 If religious
tensions continue to escalate and India sees more growth in export markets in front of
Bangladesh’s political crisis, India may reconsider its economic ties with Bangladesh especially
when concerns around the garment industry have been previously expressed by authorities.39

38
Jaishankar, Dr S. 2024 “Suo moto statement by EAM, Dr. S. Jaishankar in Rajya Sabha on the situation in
Bangladesh” Ministry of External Affairs, Government of india.
[Link]
Rajyasabha__on_the_situation_in_Bangladesh
39
Yammanur, Shravan and Mangesh Krishna 2024. “From Stability to Turmoil: Managing Political Risk in
Bangladesh for Foreign Investors” Lexology.
[Link]