In a show of solidarity, the Garment Manufacturers Association in Cambodia (GMAC) joined forces with eight competing Asian textile and garment lobby groups to demand better purchasing practices in an industry wrestling with Covid-19 production and supply chain disruptions.
The Sustainable Textile of the Asian Region (STAR) Network is the first inter-Asian network of producer associations of the textile and garment industry, which came together on January 12, marking the start of a new initiative, STAR Network said in a January 18 press statement.
The central focus of the network is to raise questions surrounding purchasing practices, such as payment and delivery terms, from the perspective of manufacturers and the associations that represent them as a true, unbiased bottom-up initiative, it said.
It listed the organisations as GMAC, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), China National Textile and Apparel Council (CNTAC) and Pakistan Towel Manufacturers Association (PTMA).
The remaining groups are Pakistan Hosiery Manufacturers and Exporters Association (PHMA), Towel Manufacturers Association of Pakistan (TMA), Myanmar Garment Manufacturers Association (MGMA) and Vietnam Textile and Garment Association (VITAS).
“We want to come together as associations and manufacturers in Asia, to agree on common positions regarding payment and delivery terms so that we have a stronger voice in individual and in collective discussions with brands and buyers on improving purchasing practices.
“This common position will be powerful”, said STAR Network spokesperson Miran Ali, who estimates that the network represents over 60 per cent of all global apparel exports by manufacturers.
GMAC secretary-general Ken Loo explained that payment terms in the garment industry differ greatly from other sectors.
Citing a litany of issues such as “exceedingly long credit terms” and an “unhealthy bias in favour of buyers”, Loo said these put merchants in a cash flow dilemma and expose them to financial risks.
Backed by a letter of credit or just a sales contract, the credit term that suppliers are obliged or compelled to grant buyers is between 30 and 150 days after shipment, he said.
In a recent survey of its members, GMAC found that 40 per cent of respondents cited buyers requesting longer credit terms during Covid-19, he said.
Adding insult to injury, more than 40 per cent of respondents said buyers had low-balled them, threatening to cancel orders, he added.
“This is an evolving issue, from bad to worse. The current system is not sustainable and needs revising because it benefits the buyers to such an extent that they are untenable for the future.
“We recognise that each party has its own difficulties, but buyers are surely in a better financial position, unlike the manufacturers who are financially weaker and have to deal directly with their workers’ wages.
“There can’t be deferred payment in workers’ wages, or factories will have to sustain damaging strikes,” Loo said.
Cambodian Labour Confederation (CLC) president Ath Thorn said better payment practices would help to alleviate the plight of the Covid-19-ravaged industry.
“I do agree with the associations’ call for better payment practice from buyers, suppliers here also need the money to pay for workers.
“However, I also do encourage the suppliers to pay their workers once they’ve received the oft-delayed payment from their buyers,” he said.
The STAR Network pointed out that the nine associations will be working in five working groups, defining their “red lines”, requests and recommendations on topics such as payment and delivery practices, planning and information exchange and third-party negotiations until March.
Based on the output of the working groups, the second phase of the initiative will drive a roll-out in the industry, the network said.
According to Loo, the volume of Cambodian garment, footwear and travel goods exports dipped 10 per cent in the first 10 months of 2020 over the corresponding period in the previous year.