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For Retailers, Getting Out of Bangladesh Isn't So Easy

Members of the Bangladeshi Army carry the body of a garment worker following a factory building collapse on April 30.

Photograph by Munir Uz Zaman/AFP via Getty Images

Members of the Bangladeshi Army carry the body of a garment worker following a factory building collapse on April 30.

When it comes to labor rights and working conditions, Bangladesh is the new China. And not in a good way. The South Asian nation has been the scene of two major industrial disasters in the past six months. In November, a fire in a factory left 112 garment workers dead; in April, a factory collapsed, killing at least 433 garment workers and injuring many more. Now companies from Walt Disney (DIS) to Wal-Mart (WMT) have to decide how—or if—to use Bangladeshi contractors and subcontractors to make their products.

Disney has chosen to cut Bangladesh out of its supply chain altogether. The decision, made in March and reported by the New York Times on May 2, was probably pretty easy for the company to make. Disney is the world’s largest licensor, with sales of nearly $40 billion. But as the Times reports, less than 1 percent of the factories used by Disney’s contractors are in Bangladesh.

Disney’s statement notes that it has banned production in 43 countries, including Bangladesh, Belarus, Ecuador, Pakistan, and Venezuela. It also says: “Only a few of our licensees and vendors currently produce products in these countries.”

For companies that rely more heavily on Bangladesh, simply shutting down operations isn’t really an option. For one thing, where would they go? Other low-wage countries are likely to have the same kinds of problems that Bangladesh does: lax regulation, corruption, and little history of support for workers’ rights.

And Bangladesh, of course, relies on these companies. Bangladesh has quietly become the world’s second-largest apparel exporter, after China. As Bloomberg News reports, textiles contribute more than 10 percent of Bangladesh’s gross domestic product and about 80 percent of the nation’s exports, mainly to the U.S. and the European Union.

So these retailers have some clout—but so far haven’t chosen to exercise it altogether. Several major retailers, including Wal-Mart, the Gap (GPS), and H&M (HMB:SS), did meet recently with labor groups and nongovernmental organizations to discuss how to improve worker safety in Bangladesh. They didn’t announce any initiatives. But apparently a document about the talks will be released May 15.

Berfield is a writer for Bloomberg Businessweek in New York. Follow her on Twitter @susanberfield.

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