Small and medium-sized garment factories in Bangladesh are shutting down. The main reasons are: the high cost of production, lower prices offered by foreign buyers, the recent wage hike and the recent free trade agreement between Vietnam and the European Union. Many work orders are shifting to Vietnam, one of the competitors of Bangladesh, because of this free trade agreement. Another important reason is that larger firms’ sub-contracting work to small units has been restricted after the Rana Plaza building collapse in 2013. The restriction on sub-contracting is a major threat for the units as most of them are dependent on the bigger units overloaded with work orders. Now they can’t do the same job because of poor compliance. It is this that prevents retailers from placing work orders with them. Also, small garment units face capital shortages and have low negotiation skills.

There are more than 1000 small and medium units in the garment sector, each employing between 500 and 2,000 workers. About 50 small and medium-sized garment factories have shut operations since April. Closures will take the number of small and medium apparel factories that went out of business in the last one year to more than 200 units.