Sanctions threat looms over Bangladesh’s garment sector ahead of elections

Garment manufacturers worry a one-sided national vote could lead to economic sanctions for the nation and them.

Dhaka, Bangladesh — Weeks after turbulent wage-hike protests and subsequent factory closures, Bangladesh’s ready-made garment (RMG) industry, a key revenue earner for the nation, is dealing with a new phase of anxiety: “possible” economic sanctions by the country’s Western partners.

The United States and European Union collectively account for more than 80 percent of Bangladesh’s multibillion-dollar apparel sales, and any sanction on the RMG industry would put a severe dent in its already beleaguered economy, said analysts.

The threat of sanctions from the US arose once Dhaka announced January 7 for national elections in what is likely to be another seemingly one-sided vote.

Those concerns were further boosted in early December when a key garment supplier to the US was warned of sanctions in a letter of credit (LC) from a foreign garment buyer.

An LC is issued by financial institutions or similar parties to guarantee payment to sellers of goods and services after appropriate documentations are presented. It essentially helps in avoiding risk by having intermediate buyer and seller banks that ensure proper payment.