Looming Bangladesh Election Raises Global Jitters

As the campaign trail nears the finish line for the Bangladesh elections on Jan. 7, business leaders and manufacturers are anxious and more than a little on edge.

It’s not about the outcome—there is little doubt that the ruling Awami League party, led by prime minister Sheikh Hasina, will remain in power. Nor is the concern particularly high about the violence that has been characteristic of past elections, with blockades, protests and police action. Or the fact that the main opposition, the Bangladesh National Party (BNP), is boycotting the event. The fret is centered around global reprimands about “free and fair elections,” with some threats more outspoken than others—including the possibility of sanctions.

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Several manufacturers voiced concern to Sourcing Journal about potential repercussions in the election’s aftermath, primarily from the U.S., which is one of the country’s biggest markets for apparel exports. More than 80 percent of total exports from Bangladesh are apparel, accounting for $46.99 billion in the financial year 2022-23.

These anxieties have been amplified as letters of credit (LC) from various agents have added in new clauses specifically referring to “delays related to sanctions.”

A letter of credit shared by one manufacturer specifically stated that the supplier “must comply with all sanctions, embargo and other laws and regulations of the U.S. and of other applicable jurisdictions to the extent that they do not conflict with such U.S. laws and regulations.”

“This kind of clause has never been inserted by buyers before, which elaborated that there will be nonpayment in case of a trade sanction/embargo,” explained another exporter who asked not to be identified.

The BGMEA has been alerting its members not to do business with agents who insert the new language, and are putting together a list of buyers who have been adding this “sanction clause.” “LCs with sanctions clauses will not be accepted,“ said Mohammad Hatem, executive president, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). “A list is being made and action will be taken against those who send LCs with unwanted clauses.”

Many manufacturers said there wasn’t much that they could do, except “wait and watch.”

Rubana Huq, former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), summed it up succinctly. “It worries me.”

“Since the government is going ahead with elections and since the U.S. does not so far view this election as inclusive, to the best of my knowledge we have reason to be apprehensive about their reaction,” she said.

“We are passing through sensitive times but never before has it received so much attention,” Dr. Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), a think tank in South Asia, told Sourcing Journal.

“Looking back at previous elections—in 2014 and 2018 both were grossly flawed and some countries made objections—but continued their relationship. I don’t see that exports will face any challenges because of elections, unless the major destinations, like the EU and the U.S. take measures in the context of election-related issues,” she said.

Incidents of violence could change the equation, however. “[T]he U.S has already given some warning about sanctions—but will it be on the people, or some members of the political party, or for business, we don’t know,” she added. “I don’t expect there will be a sudden reaction, but economic measures might get more extreme.”

Khatun was referring to U.S. admonitions that the elections in Bangladesh must be “fair and free.” However, that is unlikely given the fact that the opposition party, the Bangladesh National Party has decided to boycott, after their calls for a caretaker government to oversee the elections were rejected and dozens of BNP leaders, including the top echelon, have been arrested.

Many of the factory owners believe that there has been economic growth under the current regime, and exports have continued to grow despite troubled conditions. But there are others who say that it is time for a respite from the shortages in gas and electricity, rising inflation, and high raw material prices.

For some, the debate in Dhaka is also about how much global voices factor into what is really a national election.

“Bangladesh elections have become a matter of interest not only for the U.S, but also for the other superpowers. There is a huge objection that China, Russia and India are all interfering in our elections and all want to have a grip on Bangladesh—everybody is trying to put a foot in. The U.S. is more vocal, the others are less,” Khatun said. “We feel that we are an independent country, and the people should have their own say. Unfortunately, because of the geographical location and geopolitics and geo-strategy, Bangladesh has become a place of interest for the superpowers. The U.S is also taking an active interest because of the location—they don’t want to see China having an upper hand on Bangladesh.”

Meanwhile, violence is on the rise.

According to the BNP, more than 21,000 of its activists—including its entire leadership—have been arrested since an Oct. 28 rally. Human Rights Watch called the government’s action against the political opposition a “violent autocratic crackdown,” in a report on Nov. 26. “The government authorities are undermining claims of a fair election by ignoring rule of law. Authorities should release those arbitrarily arrested, investigate all claims of torture, and hold those responsible to account,” it noted.

Growing reports of state repression, political violence and vote rigging have prompted global outcry as well. According to a foreign ministry spokesperson, “more than 180 foreign observers have applied to the election commission to monitor the upcoming elections from 35 countries around the world.”

Last week, foreign minister AK Abdul Momen said, “We want the entire world to come and see, and learn from us,” adding that the government was “committed to hold a free, fair and transparent election.”

“There are many countries with whom we have economic and political ties that want to see democracy and within their policies they can take measures—it should not be a tool for bullying,” said Siddiqur Rahman, Industries and Trade Affairs Secretary of the ruling Awami League, and former BGMEA president. “The European Union doesn’t hold such extreme view that they will put a ban on exports.

“Even when the EU team came and met with various government officials, we felt they were concerned about compliance measures, worker wages and rights and labor issues—but they didn’t say ‘put a ban,'” Rahman continued. “It’s a different approach from the U.S.”

The elections also raise other topics that have put local industry in peril. Inflation, low foreign exchange reserves, shortages of electricity and gas, have been rampant problems.

And the new local minimum wage, which took effect just weeks ago, is still causing significant unrest in the sector.

In announcing the first pay increase in five years, the wage board revealed that the lowest-grade workers will receive a wage of 12,500 Bangladeshi taka ($113) as of Dec. 1, a 56 percent increase from the previous floor of 8,000 taka ($72) but just over half of the 23,000 taka ($208) unions had been lobbying for. This also has led to violence and protests.

“We have already completed 13 workshops for the factory personnel, half-day each, covering 1,900 participants from 1,300 factories in total. The purpose is to support factories and avoid any confusion while implementing the wage, as well as to make sure that compliance is being maintained in the process of wage upgrading,” said Faruque Hassan, BGMEA president.

Many factory owners believe that a recent article by The Guardian which claimed that a Bangladesh garment worker had taken up sex work to supplement her income, was just a “global malicious campaign to cause damage to the apparel exports sector.”

Much remains in the balance but two things seem certain—the Awami League will remain in power and many will be dissatisfied with the process.

As Iftekhar Zaman, executive director of Transparency International Bangladesh, said, “The election may be held on time but it will be non-inclusive and morally void.”