The Bangladeshi government said Tuesday that it will permanently shutter a dozen of the Beximco Group apparel factories that laid off tens of thousands of workers last year, following the severely indebted conglomerate’s inability to obtain letters of credit to fulfill its remaining—and declining—export orders.
The announcement, made by an advisory committee that was convened in December to address business and labor issues at Beximco Industrial Park in Gazipur, blamed the “massive” loans that Beximco obtained through fraudulent means, including the use of shell companies to obtain lines of credit for goods whose proceeds weren’t expatriated to Bangladesh as legally required.
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Labor advisor M. Sakhawat Hussain said that the company’s “loan scam,” estimated at 28,544 crore Bangladeshi taka, or roughly $2.3 billion, exceeded that of the 2016 Bangladesh Bank cyber heist, which saw security hackers nick nearly $1 billion from the central bank’s Federal Reserve Bank of New York account. A forensic investigation is underway to determine where the money Beximco founders Salman F. Rahman and Sohail F. Rahman borrowed from 12 different banks has gone. In terms of total loans and liabilities, Beximco owes some 50,098 crore taka, or roughly $4.1 billion, nearly half of which is in default.
Hussain also said that the committee would be replacing Beximco’s existing receiver for failing to implement its decision regarding the closure of Beximco’s laid-off companies. Another decision was made to sell the mortgage shares of two of Beximco’s listed firms—Beximco Pharmaceuticals and Shinepukur Ceramics—to pay the axed workers’ dues. Any outstanding arrears will be paid by February, though that may come as cold comfort to the ex-employees who have been protesting to demand their factories’ reopening, including by allegedly setting a factory and several vehicles on fire.
“Whether this money comes from the sale of shares or other sources, we will ensure it is paid,” Hussain said. “If necessary, we will raise funds from the finance division.”
As of Saturday, police have arrested 37 individuals in connection to the demonstration. So far, three cases against a combined 5,000 unidentified individuals have been filed by G.M. Tariqul Islam, manager of Grameen Fabrics and Fashion; by Habibullah Akand, whose bus was set ablaze; and by Rafiqul Islam, a sub-inspector of the Gazipur Industrial Police who cited attacks of law enforcement officials.
Of the 32 factories that Beximco Industrial Park had on the books, 16 were “non-existent” but were used as collateral to rack up 11,923 crore taka ($978 million) in debt, an investigation found. The other 16, which include Beximco Fashions, Crescent Fashion and Design, Shinepukur Garments and Yellow Apparels, announced 40,000 layoffs in December after failing to overcome their liquidity crunch to afford raw materials and workers’ wages.
Beximco has been working to resume operations. Earlier this month, managing director Osman Kaiser Chowdhury wrote to the state-owned Janata Bank seeking 400 crore taka ($46 million) in short-term financing, along with a 15-year rescheduling of all debts incurred until December 2024 at a 5 percent interest rate with a two-year moratorium. Beximco already owes Janata Bank 23,407 crore taka ($2.7 billion), nearly all of which has been designated “bad” or overdue.
But Hussain said reopening the closed facilities was out of the question. “These factories have accumulated so much debt that they have lost their operational viability,” he said.
Only three Beximco Industrial Park units remain running, according to the committee: Beximco Export Import Company, Beximco PPE and RR Washing. Chowdhury’s plan to Janata Bank, however, suggests that another 8,000 workers and 500 executives could be laid off by May. But worse may be to come.
“If the banking facility is not provided as per our proposal, there is no other option but to close the businesses,” he wrote.
