Wal-Mart to Lend $50 Million to Improve Bangladesh Safety


August 30, 2013

Wal-Mart Store Inc. (WMT) said it is lending $50 million to Bangladesh factory owners, joining global retailers in a push for safer plants in the country after the April collapse of a garment complex killed more than 1,000.

The loan is part of a combined amount of more than $100 million that a group of North American retailers, including Wal-Mart and Target Corp., pledged in a pact announced in July.

Called the Alliance for Bangladesh Worker Safety, the group has said it will set safety standards by October and refuse to buy from factories deemed unsafe. The initiatives followed the collapse of the eight-story Rana Plaza factory complex, the worst industrial accident in the nation’s history.

Surging wages and inflation in China have prompted retailers to shift some production to other nations such as Bangladesh. In response, a $19 billion manufacturing industry has sprung up in the South Asian country, marred by factories operated in buildings with poor electrical wiring, an insufficient number of exits and little fire-fighting equipment.

The 20 retailers in the North American safety pact include Gap Inc., J.C. Penney Co., Costco Wholesale Corp. and Sears Holdings Corp. Li & Fung Ltd., the global outsourcer that supplies to Wal-Mart, will serve in an advisory capacity.

A separate accord signed by Hennes & Mauritz AB (HMB) and Inditex SA, Europe’s two largest clothing retailers, pledged at least $60 million over five years to monitor safety in Bangladesh plants. The Europe plan obligates companies to ensure their factories have the capital to make necessary repairs.

Source: Bloomberg