California Apparel News

William K. Fung, chairman of apparel sourcing giant Li & Fung, said his $20 billion company doesn’t believe it should stop manufacturing in Bangladesh after a structurally unsound building collapsed two months ago and killed more than 1,200 garment workers.

“We are so concerned about that,” said Fung, who was in Los Angeles on June 14 to speak at a “Think Asia, Think Hong Kong” symposium, held at the J.W. Marriott Los Angeles LA Live Hotel. “We are proud of the fact that we are sourcing from these developing countries. The garment industry is the first industry that developing countries get into. We were early in China, India and Vietnam. But it is a process of bringing them [the garment factories] up [to higher standards]. We need to engage them and make sure the government puts in the right regulations. What we can’t do is abandon them.”

Fung, whose Hong Kong–based company is the world’s largest supplier of apparel and toys, said his group has been working to support the European Union’s building and fire-safety accord that would make factory buildings safer in Bangladesh.

The accord requires retailers buying from the world’s second-largest exporter of clothing (after China) to have their factories submit to third-party inspections and pay for repairs and safety improvements.

Big EU apparel and retail companies such as H&M of Sweden, Zara of Spain and Marks & Spencer of England have signed on. Only a few U.S. companies agreed to participate, such as PVH Corp., which owns the Calvin Klein and Tommy Hilfiger brands and Abercrombie & Fitch.

Instead, U.S. companies such as Gap Inc., Wal-Mart, JCPenney and Sears as well as several retail and apparel federations announced at the end of May that they would forge their own plan by early July to foster safety in Bangladesh’s apparel factories. A plan will be spearheaded by the Bipartisan Policy Center, a nonprofit group in Washington, D.C.

“We are working with the accord in Europe in terms of input and the alliance here,” said Fung, who noted that a little more than 10 percent of his company’s apparel sourcing is done in Bangladesh.

Li & Fung still does a great deal of its apparel sourcing in China but has moved its low-end apparel to developing countries. Its higher-value items are being produced in inland China, where wages are lower. “But the value of what we do in China has remained the same,” Fung noted.

Fung, who controls the giant sourcing company with his brother, Victor, said he sees China as evolving over the next 25 years into the world’s biggest consumer market with its population of 1.3 billion people. But companies trying to sell to the Chinese have to realize there is not just one consumer market but many that are determined by geographic location and dialects.

The country’s three distinct markets are clustered around Beijing, Shanghai and the Pearl River Delta, which includes Guangzhou, Shenzhen and Hong Kong. “Companies that used to make products in China are turning around this machine and supplying China,” he said.