In a crowded industrial district on the outskirts of Bangladesh’s capital, Dhaka, a seven-storey building is stacked with cartons labelled with Australian fast fashion brands like Millers, Rivers and Rockmans.

Inside, rows of garment workers — mostly women — continue to cut denim and assemble jeans.

But the future of the Padma Satel Arab Fashions factory is in doubt after Mosaic Brands, the Australian parent company of several fashion labels, defaulted on $2.5 million in payments to the supplier.

Mosaic Brands’ decision to enter voluntary administration late last month has triggered a ripple effect across Bangladesh’s garment sector, threatening the livelihoods of thousands of workers in 23 factories reportedly owed more than $30 million.

“Since June, we have been continuously requesting them to pay our overdue payment, but they told us their sales were down and encouraged us to continue our shipments and they would pay soon,” said Padma Satel Arab Fashions director Jabed Ahmed.

For the 3,000 workers at the factory, Mosaic’s missed payments have caused uncertainty about the future.

Yasmin Laboni, a 26-year-old garment worker, fears being unable to feed her two children.

“Our owner can’t pay us from his pocket, at best he can maintain some of the workers,” she said.

“Everyone will be affected by this non-payment.

“It will be difficult to pay for medical expenses and to buy clothing for ourselves.”

Mohammad Alam Mia, a factory manager earning $450 monthly, worries about mass lay-offs if Mosaic’s debts are not paid.

“All we ask is that foreigners pay on time,” he said.

The suppliers are calling for a thorough audit to uncover the full scale of the defaults affecting factories across Bangladesh, India and China.

Ms Laboni, the garment worker, said: “We only want what we earned.”

‘We can’t sustain that’

In September, Mosaic announced it would shut down five of its brands to restructure operations: Rockmans, Autograph, Crossroads, W.Lane and BeMe.

It said it would instead invest in its other brands: Millers, Noni B, Rivers and Katies.

“Our priority is to accelerate the rationalisation plans we have in place to focus on the core brands to service current and attract new customers across metropolitan and importantly regional Australia,” chief executive Erica Berchtold said at the time.

Mosaic said it filed for administration the following month as “a necessary process to reset” the business and ensure its ongoing success.

Mosaic’s administrators, FTI Consulting, met with creditors earlier this month and are now assessing the company’s viability.

At a second creditors’ meeting in the coming weeks, they are expected to propose a plan that could involve asset sales, restructuring and even liquidation.

For unsecured creditors such as overseas suppliers, the process is uncertain, with payments depending on their place in the hierarchy of claims and the terms of the final restructuring plan.

Suppliers who spoke to the ABC complained that Mosaic’s aggressive business practices had exacerbated problems caused by the company’s failure.

Neither Mosaic Brands nor FTI Consulting responded to the ABC’s requests for comment.

Ohmar Chowdhury, owner of Hydroxide Knitwear, said he scaled up production and hired additional workers to meet Mosaic’s demands, which included unusually long payment terms of 120 days — four times the industry standard.

“This is like criminal fraud,” Mr Chowdhury alleged.

Australia accused of ‘hypocrisy’, double standards

Bangladesh is the second-largest exporter of ready-made garments in the world after China.

The sector generates $34 billion in revenue each year — 85 per cent of the country’s export revenue — and employs 4 million people.

The Bangladesh Garment Manufacturers and Exporters Association said Mosaic’s conduct set a bad precedent for the industry, which was already struggling after the pandemic and overthrow of former leader Sheikh Hasina’s government.

After writing to Australia’s High Commission about Mosaic’s non-payment, the association was told the best course of action would be to seek independent legal advice.

Mohiuddin Rubel, a former director of the association, said Australia’s reputation was at stake.

“If one Australian brand doesn’t pay, despite raising this to the Australian High Commission several times, what does it say about Australian standards [and] not wanting to take responsibility?” he said.

Suppliers told the ABC that Mosaic was not being held to the same standard as Bangladeshi factories, which faced intense scrutiny to comply with standards on worker rights, fire safety and sustainability.

Hydroxide Knitwear owner Mr Chowdhury told the ABC that Mosaic’s “hypocrisy is staggering”.

“Mosaic claims to care about worker welfare, but here they take the goods and don’t pay and face no repercussions,” he said.

“They demand transparency from us, but they evade accountability.”

Ripples felt throughout Bangladesh’s garment industry

Oxfam Australia, which provides development assistance in Bangladesh, said Mosaic’s default highlighted entrenched exploitation in the garment industry.

“These workers are already paid poverty wages at around $6 per day for the minimum wage,” said Sarah Rogan, Oxfam’s advocacy lead.

The manager of Mosaic supplier Sultana Sweaters, Sarwar Hossain, said banks were now hesitant to extend loans to struggling factories.

He said the factory he worked at was owed nearly $1 million by Mosaic and had been forced to delay his wages for months.

“I’ve thought about taking my life; this situation is unbearable,” Mr Hossain said.

He said wages were not the only expense suppliers had to worry about, but also the costs of raw materials, electricity, transport and more.

Mr Hossain said Mosaic’s debts began to pile up last year but he kept making shipments to fulfil the purchase orders.

“We thought if Mosaic is still placing orders then we have to keep the relationship alive,” he said.

He now regrets that decision.

“Because we were one of the largest manufacturers, we could not entertain unethical practices and had to protect our reputation,” said Mr Hossain.

“So we tried to keep going and wait until we can sit together and ask again for payment.”

A spokesperson for Mosaic’s receivers, KPMG, said in an email to ABC that they were working closely with all suppliers to stabilise Mosaic’s operations.

“Depending on the outcome of the sale of business process, there may be an opportunity for suppliers to reset trading terms post receivership,” they said.