The way forward for RMG
Mamun Rashid

This article is an excerpt of a keynote paper presented at BATEXPO 2013

  • Workers are seen working in a garment factory 
    Photo- Syed Zakir Hossain

After the Rana Plaza incident that took more than eleven hundred lives, there was supposed to be a new awakening among all stakeholders in our apparel industry be it the factory owners, exporters, government agencies, labour unions, development partners, and, more importantly, the buyers as well as the official agencies in the buying countries. We have seen some efforts taken from that direction too.

However, many local policy planners are still doubting the future of this industry segment as a whole. No, we don’t want these things to recur, we don’t want any more unwanted deaths, unprepared deaths, uncared and unattended “man-made” disasters in our manufacturing plants, especially in our most promising and competitive ready-made garment (RMG) sector.

No matter whether our labour is cheap or not, whether we do have “proven skills” or not, no civilised nation can afford to maintain its competitiveness on a sustainable basis in an irresponsible way. It speaks better neither for the industry nor for the country.

We have to fix our RMG sector. Be it an issue relating to human resources or industrial relations, labour standards or minimum wage, productivity or skill development, or safety and security of workers Bangladesh has to address each one of these issues in order to maintain the competitiveness of our RMG sector in the global apparel “supply chain.”

The country entered the apparel export market in 1978 with only nine units and earned $0.069m. During the last three decades this sector has achieved a phenomenal growth due to continuous policy support from the government, and more importantly dynamism of the private sector entrepreneurs along with extremely hard-working but mostly civic workers.

Now, the number of RMG units is around 5,000 and the export earnings have exceeded $21.5bn with 145 countries using “made in Bangladesh” knit garments and 126 countries using products woven in Bangladesh. Analysts are saying the apparel exports can be more than doubled by 2020.

Recent statistics tells us, 4 million workers are working in the RMG units, of whom around 80% are women. RMG roughly covers 78% of the total export of the country and is the highest earning industry in the economy. 4 million men and women in more than 5000 factories, which is almost two-thirds of the number of employees engaged in the manufacturing sector, constitute the real backbone of the Bangladeshi economy.

Against all these achievements, we just cannot overlook the major issues and problems facing the industry, especially the RMG workers. The common problems being encountered by the RMG workers are low wage, irregular payment, forceful overtime, poor working environment, physical and sexual harassment, termination, and more importantly, accidents and deaths for safety and security failures.

Low wages have traditionally been a major strength of Bangladesh’s labour-intensive apparel sector. The hourly wage rate in Bangladesh’s RMG sector is lower than those in China, Vietnam and Sri Lanka. Though the situation is improving, allegations remain that many owners do not pay the monthly wages and overtime bills to their workers in time and look after the welfare of the workers.

In some factories, the owners deliberately keep at least two months’ salary and overtime bills of the workers in arrears. The management does hiring and firing of workers randomly and retrenched workers, in most cases, are not paid their dues.

Furthermore, in the absence of weekly holiday in some factories the workers and their children are all being affected both mentally and physically. Subsequent accidents have proven that many garment factories in Bangladesh have no minimum safety measures, not even the required number of fire extinguishers.

Many garment factories in Dhaka alone do not have emergency exits. Most factories do not conduct the required monthly evacuation drills; those who do, do not have identified fire warden in their plants or production floors, meaning there are work overlapping among production managers re: fire drills and fire safety assurance.

These saw around 1500 deaths in garment factories across the country since 1990. Some of the victims were burnt alive and others died either from building collapse, suffocation or in stampede. The recent incidents in Ashulia and Savar has proven all these to be brutally true.

Most of the RMG factories do not have any special reproductive health care for female workers to safeguard the motherhood. Due to absence of such healthcare along with congested and suffocating working environment, the trend of producing physically disabled babies is reportedly increasing.

One may raise a valid question: why are there frequent fire incidents or building collapse in garment factories alone when there are hundreds of other factories across the country? The answer is not that difficult to find. Most of the garment factories are housed in rented premises at commercial or residential areas.

These buildings have not been built to accommodate factories having all the safety measures. According to national labour studies, there are only a few inspectors for the entire industry almost the same number as in the 1970s, when the industry first sprouted.

According to unofficial sources, most of the garment factories in Bangladesh lack proper industrial approval. Thousands of buildings escape scrutiny because the building inspection system is as old and decrepit as the buildings themselves.

Many issues concerning the Bangladesh RMG sector surfaced from time to time, the first being the child labour issue. An influential US labour organisation forced the government and the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) to address the child labour issue. They had to phase-out child labour from RMG units and create facilities for their rehabilitation and schooling. It’s pleasing to note that child labour is a bygone history in our apparel industry.

There is no denying that employers do enjoy upper hand in Bangladesh labour market where every third person is either unemployed or under-employed. But for the sake of better and quality output, the owners themselves need to be more aware of keeping their workforce satisfied by providing them with reasonable pay and ensuring other basic necessities.

It goes below the dignity of any nation if the outsiders always force its factory owners to comply with their own demand relating to better wages and freedom of associations for the workers and improved working conditions in the workplace.

Though labour is readily available and cheap, it comes at a cost. RMG industries are gradually facing shortages of skilled workers and lack of mid-level managers. Though BGMEA along with H&M, SIDA, TESCO, DFID, and Bangladesh Ministry of Commerce has taken initiatives of skill development, more such initiatives are required to meet the demand of the industry and to enhance the productivity of the industry; especially when the sector has started to feel the “pinch” of labour shortage.

The diversity of apparel industry is $500bn and the fast-increasing global market can be reached with more process-focused production system than the existing entrepreneur-driven production system. Currently the main exports of the apparel industry are in the “production of tangible activities.”

The export revenue can increase with pre-production of intangible activities such as R&D, Design, and post-production intangible activities such as marketing, service, etc. To achieve this diversity, the owners need to focus on the mid-management with a sophisticated HR department specialised in apparel industry.

Infrastructural threats also need to be taken care of by the government and stakeholders. Capacity of Chittagong port, Dhaka-Chittagong four-lane highways, and dedicated garments village may also help the overall industry. Dedicated basic study about apparel industry in the school, college, and more importantly university level may also create more awareness about this major foreign currency earning industry and also prevent any future accidents or untoward incidents.

The financial institutions or banks should assist the RMG entrepreneurs and professionals to adjust with the new and shifting global trade regime. Entrepreneurs need low cost foreign currency funds to finance upgradation of plants and relocation; they need to adjust with changed international trade payment or settlement regime like open account trade, delivered duty paid, delivered at terminals, delivered at place or even delivered at the shelf in the superstores or even possible management of the shelf at the retailers’ end.

The owners as well as buyers also need to take responsibilities for the existing and future production plants with proper safety and security. The new factories should also ensure the green production system to create a healthy environment for the workers. The buyers ethically cannot avoid the responsibilities of the workers’ life, simply by buying products at lower costs due to the extreme competition.

Bangladesh being the second largest apparel exporter is expected to play a major role in the global apparel market. With three decades of experience, supply of cheap labour, huge number of entrepreneurs emerging over the years, Bangladesh has established a structural competitiveness in the apparel industry, which is likely to sustain for the years to come as the structure of most developed countries has declined in the last five decades since the LTA (long term agreement regarding international trade in cotton textile) came into force in 1962.

With the export doubling in a decade, the Bangladeshi apparel industry requires support from stakeholders. Entrepreneurs require investing more on the entrepreneurial skills development, improving the existing productivity, developing the living standard of workers and providing them a green, healthy work environment.

The stakeholders, policy makers, governments, buyers, donors and different development agency must cooperate with the entrepreneurs, policy makers, management and labourers to achieve this. This is about time we “walk the talk” regarding a separate and independent Apparel Development Board like BTRC, IDRA, BOI, BSEC or Bangladesh Bank. We are depending too much on BGMEA, an owner driven organisation.

In light of all these, we have to evaluate the situation judiciously and with clear responsibility. There is no way that the leaders of the RMG industry ignore the grievances of the workers. They can no longer afford to refrain from investing in the welfare of their workers and workplace. They would have to immediately look into some critical issues.

A barrier to change in the Bangladeshi RMG industry is the lack of understanding of global pressures to improve labour standards among middle management. There is a need for rigorous training on industrial relations, human resource management, factory management, occupational hazard management, disaster management and continuity of business at the supervisory level to build more educated manpower instead of only skilled ones. More emphasis on gender issues is needed, as RMG sector middle management is predominantly female.

The absence of hard evidence about the links between implementing core labour standards and increased profitability makes it difficult to establish the business case in support of improved labour standards. Most of the RMG units in Bangladesh are owner driven rather than process driven. This culture needs to be changed.

There should be a listening culture in place, which will help to identify the opportunities as well as to foresee imminent crises. It’s high time that BGMEA thinks of an integrated communication strategy as well as of investing in capacity building of the related media people. Ad-hoc press conferences or reactions will not hold water in the long run.

The RMG sector in Bangladesh has come a long way, especially in the last two decades since 1990. The industry has crossed many hurdles to stay competitive. It has proved many predictions futile and wrong, and competed fiercely even after the abolition of quota and through global economic meltdown. The credit for that achievement goes to both entrepreneurs and labourers, and may be to the government too.

Taking that fighting spirit ahead, the RMG sector must formulate an equitable solution for all involved parties and ensure brighter future for the country as a whole. The near term reality for a country like Bangladesh remains to be competitive through cheap labour only, unless we can improve our infrastructure and fix the domestic economy dramatically as well as manage a shift in quality through better productivity and efficiency more importantly by fixing the “managerial gap” in this sector.

Some of the garment factory owners (especially in the export processing zones) have recognised the hard realities and are managing the transition well. Others have to take it or leave it. These “others” also include workers, policy planners, and citizenry and may be buyers too, as mentioned earlier.

Now, coming back to the Tazreen or Rana Plaza incidents: though the BGMEA leaders along with few “top brass” in the government smelt the same old “conspiracy” behind the factory fire initially, soon they came to realise that they have to “fasten their own seat belts.” This was obviously a “breath of fresh air” for the stakeholders in the industry.

BGMEA has been seen taking some proactive measures to avoid “future surprises.” They must walk the talk now. They should start working with the development partners, most importantly the large buyers and sourcing agencies, to bring in “new standards” including the “green production environment” in this industry to avoid all possible surprises in future and ensure commitment to its success.

The Bangladeshi apparel industry has come a long way. As mentioned, it was not only for “cheap labour” or even “China plus one.” Entrepreneurship, work ethics, diversity, capacity and policy support also played a major role here. Buyers look for several types of garments from here in Bangladesh.

It is one of the few countries among the peers who are producing for the many brands like Target, Wal-Mart, Sears, K-Mart, TESCO, Sainsbury’s, American Eagle, Abercrombie & Fitch, H&M, GAP, NEXT, Marks & Spencer, Aeropostale, Wrangler, Lee, Nike, PUMA, Adidas, PVH, Tommy Hilfiger, CK, Timberland, ZARA, ESPIRIT, Polo Ralph Lauren and many more.

Despite the barriers and challenges, Bangladesh has been branded with the tag line of “yet, we deliver.” This is what will keep Bangladesh going. But we have to behave; we all have to behave including a bit more of hand-holding from the large buyers and development partners in order to pass on few extra bucks to the workers with a bit of better living standards.
 

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Mamun Rashid

Mamun Rashid is a business professor and financial sector entrepreneur. 

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