Out of about 200 nations of the world, it is not a matter to be scoffed at, that Bangladesh has secured its position between the 40th and 50th, in terms of the size of the economy, consistently over the last few years. And this is only using financial data which is legally disclosed.
The ranking of Bangladesh would possibly be higher if all the undeclared wealth of the nation would be tallied as well. So Bangladesh is really not as downtrodden as it may appear to many. In fact it is now well recognized as an upcoming place for growth and opportunities.
And one of the main reasons that Bangladesh has been able to attain this status is because of the ready-made garments sector that is flourishing in the country since the early 1980s and because of all the positive changes it has triggered off as a chain reaction across the nation in terms of economy as well as social development.
In 2006, the RMG sector of Bangladesh had been able to export about $8bn worth of products across the world, which at that time was considered to be a great feat. Today, less than eight years later, the industry’s exports have reached about $26bn annually, which is an almost 300% growth from the 2006 baseline.
There are almost 4,000 active factories belonging to about 1,500 holding companies, employing from a few hundred people to over 15,000 in a single factory. The total employment generated by the sector is a staggering 5.5 million, inclusive of all staff and management as well.
The number would leap up by a further couple of million, if we include the textile factories and trims and accessories manufacturing companies and all the buying, sourcing and liaison offices of apparel brands.
If each employee is considered to be supporting four others in the family, then the number of people depending on the sector for their survival, gets catapulted up to at least 30 million or three crore. Therefore, it is not an exaggeration to say that it is indeed this industry which forms the backbone of the economy of Bangladesh and it is this sector that supports the creation, growth and prosperity of many other sectors of the country.
Impact on banking sector
One of the most direct beneficiaries of the RMG industry is the banking sector. All of these thousands of factories have been built upon loans from the banks which derive more earnings by financing working capital for these companies and also by providing letters of credit and trade financing.
More than two million of the employees and owners and their family members of these garment companies have accounts in the banks, with varying quantities of savings, contributing significantly to the lendable fund reserve of the banks. Many hundred thousands of these employees have taken loans for various purposes and almost a million employees of the RMG sector use credit cards issued by these banks.
All of these directly contribute to the enhanced profitability of the banking sector and of the financial institutes. Thus all the tens of thousands of employees working in all the banks and the hundreds of thousands of their family members are all supported by the RMG sector to a great extent.
Almost 3,000 factories have been constructed in the last eight years alone, each measuring from a minimum of 20 to 30,000 square feet to up to a million square feet, with the majority of them measuring between 100,000 to 200,000 square feet. Counting all the factories that came up in the 90s and onwards as well, the total construction work that was required by this sector, does tantamount to a few billion square feet of civil engineering!
The making of all this has generated the boom in the construction industry, and the sale and supply of construction materials, and have provided employment to several million construction workers across the last decade and half. There have been several tens of thousands of architects, interior designers, and engineers from the field of electrical, mechanical and civil engineering, who have worked for these projects.
The specialised requirements of the sector has led to the establishment of dedicated universities focusing on textile and apparel technology based education. This has churned out many tens of thousands of graduates, most of whom have been successfully absorbed into the RMG sector, which has also provided work opportunities to a few hundred thousand BBA and MBA graduates from both public and private universities.
Impact on workers’ income
The RMG sector has boosted the general income of the people that work within it and their associated subsectors, resulting in a tremendous boost in the living standards of people across the country and in consumption patterns. Food and groceries of higher grade are now purchased in much greater quantities even in villages, where the family members of the employees of most of the RMG sector employees reside.
Low priced locally made electronic items ranging from phones to television sets and DVD players have flooded even the rural communities. People are purchasing healthcare and cosmetic products many times more than before and spending a lot more on entertainment too.
It has to be realised that the earning of the workers in this sector is in fact considerably higher than what people earn in other industries and thus, the furor that is generated by the media and some portions of the intellectual community about the low income of workers in the sector is indeed quite unfounded and baseless. The minimum wage of Tk3,000 that used to prevail was only applicable for helpers and there were higher levels of minimum wages for various designations.
Thus the minimum wage of Tk3,000 was applicable for less than 10% of the workers at the bottom of the hierarchy. Besides, it has to be realised that the workers earn over double of the minimum wage after inclusion of the overtime, the attendance bonus, and some other allowances provided by the factories. Thus, the average earning of workers till 2013 was as high as Tk7,500 to Tk8,000, which was not as low as was misrepresented.
Now, with the increase of minimum wages for helpers to Tk5,300, from December 2013, which accordingly means minimum wages for higher levels of workers reaching up to 8,000 or higher, have now resulted in a situation where there are many workers earning up to even Tk20,000 a month. The average earning of the worker now, is about Tk12,000 to Tk13,000 per month, which is at par with or even higher in many cases, than the salaries paid to university graduates by local private companies and even some banks.
The rise in this salary level has also set off a domino effect leading to slow and gradual increase of salaries of staff and officers too. Thus, the life of the RMG sector employees, including even the factory workers, is in actuality, considerably better than what the general prevailing impression is.
Impact on foreign investment
This is also the sector that has led to the influx of a few billion dollars worth of foreign investment across all the export promotion zones. The sector, which has led to the creation of a large number of power and energy providing companies supplying electricity, has also directly supported the creation of hundreds of thousands of ancillary service providers.
The housing and real estate sector has experienced a major boost since the mid 1990s, in part because of the surge in the RMG sector. Most of the owners and higher level management members of these thousands of companies have purchased apartments or plots of land. This again has benefitted the construction industry and those supplying materials.
This has in general contributed to the rise in property prices, something that was also brought about in the outlying areas by the companies purchasing large tracts of land in villages for the making of factories. Rent has also increased for the low cost homes of the workers and also in the areas where most of the mid and upper management of these companies reside.
Tens of thousands of foreign nationals working in the sector and staying in Dhaka and Chittagong have contributed to many architects leaning more towards international designs and standards, when designing and making residential buildings in areas which are preferred by these foreign nationals, thereby improving the look as well as quality of thousands of apartment buildings.
The transport sector has also experienced a major expansion, directly because of the RMG sector. All the companies operating in the industry owns many vehicles, some up to even 200 vehicles that they use for various commercial and noncommercial purposes, not only including cars and microbuses, but also large passenger buses, trucks and covered vans.
The owners of these garment companies are also the ones who can afford the purchase and maintenance of the best brands of vehicles in the country. All of this in aggregate supports the companies selling automobiles, the fuel providers, and the workshops and garages. And there are a few hundred companies that have arisen who provide rented vehicles to the RMG companies.
Not only in the realm of logistics, but the RMG sector directly contributes to the bulk of the profits of the clearing and forwarding companies, the shipping sector, the freight forwarders and also the cargo section of the airlines. The RMG sector alone comprises over half of all the cargo that is transported. Thousands of small and medium catering companies are thriving as well, who supply food on a regular basis to the factories.
The TV channels and newspapers, restaurants, clothing stores and boutiques, private clubs, educational institutions, commercial buildings, etc, have almost all been formed by investments acquired from earnings generated by the RMG industry. Domestic travel and tourism has also been propelled forward greatly due to the expansion of the sector.
Factories have been set up in distant places, leading to the sprouting of numerous resorts and hotels in many districts as well as in remote locations to provide accommodation for those who visit those factories for work purposes, and for them to bring their friends and family members along at times. The growth of the sector has also been one of the main reasons for the sprouting up of over a dozen export processing zones in distant districts, thereby leading to economic advancement of those regions in various ways.
International travel and tourism has been greatly enhanced over the years in Bangladesh because of the RMG sector. There are thousands of international buyers and consultants who are travelling to Bangladesh on any given day, and it is to support this influx of business related visitors that hundreds of small hotels and guest houses have arisen all over the city.
All of these small hotels and guest houses remain fully occupied, which is also the case with the major hotels. Thus the boom in the hotel industry is a derivation of the RMG sector. Work related to marketing and training in this sector, has also greatly increased the travel of people from Bangladesh to other countries. The high income of the employees has encouraged more personal trips to other countries as well, helping to make the travel agencies burgeon into a booming industry.
There are tens of thousands of small and medium clothing stores across the country which sell the slightly defective, rejected or excess produced items taken from all the factories at very low prices, directly enabling millions of people in the country to buy and have excellent quality of clothes at low cost. It also provides the livelihood to all those engaged in selling these products.
There is a surprisingly large fabric recycling industry that has arisen in the last decade or so, where scraps of fabrics are taken and converted into thread and new textiles, which are then used for producing new items. This recycling business generates income for a large population as well.
The RMG sector also supports the existence of numerous NGOs, training organisations, consultants, environmental and infrastructural services providers, and generates the employment for a host of international experts working for various organisations engaged in trying to develop the sector further. Indeed there are more than 100,000 foreign nationals living in the country, who, or the main earning member of whose family, derives their income from working in this sector or directly as an employee of these companies.
There are more than 50,000 people from other SAARC nations, as well as tens of thousands of foreign nationals from China, Korea, Japan, even Turkey and some European countries, all employed by the RMG companies, living in Dhaka and Chittagong and near the export promotion zones.
Indeed, the fact that Bangladesh is now considered one of the leading destinations for high paid jobs for many foreign nationals and that they work under Bangladeshi management and ownership is certainly something about which the country can afford to feel proud of. This has also paved the way for the country’s talented youth to learn important skills and work processes from remaining under the guidance of these international experts. The level of skill and expertise of Bangladesh is being greatly enhanced.
The presence of such a large foreign population in the country, and the exposure to the regular influx of foreigners every day has contributed significantly to cultural advancement of the country as well. People have slowly become a lot less xenophobic, and there is a much better level of cross cultural understanding and trust. Many foreigners from all over the world are having a far clearer idea about what Bangladesh is, and is learning to view the country and its people with respect, and not just as a developing nation in need of aid all the time, or a country of fanatics breeding potential terrorists. So the sector is helping in bridging the cultural divide as well and making the country more globalised.
Reality of the RMG industry
Despite a lot of fallacies, the reality is that the garments factories provide much healthier and ergonomically advanced working conditions to workers than in most other kinds of industries. If we consider the new factories that have come up in the last few years and especially the hundreds of massive factories in the export promotion zones, one would feel that the factories provide almost the same environment as a modern corporate office, even for the actual factory workers.
Indeed, the compliance situation is also a lot better than what people perceive it to be. Child labour is almost non-existent, as are practices such as salary non payment or discriminative salary setting etc. The strict monitoring by the foreign brands placing orders has helped a long way in ensuring the upkeep of social compliance standards.
The increase in awareness about safety related to electrical, fire, and structural aspects, and all the development work taking place in these fields, greatly spearheaded by the Accord and Alliance of foreign apparel brands, is paving the way for even safer factories.
In fact there are more fire doors, sprinklers, fire fighting equipment and environmental consciousness woven into more of these factories than is present in even many of the smartest offices, hotels, and commercial buildings and residences. People are safer in the garments factories than in their homes and in other buildings. But that is a fact that few realise.
One also has to take into consideration the reality that the profitability of the industry is indeed quite low, hardly exceeding 7% or 8% of the total revenue. This can also get depleted very easily due to air shipments caused by production delays, and by factories remaining closed out of schedule only for a few days in a year. Thus, the allegations made about the industry not providing even more than what it does, for its employees, despite such high earning, is also not entirely as valid a remark as many think.
These are some of the many negative rumours that prevail about the industry, due to the fact that not too many people get to know about the industry and its magnitude and the extent of its contributions. This is because of the fact that there is very little advertising or public relations work done by companies in this sector, as their products are for export and not for local consumption. However, the time has come to invest in image building.
Thus, I would lament that indeed the RMG sector is unfortunate, for it continues to bear calumny and ignominy which is undeserved. It is not given the recognition and credit that is rightfully due to it and all the entrepreneurs and people working in the sector.
And it really is time now, for the overall society of Bangladesh to understand how all of their lives are dependent upon the success of the RMG sector, and it is time to recognise the potential the sector has for shaping Bangladesh into a developed nation.
To that end, I would recommend strongly, that the entrepreneurs engaged in the sector, and the associations such as BGMEA, begin to invest a lot more of their time, resources and energy in building up the positive image of the industry among the people of the nation.
