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OP-ED: Not a good time for the RMG sector

  • Published at 09:24 pm August 18th, 2020

How Covid-19 dealt a great blow to our main industry

The time we are living in is unprecedented. Covid-19 has shattered and disturbed almost every sector like no other disaster in recent memory. Bangladesh has also not been left out in this regard. In such a densely populated and impoverished country, Covid-19 is playing the role of a ticking-time bomb.

Bangladesh holds the crown for the world’s second largest garment exporter after China. About 83% of Bangladesh’s total export earnings come from the garment industry, which generates $32 billion every year. RMG and remittance are the two largest contributors to Bangladesh’s GDP. These two sectors respectably contribute 11% and 8% to the GDP.

Ready-made garments have been playing a key role for the last few decades in Bangladesh’s GDP. Almost 80% of the country’s total manufacturing income comes from RMG sectors with the involvement of nearly 4 million workers.

Bangladesh is heavily dependent on China because of the import of raw materials and necessary industrial ingredients. Every year, Bangladesh imports a huge amount of raw materials from China, which nearly costs Tk14,000 crore. Due to the Covid-19 pandemic, China has shut down the export.

The impact has fallen upon Bangladesh garments. That’s why the industries are compelled to be closed. Europe is considered the biggest garment export market of Bangladesh, and bears almost 60% of the total consumption. Now, due to the prohibition of export to Europe and US markets, the factories cannot but close their affiliation with the garment workers.

In this case, the factories are unable to provide wages to the workers. This is adding an extra ache to our economic stagnation. And this economic stagnation is putting a huge community in poverty. So far, Bangladesh’s RMG industries have witnessed nearly a loss of $1.51 billion which hobbles the livelihood of around 1.2 million workers as said by the president of Bangladesh Garment Exporter and Manufacturers Association (BGMEA), Rubana Huq.

Due to the stoppage of export from Bangladeshi RMG products to Europe and US markets, the Bangladeshi factories are losing nearly $100 a day. About a quarter of all garment workers is below the poverty line, whereas $96 a month may be considered below the living wage.

According to BGMEA, about $1.5 billion in RMG exports have been stalled and the rest has been cancelled. As a result, the sustainability of RMG factories is looking extremely bleak. The survey found that when the order was cancelled, the supplier refused to pay buyers 12.1% for the raw materials like fabrics, machine, and so on which were already purchased, and 91.3% buyers refused to pay production cost.

As a result, 58% of factories were on the path of shutting down. Due to the economic fallout from the Covid-19 pandemic, around 1 million workers have been laid off, some of them were fired, some were furloughed. The foreign markets are unwilling to take orders. So, RMG factories are losing orders in quick succession. Thousands of jobs are at stake. The garment sector is fully dependent on the export-import circle.

Giant companies like H&M and Target declared that they would only pay for the products which had already been ordered before. But renowned companies like JCPenney, Kohl’s, Walmart have refused to pay for those.

They have cancelled such orders which already had reached their port or been shipped. The industries are in a dilemma, where on one side, the suppliers are making pressure to keep the factories open, and on the other hand, trade unions and activists are emphasizing health issues first.

Right now, there are 4,560 active garment industries in Bangladesh according to BGMEA.

A survey conducted by Brac University and CandA Foundation observed that those factories which are not linked with BGMEA and BKMEA were sub-contracted in huge numbers, and kept operating at 50% of their capacity

A recent survey by the Global Workers Writers Centre found that order cancellations are having a devastating effect on businesses and workers. The pandemic has caused a loss of around one million jobs in the sector, since overseas orders have plummeted as a result of reduced discretionary spending.

From the current situation, one can notice the following: If the pandemic continues for more than a year, job losses and subsequent business shutdowns will have multiple severe effects on the economy.

Covid-19 is largely exacerbating the impact overall and creating a multi-dimensional crisis. To get back on their feet and minimize the overall loss, an effective and widespread plan by the government is required. The government should provide financial assistance to save the dying RMG industries from collapse.

Paid leave must be given by the employers till the situation is under control. If the industries need to reopen, treatment and sufficient health care must be ensured. Cash support to workers is necessary.

A tripartite monitoring task force consisting of the government., Ministry of Labour, and Trade Unions can boost up the progress. Factory owners, brands, individual workers, right organizations, and trade unions should join hands and take effective measures required to get out of this economic instability.

Nadim Zawad Akil and Jeba Sabiha Tonny are students of law. They can be reached at [email protected] and [email protected] respectively.

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