In the early 1980s, when the barely decade old Bangladesh was looking to announce its arrival as a country willing to industrialise and unleash its private sector, the garment manufacturing industry was the sector which provided the much needed platform.
Since its inception, the RMG sector has made an unparalleled contribution to our economy and enhanced our image as a global producer.
However, despite being in this trade for more than three decades if one is asked to carry out a SWOT analysis of the garments industry of Bangladesh, “cheapest labour” will be outlined as the key strength and the prime reason for its very existence.
That begs the question, how can an industry that has sustained over 30 years still keep producing the cheapest garments, enabled by the cheapest labour, whereas other countries have moved up the ladder?
Not only just cheap labour, Bangladesh is also known to be one of the key global hubs of basic garment production, which does not account for much value addition in general.
Countries like Vietnam, Cambodia and China now have higher wages than Bangladesh and visibly seem to have moved up the product ladder as well. Compared to China, where the minimum wage for garment workers ranges from $154 to $230 per month, and in Cambodia, where the monthly base is $80, Bangladesh stands at a meagre $38.50.
A close look at this phenomenon is likely to reveal several factors, which contribute to the prevalence of low wages in Bangladesh. However, the key factor that plays an enabling role in this matter is simply the problem of perception.
Major global apparel buyers see Bangladesh as a market where they can obtain the most competitive prices for a high volume of lower end products. The direct result of this perception is reflected in lower price targets set by buyers for most Bangladeshi suppliers, which they try to meet by undercutting each other, hence further driving down the prices.
In this regard, the garment industry in Bangladesh can be deemed to be rather over-competitive in nature and such competition eventually ends up perpetuating the image of the cheapest producer.
In many different ways it is a self-fulfilling prophecy. When prices are dramatically driven down, the natural tendency of a garment manufacturer would be to manage his unit at an optimal level with regard to overheads, and when wages constitute the largest portion of it, the pressure to drive it down is inevitable.
While the major recognised buyers are looking for the cheapest prices in Bangladesh, their requirements in terms of factory compliance are quite high. However, in a bid to keep prices down it becomes rather difficult for an average manufacturer to keep indulging in ethical and amenable practices.
While manufacturers can undertake enough physical compliance measures to please the buyers, maintaining social compliance on a daily basis becomes an exceedingly difficult task; it involves costs and continuous reinvestment.
Furthermore, with shrinking profit margins, small and medium factories hardly manage to accumulate enough funds to account for contingency situations, making them susceptible to substantial risk.
In that respect, the manufacturers who have reached the ideal level of economies of scale are still highly profitable and ideally compliant, but these are not the producers we should be worried about.
According to the statistics provided by the BGMEA, the number of factory units in Bangladesh stands at an appalling 2,923, constituting mostly of small and medium sized ones; and these are the factories that usually struggle with low price targets set by buyers.
Much has been talked about raising the minimum wage bar yet again in order to account for perennial inflationary pressure, which is reflected by increasing the price levels of bare essentials. However, the garment sector is not likely to benefit much from a readjustment in minimum wage as long as Bangladesh is perceived to be the home of cheap labour.
More dangerously it eventually increases the likelihood of manufacturers compromising safety standards to make a reasonable profit, best portrayed by the Rana Plaza disaster.
There is no shred of doubt that the government has a solemn duty in terms of implementing stricter building codes and enforcing minimum wage, but the real responsibility lies with the buyers and manufacturers.
Some might try to justify lower wages due to the lower efficiency of the Bangladeshi workforce compared to other countries, but if most factories are literally scraping to make a profit, developing resource facilities to accommodate viable training is beyond consideration.
While the government can take limited measures to develop labour training facilities, it is the manufacturers who have to take the lead role.
In terms of education level of our workforce we are lagging far behind and this is an area of serious consternation. Sri Lanka is a prime example of a country which has benefitted immensely from an educated labour force in terms of productivity and healthy labour practices, but in a low cost market like Bangladesh most manufacturers would view unionism as a distant reality.
In short, Bangladesh cannot continue to be the symbol of cheap labour indefinitely in the global apparel market, and a perceptible revamping of its image is urgently required.
This is only possible with a consolidated effort from the buyers and manufacturers, aided to a certain extent by the government. The Bangladesh garments industry has improved leaps and bounds over a period extending over thirty years but one has to admit that the rate of improvement has not been satisfactory compared to other countries, especially in terms of safety standards and workers’ pay.
Given the intensity and endurance this sector has displayed over the years, it is safe to assume that it does have the capacity to take it up a notch and break this vicious cycle of low pay and deprivation.
