Problems of Garments Industry in Bangladesh

The garment industry is the main source of foreign exchange of Bangladesh. It

has been the key export division for the last 25 years. Garment factories provide
employment to 40 percent of total industrial workers of Bangladesh. So garment
industry is the source of employment in Bangladesh. But without the proper laws
the worker are demanding their various wants and as a result, conflict begins
with the industry. This report made to identify Problems of Garments Industry in
Bangladesh and how to recover this problem.

Introduction

Problems of Garments Industry in Bangladesh

The Ready Made Garments industry of Bangladesh has expanded dramatically

over the last three decades.

The history of the Readymade Garments Sector in Bangladesh is a fairly recent

one. Nonetheless, it is a rich and varied tale. The recent struggle to realize
Workers’ Rights adds an important episode to the story.

The RMG industry of Bangladesh has expanded dramatically over the last
three decades. Traditionally, the jute industry dominated the industrial sector of
the country until the 1970s. Since the early 1980s, the RMG industry has
emerged as an important player in the economy of the country and has gradually
replaced the jute industry.

Although Bangladesh is not developed in industry, it has been enriched in

Garment industries in the recent past years. In the field of Industrialization
garment industry is a promising step. The sector now dominates the modern
economy in export earnings, secondary impact and employment generated. It
has given the opportunity of employment to millions of unemployed, specially
innumerable uneducated women of the country. It is making a significant
contribution in the field of our export income.

Bangladesh exports 35 types of garment products to about 31 countries around

the world. The RMG sector is a 100% export-oriented industry.

That Bangladesh today is considered an economic competitor in terms of

international garment manufacturing by other countries of the region and beyond
is the country since gaining independence in 1971. It appears much of the socio-
economic development in the first decade of the twenty-first century for
Bangladesh and its approximately 1.5 million women workers depends on the
continuing success of the RMG industry.

Problems surrounding readymade garments sector:

The garment industry of Bangladesh has been the key export division and a main
source of foreign exchange for the last 25 years. National labor laws do not apply
in the EPZs, leaving BEPZA in full control over work conditions, wages and
benefits. Garment factories in Bangladesh provide employment to 40 percent of
industrial workers. But without the proper laws the worker are demanding their
various wants and as a result conflict is began with the industry

Raw materials:

Bangladesh imports raw materials for garments like cotton, thread color etc. This
dependence on raw materials hampers the development of garments industry.
Moreover, foreign suppliers often supply low quality materials, which result in low
quality products

Unskilled workers: 

Most of the illiterate women workers employed in garments are unskilled and so
their products often become lower in quality.

Improper working environment:

Taking the advantages of workers’ poverty and ignorance the owners forced
them to work in unsafe and unhealthy workplace overcrowded with workers
beyond the capacity of the factory floor and improper ventilation.

Most of the garment factories in our country lack the basic amenities where our
garment workers sweat their brows from morning to evening to earn our
countries the major portion of our foreign exchange. Anybody visiting the factory
the first impression he or she will have that these workers are in a roost.

Improper ventilation, stuffy situation, filthy rooms are the characteristics of the
majority of our factories. The owners’ profit is the first priority and this attitude has
gone to such an extent that they do not care about their lives.

Lack of managerial knowledge:

There are some other problems which are associated with this sector. Those are-
lack of marketing tactics, absence of easily on-hand middle management, a small
number of manufacturing methods, lack of training organizations for industrial
workers, supervisors and managers, autocratic approach of nearly all the
investors, fewer process units for textiles and garments, sluggish backward or
forward blending procedure, incompetent ports, entry/exit complicated and
loading/unloading takes much time, time-consuming custom clearance etc.

The gendered division of labor:

In the garment industry in Bangladesh, tasks are allocated largely on the basis of
gender. This determines many of the working conditions of women workers. All
the workers in the sewing section are women, while almost all those in the
cutting, ironing and finishing sections are men. Women workers are absorbed in
a variety of occupations from cutting, sewing, inserting buttons, making button
holes, checking, cleaning the threads, ironing, folding, packing and training to
supervising.

Women work mainly as helpers, machinists and less frequently, as line

supervisors and quality controllers. There are no female cutting masters. Men
dominate the administrative and management level jobs. Women are
discriminated against in terms of access to higher-paid white collar and
management positions.

When asked why they prefer to amply women for sewing, the owner and
managers gave several reasons. Most felt that sewing is traditionally done by
women and that women are more patient and more controllable than men.

Wages:

The government of Bangladesh sets minimum wages for various categories of

workers. According to of Minimum Wage Ordinance 1994, apprentices’ helpers
are to receive Tk500 and Tk930 per month respectively. Apprentices are helpers
who have been working in the garment industry for less than three months. After
three months, Apprentices are appointed as helpers. Often female helpers are
discriminated against in terms of wages levels, and these wages are also often
fixed far below the minimum wage rate. A survey conducted in 1998 showed that
73% of female helpers, as opposed to 15% of their male counterparts, did not
receive even the minimum wage.

Insufficient for loan:

Insufficiency of the loan in time, the uncertainty of electricity, delay in getting
materials, lack of communication, the problem in taxes etc. Often obstruct the
industry. In the world market, 115 to 120 items of dress are in demand whereas
Bangladesh supplies only ten to twelve items of garments. India, south Korea,
Hong Kong, Singapore, Thailand, Taiwan etc, have made remarkable progress in
garments industries. Bangladesh is going to challenge the garments of those
countries in the world market.

Unit labor cost:

Bangladesh has the cheapest unit labor cost in South Asia. It costs only 11 cents
to produce a shirt in Bangladesh, whereas it costs 79 cents in Sri Lanka and 26
cents in India. Clearly, Bangladesh’s comparative advantage lies in having the
cheapest unit labor cost.

Working hours:

Though the wages are low, the working hours are very long. The RMG factories
claim to operate one eight-hour shift six days a week. The 1965 factory Act
allows women to work delivery deadlines; however, women are virtually
compelled to work after 8 o’clock. Sometimes they work until 3 o’clock in the
morning and report back to start work again five hours later ar 8 o’clock. They are
asked to work whole months at a time the Factory Act, which stipulates that no
employee should work more than ten days consecutively without a break.

Poor accommodation facilities:

As most of the garment workers come from the poor family and comes from the
remote areas and they have to attend to the duties on time, these workers have
to hire a room near the factory where four to five huddle in a room and spend life
in sub human condition.

For four to five workers there is one common latrine and a kitchen for which they
have to pay from Tk=2000 to Tk=2500/-. They share this amount among
themselves to minimize the accommodation expense.

One cannot believe their eyes in what horrible condition they have to pass out
their time after the almost whole day of hard work in the factory. After the
laborious job, they come into their roost, cook their food and have their dinner or
lunch in unhygienic floor or bed and sleep where they take their food. They share
the single bed or sleep on the floor.
The owners of these factories must not treat the workers as animals. The owners
of these factories who drive the most luxurious car and live in the most luxurious
house do ever think that these are the workers who have made their living so
juicy. Will these selfish owners ever think of these workers of their better living for
the sake of humanity by providing better accommodation for these workers in
addition to providing with the job?

Safety Problems:

Because of the carelessness of the factory management and for their arrogance
factory doors used to be kept locked for security reason-defying act.

Safety need for the worker is mandatory to maintain in all the organization. But
without the facility of this necessary product a lot of accident is occur incurred
every year in most of the company. Some important cause of the accident are
given below-

 Routes are blocked by storage materials

 Machine layout is often staggered
 Lack of signage for escape route
 No provision for emergency lighting
 Doors, opening along escape routes, are not fire resistant
 Doors are not self-closing and often do not open along the direction of escape
 Adequate doors as well as adequate staircases are not provided to aid quick exit
 Fire exit or emergency staircase lacks proper maintenance
 Lack of proper exit route to reach the place of safety
 Parked vehicles, goods and rubbish on the outside of the building obstruct exits
to the open air
 Fire in a Bangladesh factory is likely to spread quickly because the principle of
compartmentalization is practiced

Political crisis:

Garments industries often pay dearly for political unrest, hartal and terrorism etc.

The international market has withdrawn quota advantage over garments export
form Bangladesh since December 2005.

Bangladesh has to advance cautiously for getting the better position of her
garments in the world market. Finally destruction of twin tower on 11 September
2001. Invasion of Afghanistan and Iraq and depression in world Economy have
seriously affected the export trade of Bangladesh.
Price competitiveness:

China and some other competitors of Bangladesh have implemented sharp price-

cutting policies in exporting garment products over the last few years, but
Bangladesh has failed to respond effectively to such policies. China was able to
drop the export price of 29 garment categories by 46 percent on average in the
United States within a year, from $6.23 per sq meter in December 2001 to $3.37
per sq meter in December 2002. Bangladesh needs to respond to such price-
cutting policies of its rivals in order to remain competitive in the quota-free global
market.

Lead time

Lead time refers to the time required for supplying the ordered garment products
after the export order has been received.

In the 1980s, the usual lead time in the garment industry was 120-150 days for
the main garment supplier countries of the world; it has been reduced to 30-40
days in the current decade.

However, in this regard the Bangladesh RMG industry has improved little; for
example, the average lead time is 90-120 days for woven garment firms and 60-
80 days for knit garment firms. In China, the average lead time is 40-60 days and
50-60 days for woven and knit products respectively; in India, it is 50-70 days
and 60-70 days for the same products respectively.

Bangladesh should improve its average lead time to compete in the international
market.

Conclusion:

The Ready-Made Garments (RMG) industry occupies a unique position in the

Bangladesh economy. It is the largest exporting industry in Bangladesh, which
experienced phenomenal growth during the last 25 years.

Given the remarkable entrepreneurial initiatives and the dedication of its

workforce, Bangladesh can look forward to advancing its share of the global
RMG market.

RMG sector: Challenges versus opportunities

The raging controversy over wage hike in the readymade garments (RMG) sector
continues. This is happening at a time when the industrial structure in China, the
world’s largest exporter of apparel products and one of the major competitors of
Bangladesh, is undergoing rapid transformations. While the China shift could
benefit Bangladesh’s RMG in the medium to long run, the industry faces some
short-term challenges largely owing to economic problems in the advanced
economies.

While the emerging markets returned to the high growth path following the great
recession of 2008-09, the advanced countries’ economic outlook remains
gloomy. The hope of economic recovery is overshadowed by continuous job
losses in the United States (US) and the sovereign debt problem on both shores
of the Atlantic.

Further, most countries in Europe are announcing a series of austerity measures

that could slash their demand for imported goods and services significantly. Both
Europe and the US remain Bangladesh’s major exports markets.

Amidst the global financial crisis, Bangladesh’s apparel exports have not had
much impact largely owing to the massive fiscal stimulus packages in the
advanced world. However, the recent austerity measures and a less than rosy
outlook of advanced economies could affect Bangladesh’s apparel sector
adversely. This indeed limits the RMG owners in Bangladesh revising labor cost
upward, particularly at the scale the workers have been demanding.

However, there is also a silver lining as far as the industry’s prospects are
concerned. China is increasingly focusing on the development of high-end
manufacturing and services, given the structural needs of its economy. Beijing
has also decided to allow a gradual appreciation of its currency in the wake of
relentless pressure from the US and Europe. China’s undervalued exchange-rate
policy is believed to be a cause of strain in the global economy.

The rising unit labor costs an upward adjustment in its currency mean that a
plethora of low-end manufacturing jobs will eventually be moving out from China.
Indeed, many jobs have already moved inland from China’s coastal areas and
some low-end manufacturing units are relocating to Vietnam.

The shortage of workers is particularly acute in the country’s two major

manufacturing hubs — the Pearl River Delta and the Yangtze River Delta. In
Guangdong province, there was a shortage of half a million workers in 2009.
Following this development, of late, the minimum wage in Beijing has increased
to 960 Yuan ($142, Tk. 9,800). There is no unique minimum wage in China. It is
set locally according to standards laid out by the central government.
Moreover, following the recent financial crisis, there is a realization in China that
the country’s current growth model that relies excessively on exports and
investment needs to be rebalanced, with a greater emphasis on consumption.
Development of high-end manufacturing and service sectors is the key in this
regard.

China’s move towards a vertical economy could create much room for
Bangladesh, given the latter’s abundant supply of labor. Bangladesh’s other
competitors in the neighborhood, India, and Pakistan, are not in a good shape
owing to the former’s dilemma with its economic openness and the latter’s
overwhelming political problems.

India’s economic openness bars its apparel sector taking the currency advantage
— undervalued exchange rate — that the Bangladeshi RMG sector enjoys, given
the huge capital inflows in the country that makes the Rupee exchange rate
highly volatile. Moreover, India’s labor market is highly inflexible, a major problem
in its industrial structure. This leaves Bangladesh, Indonesia and Vietnam to
augment their market shares in the wake of the China shift.

Given the structural shift in China and a bleak economic outlook of the advanced
countries, the authorities in Bangladesh must understand the changes clearly
before taking ad hoc decisions. There are three stakeholders as far as the RMG
sector is concerned — the plant owners, the workers, and the government.

The workers’ fight against unsustainably lower wages in RMG is understandable

given the growing cost of living in Dhaka. Nevertheless, they must accept the fact
that it is the cheap labor cost that has made Bangladesh a competitive place for
apparel manufacturing. Nonetheless, the recent hike in China’s minimum wage
will help Bangladesh to maintain its low-cost advantage despite the likely upward
wage adjustment in the RMG sector.

The government cannot escape its responsibility by merely announcing a

minimum wage and letting the law enforcers go after the protesters. The
successive governments in Bangladesh have failed to provide the required
infrastructure and uninterrupted energy supply, making per unit production cost in
Bangladesh more expensive than most of its competitors, if one isolates the
wage cost effects.

The high energy cost and the poor infrastructure are neutralizing Bangladesh’s
cheap labor advantage — leaving a squeezed margin for the producers.
Unfortunately, the deadweight loss arising from the government’s poor service
delivery is mostly shared by the workers.
The situation in the global economy should be researched carefully. The owners
and the government should explore new markets for apparel products,
particularly focusing on emerging markets. More than half of global economic
growth is now driven by emerging markets. However, Bangladesh’s PR skills are
relatively underdeveloped. This is reflected by the fact that it has failed to
showcase the country in the 2010 Shanghai Expo, the largest business gathering
ever.

The emerging markets may not substitute the advanced world as the consumer
of last resort, at least in the short run, but in the medium, to long run, they could
become significant markets for Bangladesh’s RMG products. Many emerging
markets including China are developing domestic markets offering various
incentives. The expansion of the auto market in China in 2008-2009 is the prime
example.

Moreover, as we observed in the case of China, an economy cannot suppress

the prices of its non-tradables (housing, for instance) for long if the concerned
economy undergoes a steady growth for decades. So, the exchange rates in
China, Brazil, and other emerging markets will gradually appreciate with their
strong economic growth. The real exchange rate is nothing but the ratio of the
goods and services that can be traded in international markets (e.g. an iPod) and
those that cannot be traded (e.g. a haircut).

Bangladesh’s autarkic financial system can continue to afford to offer the

exchange rate advantage to its exporters. Economic literature suggests that
undervaluation is a second-best mechanism for alleviating institutional weakness
and market failures that tax the tradables. Market failure in Bangladesh is
rampant and its institutions remain weak.

This also means that owing to high opportunity costs, China, Brazil, South Africa
and even India will increasingly abandon low-end manufacturing plants and start
buying such products, including apparel, from Bangladesh, Indonesia, and similar
low-cost producers. Such a scenario is not very unlikely in the near future.
Bangladesh is one of the few countries that stand to benefit from such changes if
the respective stakeholders act prudently.

The apparel industry of Bangladesh is in a double bind: continuous high inflation

has led to a wage pressure and a gloomy global economy has left the garment
owners in a tight financial situation.

The garment workers had a pay hike less than two years ago, but they are
already finding it hard to meet their expenses.
Financially, the garment owners are in a bad shape too as work orders have
dipped alarmingly.

Take Rahima (her real name withheld), for instance. She earns 4,500 Taka
(US$54.91) a month and pays 1,000 Taka ($12.20) per month for her one-room
shanty. Her landlord now wants 1,400 Taka ($17.08).

Over the past several months, she had to skip eggs, the almost one and only
source of protein for low-income group people.

“Four eggs cost 40 Taka now. When my wages were increased [in late 2010]
they cost 24 Taka,” she says as she explains why she cannot afford eggs
anymore.

With such a price spiral, the inflation graph has swung wildly and remains at a
high level. On a 12-month average basis, the inflation rate accelerated to 10.76
percent in May, up from 8.67 percent in the same month a year ago, according to
the Bangladesh Bureau of Statistics.

Rahima and her fellow workers were shattered by the skyward journey of
inflation.

“The workers did not get any benefit of the pay raise as the house owners
increased rents four times a year,” said a worker at Ha-Meem Garment at
Ashulia on the outskirts of the capital.

Rahima’s employer, Arif (again, not his real name), sandwiched between inflation
and global financial crisis, also feels helpless.

He found prices of his product — basic T-shirts — falling to $2 now from $4 a

piece two years ago, while his interest rate remained high at 15 percent. In a time
of high inflation, one cannot expect banks to charge low.

“Inflation is cutting into workers’ purchasing power,” says Ahsan H. Mansur,

executive director of the Policy Research Institute, adding that food and housing
are the two major expenditure items for the garment workers.

A garment worker spends 60 percent of his income on food, which is the same
as the national average; and nearly 25 percent on accommodation, which is 7
percentage points higher than the national average of 18 percent in urban areas,
he adds.
Prices of firewood also shot up due to higher demand among the workers in
Ashulia in the absence of gas burners.

On November 1, 2010, the wage board for garment industries nearly doubled the
minimum wages to about 3,000 Taka ($36.61) a month at the entry level. In
dollar terms, the minimum wage was $43, the lowest in the world, at the
exchange rate in 2010, which is now $36.4, as the taka has lost its value against
the dollar.

Facing severe protests by workers over the last six days, the owners of more
than 300 garment factories in the industrial hub of Ashulia closed down their units
from yesterday for an indefinite period.

The latest spell of labor unrest started with the rumour of the death of Salman, a
storekeeper at a unit of Ha-Meem Group, on May 11. Later, Salman was found
alive with minor injuries he had suffered in clashes with factory officials.

The Salman issue over, factories in Ashulia resumed production on May 14.

But street violence returned to Ashulia on June 11. This time, the workers made
a demand for a pay hike.

During a meeting with Labour and Employment Minister Khandker Mosharraf

Hossain at the Ha-Meem factory on June 13, the workers pressed their clear
demand for a wage raise.

Slowing export

With the country’s main export earning garment sector mired in labour unrest,
exporters look to a bleak future as the financial crisis in Europe, the major export
destination, cut into export growth.

Export Promotion Bureau data show Bangladesh’s export growth to have slipped
7.52 per cent below the target in July-May period of the current fiscal year,
compared to the same period a year ago.

In the 11 months through May this year, knitwear exports were calculated at
$8.58 billion, which is 11.5 per cent below the target. During the same period,
woven exports were calculated at $8.7 billion, which is 1.45 per cent more than
the target, the data show.

Asked, Shafiul Islam Mohiuddin, president of Bangladesh Garment

Manufacturers and Exporters Association (BGMEA), said the organisation had
held several meetings with the stakeholders over the last one month, but nobody
came forward with any charter of demands.

“I did not get any list of demands from any quarter,” Mohiuddin told The Daily
Star yesterday.

“We are still saying we are the victims of a conspiracy.”

“Many owners will go bankrupt because of the closure of the factories as they are
losing production every day,” he said, adding that the shutdown would hamper
export growth.

Referring to the recent vandalism in at least 200 factories at Ashulia, the BGMEA
president said, “The government should punish the culprits who are involved in
the vandalism.

“The highest loss of the country is that it will lose its image before the buyers.”

The Wage Board on garments in Bangladesh nearly doubled minimum

wages on July 29, 2010. The minimum wage at the entry level will be raised to
Tk 3,000 a month (or about $43) from Tk 1,662.50 ($24). The new pay structure,
proposed to be effective from November 1, maintains the existing seven grades
with the highest pay fixed at Tk 9,300 ($140) per month. About 3.5 million
Bangladeshis work in the garment industry, which accounts for 80 percent of the
country’s exports. International companies like Wal-Mart, JC Penney, H&M, Zara,
Tesco, Carrefour, Gap, Metro, Marks & Spencer, Kohl’s, Levi Strauss and
Tommy Hilfiger all import in bulk from Bangladesh.

Garment workers apparently are unhappy over their wages, even after the
proposed increase. They protested by smashing vehicles and blocking traffic in
various garment sites in Dhaka following the announcement of the wage
increase. Why has the frequency of violence increased?

Some observers attribute it to rising prices of essentials; unpaid salaries;

absence of responsible trade unions and good relations between workers and
owners; misbehavior of mid-level officials; and deferred payments to workers.
Some RMG entrepreneurs blame the administrative failures of the government;
“conspiracy” from outside and lax implementation of law and order. There are
also allegations that a vested group is behind the violence. Very often, the
agitating workers are aided by mysterious outsiders. There is no denying that a
fairly widespread undercurrent of discontent does exist amongst the workers.
The challenges facing the Bangladesh garment industry are formidable. The
industry needs to get regular orders from international buyers in order to thrive.
These buyers are primarily interested in price, lead time, and quality. The cost of
labor is one of the key factors for Bangladesh’s success in garments. Workers
and labor leaders say the raise is inadequate and does not match the high cost
of living. The manufacturers complain they continue to be squeezed by a slump
in world market prices because of a still fragile recovery from the global
economic crisis. They also point to higher production costs due to the energy
crisis and poor infrastructure. One industry leader observed the wage increase
would be especially hard on smaller factories. There is truth in all of these.

There are two questions that we need to understand.

First, the extent of the impact on the owners would depend on how much more
companies like Wal-Mart and H & M are willing to pay to offset the rise in the cost
of production. Second, even if the buyers refuse to increase their price offers, the
owners may have the capacity to take a hit on profits depending on the impact of
the proposed increase on the wage bill.

Turning to the first question, the key information in assessing how much more
they should be willing to pay is the percentage of the retail price of garment that
is accounted for by labor costs. Although estimates vary by product and location
of production, it is clear from published academic research, that labor costs
typically constitute 1-3 percent for a garment produced in the developing world.
Hence, large increases in labor costs do not require correspondingly large
increases in retail price. For example, for a typical sportswear garment, doubling
wages would increase retail price by roughly 1-3 percent; tripling wages would
result in price increases of 2-6 percent. These estimates assume that all of the
increased cost is passed along to the consumer. If some of the costs are
absorbed by exporters, retail price increases would, of course, be
commensurately smaller.

Here are a few more illustrations based on academic research on the relationship
between apparel production costs and retail prices.

• For men’s casual shirt manufactured in Mexico and sold in U. S., direct labor
accounts for 1.6 percent of the final retail price. Doubling the wages of all non-
supervisory workers would result in an increase of roughly 1.6 percent.
• For men’s knit shirt manufactured in the Philippines and sold in the U.S., labor
costs, including the salaries of floor supervisors but not higher management,
represent 1.56 percent of the final retail price. Doubling wages would result in a
retail price increase of 1.54 percent.
• For an embroidered logo sweatshirt manufactured in the Dominican Republic
and sold in the U.S., the production costs accounted for by direct and supervisory
labor represent 1.29 percent of the final retail price of the garment. Doubling
wages would result in an increase of 1.27 percent.

Bear in mind that Mexico, the Philippines, and the Dominican Republic have
relatively high labor costs. Prevailing wage rates in countries such as
Bangladesh, Cambodia, China, Indonesia, India, and Pakistan are substantially
lower. As a result, the required increase in retail prices due to labor cost
increases in these countries would be somewhat lower for products produced in
the same countries. Surely, buyers can afford to bear at least a part of the
required increase.

Turning now to the second question, the key information is the increase in
average wage for the industry as a whole taking into account the distribution of
the garment work force by grades. Based on the conversation with one insider,
we assume that grades 1-5 each account for 10 percent, grade 6 accounts for 15
percent, grade 7 accounts for 30 percent and the remaining 5 percent are
apprentices. This gives a weighted average wage of about Tk 2409 per month
before the increase and Tk 4290 per month after the increase, representing 78.1
percent growth in average nominal wage and 33 percent growth in average real
wage.

Note that the extent of the average real wage increase exceeds the 19.8 percent
growth in real GDP per capita since the last wage adjustment in 2006. Thus, the
proposed increase puts the average garment worker ahead of the typical
Bangladeshi in terms of income growth. This is even more so for grade 7
entrants where the real minimum wage is proposed to increase by nearly 46.5
percent.

Given the 3.5 million workers in the industry, the increase in average nominal
wage from Tk 2409 per month to Tk 4290 per month would lead to a maximum
increase in the annual wage bill of the industry by about Tk 79 billion(equivalent
to about $1.1 billion). This is the maximum possible increase because the initial
average wage of Tk 2409 per month is based on the assumption that workers
were paid the minimum wage in each grade, which generally may not be true.
This maximum possible increase constitutes 9.2 percent of total FY10 garment
exports. Data on average profit margin in the garment industry as a whole is not
available. Guesstimates are that it is unlikely to be more than 8 to 10 percent of
the value of exports. In the absence of any price increase from the buyers, the
contemplated wage increase is therefore likely to hit profits significantly in
Bangladesh’s garment industry.
RMG exports have nearly doubled in last five years—from $6.4 billion in
FY05 to $12.5 billion in FY10. Surely, this could not have taken place without
accompanying the rise in profit. The industry should therefore be able to bear the
increase in the wage bill from accumulated retained earnings if current profit falls
short. Export price adjustment will eventually come, alleviating the pressure.

The main actors need to join forces to build a competitive RMG sector in
Bangladesh. It is crucial for the different stakeholders (including buyers) of the
sector to hold dialogues amongst themselves in order to identify issues that
constrain the industry and reach agreement on what each stakeholder can do to
protect their own interests without killing the goose that lays the golden eggs.

More than three hundred and fifty readymade garment factories at Ashulia – an
industrial hum only ten kilometers away from the Capital city were shut down
indefinitely by the owners following violent protests and destruction of industrial
properties by the RMG workers and outside agents. President of the Bangladesh
Garment Manufacturers and Exporters Association [BGMEA] Shafiul Islam
Mohiuddin made the announcement, saying the plants would reopen only after
the government ensures “enough security”. The decision follows the fifth day of
protests by tens of thousands of workers who clashed with police, vandalised
plants and blocked a key highway for hours. Employees – who work 10-16 hours
a day, six days a week for the lowest garment sector wages in the world – were
demanding a 50 percent pay hike and subsidized food to cope with the rising
cost of living. Most of Bangladesh’s big garment factories are based at Ashulia.
They employ around half a million workers who sew clothing for some of the
world’s largest retailers such as Wal-Mart, Gap, Tesco, H&M and Carrefour.

In 2010, Bangladesh garment factories were hit by months of violent protests that
forced the government and factory owners to agree to increase wages by 80
percent, or a minimum US$37 per month. The export of garments, which made
US$19 billion for the impoverished country last year, is the mainstay of the
economy of Bangladesh, accounting for 80 percent of its total shipments.
Tensions have been brewing at Ashulia and other textile manufacturing zones in
recent months following the abduction and murder of a top garment union leader
in April. Unions have accused Bangladesh’s feared security forces of killing him.
U.S. Secretary of State Hillary Clinton demanded an independent probe into the
incident when she visited the country last month.

Following the indefinite suspension of production in hundreds of RMG factories at

Ashulia and similar fear of outbreak of demonstrations and protests at remaining
segments of country’s readymade garment factories, leaders of BGMEA are now
extremely worried about the delay or failures in shipments, which will surely
cause a huge deadlock in the readymade garment sector as well as Bangladeshi
textile exporters may lose significant stake of international orders for the winter
apparels. Some of the owners of the apparels industries in Bangladesh will also
be forced in sending their shipments by air to somehow manage the time loss,
which surely will cause huge financial loss to them. BGMEA sources said the
violence erupted at a time when the US$ 19 billion industry has been facing a
tough time in recent years on labour related issues that has put Bangladesh’s
apparel export at risk to her major export destinations like the USA and European
Union [EU] region. Bangladesh’s garment export to the EU markets has gone
down by nearly 15.40 percent while shipment to the USA has recorded a 28.40
percent fall in the current year, according to the data of BGMEA.

Seeing 350 RMG factories shut down indefinitely, thousands of garment workers
again fought pitched battles with law enforcers in Ashulia on June 17, 2012,
fuming over the shutdown of all garment factories in the industrial belt.

While the Bangladeshi textile manufactories and owners of the readymade

garment factories are unwilling to reach into any amicable settlement with the
RMG workers and increase their wages, there are specific signals from a number
of sources within the giant buyers of textile products in United States and
European Union stating they may now set a deadline for the Bangladeshi
entrepreneurs in accepting the demand of the workers, or otherwise, those giant
buyer may start excluding Bangladesh from getting any future orders. Some
vested interest groups being funded by the textile exporters in the neighboring
nation are reportedly giving instigations and funding to the agitators and agents
of agitation in causing severe disruption to production of textile products and
readymade garments in Bangladesh. If such large orders are cancelled, these
will be shifted to India and other countries, while Bangladeshi RMG workers will
face the severest crisis following the permanent closure of the factories. There
are more than 3,500 RMG factories in Bangladesh, where more than 7 million
workers are employed. Any such ill fate of the RMG factories will cause huge
social catastrophe for the country as millions of female workers will lose the job,
which would force many of them in entering illicit and immoral professions such
as prostitution. Commenting on the current labor unrest in the RMG factories, US
ambassador in Bangladesh, Dan Mozena said Bangladesh garment sector may
face a major setback as the American buyers are worried over the prevailing
labour situation here. He warned that Bangladesh has every chance to be
identified as an anti-labor state among the US apparel buyers if labour rights are
not upheld and murderers of prominent union leader Aminul Islam brought to
book.

The US envoy said the emerging developments in the US, the single-largest
destination for the country’s RMG, could coalesce into a perfect storm that could
threaten Bangladesh and its brand in the US through driving away key American
buyers of Bangladeshi garments. Aminul Islam, who was a senior organiser at
the Bangladesh Center for Worker Solidarity [BCWS] and associated with the
AFL-CIO, was found dead in April last in Tangail district after he was abducted.
Immediately after the killing, international buyers from the USA, Canada and
Europe wrote a letter to the Bangladeshi Prime Minister in mid April, expressing
their concerns over Islam’s death. The US Secretary of State, Hillary Rodham
Clinton during her recent visit to Dhaka demanded effective measures to address
the labour problems in the garment sector so that big foreign manufacturers did
not shy away from investing in the industry here.

Readymade garments and textile sector, which earns huge amount of foreign
currency for Bangladesh every year is now under acute crisis following labor
unrest, mostly instigated by a leader of Communist Party in the country. On June
21, 2010, leaders of Bangladesh Garments Manufacturers and Exporters
Association [BGMEA] decided to shut down 300 factories at Ashulia export
processing zone area [near Dhaka city], following days long labor agitation and
destructive acts. According to experts, such closure for an indefinite period will
put the entire export trade of Bangladesh from textile and RMG sector into huge
risk, as many of the exporters will fail to ship their consignments to prospective
buyers on time.

Bangladeshi entrepreneurs are already facing severe competition from exports in

Vietnam, Cambodia and Indonesia. China will gradually lose the international
market of textile export as labor cost in that country is increasing in recent
months. This could be an excellent opportunity for Bangladesh in grabbing a
larger stake in the international market, if there would have been no such crisis
created by a hand-picked number of RMG workers mostly used by Communists
and leftists.

Bangladesh Garment Manufacturers and Exporters Association [BGMEA]

decided to close all apparel units in Ashulia for an indefinite period in the wake of
labor unrest that injured at least 200 people. The decision came at an emergency
meeting of the association and it reasoned out that the continuous unrest spread
jitters among garment entrepreneurs.

Ashulia, an industrial belt, turned into a battlefield with several thousand

garment-workers blockading the busy road and vandalizing vehicles. The
workers demanded TK 5,000 [US$ 72] in minimum wages.

At least 20 police personnel were among the injured after clashes raged between
the workers and law enforcers.
The areas troubled by the labor unrest include Jirabo, Narasinghapur,
Ghoshbagh and Baipail.

Police and locals said the trouble originated from Ananta Garments in
Nishchintopur, where workers demonstrated for a three-fold pay hike to US$ 73
per month. The violence spread as a group of workers from a nearby factory
broke into a Ha-Meem Group factories during the lunch break, said witnesses.

Delwar Hossain, deputy managing director of Ha-Meem Group, said the ‘outside
workers’ assaulted one of his line chiefs, as the officer tried to keep them from
rampaging into the apparel unit.

“The line chief was severely injured. Worse still, the agitators did not let him go to
the hospital for hours,” Hossain said.

Police said Ha-Meem officials held a meeting with the agitators to settle the
matter, but the effort failed. This prompted the company to shut its factories to
avoid further trouble.

However, the agitation spread further when the angry workers came back out on
the road and vandalized at least 50 vehicles and around 30 adjacent factories,
witnesses said. The workers locked in clashes with the police as the law
enforcers tried to obstruct them from blockading the road by firing rubber bullets,
teargas canisters and spraying hot water.

Police said some unidentified people set fire to three vehicles of Skyline
Garments Limited. Traffic on Dhaka-Tangail and Nabinagar-Kaliakoir highways
came to a standstill at the time.

Garment makers expressed concern over the current spell of labor unrest that
has been taking a heavy toll on the country’s prime export earning apparel
industry.

The exporters fear that orders from international buyers may shift to alternative
destinations, following continued labor unrest, BGMEA said in an earlier
statement.

The statement added that the unrest took place when stakeholders are reviewing
the minimum wage structure for garment workers.

BGMEA leaders said production in the factories at Ashulia, Savar and Rupganj
has been hampered badly over the last 15 days.
They said the workers are not showing up at work and are involved in the unrest
to realise some illogical demands, ahead of the announcement of a fresh
minimum wage structure.

Bangladesh government is likely to announce the new wage structure for the
garment workers before Eid-ul-Fitr. The unrest is taking place even though
owners are now paying the workers according to the rules of the minimum wage
structure, the statement added.

The BGMEA leaders also said they cannot produce at full capacity due to the
ongoing shortage of gas and power. As a result, they are failing to maintain the
lead-time set by international buyers.

Failing on-time production, the owners had to air ship 45,882 tones of apparel
items from December 9 to April 10 at a cost of TK 1.3 billion, the statement said.

“If such unrest prevails in the industrial sector, it will erode the confidence level of
the entrepreneurs,” the statement said. BGMEA sought cooperation from all to
save the garments industry, which directly employs 3.5 million workers, the
statement said.

The entire situation is the real threat to the most prospective industrial sector in
Bangladesh. It is alleged that a leader of Communist Part is behind such
notoriety in the RMG sector. The ruling government in Bangladesh set Dilip
Barua, a leader of the leftist party in charge industries ministry. The very
appointment of this leftist leader was immediately questioned by most of the
entrepreneurs in the country.

For the sake of saving Bangladeshi RMG sector for possible collapse, the
government needs to take immediate steps in resolving the crisis in the sector,
as the government now needs to assess, if a leftist leader should be allowed to
continue in the industries ministry.

Conspiring fresh unrest in RMG sector

As the month of Ramadan is scheduled to begin from August 2, 2011, vested

quarters, who are conspiring for years to completely damage the flourished
readymade garments and textile sector in Bangladesh, are reported conspiring to
stage series of unrest, lawlessness and anarchism in at least 15 top graded
readymade garment and textile factories with the excuse of Eid [Muslim festival]
bonus etc.
Moshrefa Mishu, the woman who is infamous of giving instigation to such
destructive activities within the readymade garment factories are now enjoying
backing from a few leftist politicians and so-called rights groups as well as paid
agents of vested interest groups. Mishu has been arrested and imprisoned a
number of times for violating local laws and for her proved affiliation with series of
criminal activities against readymade garment sector. According to the latest
information, an individual named William Gomes, who earlier was connected with
the cross-border crime, including trafficking in women has been claiming to a
number of readymade garment factories as ‘advisor’ to Mushrefa Mishu and
demanding huge amount as ransom, if the factory owners were willing to avoid
labor unrest.

Moshrefa Mishu was implanted as the ‘leader of the workers at readymade

garment factories’ by the competing nations, who are trying to grab Bangladesh’s
export market in the United States and European Union. It is learnt from reliable
sources that, Mishu was referred to one of the competitor nations by a left-wing
social activist with the request of ‘patronizing’ her with ‘all possible supports,
including logistics supports’ enabling her to initiate and continue ‘movements’
within readymade garment sector. Later, Mishu managed to get a number of anti-
Bangladesh elements in her group, who are continuously trying damage the
export market of Bangladeshi textile products, as well as to discourage the
entrepreneurs and foreign investors from investing in the readymade garment
sector.

According to a scoop, fresh agitations will begin at country’s readymade garment

sector from the second week of Ramadan. They conspirators are targeting
several factories within Export Processing Zones as well as Savar and Tongi.
William Gomes, the claimed advisor of Mushrefa Mishu is making shuttle trips to
these readymade garment factories and secretly meeting the selected number of
workers with the secret tips from Mushrefa Mishu on the strategy of the
upcoming agitation plan.

If the conspirators will succeed, Bangladeshi readymade garment sector will not
only face serious adversities, but will also cause in suspension, canceling and
delay in export orders, which would worth a few hundred million dollar. Owners of
readymade garment factories have been demanding deployment of police within
the factory premises and Export Processing Zone areas. One of the front ranking
owners of readymade garment factories, A.K. Azad, who runs a conglomerate
named Hameem Group has been taking series of initiatives on his own since he
became the President of Bangladesh Federation of Commerce and Industries,
with the goal of saving country’s readymade garment sector. Mr. Azad is also
playing important role in expanding Bangladesh’s market for its textile products in
the West as well as other countries in the world. He also has repeatedly voiced in
favor of necessary security measures at the readymade garment factories and
export processing zones in Bangladesh.

A few million people, mostly belonging to the lower and lowest income groups in
Bangladesh are currently employed in country’s readymade garment sector. A
large segment of these people are female. For the sake of protecting the
readymade garment from any further loss as well as to ensure Bangladesh’s
domination in the textile export sector, the government needs to initiate
immediate plan of not only giving fullest security to the readymade garment
factories as well as, local intelligence should star keeping eyes on Mushrefa
Mishu and her collaborators.

Growth rate is decreasing:

The RMG sector, which accounts for more than 75 percent of Bangladesh’s
export earnings, fell behind the export target of the EPB (Export Promotion
Bureau) for the first time in history, notching a negative growth of 6.03 percent in
knitwear products and barely edging past with 0.16 percent rise in woven items
during the last fiscal year. (Stat: The Daily Star)

The reason behind is that major buyers are cutting order citing many reasons
and piling up orders for India, Vietnam and other Asian countries.

The leading garment exporter sees the sale loss to major retailers in the US and
the Bangladeshi government’s failure to protect garment industries and
investment as two main reasons for the slump in business.

Market watchers meanwhile predict that worse is to come next year when the
EU’s 7.5 percent export growth restriction on China goes by December-end.

One experienced exporter said that Bangladesh garment would grow more
strongly if the business climate was improved and the fears of RMG buyers
dispelled.

“The buyers appreciate the anti-corruption drive, stable political situation and
improvement in areas like the port, electricity and customs. But they are also
concerned about where does the country go? Where does it end”

Readymade garment (RMG) entrepreneurs has sought soft loan facilities from
the government to provide regular wages and bonuses for their workers in the
current what they said dull season (reports the Daily Star):
The BGMEA president attributed the dull season for the sector to short winter in
Europe and the US and shaky consuming practice for high oil prices.