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Monday, November 19, 2018 08:42:04 PM
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Problem : Prospect : Challenges

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16th-May-2018       
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Sadly, a significant number of garments factories have completed only 20 per cent of the remediation suggested over the past two years. This means there is a lot to be done by this large number of factories in order to stay in business. The Department of Inspection for Factories and Establishments (DIFE), a body vested with the power to inspect for the NI have issued a directive for the factory authorities to complete remediation by April,'18. Failure to meet the deadline will invite closure of factories, the authorities threaten.
So, overall not all is well on the readymade garments front of the country. The factories housed in their own buildings certainly have a better chance of standard. But the factory owners have to be serious about the job on hands. In a highly competitive world, they must pull their socks up and be ready to take the challenge. The fact that 256 units have improved their performance by this time is going to act as an incentive for them. When the competition is stiff, the toughest get going.
Need of recapitalization
The fate of the rest 468 looks bleak indeed because they are operating from rented buildings where other establishments are also housed. Remediation there is out of the question. All they need is recapitalization. If they cannot independently take up the job, better it would be to go for partnership business. Vietnam is making gains in export share in the global market because it has proceeded in a planned manner. Bangladesh, sadly, did not follow the same policy. Now putting its house in order proves daunting. But given the prospect of a better organized garments industry, the country has no option other than getting its acys together. A campaign for convincing Western buyers aimed at raising prices of Bangladeshi products should also be launched. Its positive impact can save garments factories here.
Difficulties must be faced
The RMG sector faces difficulties that have been growing steadily and has reached crisis levels. These difficulties must be faced and remedied. Otherwise, the future is bleak. These are five serious problems the RMG sector must recognize and act upon.
Demand for Bangladesh-produced garments is weakening. Order books are short and some manufacturers report that buyer interest in Bangladesh is falling. Bangladesh is still the low-cost producer in the world market, but buyers are attaching increasing importance to one-time delivery, rapid response to changes in styles, and fear of terrorism. The impact of the Holy Artisan Bakery terror attack is still there.
The prices offered to Bangladesh garment manufacturers continue to decline. To meet these price offers, the industry must raise its productivity and increase automation. There is no other alternative path.
The costs incurred in producing garments are rising and the return to investment in new production capacity is falling. Factories are closing. Running a garment factory has become increasingly difficult with all kinds of interference from both the Bangladesh government and foreign groups. Several owners have reported increasing extortion from the police. The tax authorities are trying to increase collections from the RMG factories.
Foreign governments have promoted unreasonable and high-cost interference in Bangladesh, increasing the costs of production without any increase in productivity, diverting investable funds away from automation to zero-return safety investments, promoting increases in labour costs, while infringing on Bangladesh's sovereignty.
The industry has failed to regulate itself in the field of labour relations. Many Bangladesh factories follow carefully the labour laws of the country with respect to payment of wages, overtime regulation, following the minimum wage rules, treating workers with respect. Apart from the legal aspects this is smart business as contented workers lead to higher productivity. But many, probably most of the factories, do not follow the labour law.
The industry is in trouble and this has serious consequences for the economy. The growth of the Bangladesh economy is based on export growth and this is the only path to rapid (more than 6.o per cent) increase of GDP (gross domestic product). With garments representing 80 per cent of exports, it is clear that economic expansion is closely linked to the garment sectors. The prospect of slowing growth or even stagnation of the sector is the most important problem facing the economic managers.
The governance of the sector requires cooperation between government and the industry leaders to overcome the five problems that are outlined above.
Frightened owners of brand
The tragic collapse of Rana Plaza frightened the owners of the brands into taking actions to improve safety, hoping to protect their reputations while continuing to source from Bangladesh. The brands were all in favour but stepped back when it looked like they would have to pay. Instead, we have seen the building of a completely unnecessary bureaucracy around people and organisations who saw money and jobs for themselves, with financial and aid organisations happily joining in the feast. Not a single person involved in this has any idea about the costs and uncertainties that must be faced, how to operate a large garment factory, nor the demanding behavior of the brands. The bureaucratic instincts emerged in an almost classic case of building programmes and concepts that have no demonstrated merit and are funded by liberal governments or charities.
The argument of the Accord and the Alliance is that al safety improvements that they demand are necessary. This has been done without any consideration of the financial impact on the factories. The safety requirements are excessive and unrealistic and do not reflect a proper balance of cost and benefit. What has happened here is, in an enthusiastic explosion of doing good, these foreign governments and organisations have trampled all over the sovereignty of Bangladesh pretending to be interested in the workers' welfare but, in fact, protecting their reputation or creating high-paying jobs for themselves to carry out activities that contribute nothing. Instead, their efforts are destructive for the RMG sector.
Accords extend for lifetime
Now the Accord is trying to extend its lifetime (and the jobs of the staff) by involving itself in the issues of labour union and labour rights. The ILO is involved in this effort along with the Solidarity Centre, an organization supported by the US Government. All of these groups are selling a product that has been discarded in the industrial world, the labour union. The labour union has had anhonourable role in the development of industrial societies, but it is now a dinosaur that has little impact on how economies function. Unions had their day in the United States from 1900-1970. Since then unions have only prospered in the public sector. Unionisation in the private sector has declined steadily until it is 6.0 per cent. In France it is 5.0 per cent, in Germany 17 per cent, Japan 16 per cent and the UK 10 per cent. Constant efforts to organize unions have failed as the workers have voted against establishing a union and private sector union membership is declining everywhere.
The version of a modern economy as it was perceived in the 1930-1960s included labour unions. No more. In most industrial countries, unions have become of little importance in the governance of industry. Only in the public sector do we see continuing strong unions.
Forcing labour unions on the garment sector is an act of arrogance and ignorance. It is arrogant as the EU and the USA are trying to force something on Bangladesh that is failing in their own societies and originates not from a real understanding of what is going on in Bangladesh but from their domestic political considerations.
Push for Labour Union
There are real issues in the governance of the relationship between the factory owners and the workers. Labour unions are not the solution. The labour union will be bought off by the owners - something we are already seeing happen. Honest labour union leaders can make little progress and will be undermining by management.
The impact of this exaggerated safely drive and the push for labour unions is to drive up costs. The factory already caught between rising costs and falling prices will be squeezed out of existence. The people pushing labour unions will be far away enjoying life. The workers will be out of jobs.
The Bangladesh government should enforce its own labour laws the best it can. It should not extend further time to the Accord and Alliance, enough is enough. The Bangladesh authorities and BGMEA should take over the role of these two organizations. Foreign organisation even supported by foreign governments, should no longer be permitted to mess around in labour matters. If this is allowed, the garment sector will fail and Bangladesh will fall back into poverty!
The EU is bluffing and the USA shifting positions. The Government should stand firm on the above mentioned issues.
GSP suspension by EU
European Commission, the executive organ of the EU and with competence on trade issues in its entirely, cautioned Bangladesh by sending two letters in a few months' time to remind of the stake in GSP. The letters even put a deadline for Bangladesh to act on the recommendations provided earlier by the ILO on the BLA and the EPZ laws.
The EU has been the single largest export destination for Bangladesh's RMG industry. During the fiscal year 2014-15, a total of US$ 15.36 billion worth of garment products were exported to the 27-nation EU block and the figure grew to an amount of $17.75 billion during the fiscal year 2016-17 when the annual export was $ 28 billion. It proves the importance of the EU to the country's RMG products' business. Therefore, the issue of GSP scheme provided by the EU, which is the major reason for the growth of garments export to the region, needs to draw the highest level of priority.
The special Paragraph inserted in the International Labour Committee Report of June 2016, noted with 'deep concern that the government has failed to make progress on the repeated and consistent conclusions of this committee despite the substantial technical assistance and financial resources provided by donor countries.' It is interesting to note the frustrating tone over the government's previous assurance made to the ILO. ILO's broad areas of concerns are:
Issues related to the freedom of association and collective bargaining in the Labour Act, 2013, particularly that unsolved 'priorities identified by social partners.'
Full freedom of association in the EPZs, including the ability to from employers' and workers' organizations to associate with the workers' organisations outside the EPZ.'
To act urgently on the anti-union activities, reinstatement of legally-dismissed workers' and enforce disciplinary/legal actions against the people who committed violence against the workers.
Expeditious registration of trade unions with easier legal procedures.
The pressure from international trade unions and the European Parliament is unlikely to go away from reviewing Bangladesh's status as a recipient of GSP for the LDCs. Some of them believe that initiation of the GSP investigation in Bangladesh will compel the country to act on the protracted concerns over the workers' rights.
Bangladesh has committed to resolving all the issues raised by the ILO in the Special Paragraph during its last meeting with the ILO a few months ago.
Traditional security system
Bangladesh has set an export target of USD 50 billion by 2021 for the readymade garment sector. The target appears slightly ambitious and skeptical about its attainability after the Holy Artisan Bakery incident in 2016, following which many buyers and foreign nationals became worried about their security. To achieve a target of this magnitude in only five years' time, it will require a steady growth of around 14 per cent in export income per year which appears difficult now with a number of challenges arising - especially security issues and image crisis. Bangladesh's RMG industry is still reeling from the Rana Plaza disaster. Tazreen Fashions fire incident and Holy Artisan attack in recent years.
Physical security practitioners must improve their methods to meet future threats with proactive measures against any threat to garments and textile industry in Bangladesh by an Integrated Security System - which includes intelligence mechanism with technology and physical security - becoming more dynamic than they are today.
Physical security is a combination of physical and procedural measures designed to prevent or mitigate threats or attacks against people, information and assets. A physical security programme has the aims to detect, deter, delay, respond and recover.
Physical security has three important components: access control, surveillance and testing. Such hardening measures include fencing, locks, access control cards, biometric access control systems and fire suppression systems. Physical locations should be monitored using CCTV-like surveillance cameras and notification systems, such as intrusion detection sensors, heat sensors and smoke detectors.
Uprising by unruly workers
Many RMG industries in Bangladesh were subjected to a sort of uprising by unruly workers on many occasions which posed serious threat to Bangladesh's garment and textile sector. After analyzing every incident it was found with tangible evidence that garment workers agitated during the incidents, but it was the outsiders who mainly got involved in smashing, looting, rioting and damaging factory machines and assets.
In many factories, there is no mechanism to get early warning that can indicate any such incident may take place inside the factory. So, it is high time for each factory to have own mechanism to get
early information and take precautionary measures beforehand. Although industrial police, Special Branch and National Security Intelligence work on this, it does not help very effectively at the factory level.
Proactive intelligence actions for physical security in garment and textile industry includes:
Assessing the unusual situation covertly and overly,
Monitoring human activity on important production floor(s) and thereby tracking suspicious or abnormal activity movement,
Keeping numour under control before it makes a hue and cry.
Identifying the troublemaker(s) and make them aware about any grouping.
Keeping eyes open for community watching outside the factory premises where factory personnel do reside,
Cross-checking of factory personnel's background.
Bangladesh Export Processing Zones authority (BEPZA) and Industrial Police are having a skeleton intelligence sectors to monitor the RMG and industry situation and it actually does not exert any direct impact on the factories. Being the country's apex trade body representing the garment sector, BGMEA is having social sector development to monitor situation in the RMG industry.
Affordable health insurance
SNV Netherlands Development Organisation piloted in the RMG industries of Bangladesh with finding support from The Embassy of the Kingdom of Netherlands (EKN). The aim of this project is to test viable business solutions to improve workers' health while Sextual and Reproductive Health Rights (SRHR) remain the priority. SNV invited interested private sector companies and NGOs to offer innovative business models, which would ensure affordable, accessible and available health services to the RMG workers.
SNV also helped the capacity building of local providers in market analysis, design of business models, partnership building with RMG factories and business solutions. Through the process, one of the private companies offered an affordable health scheme for the workers.
According to BGMEA, around 4.2 million workers are working for the RMG sector in Bangladesh, 80 per cent of them are female. The premium for a female worker's health insurance is BDT 500 and thus the total market size would be BDT 2.0 per annum. Progati Life Insurance Limited, being one of the leading health insurance providers in the country, came up with a thought to serve the RMG workers. They are expected to get to at least 50 per cent of the market share and thus the projected market share of this product is around BDT 1.0 billion.
Business opportunity
The business model is focused on the low income people (LIP) working in the RMG sector of Bangladesh. Their income is almost uniform and average income per day is below US$ 3.0 and thus they are below the poverty line as per the definition of sustainable development goals (SDGs). The age gradation of these people ranges from 18-34, which indicates they are in the peak of their reproductive age. The female workers are susceptible to sexual and reproductive diseases due to long working hours, unhygienic menstrual management, malnutrition and poor working conditions.
Medical centers non-functioning
Many of the factories have their own medical centres with doctors, but they are non-functional, and thus workers' health problems are unsolved, which also effects factory productivity and leads to higher operational cost. Many of the factory owners and buyers are seeking effective solution, but still remain far away as most of the product and service providers have a lack of interest to serve the LIP. Bangladesh invited inclusive business model to solve RMG workers' SRHRs after the value chain analysis of the sector SNY engaged all stakeholders following a systematic approach and adopted numbers of capacity building activities to design and develop the business model. All of the relevant stakeholders are brought on the same table for sharing their thoughts on indentifying opportunities through joint initiatives. The findings showed that around 43 per cent of the RMG workers become sick and lose around 04 days' salary due to sickness absenteeism. Around 87 per cent of the workers seek healthcare services, 40 per cent of whom cannot afford the health services due to high cost. Around 75 per cent workers were, however, found to be willing to pay for health insurance.
The health services are maintained both inside and outside the factory. Service provision inside the factory premises :
Availability of qualified physicians during the working hours,
Health education to make workers aware of the health issues,
Management sensitization for gender-sensitive health services,
Outside the factory premises:
Round the clock (24/7) availability of qualified doctors and nurses with diagnosis and hospitalization facilities.
Health insurance card provides privileged health service.
This is the only health insurance project in the country's RMG sector where workers and factory owners have started to share the premium jointly. Numbers of factories and international buyers have agreed showed interest to join the initiative. Already two international buyers have agreed to share premium for 30,000 workers of their supplier factory here. We believe that more workers would be covered under health insurance scheme that would enable a business-friendly and congenial environment in Bangladesh's booming RMG industry.
Accord to leave May, 31
Accord, the garment factory inspection agency sponsored by more than 200 brands mostly based in Europe, will leave Bangladesh in May, 2018 after failing to get an extension despite lobbying more than a year. The platform wanted to stay in Bangladesh until 2021 to ensure its goals were fully met.
The government said the platform's tenure in Bangladesh may be extended by six more months from may,31 if the steering committee deems it necessary. In that case, the name of the agency will be 'transitional Accord,' Commerce Minister Tofail Ahmed said after a meeting of the steering committee of the Accord, the main operation body of the platform. A new steering committee comprising representatives from the international clothing brands that source from Bangladesh, representatives from the BGMEA. International Labour Organisation and trade union leaders will review the activities of Accord in January and May,'18.
Alliance, the platforms have already completed 80 per cent of the inspection and remediation of the factory buildings from which their members source apparel items. The factory owners have spent between Tk 5 crore and Tk 20 crore for remediation of the structures as per the recommendations of the experts of Accord and Alliance. But the agencies will hand over their responsibilities to the Remediation Coordination Cell, which will monitor the progress in enhancing workplace safety in garment factories. The cell will be run by the steering committee, which will act under the Ministry of Labour and Employment.
Contd on page 44

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