Global Standards for Garment Industry under Scrutiny After the Bangladesh Disaster

INTRODUCTION The economy of Bangladesh is largely dependent on agriculture. However, in recent years, the ReadyMade Garments (RMG) sector has emerged as the biggest earner of foreign currency. The ready-made garment (RMG) sector has experienced an exponential growth since the 1980s. This sector contributes significantly to the GDP. It also provides employment to around 4.2 million Bangladeshis, mainly women from low income families which affect their social statuses. The recent struggle to realize Workers' Rights adds an important episode to the story. 1. What are the challenges facing Bangladesh Ready Made Garments (RMG) Industry? About 80 per cent or $19.00 billion out of the $ 24.00 billion export earnings comes from the RMG sector. Now Bangladesh is the second largest RMG exporter in the world, after China. It can be easily said that the economy of the country mostly depends on the RMG sector. But some recent incidents and tragedies have put the golden age of RMG sector of Bangladesh into a dark era. It can be alleged that it is facing more challenges now than ever before. The biggest challenges that Bangladesh Ready Made Garments (RMG) industry is facing are Lack of safety and security in RMG factories: The recent incidents of Tazreen Fashions that claimed lives of 112 workers on November 24 last year and another incident On 24 April 2013when an eight-story commercial building, Rana Plaza, collapsed in Savar, that claimed lives of 1,127 people. The murder of labor union leader Aminul Islam is another burning issue. Poor infrastructure: With inadequate supply of gas and power, the poor infrastructures became a major challenge for the ready-made garment (RMG) sector. The bad condition of road is also an immense problem. Many garment exporters complained that they cannot meet the strict lead-time set by the international buyers for delayed shipment in Chittagong port due to poor road condition. Provocative Political Situation: A one-day hartal hampers production worth about Tk 200 crore and export order worth US$ 25.65 lakh have been cancelled due to hartal while the amount of discount on the export was US$ 11.32 lakh due to the same reason. RMG Buyers also do not want to come in Bangladesh for security concern. Scarcity of Skilled Workers: Three decades old garment sector is now suffering from 25 percent shortage of skilled workers as the country could not arrange vocational and technical education system for the workers. New export destination: Finding new destinations is really a big challenge for Bangladeshi garment items. All markets are considered as new destinations excepting the US, the EU and Canada. Bangladesh has a lot of potentials in India, South Africa, South Korea, China, Malaysia, Japan, New Zealand, Australia, Russia and Turkey. But challenges remained in exploration of those markets. 2. How is the recent tragedy at Rana Plaza going to affect the industry? The Ready Made Garment industry (RMG), the mainstay of the countrys economy, has begun to feel the pinch in the aftermath of the Savar tragedy at Rana Plaza. Many garment factories are now facing worker shortages of roughly 30%. Panicked by the countrys deadliest industrial accident, which claimed more than 1,000 lives and left 1|Page

Global Standards for Garment Industry under Scrutiny After the Bangladesh Disaster

hundreds injured, workers have started moving to other jobs. The worker shortages are now leading to a fall in production in garment. The crisis came at a time when Bangladesh was gaining its competitive edge in export markets due to the rising input costs in worlds largest cloth -manufacturing countries like China and India. Questions have been raised about the future of the garments industry. A very large foreign buyer has decided to pull out of Bangladesh because of the dangers of the garments industry here. Others may follow this example. If this happens, it will severely damage our social and economic future. This industry does not only increase our national income but has brought immense change in our society by transforming the lives of women in the country. Approximately 60 percent of Bangladeshs clothing exports heading to European Union. It is not just the EU considering drastic action. Since the disaster, it has emerged that the U.S. was already considering revoking the countrys preferred trade status due to concerns about treatment of workers in Bangladeshi factories. Disney has already taken action against the South Asian nation, and others who have not acted now face much more media and public scrutiny. In the wake of the disaster, there has been a worldwide media and consumer reaction on Bangladeshs working and safety conditions, with some companies taking a lead in acting or planning action on the issue and trade blocs even suggesting a boycott of Bangladeshi suppliers. It is almost certain that a full boycott of Bangladeshi garment factories by foreign (mostly Western) retailers and brands would create a much bigger human tragedy than even the disturbing fires, collapses and inexcusably low wages seen in the country. The threat of a boycott, however, could be very useful in forcing improvements to local conditions, and for such threats to be taken seriously; the exit of a few big names such as Disney may well prove to be necessary. The crack in Rana Plaza that caused the collapse of the building has only shown us that if we don't face up to the cracks in our state systems, that we as a nation will get lost in the debris of the collapse. 3. What are the steps needed to be undertaken by various stakeholders to maintain the leading position of Bangladesh RMG Industry? The steps needed to be undertaken by various stakeholders to maintain the leading position of Bangladesh RMG industry are given belowPolicy Regime of Government of Bangladesh should play an active role in designing policy support to the RMG sector that includes back-to-back L/C, bonded warehouse, cash incentives, export credit guarantee scheme, tax holiday and related facilities. The reduced tax rates and other facilities may have a positive impact on the RMG sector.

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Global Standards for Garment Industry under Scrutiny After the Bangladesh Disaster

Infrastructural Impediments In Bangladesh, continuing growth of the RMG sector is dependent on the development of a strong backward linkage in order to reduce the lead time. However, other factors constraining competitiveness of Bangladeshs RMG exports included the absence of adequate physical infrastructure and utilities. Along with the government the stakeholders also should concern enough to ensure the fact. Labor Productivity The productive efficiency of labor is more important determinant for gaining comparative advantage than the physical abundance of labor. In Bangladesh, the garment workers are mostly women with little education and training. The employment of an uneven number of unskilled labors by the garment factories results in low productivity and comparatively more expensive apparels. Bangladesh labor productivity is known to be lower when it compared with of Sri Lanka, South Korea and Hong Kong. Bangladesh must look for ways to improve the productivity of its labor force if it wants to compete regionally if not globally. Because of cheap labor if our country makes the labor productivity in the apex position, then we think the future of this sector is highly optimistic. Research and Training The country has no dedicated research institute related to the apparel sector. RMG is highly fashion oriented and constant market research is necessary to become successful in the business. A facilitating public sector role can be very relevant here. Suggestions Regarding Safety and Security Precautionary should need to be adopted are given below:

Building should be constructed with fire resisting materials Adequate exits and proper escape routes should be designed Protection against fire and smoke should be ensured Electrical wiring must be properly designed, installed and maintained Escape routes should be lighted at all times, kept clear, be indicated by signs Regular fire drills should be held

4. Do you think such measures will actually be put in place? The ready-made garment (RMG) sector has a greater potential than any other sector in contributing to the reduction of poverty in Bangladesh. The sector is very important in terms of employment, foreign exchange earnings and its contribution to Gross Domestic Product (GDP). After the worst industrial accident in the history of garment industry the first question that has come to the fore as one of the concomitant effects from this unexpected, terrible condition is obviously the future of the countrys RMG industry. To maintain the leading position of Bangladesh RMG industry various stakeholders badly need to undertake some necessary steps some of which we have mentioned in our earlier answer. Now the question is whether such measures will actually be put in place or not. If we consider the interview of our prime minister given to CNN where she mentioned several initiatives which have already been taken to ensure the safety of buildings and workers we can expect that such measures will actually be put in place. Bangladesh 3|Page

Global Standards for Garment Industry under Scrutiny After the Bangladesh Disaster

Government has promised several supportive policies like policy regarding safety of working environment. Our government is also planning for a new minimum wage board that will issue recommendations for pay raises within three months. Since the catastrophe, the Bangladesh Garments Manufacturers & Exporters Association (BGMEA) has been in dialogue with the government and international buyers on improving safety standards and better working conditions for employees. So we can be assured that different steps to protect our workers from sudden incidents caused by fire or collapse of a building will definitely be put in place. Though our government already mentioned to provide a safety environment which includes mainly physical infrastructure of factories but this wont be put in place. There are multiple reasons for that. First of all, there are many factories which are already running smoothly although they are not physically stable but they are not monitored under local government because it will cost owners a big amount if they need to fulfill the safety compliance again. So these owner groups will never change the way they are doing business right now. A new comer has to follow every rule after the tragedy but already who had been running factories they will ignore as we are politically unstable. Research and Training may be put in place as because there is already a trainingmodule system in factories and business exists. Important part is whether this once in a year training program will have an impact on productivity or not thats an issue. If we consider labor productivity, which will make a labor more skilled will never be put in place because an unskilled labor costs less than a skilled one. Increasing the rate of skilled labor means higher salary and benefits. We are doing very good business in RMG because we are exporting products at cheap cost which is resulted by cheap labor cost. 5. Will the RMG Industry be able to recover from the current crisis and realize the potential mentioned in the McKinsey report? It is not imossible but its is going to need some time for RMG inddustry of Bangladesh to recover from the current crisis and to realize the potential mentioned in the article Bangladesh : The next hot spot in apparel sourcing prepared by the management consultancy firm McKinsey. As mentioned in the report the the three main stakeholders the government, suppliers, and buyers have to work together to help this industry to turn around from its current situation. Measurements and actions have to be taken to help the RMG sector of Bangladesh. hhe government of Bangladesh is taking some steps to help the RMG sector of Bangladesh. On November 25,2012, the government announced its second phase of stimulus package worth Tk 1,000 crore to cushion the export sectors affected by global recession, which also covered the main foreign exchange earning sector. As per the packagethat the government offer , which will compensate power crisis by paying the license renewal fees for the captive power plants, extension of the bank loan re-scheduling without any down-payment from October 2009 to June 2010 at 10 per cent interest instead of the current 13 per cent for the RMG and

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Global Standards for Garment Industry under Scrutiny After the Bangladesh Disaster

textile sectors. Besides, a five per cent cash incentive will be provided for the apparel exporters to explore new export market except US, EU and Canada for three years. horeign buyers are also offering their valuable aids to help the RMG sector of Bangladesh. According to an article published in uhhe cew Agea on06 th June2013 The UK government will provide Bangladesh with a fund of 18 million to train readymade garments workers. Visiting UK minister Alan Duncan made the announcement at the Centre for the Rehabilitation of the Paralysed in Savar, where he had been to visit those injured at the Rana Plaza collapse on April 24. The UK aid will be used for training low-skilled garment workers and construction workers to improve their productivity. Britain will also provide a team of experts to review the countrys building inspection system, he added. Alan also called on British clothes retailers to assume responsibility for the way their products are made. So, by using all the helps, getting up from the current crisis trap and realizing the potentials does not seem vehard to achie. CONCLUSION: It is unacceptable that we had to forcefully experience such a tragic experience, the deaths of so many nationals, thus the key influencers in this industry: The National Government, Foreign Buyers and the local Suppliers of Finished goods (the latter of two which both influence foreign policies and thus ultimately impact the lives of our labor force) must devise both short term and long term strategies to ensure that such catastrophes occurrence is nullified. Some suggestions include that business men and entrepreneurs of this industry over here develop a sense of work ethics, by lowering their profit margins for a specified period of time, they can invest in the health and safety facilities of their factories. This investment by cutting down profits over a somewhat long-term period of time, they can possess advanced and more worker oriented plants and facilities of production which will surely win back the confidence of the foreign investors that we lost, and regain market share by overtaking countries like Pakistan, Vietnam and Cambodia. Government should renew their policies regarding issuing and mainly, renewing, trade licenses for RMG facilities and introduce regulatory bodies which are more competent and swift towards acting as whistle blowers when local RMG manufacturing companies do not meet the set standards, and the consequences of such should be severe and effective. If such policies are undertaken which are only via internal efforts, we can bring about major changes in the standards of living of the under privileged and also regain trust of the global economy.

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