SSRN Id1117186

Acknowledgement
Bangladeshi Garment Industry is the largest industrial sector of the country. Though the history of Readymade Garment Industry is not older one but Bangladeshi clothing business has a golden history. Probably it started from the Mughal age in Indian subcontinent through Dhakai Musline. It had global reputation as well as demandable market around the globe especially in the European market. After industrial revolution in the west they were busy with technological advancement & started outsourcing of ready made garments to meet up their daily demands. Many LDCs took that chance & started ready made garment export at that markets. As an LDC Bangladesh took this chance enjoyed quota & other facilities of them. Thus ready made garment industry started to contribute in our economy from late eightys (1977). The history of the garment industry dates back to 1977 when the first consignment was exported to then West Germany by Jewel Garments. The number of units, however, remained a meager 46 until the end of 1983. From a humble beginning the sector has thus made phenomenal growth over the last two decades, the number of units growing to around 4500. The RMG industry achievement is noteworthy, particularly for a country plagued with poor resource endowments and adverse conditions for industrialization. Exports increased from approximately 32 million US dollars in 1983/84 to 1.4 billion dollars in 1992/93. In 1987/88, the RMG export share surpassed that of raw jute and allied products. The figure further rose to 5.7 billion dollars in 2003/04, representing a contribution of about 75 percent of the countrys total export earnings in that year4. The employment generated by the sector is estimated to be around 1.5 million workers. Several factors account for the outstanding success of the RMG industry in Bangladesh. At the same time this industry had faced & till facing many problems also. These problems & prospects of RMG industry in Bangladesh is my topic to find out as well as to make critical analysis on these. The importance of my study has been raised up by recent labor unrest in RMG sector. To analyze this board topic a took fulltime guidance from my dissertation guide Mr. A. K. M. Abduj Jaher in preparing questionnaire, operating field survey, presenting the survey report as well as constructing the report as a whole. So I am grateful to him. Here I use data from different sources like, BGMEA, BKMEA, CPD, World Bank, UNDP, Lmd Journal Published by Australian National University, CIA Report, ADB, Bureau of Economic Research- University of Dhaka, The University of Chicago Press & many other sources stated in reference section. Thus I am obliged to all of them at the same time I would like to offer my warm thanks to all of them. Many Garments owners, workers, & buyers have helped my by providing their valuable opinion on the topic or through interview. So I am grateful to them for helping me by providing primary data. Again I would like to offer my warm thanks to all of them for helping me a lot in construction of this dissertation report.
Md. Joynal Abdin mdjoynal@gmail.com

Electronic copy available at: http://ssrn.com/abstract=1117186
Executive Summery
The Readymade Garment Industry of Bangladesh has become the largest foreign exchange earning sector, exporting apparel of all sorts to the USA, Europe and other developed countries. The Readymade Garment (RMG) industry of Bangladesh tells an impressive story about the leadership of private enterprise and the countrys successful transition to a major export-oriented economy. The country registered its first apparel export in 1978, but the progress since the early 1980s has been simply phenomenal. It has by now become a colossal industry, earning the lion's share of the country's foreign exchange and providing the nation's women with the largest formal employment. With the first garment exporting unit, Reaz Garments in 1978, and along with that initiative, Desh Garments, led by the visionary entrepreneur, Mr. Noorul Quader, Bangladesh stepped into a new promised land of prosperity. The success story of the Readymade Garments sector of Bangladesh is based on employment generation and increasingly high value addition, thus smoothening the path for growth and development of the country. The apparel and garment industry propels sectors such as banking, finance and insurance, cargo, shipping and transport, entertainment and hospitality, research and education and a lot more. The mentioned performance of the industry has been possible due to: A. The cheap but disciplined and regimented workforce has been key for the success of this industry. B. The entrepreneur class has been dedicated and motivated to the country's economic prosperity. C. The quality of the manufactured apparel, which has been increasingly recognized by our international buyers and end users all over the world. D. Buyers' response has been encouraging through repeat orders. The industry has been producing all sorts of apparels for all seasons and has managed to get repeat orders for every season. E. The import policy of Bangladesh has been flexible and friendly for import of accessories. This vital and vibrant export oriented industry has been facing some problems from local forces, which may be termed weaknesses (or the Nation's weakness), and some problems caused by forces beyond our geographical/political boundary, which may be termed as threats to our industry. The Readymade Garment Industry is already 20 years old but during the last two decades no planned, fruitful policy to build up a backward linkage textile industry to feed the RMG industry has been taken by the authorities. Even the existing textile industries are not capable of producing high standard fabrics to offset the foreign ones from the market. Shortage of capital necessary to develop local sources for quality fabrics/yam is a major weakness. The reason behind the shortage of capital, however, can be attributed to the socioeconomic condition of the country; enabling foreign direct investment could however, compensate for this. Furthermore although the Government has responded to the RMG industry's requests for devaluation of the local currency the Taka from time to time, it has failed to decrease the current rate of interest. At the same time, our financial policy measures are not sufficient to attract entrepreneurs to invest in the textile industry. Anomalies in the banking sector, problems at the port, vindictive political environment, bureaucratic shackles, electricity crisis, and currency adjustment policy pursued by the country, and the lack of some policy support from the government to sustain the country's falling competitiveness against its competitors in the international market are other serious weaknesses. Md. Joynal Abdin mdjoynal@gmail.com
Electronic copy available at: http://ssrn.com/abstract=1117186
Foreword:
Being connected with other parts of the world through the movement of capital, goods and people is nothing new for Bangladesh. In the pre-colonial period, Bengal, the eastern half of which constitutes the present Bangladesh, was once a centre of cotton textile and silk manufacturing. During the Mughal period, these products were exported to meet the demands of the Asian and European markets2. Bengali people, meanwhile, went to England as the servants of East India Company officers and as sailors on British ships (Gardner 1995: 36). And women were by no means excluded from the influence of the globalization of that period. While womens labor, in high demand for production of home spun yarn during the eighteenth century, lost its value when textiles made in British factories began to flood the Indian market (Hossain, Jahan and Sobhan 1990: 14-17), the rise of the export-oriented readymade garment industry (hereafter referred to as RMG industry) has given Bangladesh women a predominant position in the economic and social space opened up by globalization. The RMG industry in Bangladesh has grown phenomenally over the past twenty years, belying the initial scepticism about its long-term sustainability. In 2004/05 garment exports amounted to approximately 5.4 billion US dollars, accounting for 66 percent of the countrys total export earnings3. In its main export markets, the US and the EU, Bangladesh ranked 10th and 3rd, respectively, in terms of export value at the end of 2004. Despite this seemingly remarkable performance, however, in the decade from 1995 there was much discussion of the uncertainties looming over the future of the industry. In December 1994, with the conclusion of the Uruguay Round, the Multi Fibre Agreement (MFA) which had governed global trade in textile and clothing since 1974 was succeeded by the Agreement on Textile and Clothing (ATC). The ATC called for a gradual phasing out of all MFA restrictions by the year 2005. As will be discussed in the following section, the MFA regime provided an opportunity for the RMG industry to be implanted in Bangladesh by inducing a structural shift in the sourcing of global exports of textiles and clothing and ensuring guaranteed access to some markets. There were opposing views about the prospects of the RMG industry of Bangladesh in the post-MFA era. The optimistic view emphasized the solid position Bangladesh had held over the years as a reliable source of cheap garments produced with an abundant supply of skilled, cheap labour. The pessimists, meanwhile, saw no chance for Bangladesh to survive in the global mega-competition. What was certain, however, was that performance of the industry as a whole would to a substantial extent depend on worker performance and that workers lives would be profoundly affected. The main objective of this paper is to assess the actual impact of MFA withdrawal on RMG workers lives through a sample survey of workers. The tremendous success of readymade garment exports from Bangladesh over the last two decades has surpassed the most optimistic expectations. Today the apparel export sector is a multi-billion-dollar manufacturing and export industry in the country. The overall impact of the readymade garment exports is certainly one of the most significant social and economic developments in contemporary Bangladesh. With over one and a half million women workers employed in semi-skilled and Md. Joynal Abdin mdjoynal@gmail.com
skilled jobs producing clothing for exports, the development of the apparel export industry has had far-reaching implications for the society and economy of Bangladesh.
History of Bangladeshi Ready Made Garments (RMG) Industry:

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. Below, I present a detailed narration of the evolution of the RMG sector from its humble origins to the present day. The shift from a rural, agrarian economy to an urban, industrial economy is integral to the process of economic development (Kaldor, 1966, 1967). Although policymakers in the least developed countries (LDCs) have, at various times, attempted to make agriculture the primary engine of economic growth and employment generation, this approach has not worked, not least because of the contributions of the Green Revolution, which has had the dual effect of increasing agricultural productivity in the LDCs and displacing the rural labor force at the same time. Led by the example of the East Asian economies, most LDCs now accept the need for greater industrialization as the fastest path to economic growth. In particular, countries such as Japan, Taiwan and South Korea have demonstrated that an export-oriented industrial strategy can not only raise per capital income and living standards in a relatively short time; it can also play a vital role in modernizing the economy and integrating it with the global economic system. Bangladesh, one of the representative LDCs, has also been following the same route for the last 25 years. Once derided as a bottomless basket-case by Henry Kissinger, the country stumbled across an economic opportunity in the late 1970s. New rules had come to govern the international trade in textiles and apparel, allowing low-cost suppliers to gain a foothold in American and European markets. Assisted by foreign partners, and largely unaided by the government, entrepreneurs held the opportunity and exploited it to the fullest. Over a period of 25 years, the garments export sector has grown into a $6 billion industry that employs over a million people. In the process, it has boosted the overall economic growth of the country and raised the viability of other export-oriented sectors. The ready-made garments (RMG) sector has a venerable history of about 25 years. This period cannot simply be termed as "long" as this would be the understatement of the decade. This history is one of success, endeavor, and the continuous struggle of the class of entrepreneurs who remained focused on achievement and challenges. With the first garment exporting unit, Reaz Garments in 1978, and along with that initiative, Desh Garments, led by the creative thinker entrepreneur, Mr. Noorul Quader, Bangladesh stepped into a new promised land of prosperity. Upon seeing the advertisement for recruits, the country wondered in awe and questioned Mr. Quader's plans of sending 129 graduates and engineers to be trained in Korea. Why would simple sewing operations need high tech applications? Many even suspected something naughty in this venture. But after rigorous training in Korea, these graduates returned home, qualified and efficient, bringing to the land a Md. Joynal Abdin mdjoynal@gmail.com
new discipline of "line management" which elevated our tailor status to standardized manufacture. Hence, RMG took birth in this land with the help of financial institutions and the limited financial resources of the family of the young entrepreneur who respected in him a dream to set up an industrial unit allowing him global access and exposure. This is how RMG experienced lift off, and till date, with the exception of a few government policy directions, the sector can boast of not resorting to large public funding and can assert its base being in the core of purely private initiative. Every owner turned out to be the provider of hundreds of jobs for the semi-skilled work force, of which the majority happened to be women. Manufacture of a single shirt required 42 workers, a pant almost 48, a jacket almost 60. This is how this industry utilized the people and carried their torch of ambition and prosperity since the inception of this industry.
Literature Review:
Several authors have analyzed aspects of the garment industry in Bangladesh. Of the various aspects of the industry, the problems and the working conditions of female workers have received the greatest attention. There are several studies including the Bangladesh Institute of Development Studies (BIDS) study by Salma Chowdhury and Protima Mazumdar (1991) and the Bangladesh Unnayan Parisad (1990) study on this topic. Both of these studies use accepted survey and research methodology to analyze a wealth of data on the social and economic background, problems and prospects of female workers in the RMG sector. Professor Muzaffar Ahmad looks at the industrial organization of the sector and discusses strength and long-term viability of apparel manufacturing in Bangladesh. Wiig (1990) provides a good overview of this industry, especially the developments in the early years. One of the few studies on the Bangladesh apparel industry to be published in a reputed journal in the U.S. is that of Yung Whee Rhee (1990) who presents what he calls a catalyst model of development. The Bangladesh Planning Commission under the Trade and Industrial Policy (TIP) project also commissioned several studies on the industry. Hossain and Brar (1992) consider some laborrelated issues in the garment industry. Quddus (1993) presents a profile of the apparel sector in Bangladesh and discusses some other aspects of the industry. Quddus (1996) presents results from a survey of apparel entrepreneurs and evaluates the performance of entrepreneurs and their contribution to the success of this industry. Islam and Quddus (1996) present an overall analysis of the industry to evaluate its potential as a catalyst for the development of the rest of the Bangladesh economy. The 1998 Floods The floods that affected Bangladesh between July and September 1998 were among the worst natural disasters impacting Bangladesh in recent history. With the benefit of hindsight it is apparent that the damage to the manufacturing base and the general infrastructure was neither as severe nor as permanent as was estimated at the time of the crisis. Once again the spirit of entrepreneurship and survival that characterizes the ordinary citizens of Bangladesh brought about a remarkably quick recovery in the economic and commercial lives of the people. This was also true for the apparel Md. Joynal Abdin mdjoynal@gmail.com
export sector that has in the past repeatedly demonstrated its resilience and sturdiness. The floods directly impacted thirty million people for three long months, caused 1100 deaths, and destroyed partially or completely 15,000 kilometers of roads, 14,000 schools, hundreds of bridges and as many as 500,000 homes. The total damage to private and public property is estimated to be about $3.4 billion. In addition, the shock to the economy may reduce GDP growth from about 6 per cent to 2 per cent. The total loss to the economy was estimated to be at least Tk. 12,000 crore. The manufacturing sector was disrupted because many urban areas were inundated by floodwaters for a long period. The floods affected many areas where manufacturing is concentrated, such as Dhaka, Narayangang, Savor, Tongi, Rupganj, and Narsindi. Eighty percent of the 500,000 handlooms sustained damage, of which 50 percent were seriously affected in terms of assets and raw materials. As a result, manufacturing was expected to grow at only 3% during this fiscal year compared to 6.7 percent in the previous year. Fueled by higher food prices, the inflation rate shot up and was expected to be around 8 percent for the year. For Bangladesh, the readymade garment export industry has been the recognizable industry that lays the golden eggs for over fifteen years now. The sector now dominates the modern economy in export earnings, secondary impact and employment generated. The events in 1998 serve to highlight the vulnerability of this industry to both internal and external shocks on the demand and supply side. Given the dominance of the sector in the overall modern economy of Bangladesh, this vulnerability should be a matter of some concern to the policymakers in Bangladesh. Although in gross terms the sectors contributions to the countrys export earnings is around 74 percent, in net terms the share would be much less partially because the backward linkages in textile have been slow to develop. The dependence on a single sector, no matter how elastic or strong that sector is, is a matter of policy concern. I believe the policymakers in Bangladesh should work to reduce this dependence by moving quickly to develop the other export industries using the lessons learned from the success of apparel exports. Support for the apparel sector should not be reduced. In fact, another way to reduce the vulnerability is to diversify the product and the market mix. It is heartening to observe that the knit products are rapidly gaining share in overall garment exports as these products are sold in quota-free markets and reflect the strength of Bangladeshi producers in the fully competitive global apparel markets. Preliminary data and informal evidence indicate that this sector seems to have tough the devastating floods relatively well. The floods did create a crisis for the tightly scheduled export industry, but to its credit the firms responded swiftly and creatively to the unexpected dislocation and transportation disruptions. The industry is one hundred percent export-oriented and therefore insulated from domestic demand shocks; however, it remains weak to domestic supply shocks and the smooth functioning of the banking, transportation and other forward and backward linkage sectors of the economy. The Dhaka-Chittagong road remains the main transportation link connecting the production units, mostly situated in and around Dhaka and the port in Chittagong, where the raw material and the finished products are shipped in and out. Despite increased dependence on air transportation, trucks remain the main vehicles for transporting raw materials and finished products for Md. Joynal Abdin mdjoynal@gmail.com
Bangladesh garment exports. The floods disrupted the normal flow of traffic on this road. Eventually, this road link was completely severed for several days when large sections of the road went under water for a few weeks during the latter phase of the floods. This de-linking of the road connection between Dhaka and the port in Chittagong was as serious a threat as one can imagine for the garment exporters. The industry responded by calling upon the Bangladesh navy to help with trawlers and renting a plane from Thai Air that was used to directly fly garment consignments from the Dhaka airport to the Chittagong airport several times a day. According to industry sources, the list of flood-related damage to the garment industry is extensive. According to the September 1998 BGMEA newsletter, garments worth taka 1,000 crore ($208 million) could not be exported on time due to the disruption of the Dhaka-Chittagong road. Finished products worth $231 million were stockpiled and twenty percent of these may end up in a stock-lot situation. The estimated production loss was put at $120 million. As many as 250 apparel factories were partly or completely submerged during the floods. Attendance and worker productivity in factories was down as much as 35 percent during the worst period of the floods. As many as 300,000 workers were unable to work as their homes and families were stricken by the flood conditions. Many more workers fell sick from waterborne diseases. Besides natural disasters, there were several other crises that impacted the garment industry in 1998. The disruption of the Chittagong port due to labor disputes was certainly one of them. BGMEA, the industry association, has repeatedly requested the government to ban labor strikes in the Chittagong port for national security reasons. Another source of disruption for the industry was the perennial problem of hartals or general strikes called for and enforced by the political opposition. Although the leader of the main opposition party has declared, in a major concession to this industry, that the garment industry would be exempt from such hartals, in practice the situation is more difficult. Lastly, the psychological impact of these events on the existing and potential buyers cannot be overstated. Buyers in the global garment markets remain highly sensitive to the risks of unfulfilled orders. As a result of the floods, the image of Bangladesh as a somewhat unpredictable supply source may have been strengthened since the floods received considerable world media attention. Historically, apparel exports have grown at an average rate of 24 percent annually, roughly doubling every three years since 1984. In 1996-1997 the exports in gross terms equaled three billion dollars. These should reach the six-billion-dollar range by the year 2,000 and in the ten-billion-dollar range by the year 2004 when the Multi-Fiber Arrangement (MFA) quotas are expected to end, ushering in a truly global and competitive market. Among the many factors, the one most responsible for the success of this industry is the entrepreneurial spirit it has displayed. The garment entrepreneurs should receive a national "innovators" award for taking creative initiatives to overcome the crises in 1998. The list of the hurdles the industry had to overcome this year includes not only the floods related dislocations but other internal constraints as well. Among the steps taken by the entrepreneurs to improve the competitiveness of the industry were initiation of monthly meetings with the union leadership, implementation of child labor agreement, and attempts to gain market share as a result of the East Asian crisis by asking the U.S. to increase its quotas for Bangladeshi apparels. Md. Joynal Abdin mdjoynal@gmail.com
Growth in overall exports from Bangladesh peaked in 1994-1995 at 40 percent a year, but growth has remained strong. In the July 1997-February 1998 period, total export earnings equaled $3.3 billion or 16.4% above the exports over the same period in the previous year. The garment and knitwear exports accounted for the bulk of these exports. The knitwear sector especially has been highly dynamic in recent years. Given the fact that this market is outside the purview of MFA and not protected by quotas, this bodes well for the post MFA future of the industry. Bangladesh apparel exports can now point to a proven track record of successfully competing in a nonprotected global competitive environment. Unfortunately, other potentially promising exports from Bangladesh such as leather, jute goods, and frozen foods have not fared as well over this period. This has accentuated the already narrow export base of the country and is certainly a matter of concern. The excess dependence on foreign exchange earnings and export growth on garments and knitwear calls for policy attempts to diversify the export base of Bangladesh. What can be said about the future performance of the apparel export industry in Bangladesh? What are the downside risks for apparel exports from Bangladesh? Focusing on the most recent disaster, the debilitating floods of 1998 that shaved off several percentage points from the expected GDP growth this year, we have ignored another major crisis the industry seems to have weathered very well. We refer to the East Asian economic debacle of 1997-1998. The financial panic and the following economic meltdown that afflicted scores of dynamic economies neighboring Bangladesh - Malaysia, Indonesia, Thailand, Philippine and South Korea- certainly have been a restraining element in the economic performance of this sector. What are the links between the East Asian economies and garment exports from Bangladesh? There are several avenues by which negative economic shocks from these emerging economies have impacted Bangladesh. First, several of these nations are also big apparel exporters to the same markets where Bangladesh sells its apparels. The steep depreciation in their currency has made them more competitive, especially in the quota-free apparel markets. Even in the markets protected by quotas, this would be a deflationary force pulling down the unit prices and the profit margins for Bangladesh exporters. Second, using the time-tested formula, most of these economies are trying to export themselves out of their severe recessions. This has greatly increased competition for Bangladesh exports. Third, to assist them in their time of need, the U.S. and other developed nations have already relaxed quota restrictions on exports from the worst affected economies, making the playing field less level for Bangladeshi exporters. Fourth, prior to this crisis some of these nations were potentially big investors in Bangladesh in the textile and infrastructure projects. Their economic troubles have meant a dramatic scaling back in their direct investments in Bangladesh. On the plus side, the return of expatriate workers from this region has swelled the urban labor force from which garment factories recruit their workers. Next, if some of these economies weaken, causing an economic or political collapse, their ability to compete in the global markets would be impaired. This could mean new opportunities for their competitors in the short run. Finally, Bangladesh has tried to leverage the crises by demanding from the U.S. equal quota concessions, pointing out that it has been very successful in reducing the child worker problem in the apparel manufacturing sector. The lobbying for a thirty percent (same as given to others for relief) increase in quotas has yet to bear fruit, but the prospects look good. Md. Joynal Abdin mdjoynal@gmail.com
In our view, the biggest threat to apparel exports in Bangladesh comes from the financial sector. Although we do not anticipate a financial panic similar to the Asian crises as the foreign investment (hot money) and short-term borrowing has been rather limited in Bangladesh, the common element is that of a weak banking sector with very little transparency and accountability. Elements of crony capitalism and moral hazard are certainly present in Bangladesh, especially in the nationalized banking sector and in credit markets. According to the World Bank-Asian Development Bank report, the financial sector in Bangladesh remains fragile with 33 percent of the portfolios of the Nationalized Commercial Banks (NCBs) and domestic private banks in the non-performing category. Notwithstanding the fifty billion taka of taxpayers money, that was used to re-capitalize the NCBs in the early 1990s, the system-wide capital inadequacy today is estimated to be taka 133 billion. This situation could cause the entire banking system to collapse as a result of an external shock or even a domestic event such as a run on a major bank. One important lesson from the East Asian crisis is that moral hazard and the resulting financial panic can be deadly for any economy, even one whose fundamentals are otherwise sound. Without fundamental reforms in the banking sector and the financial sector, the economy of Bangladesh remains susceptible to a financial panic where a speculative price bubble crashing in the real estate sector or elsewhere could start a systemic self-fulfilling type of panic. Such a collapse would seriously impact apparel exports, which are critically dependent on the workings of a healthy banking system for the institutional set up for exports and for short-term financing. Other potential hazards include an overvaluation of the taka compared to the currency of its competitors. Despite the repeated devaluation in the recent past, according to the World Bank the taka remains overvalued in real terms. This could undermine the long term competitiveness of the industry. Finally, in 2004, under the Uruguay Round Agreement on Textiles and Clothing, the MFA quotas would be phased out. Bangladesh would lose its preferential access to its most important markets and would have to compete with India, China and other apparel exporters in a truly global competitive environment. Many apparel entrepreneurs in Bangladesh are not ready for this change although the industry as a whole probably would hold its own in the post MFA world. Finally, we would like to emphasize that the biggest source of potential problems for apparel exports are likely to be home grown, not external. First, the politicians could seriously damage this sector by creating instability and attempting to achieve their goals by violent means in the streets instead of the parliament. Second, the bankers and the bureaucrats and the politicians in power remain a source of threat. In their attempt to further extract rent from this sector, they could undermine the dynamic entrepreneurship that has characterized this industry. Third, the law enforcement agencies, by allowing the mastans and toll collectors to create a climate of terror, may debilitate commerce and production in the economy. Labor disturbances and frequent disruptions in the Chittagong port remain a source of concern to the apparel exporters. The practice of monthly meetings with union leaders and factory owners initiated by BGMEA is a step in the right direction. Garment workers remain one of the hardest working segments of the labor force in Bangladesh, and their working conditions and benefits must improve as the industry matures. In the long-run, this would be the best defense against union aggitation. Investing in worker training and Md. Joynal Abdin mdjoynal@gmail.com
in improved working conditions would certainly enhance productivity. The apparel factory owners must be proactive instead of being reactive on this important issue. According to a recent World Bank publication, exports and job-oriented manufacturing must hold the key to national development over the next quarter century. To make this possible, the limited but important industrial success achieved so far, mainly in an export enclave environment, needs to be replicated throughout the economy. The document goes on to suggest that the maximum gains in industrial production are not expected from the traditional sectors like jute, but from the labor-intensive export-oriented production that brings the benefits of global integration to the nation. Another virtue of this sector is that it is largely driven by private entrepreneurs who have in many ways become the models for entrepreneurs in other industries of the economy.
A Statistics of Bangladeshi RMG Industry:

GARMENT EXPORT DATA: QUANTITY & VALUE OF TOTAL APPAREL EXPORT
YEAR
TOTAL APPAREL EXPORT IN MN.US$ WOVEN KNIT TOTAL
TOTAL APPAREL EXPORT IN MN.DZ WOVEN KNIT TOTAL
1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 (JulyAugust)
1240.48 1291.65 1835.09 1948.81 2237.95 2844.43 2984.96 3081.19 3364.32 3124.82 3258.27 3538.07 3598.20 701.53
204.54 264.14 393.26 598.32 763.30 937.51 1035.02 1268.22 1495.51 1458.93 1653.82 2148.02 2819.47 662.63
1445.02 1555.79 2228.35 2547.13 3001.25 3781.94 4019.98 4349.41 4859.83 4583.75 4912.09 5686.09 6417.67 1364.16
36.05 34.35 47.21 48.82 53.45 65.59 64.79 66.63 71.48 77.05 82.83 90.48 92.26 18.46
10.66 10.81 15.30 23.18 27.54 32.60 36.66 45.27 52.54 63.39 69.18 91.60 120.13 28.81
46.71 45.16 62.51 72.00 80.99 98.19 101.45 111.90 124.02 140.44 152.01 182.08 212.39 47.27
MAIN APPAREL ITEMS EXPORTED FROM BANGLADESH
YEAR 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 (July-August)
SHIRTS 805.34 791.20 807.66 759.57 961.13 1043.11 1021.17 1073.59 871.21 1019.87 1116.57 1053.34 199.96
TROUSERS 80.56 101.23 112.02 230.98 333.28 394.85 484.06 656.33 636.61 643.66 1334.85 1667.72 304.22
JACKETS 126.85 146.83 171.73 309.21 467.19 393.44 439.77 573.74 412.34 464.51 364.77 430.28 117.14
T-SHIRT 225.90 232.24 366.36 391.21 388.50 471.88 563.58 597.42 546.28 642.62 1062.10 1349.71 199.90
SWEATER . . 70.41 196.60 296.29 271.70 325.07 476.87 517.83 578.37 616.31 893.12 299.94
COMPARISON OF APPAREL EXPORTS TO MAJOR MARKETS
WOVEN July - June 2003-04 EU Countries Austria Belgium Denmark Finland France Germany Greece Italy Ireland Netherlands Portugal Spain Sweden U.K. Other EU countries Total EU % of EU 4.909 82.759 21.604 8.088 218.997 686.028 1.876 114.542 31.737 146.179 2.720 106.282 63.126 382.370 6.327 1877.544 53.067 3.267 67.532 17.090 9.062 211.985 620.548 4.230 113.838 26.679 117.494 2.878 99.579 49.964 357.881 5.531 1707.558 47.456 -33.449 -18.399 -20.894 12.043 -3.202 -9.545 125.480 -0.615 -15.937 -19.623 5.809 -6.307 -20.850 -6.405 -12.581 -9.054 July - June 2004-05 Export % incr./decr.
KNIT July - June 2003-04 July June 2004-05 Export % incr./decr.
TOTAL July - June 2003-04 July June 2004-05 Export % incr./decr.
6.559 106.456 48.951 13.299 292.711 544.433 3.431 136.222 22.262 121.516 2.974 136.125 55.917 289.717 6.310 1786.883 83.187
6.871 132.839 60.621 12.798 373.285 668.818 5.438 184.929 31.292 142.664 6.482 208.220 62.408 330.081 11.349 2238.095 79.380
4.757 24.783 23.840 -3.767 27.527 22.847 58.496 35.756 40.562 17.403 117.956 52.962 11.608 13.932 79.857 25.251
11.468 189.215 70.555 21.387 511.708 1230.461 5.307 250.764 53.999 267.695 5.694 242.407 119.043 672.087 12.637 3664.427 64.445
10.138 200.371 77.711 21.860 585.270 1289.366 9.668 298.767 57.971 260.158 9.360 307.799 112.372 687.962 16.880 3945.653 61.481
-11.597 5.896 10.142 2.212 14.376 4.787 82.174 19.143 7.356 -2.816 64.384 26.976 -5.604 2.362 33.576 7.674
Canada % of Canada
185.737 5.250
189.195 5.258
1.862
70.663 3.290
118.746 4.212
68.046
256.400 4.509
307.941 4.798
20.102
USA % of USA
1391.795 39.338
1623.407 45.117
16.641
236.793 11.024
402.684 14.282
70.057
1628.588 28.642
2026.091 31.570
24.408
Japan % of Japan
15.997 0.452
12.567 0.349
-21.442
3.789 0.176
3.735 0.132
-1.425
19.786 0.348
16.302 0.254
-17.608
Australia % of Australia Other Countries % of Other Countries GRAND TOTAL
2.467 0.070
3.272 0.091
32.631
1.272 0.059
4.027 0.143
216.588
3.739 0.066
7.299 0.114
95.213
64.526 1.824
62.206 1.729
-3.595
48.622 2.264
52.185 1.851
7.328
113.148 1.990
114.391 1.782
1.099
3538.066
3598.205
1.700
2148.022
2819.472
31.259
5686.088
6417.677
12.866
% OF RMG'S TO TOTAL EXPORT
GROWTH OF MEMBERS OF BGMEA
Ready-made garments industry - Challenge of access and competition: Bangladesh is the fifth largest garment exporter to the European Union and among the top ten apparel suppliers to the US. In the past two decades Bangladesh has emerged as a very successful manufacturer and exporter of quality ready made garments (RMG). Thanks to its competitive prices and access to US market with quota facilities, the volume of garment exports has been growing spectacularly, from one million US dollar in 1970, $31.57m in 1983 to $4,35bn in 2000 and $4.91bn in 2002-03. RMG accounts for more than 75% of Bangladeshi export earnings. Among some 24 major apparel exporting countries, none has grown faster than Bangladesh since 1980s; and since 1990, no other major Asian exporter of clothing has achieved higher growth rates. Bangladesh is the fifth largest garment exporter to the European Union and among the top ten apparel suppliers to the US. European Union (EU) countries were the major importers of ready made garments in 2002-03 worth $2.76bn, followed by the US $1.87bn, Canada $1.45bn, Japan $15.28m and Australia $2.76m. Some 90 countries import apparels from Bangladesh: the US is the single largest importer followed by EU countries. Bangladesh is trying to expand its market in countries like Australia, Canada, Japan, Norway, New Zealand etc., which allow duty free imports. However, a total phasing out of the Multi-Fibre Arrangement (MFA) from 1 January, 2005, which is designed to facilitate fire trade in textiles and clothing, will throw a formidable challenge to the least developed countries (LDCs). Preferential market access to the US market is vital for the access to the US market is vital for the survival of the industry. According to many international studies Bangladesh's RMG exports would decline. The sensitivity of RMG exports to external factors became obvious after 11 September, 2001. Export to the US suffered a major setback following the terrorist attacks on the world trade centre, leading to global recession and phasing out of quota facilities there. It declined by 2.34% in 2003 and by 13.04% in the first five months of 2004. Responding to the fears and concerns of Bangladesh Garments Manufacturers and Exporters Association (BGMEA), and Exporters Association (BGMEA), the government is preparing a guideline for a fund to protect the country's textile and garments industries after the phase-out MEA next year. BGMEA represents over 3,600 apparel manufacturing companies. Its primary function is to protect the interest of the sector and promote trade negotiations in the international market, global trade bodies like the World Trade Organization (WTO), concerned UN agencies like International Labor Organization (ILO), and the United Nations Conference on Trade and Development (UNCTAD) etc. The importance of the RMG sector cannot be overemphasized as it is 'the engine of growth' for Bangladesh in so many ways, including development of society as a hile. A huge local consumer market Md. Joynal Abdin mdjoynal@gmail.com
has emerged as a result of increase in the buying capacity of the RMG work force. Others to benefit from the ever expanding garment sector are banking, insurance, packaging, transport and allied industries. For long the BGMEA had been pressing the government to set up a central bonded warehouse so that the exporters could meet the demands of the international buyers who had reduced the shipment of goods from 120 to 30-35 days. This issue and related matters have become even more urgent as the end of preferential market access poses a threat to the garments industry. BGMEA leaders are concerned about the nearly two million women workers who would be worse affected by the garments industry in ruins. To protect the industry, BGMEA wants the government to take a number of important measures in this regard. These include: setting up a central bonded warehouse; establishing linkage industries with priority on dyeing, printing and finishing factories; providing loans with low interest rate to set up backward linkage industries; and doing everything to achieve global cumulating to boost export. There is also the suggestion to extend tax holiday for RMG exports to the year 2008 and withdraw some restrictions on the tax waiver. Though exporters fear that Bangladesh would lose the market because of sharper global competition, 'the full effect of the MFA phase-out can't be predicted with certainty', as an official of the commerce ministry pointed out. Since 'the RMG sector needs to develop strategies to deal with the changing market place after 2004', the ministry has undertaken a one-year study project to assess the global market Bangladeshi garments products in the post MFA period. Most of the least developed countries have duty and quota free access to the US market; Vietnam, Laos and Cambodia are negotiating with the US government to get the status. Recently, US Congress tabled a bill offering duty and quota free access to 18 Muslim countries including Bangladesh. Therefore, the BGMEA has called upon the government to make necessary diplomatic efforts to earn duty and quota free status to the US and the non-EU countries in Europe. Once quota is phased out from 2005 competition will be stiff; only the most efficient companies and countries will be able to continue supply to the EU and US markets after 2004. As it is, international buyers want quick and efficient delivery. It Bangladesh fails to develop backward linkage industries to face the challenge, thousands of garment workers, mostly women (they constitute 80% of the work force in the sector), will face the pinch of post-MFA regime. The government and the industry need to join forces to pursue the preferential market access issue with the US government. Some countries are striving to get access, and Bangladesh government has strong reasons to pursue the case 'quickly and aggressively'. Growth of RMG Industry and MFA Implications: In spite of its recent origin, the garment industry has made an unparalleled impact on the socio-economic conditions in Bangladesh. The history of the garment industry dates back to 1977 when the first consignment was exported to then West Germany by Jewel Garments. The number of units, however, remained a meager 46 until the Md. Joynal Abdin mdjoynal@gmail.com
end of 1983. From a humble beginning the sector has thus made phenomenal growth over the last two decades, the number of units growing to around 3500. The RMG industry achievement is noteworthy, particularly for a country plagued with poor resource endowments and adverse conditions for industrialization. Exports increased from approximately 32 million US dollars in 1983/84 to 1.4 billion dollars in 1992/93. In 1987/88, the RMG export share surpassed that of raw jute and allied products. The figure further rose to 5.7 billion dollars in 2003/04, representing a contribution of about 75 percent of the countrys total export earnings in that year4. The employment generated by the sector is estimated to be around 1.5 million workers. Several factors account for the outstanding success of the RMG industry in Bangladesh. The countrys industrialization after independence in 1971 followed the same path, from state-led to privatization, as that of the majority of the developing countries. The state sector, which controlled 92 percent of the modern industrial fixed assets in 1972 as a result of the nationalization policy, had suffered from a chronic loss due to various internal and external constraints (Sobhan and Ahmad 1980). The main causes of the poor performance were mismanagement, obsolescent machinery, lack of material and foreign exchange, political instability, manipulations of labor unions by political parties and worsening terms of trade for the countrys primary export product, jute. Successive governments from the mid-1970s gradually shifted their policy stance with more emphasis on private initiatives. The policies thereafter implemented included things such as opening up sectors which were previously reserved for the state sector, including banking and insurance sectors, divestiture of state enterprises, beginning with smaller ones, and establishment of export processing zones, ensuring access for private enterprises to credit and foreign exchange facilities. In addition, the industrial policy of 1982 stipulated the return of the nationalized jute and textile mills to their former Bangladeshi owners. The revised industrial policy of 1986 further provided for equity shares of public corporations and enterprises to be floated for public subscription up to a limit of 49 percent. Export promotion was one of the top priorities of these policy initiatives. Alongside liberal policies offered for foreign direct investment, including allowing 100 percent equity share ownership, export oriented units have been offered with lucrative incentives such as tax holidays, bonded warehouse facilities and a duty drawback system. Thus by the early 1980's the policy environment became quite favorable for export industries, whether of domestic or foreign origin. Nevertheless, the congenial policy environment would have remained unexploited without external actors ready to make use of it. As in many other countries and industries, foreign multinational companies played a catalyst role in promoting this particular industry in Bangladesh. They brought initial technology and other knowhow with respect to the modern production of garments meeting international requirements. Simultaneously, through controlling product development and marketing operations, they have successfully linked Bangladesh as a competitive production base to the international market. They further contributed to diffusing technology and know-how to local firms by generating spin-offs. Md. Joynal Abdin mdjoynal@gmail.com
Behind the advent of foreign capital lies the economic restructuring that occurred in the foreign companies respective countries. The relocation of production bases necessitated by rising production costs in their home countries as well as in the countries to which they had already shifted was not limited to the developed countries alone. Newly industrializing countries, like the NIEs and ASEAN countries, which used to be the recipients of foreign investment, became part of globalization as sources of direct investment. The case of Desh Garments, one of the pioneer garment companies in Bangladesh, clearly illustrates the role played by foreign capital in the establishment and the operation of mills. Desh Garments was established by an ex-civil servant with technical collaboration with Daewoo, a leading Korean business group. Daewoo mainly took responsibility for procurement of raw materials and marketing of the companys products in the international market and for training of managers and workers. When Deshs operations proved successful, a large number of local entrepreneurs entered the sector with foreign buyers retaining major control in the marketing operations of the local mills. In other words, Bangladesh was incorporated into the lowest tier of the international subcontracting system. Prior to its collaboration with Desh Garments, Daewoos involvement in Bangladesh was limited to trading. Besides the rising cost of labor and a labor shortage in Korea, the main reason for Daewoo to invest in the RMG sector in Bangladesh was the import restrictions against some of its garment products in the US and other OECD markets under the MFA regime (Rhee 1990: 336). Since its inception in 1974, MFA was extended several times with widening coverage. The history of trade control in the textile sector can be traced back to the 1950s. The US, which had been an exporter of textile articles, had become a net importer by that time. The increased penetration of imported products, particularly Japanese textiles, into the US market prompted the US government, under pressure from the textile lobby, to take a protectionist attitude against free trade in textiles. The US raised the issue at the General Agreement on Tariffs and Trade (GATT) in 1959 and consequently a Short-Term Arrangement on cotton articles was signed in 1961. The arrangement became the Long-Term Arrangement in 1962. In 1973 this was then extended into the MFA, which was enlarged to cover all kinds of textile and clothing articles. Restrictions on exports in general took the form of bilateral quotas negotiated within the MFA framework. There have been two contrasting views regarding the effect of MFA on the developing countries. One has criticized increasing protectionism in major OECD markets as neo-protectionism, whereas the other has taken note of the positive impacts of MFA in promoting the textile and garment industry in developing countries. In reality, the actual effects of MFA differed from country to country because of the varying economic conditions and experiences in global trade. The implications of MFA differed particularly between long-standing exporting countries and new exporters of textile and clothing5. For new entrants such as Bangladesh, MFA proved a blessing since it induced industrial re-location from more advanced economies to Bangladesh. It can be said that Bangladesh as a garment exporter was created by the MFA regime6.
The sudden surge of Bangladesh garments in the OECD markets led in 1985 to a fresh imposition of quotas by some countries like the UK, France, the US and Canada. Later the UK and France lifted restrictions and subsequently only the US and Canada were implementing quotas for Bangladesh RMG exports. The US restrictions affected Bangladeshs RMG sector significantly because the export growth at that time was mainly owing to the US market. Implementation of quotas caused a decline in absolute terms for most items in the first months of 1986. However after a transition period, in 1987 the level of growth increased again, mainly due to diversification into non-quota items (Wiig 1990: 154-159). One of the successful areas of product diversification was knit-RMG, which was outside the purview of MFA. Figure 1 shows that there have been two clearly discernible phases in the growth dynamics of the RMG sector: in the initial period it was the woven-RMG sector that dominated the structure of RMG exports, while in recent yeas it has been the knit-RMG sector which has demonstrated the more robust growth. The growth of knit-RMG was spurred by a growing demand in the EU market and was also stimulated by domestic incentives in the form of cash compensation and duty drawbacks (Battacharya and Rahman 2001:4). In addition, industry-related technical and economic factors promoted the development of the knit-RMG industry7. Despite the high growth rate of RMG exports, 27 percent per year over the period between 1983/84 and 2003/04, the elimination of MFA was considered to have adverse impacts on Bangladesh RMG industry in the coming years. The post-MFA trade environment would pose a dual challenge to Bangladesh: accessing raw materials at competitive prices and competing with hitherto restricted countries in a quota-free context (Battacharya and Rahman 2001:12). The major cause of concern lies in Bangladeshs competitive strength with respect to the limited backward linkages, particularly still heavy dependence on imported fabrics, lower labour productivity, infrastructural constraints such as undeveloped port facilities, corruption and administrative red-tape. All these negative elements were considered to have imposed tremendous constraints on Bangladesh. Figure 1.Trend of garment exports
Dollar Source: Bangladesh Economic Review, Ministory of Finance, various issues..
Statement of Objectives
Ready Made Garment Industry is 100% export oriented as well as the single largest foreign currency earning sector of Bangladeshi economy. Its tremendous growth in the last twenty five years has break down all previous records as well as a milestone for many developing economy also. But it is a matter of great sorrow that, this sector has been captured by tri dimensional problems. Global free market economy, global competition, withdrawals of MFA & quota facilities, political instability, lack of policy support, inadequate financial & infrastructural support, recent labor unrest in RMG sector and many more are the problems for the garment owner in Bangladesh. Mismanagement, inadequate wages, long working hours, lack of many basic needs, exploiting mentality of the owners are the problems for the garment worker in Bangladesh. Bureaucratic jam, political instability, lack of proper & quick government decision, and lack of many types of government support are the main problems for foreign buyers and investors. It need not discuss again that, after passing twenty five years of tremendous success & outstanding growth, this sector have emerged as a too much prospective sector in our economy. We have economy as well as skilled manpower, experience expertise and a large market among more than 50 countries including the USA, Canada, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, & UK. To lead the world of Ready Made Garments we shall have to be most competitive, more conscious and uncompromising about the quality of the product. To enjoy continuous access in the new markets like Middle East countries, Japan such others we shall have to remove the barriers from this sector. At the same time we will have to ensure proper utilization of the prospects. To do this tremendous work accurately, we will have to study this sector several times from different perspective. Only owners dominating or trade unions bargaining or buyers low cost work should not be the expectations. So, scholarly research has no alternative to identify the problems & ways of solutions of RMG industries in Bangladesh. At the same time research can help a lot to acquire as well as utilization of opportunities that we have. In fine I would like to state that, objective of this study is to identify various problems of RMG sector from owners, workers, & buyers perspective and way of solution. At the same time this research will allocate opportunities of Bangladeshi RMG industries for better utilization. This paper will also describe future prospects of this industry.
Methodology
A. Research Design: In this study I have tried at my best to find out the overall problems & way of solutions of these problem at the same time future prospects of Bangladeshi RMG sector & ways of utilizing the advantages from every aspects. I would like to say it is a conclusive research by following both the methods of doing research i.e. through conducting a survey by questionnaire (Open-ended & closeended questionnaire) as well as small-sample based narrative studies such as the World Bank, the World Health Organization (WHO) do. I interviewed 25 women, 15 male workers 5 owners & 5 buyers in the RMG industry. The small number is also significant considering the facts that the interviews are indepth narrative of the 50 related persons. Cannon E.T.A (1988) state that the qualitative research frequently involves: i. Face to face contact between researcher & subject. ii. Open-ended rather than close ended questions. iii. Unstructured rather than structured interview schedule. iv. Small samples. It is much more useful if the small samples under study are relatively homogenous, since extreme diversity make the task identifying common patterns almost impossible. There are other studies (Asia specific press: Australian National University 2001) Problems surrounding wages: the ready made garment sector in Bangladesh, they used only 35 women workers as sample. Other studies (Kabeer 1991, Kibria 1995; World Bank 2000; and Markovic & Manderson 2000) based on narratives of women only and these studies consist of 34 52 interviewees. I justify my methodology as in-depth interviews were conducted to explore their settlement experiences, as I believed this to be the methods which would best capture the integrity and complexity of their lives and hence I can reach into my destination. The workers samples were taken from three different locations, Dhaka, Savar and Chittagong (Table 9). These three places are where most RMG factories are concentrated. Another area, Narayanganj, where knitwear factories are clustered, was initially marked for collection of samples but was later dropped because knitwear factories were found to be better-off than woven-garment factories. Thus the majority of samples are of workers at woven-garment factories (Table 10). Since there are differences in terms of size and management between factories located in, and outside of, Export Processing Zones (EPZ), workers who work or worked in both types of factory were covered (Table 11).
Table 9. Female sample by residence
Table 10.Type of factory
Moreover, although it would have been desirable to make a balanced gender analysis of the impacts by taking both male and female samples, given time and financial limitations, only female samples were taken. Also, preliminary information provided by the fieldworkers indicated that most retrenched workers were women. Table 11. Location of workplace
Data collection was conducted between November and December 2005 by four NUK field workers, one male and three female, on the basis of separate structured questionnaires. Table 12 shows that a large number of interviews were conducted in workers residences. For retrenched workers, the next most frequent place of interview was at factory gates, where they had gathered looking for work, but for current workers it was the womens hostels run by NUK. Table 12. Place of Interview
Table 13 shows the distribution of the sample by employment size of factory. Since the information on the number of workers employed in the factories where they now work and where they last worked was taken from the workers, it may not be precisely accurate. Nevertheless it indicates generally that the currently employed workers tend to work in larger factories than the retrenched workers. The smallest factory in the case of the retrenched workers sample employs 100 workers whereas the figure is 470 for the current workers. The largest concentration is in the range between 1000 to 2000 workers in both samples.
Table 13. Distribution of sample by employment size of factory
B. Profile of workers (1) Age The largest number of both current and retrenched workers is in the age cohort 20 to 24 years old (Table 14), but the age distribution of retrenched workers is skewed towards the lower ages. The average age of current and retrenched workers is 24.1 and 21.6 years old, respectively. It should be noted that there are 9 child workers who are less than 15 years old among the retrenched workers. This indicates that although hiring child labor has been strongly discouraged under international pressure as well as by the joint initiatives of Bangladesh Garment Exporters and Manufacturers Association (BGMEA), the apex organization of the garment (mostly woven) industry, UNICEF, ILO and some NGOs, there are still a sizable number of child workers. These workers may have concealed their real ages at the time of hiring. However it indicates the insecurity of their job status. Table 14. Age distribution
(2) Education The educational level of the retrenched workers sample is on the whole lower than that of the current workers sample. The largest number of retrenched workers (42 persons) studied only at the primary level while the largest number of current workers studied at the lower secondary level (class 6 to 9) (Table 15). However the difference is not very significant. It is notable that there are substantial numbers of retrenched workers with secondary level education. Table 15. Educational status
(3) Marital status In terms of marital status, both samples show similar characteristics (Table 16). Around half of the workers are married with a slightly higher share of married women among the retrenched workers. The average age of marriage of current and retrenched workers is 18.9 years and 18.1 yeas old, respectively. Although the sample size is too small to make any judgment, it should be noted that there are a greater number of current workers who are separated from their husbands. Separation, or abandonment by one of the spouses, is more often observed than legal divorce in the Bangladesh context. As has been mentioned, the RMG industry offers an important means of earning a living for women with no financial support from a man. Our data may indicate that separated women cannot afford to be unemployed. Since the period of being unemployed was not very long at the time of our survey, further research is needed to analyze the longer-term effect of retrenchment on the marital status of workers. Table 16. Marital status
(4) Migratory status Almost all the sample workers are of rural origin except two of the current workers and four of the retrenched workers. They come from various districts, but it is noteworthy that the Barishal district provided the highest number of workers in both samples (16 of the current workers and 26 of the retrenched workers). Other major districts of origin are Pirojpur, Mymensingh, Narsingdi, Commilla, Faridpur and Jamalpur. This is in conformity with the general migration trend in Bangladesh (Afsar 2000). Table 17. Time of migration
Table 17 shows when the migrant workers moved to Dhaka. Those who have resided more than ten years in cities constitute only one tenth of the total sample. As for the retrenched workers, the highest number migrated between one and three years ago. The reason for migration is predominantly to seek work (78 percent of current workers and 87 percent of retrenched workers); family-induced migration is limited to 10 and 3 percent, respectively. C. Work experience (1) Designation of workers Table 18. Position of workers
Table 18 shows the distribution of workers by position. For the retrenched workers, the last position held is presented. Nearly 70 percent in both samples are sewing operators. The helper share is much higher among the retrenched workers. In terms of employment status, 92 percent of the current workers are regular workers and the remaining 8 percent are on probation. On the other hand, 78 percent of the retrenched workers were regular workers and 22 percent were on probation in the last factory where they worked. There are no contract workers in the sample16. (2) Work history Only four current workers and six retrenched workers had wage work experience other than that in the RMG industry, all of them as domestic servants. The rest had previously either been students or had been helping with household chores at home. Of the ten ex-domestic servants, nine gave better income prospects as the reason for changing to the RMG industry and one cited better physical environment as the reason. Table 19. Year of first factory employment
Table 19 shows that the majority of both current and retrenched workers entered their first RMG factory after 2000. The share is higher among the retrenched workers. It can be said that there are more inexperienced workers in the retrenched workers sample than in the other. The relatively high turnover of garment workers is generally attributed to various reasons. Some of the economic reasons are poor promotion prospects (especially from helper to operator) and the attraction of higher wages and better facilities in other factories, Family related reasons include such things as marriage, childbirth, and sickness of family members. On average, the current and retrenched workers had worked at 2.3 and 2.4 factories, respectively. Thirty-five percent of current workers had experienced promotion, in 30 cases promotion being from helper to either operator or quality controller. Some 73 percent of current workers believe that Md. Joynal Abdin mdjoynal@gmail.com
their work experience and desire to become a supervisor will lead to promotion in the future. Although openings for promotion to supervisory positions are in fact limited, it can be said that becoming a supervisor is perceived by many workers to be an attainable goal. (3) Work conditions Regular working hours for 80 percent of current workers and 95 percent of retrenched workers are, or were, from 8 in the morning to 5 in the evening. Overtime work was said to be normal, except for 15 current workers and one retrenched worker. Average overtime per day is 2.7 hours for the current worker group and was 3.9 hours for retrenched workers at the last factory where they worked. Of the retrenched workers, the largest number, 36 persons, did 5 hours overtime regularly. Of the current workers, 31 said they regularly worked 2 hours overtime. The long overtime could be the reason why many retrenched workers left their job. The harder working conditions the retrenched workers experienced are reflected also in the lack of paid weekly holidays. Whereas 81 percent of the current workers enjoy paid weekly holidays, only 43 percent of the retrenched workers had that benefit. Although most of the workers have Eid holiday with pay, other paid holidays are extremely limited, except for sick leave, general leave and maternity leave. And these were mentioned only by current workers, none of the retrenched workers citing the availability of such leaves. (4) Wage structure Payment system is summarized in Table 20. Although fixed salary plus overtime is the dominant payment type for both samples, it is clear that more retrenched workers than current workers received fixed salary without overtime. Given the fact that the retrenched workers did longer overtime, the exploitative nature of this mode of payment is obvious. However, if we look at average monthly wages including overtime for both samples, we see that the wages of retrenched workers (the amount they received at the last factory where they worked) are higher than those of current workers, i.e., Tk.2483 in the case of the former and Tk.2073 in the case of the latter. For both categories, operator and helper, the average wages are higher for the retrenched workers. This should be investigated with a more through survey. The average monthly wages are presented in Table 21. Table 20. System of payment
Table 21. Average monthly wages including overtime (Taka)
Gender Differences in Conditions of Employment and the Work Environment Conditions of Employment This section looks at the validity of the assumption that the terms and conditions of employment in the export-oriented garment industry are gender differentiated. Earnings Based on data from surveys of 1990 and 1993, a female garment worker earns only 58 percent of a male workers earnings; in non-export industries, females earn 60 percent of male earnings. The survey data show that female workers employed in DEPZ and non-DEPZ factories earn, respectively, 65 and 55 percent of male earnings. The surveys reveal gender differences in earnings in every job category in the garment industry. The male-female earnings gap is highest for quality controllers and lowest for folders. The gender gap in earnings widened over time. A female worker could earn about 66 percent of an average male workers earnings in 1990, and about 59 percent in 1997. The gender gap widened even in the female-dominated job of operator. A female operator could earn more than 86 percent of a male operators earnings in 1990, but only 68 percent in 1997. The gender gap in earnings occurs mainly because males are increasingly employed in the skilled jobs. When a garment job becomes technologically skilled and more remunerative, female workers are ousted from that job and concentrated more and more in low-skilled jobs. Because they are employed in technologically skilled jobs, mens earnings rise at much faster rates than womens do. Over the period 1990-97 the nominal rate of increase in female workers pay was estimated at only 5 percent. Over the same period an average male workers pay increased by about eight percent. The rate of increase for males and females was almost at par at the lower-level jobs, but mens pay increased at a much higher rate for higher-level jobs like supervisor and quality controller. Employers often justify gender difference in earnings by saying that female workers get lower income than male workers because they are less efficient than male workers. Female workers are younger, less educated and less experienced than male workers, but the gender gap in the wage rate persists even after controlling for all these factors. For example, the most distinguishing factor affecting the wage rate turns out to be workers education. The wage rate rises steadily with level of education. However, the survey of 1997 indicates that female workers with comparable education receive lower wages than their male counterparts, although the malefemale wage gap narrows as level of education rises. Employers justify the male-female difference in wage rates by saying that male and female workers hold different jobs. Documented evidence on occupational structure in the garment industry shows that women are employed mostly in unskilled and temporary occupations, where wages are low. Moreover, these jobs offer slim prospects for occupational mobility. The sewing and finishing sections are overMd. Joynal Abdin mdjoynal@gmail.com
represented by women, whereas the cutting section, which has the highest monthly pay, is highly under-represented by women. Moreover, there is further sex segregation within the sewing and finishing sections. The surveys of 1990 and 1997 show that within the sewing section, the job of supervisor is highly remunerative and in the finishing section, the job of quality controller is highly remunerative. Women are highly under-represented in these managerial jobs, although they are overrepresented in these sections. Women earn less than men do even when they hold the same job. Even in the operator and helper category jobs, which are dominated by female workers, they earn less than their male counterparts. The gender gap in earnings persists even after controlling for skill. The survey of 1997 shows that a female operator in the woven wears factories earns 74 percent of a male operators earnings; in the knitwear factories, where operators use improved technology, a female operator earns only 69 percent of her male counterparts earnings. Bivariate analysis indicates that no single factor explains the difference between mens and womens monthly earnings. However, bivariate analysis often fails to capture the total influence. Hence, a rigorous analysis is necessary to measure the gender differential in the wage rate. The regression analysis in Paul-Majumder and Zohir (1993) shows that female workers earn significantly less than their male counterparts having the same education and experience. Controlling for the latter variables, a worker employed in the garment industry receives 41 percent higher pay for being male (Paul-Majumder and Zohir 1993). The study shows that workers in nonexport industries, such as textiles, receive 24 percent higher pay for being male. In addition, the survey of 1990 shows that wages are below the legal minimum wage for 42 percent of the female workers compared with about 17 percent of the male workers. By 1997, 32 percent female workers and only 6 percent of male workers received wages below the legal minimum for the helper category of workers. Among the female workers, the helper category is the most deprived as far as the minimum wage. Findings show that 73 percent of female helper category workers do not receive the minimum wage compared with 15 percent of their male counterparts. Among the operator category workers, 33 percent of females and only about seven percent of males do not receive the minimum wage. Other Conditions In addition to earnings, several other factors affect the conditions of employment, including the mode of recruitment, work hours, leave facilities, prospects for promotion, and training facilities. Although the garment industry belongs to the formal sector, the recruitment procedure is largely informal because seasonal demand requires a labor market with high flexibility so that labor can be easily found when needed and easily disposed off when not required. Thus, employers ho do not want to be subject to labor laws requiring that they pay retrenchment benefits to workers, like to recruit workers through informal mechanisms. The survey of 1990 shows that more than 75 percent of female workers and 57 percent of male workers were recruited through neighbors, friends, or relatives working in the garment industry. Garment jobs are never advertised in the newspaper. According to the survey of 1993, about 19 percent of male and about 24 percent of female workers in non-export industries are recruited through advertisements in the newspaper. Md. Joynal Abdin mdjoynal@gmail.com
In the export industries, work hour is long in order to meet foreign demand on time. Female and male garment workers work about 12 hours a day. The survey of 1997 shows that in the garment factories located in the DEPZ, where labor laws are strictly followed due to constant monitoring, an average worker works about 10 hours daily. In non-export industries the average worker works a little more than eight hours a day. The absence of leave facilities is another important factor that makes the terms and conditions of garment employment very stringent. Both male and female garment workers have to work on weekly holidays. Although they were paid for overtime work on weekly holidays, no alternate holidays are given. By contrast, workers in other export and non-export industries, enjoy almost all weekly holidays. There is a big gender difference regarding the granting of paid leave. Only about 35 percent of female workers who asked for leave were granted paid leave, compared with about 60 percent for the male workers (Paul-Majumder and Begum 1999 longer version of this paper). There is no provision of medical leave, although the Factory Act of 1965 provides for it. Of the 32 factories surveyed in 1990, 13 claimed that maternity leave was given to the workers during the last year. Of these, only three factories, gave leave with pay and none of the factories gave 12 weeks as provided by the Maternity Benefit Act of 1950. Prospects for promotion in the garment industry are slim. In most cases garment workers remain in the same job throughout their working life. Among female workers generally, helper category workers get promoted to the post of operator, but few female operators are promoted to the higher category jobs of supervisor or production manager. However, the findings show that prospects for promotion are better in the garment industry than in either non-export industries or other export industries. In addition, gender difference in promotion granting is lower in the garment industry than that in non-export and other export industries. As far as income increments, most of the workers working for more than one year in the same garment factory receive at least one increment in their income. The export-oriented garment industry is characterized by high inter-factory mobility. About 48 percent of female workers and 42 percent of male workers have changed their jobs at least once (Zohir and Paul-Majumder 1996). In non-export industries only 17 percent of female workers and 26 percent of male workers have changed their jobs at least once (survey of 1993). By changing jobs, female workers can increase their income by about 15 percent. On-the-job training is the only training facility in the export-oriented garment industry. In 1995, the Bangladesh Garment Manufacturers and Exporters Association undertook a training program sponsored by UNDP/ILO. Only 20 percent of the trainees were females, although women make up the majority of workers in the garment industry (Paul-Majumder and Begum 1997). Work Environment Export-oriented industry is supposed to maintain working conditions that are comparable to international standard because the industry produces for the international market. Therefore, export-oriented industrialization is supposed to Md. Joynal Abdin mdjoynal@gmail.com
have a positive impact on working conditions. However, in most cases, exportoriented industry is based on sub-standard working conditions. Sub-standard working conditions in the garment industry affect men and women differently because they hold different jobs. Women suffer the worst from adverse working conditions because they hold low-skilled jobs where occupational hazards are greater. Most of the garment factory buildings are overcrowded, congested and poorly ventilated. As a result garment workers are exposed to toxic substance and dust. Raw materials contain dust and fiber particles that hang in the air. Dye, a toxic substance emitted from colored cloth, spreads in the workroom. The workers, particularly the operators and sewing helpers, who are mostly women, continuously inhale these substances. Most factories do not have adequate ventilation and exhaust fans and few workers use masks. Another problem is that most garment factories do not have adequate fire prevention measures. The survey of 1997 shows that in addition to other fire code violations, most of the garment factories do not have fire exits or fire alarms. According to the Bangladesh Fire Brigade, up to November 1997, 58 fire accidents took place in the garment industry; 118 workers were killed, of which 90 percent were female workers. The export-oriented garment industry has grossly violated the Factory Act of 1965 and the Factory Rules of 1979, which specify that every factory must have adequate staff amenities. In all garment factories surveyed, except the ones in the DEPZ, staff amenities are grossly insufficient. On average, there is only one latrine per 61 female workers, compared with one for every 31 male workers. Male workers are not required to seek permission for break because most of them are employed in the cutting and finishing sections, where works are not assembly oriented. But female workers, who are mostly employed in assembly oriented works, have to seek permission for breaks, which the supervisors often deny. Garment workers suffer from the absence of a lunchroom, lack of pure drinking water, and lack of canteen facilities. However, in terms of cleanliness, working conditions in the garment factories situated in the DEPZ and suburban areas are far better than those in the factories situated in Dhaka and Narayangonj (PaulMajumder and Begum 1999 longer version of this paper). Impact on Economic, Social and Health Status Economic Status In spite of discrimination and irregularity in wages and earning below the minimum wage, female workers employed in the export-oriented garment industry contribute about 46 percent of their family income. Survey of 1997 shows that about 23 percent of the unmarried garment workers are the main earners of their family. Without female workers earning, 80 percent of their families would slide below the poverty level (Paul-Majumder and Zohir 1995). The nutritional food intake of garment workers is much higher than that of the poor people of Bangladesh. Paul-Majumder et al. (1996) find that only 29 percent of slum Md. Joynal Abdin mdjoynal@gmail.com
families have fish, meat or egg in their daily diet. The survey of 1997 shows that, 72 percent of female workers eat these quality foods in their lunch. However, although the quality of female workers food intake has improved, it is not enough to meet their requirements. Female workers suffer from chronic energy deficiency and occupational hazards that adversely affect their health. Female garment workers can spend some of their income on medical care, whereas 80 percent of poor women cannot afford any treatment for illness (Paul-Majumder et al.1996). Female garment workers spend about 13 percent of their income on clothing and cosmetics. They save about six percent of their monthly income, whereas an average male worker saves only four percent of their income. About nine percent of female workers invest their savings in business, land, or housing. Social Status Womens employment in the export-oriented garment industry has affected selfesteem and self-confidence, conjugal life, matrimonial relationship, fertility, age at marriage, sharing of domestic chores, and decision making (Paul-Majumder and Zohir 1995). By contrast, garment work has very little influence on the social status of male workers. However, garment workers suffer from social insecurity associated with their employment. Female garment workers face an uncongenial work environment, unsafe transportation, and housing. These factors do not affect male workers. Positive Social Changes More than 90 percent of female garment workers have expressed that they have a high opinion about themselves, compared with about 57 percent of female workers in non-export industries (survey of 1993). About 37 percent of female workers in the garment industry have undertaken employment against the wishes of their family members (Paul-Majumder and Zohir 1996). Zohir and Paul-Majumder (1996), BUP (1990), Naved et al. (1997), and Afsar (1995) document that working women delay marriage. The survey of 1997 indicates that female workers, who got married before joining garment work marry at about age 16, compared with female workers, who got married after joining the garment work, who marry at age 20. Womens age at first childbirth is also significantly affected by employment in the garment industry. It is 21 for garment workers who gave birth to their first child after joining garment work, compared with age 17 for workers who gave birth to their first child before joining garment work. Amin (1997) claims that garment sector create a period of transition from childhood to adulthood, as contrasted with the abrupt assumption of roles at very young ages that marriage and child bearing mandate. Women employed in nonexport industries do not experience this period of transition. For centuries, socially and culturally, domestic chores were the sole responsibility of women. The survey of 1997 indicates that about 52 percent married female workers in the garment industry have husbands, who help them in domestic work. On average husbands spend 1.9 hours daily in household work. Female workers in nonexport industries could not shift their household responsibilities to their husbands to such a large extent. Female garment workers work about four hours more daily than their counterparts in non-export industries, and husbands participation in Md. Joynal Abdin mdjoynal@gmail.com
household work increased with the increasing participation of women in the garment industry2. Negative Social Changes The most adverse social impact of womens employment in the export-oriented garment industry of Bangladesh is violence against women. Not a single incidence of violence against female workers in non-export industries was reported in the newspaper during the last five years. However, female garment workers constitute a high risk group because they tend to be young, unmarried, rural migrants, and work late hours3. In 1998, 161 rape cases were registered with the Department of Metropolitan Police, Dhaka. Among these in 17 cases (about 11 percent of total rape cases), the victims were garment workers and only in five cases (three percent of total rape cases), the victims were non-garment workers. Female garment workers account for only two to three percent of the total population of women in the metropolitan area of Dhaka, whereas they account for 11 percent of rape cases. The surveys of 1990 and 1997 collected information from the workers regarding sexual harassment ranging from insults directed at a person's gender, suggestive comments, and demeaning remarks, to unwelcome touching and grabbing and other physical assaults, including raping. But these types of sexual harassment are highly under reported because female workers are reluctant to disclose information on this subject. Therefore, the workers were asked about the types of sexual harassment and mishaps faced by their colleagues. The survey of 1997 shows that at the workplace only five percent of female workers encountered sexual harassment. But more than nine percent reported that their colleagues faced these kinds of harassment in the workplace. The survey of 1997 shows that 20 percent of the surveyed female workers lived in slums and squatter settlements. For female garment workers, the possibility of being raped by the local rent collector is high because in slums and squatter settlements there is no law imposing authority. More than seven percent of the female workers report that they live in relatives' houses. Most workers living in relatives' houses report that they are afraid of their male relatives who try to have affairs with them. Violence against women is not limited to the workplace or residence the streets are even more risky. Paul-Majumder and Khatun, (1997) find that about 70 percent of female garment workers, who commute by bus experienced bad behavior from the conductor and driver. Health Status Many female workers suffer from various illnesses after starting work in the garment industry. This is mainly due to overwork, uncongenial working conditions, and wideranging labor law violations. Findings show that womens employment in non-export industries does not affect womens health so badly. From the survey of 1993, about 31 percent of all female workers employed in non-export industries, as opposed to only 10 percent of their counterparts in the garment industry, have good health even after undertaking jobs (Paul-Majumder and Begum 1999 longer version of this paper). Md. Joynal Abdin mdjoynal@gmail.com
Many diseases and illnesses are more prevalent among the female workers than among their male counterparts (Paul-Majumder and Begum 1999 Longer version of this paper). Within the garment factories women work in the low-skilled jobs of operator and helper, where health hazards are high. In these jobs they have to continuously inhale toxic substances emitted from dye used in colored fabric as well as dust and small particles of fiber. Sewing helpers, who are mostly women, have to either keep standing or moving from one operator to another for 10-12 hours. About 70 percent of total female workers, as opposed to only 25 percent of total male workers, hold these two types of arduous jobs. Long working hour also affects womens health more adversely than that of male workers. Due to long working hours, female workers are obliged to shorten their time for leisure and sleep because traditionally they are required to take care of all domestic chores. Besides, occupational hazards, the absence of adequate treatment facilities adversely affect the health of female garment workers. Few garment factories have a regular doctor. As a result garment workers, particularly female garment workers, whose physical mobility is restricted, have minimal access to treatment. About 40 percent of womens illnesses and diseases as opposed to 33 percent for male workers do not receive any treatment (Paul-Majumder 1998) Workers' job aspiration reflects their psychological well being (Stein, 1997). High ambition reflects good mental health. The survey of 1997 shows that only 20 percent of the female garment workers as opposed to about 33 percent of males have high aspirations about their jobs. More than 34 percent of garment workers have very low aspirations about their jobs. Export-Oriented Manufacturing and Womens Migration: The ready-made garment sector has created a niche for absorbing the relatively unskilled, semi-literate, youthful female labor from rural Bangladesh. Historically, distance has been projected as an important determinant of the number of migrants to a city (Bogue and Thompson 1949; Claeson 1968; Olsson 1965; Stewart 1960; Zipf 1946; Premi and Tom 1985). Now information and contact factors act as a surrogate for communication and tend to counter the effects of distance (Begum 1995). Thus, within the garment industry, geographic distance is of minor significance compared with information and contacts, income, living standards in area of origin, and asset ownership. Poverty in the Areas of Origin of Migrant Workers The magnitude of migration to jobs in the export-oriented garment industry is directly related to impoverishment of workers families in rural areas. Four main aspects make up the poverty nexus in the workers areas of origin: income, ownership of land or other assets, living environment, and access to institutional support. Kibria (1996) finds that women commonly enter the export garment sector for reasons of survival. Womens entry into wage employment is closely related to male unemployment, male desertion, and family separation and the syndrome of extreme poverty that inevitably occurs. By contrast, Zohir and Paul-Majumder (1996) find that garment sector requires women from relatively more solvent and enlightened families, that is, women who have above-average education. According to Johir and Paul-Majumder, since 1980, employment in the sector has been less related to Md. Joynal Abdin mdjoynal@gmail.com
impoverishment among the garment job seekers. As the industry has gained prominence, a more skilled, enterprising, and youthful section of rural society has been willing to participate. Increasingly, age, gender, and education affect the propensity to migrate to garment factories (Table A-13 and Zohir and PaulMajumder 1996). Three of the five respondents in the case studies, hail from households that are functionally landless. Afsar (1998) finds that four out of every five female workers in the garment industry and two out of every three female workers from other manufacturing industries are functionally landless in the rural areas. Comparatively fewer male workers, that is, about half, irrespective of type of industry, are functionally landless. Unfortunately, lack of data restricts analysis of living standard in rural areas. Indepth case studies indicate that garment workers have a nutritious diet, superior to the average of the urban poor (Paul-Majumder and Zohir 1995, and Paul-Majumder and Begum 1999 Longer version of his paper).). Most have enough to eat after coming to the city, with only eight percent revealing a scarcity of food. Besides the nongovernmental organizations (NGOs), formal banking systems have yet to be established in the rural areas on a comprehensive scale. After undertaking employment in the garment industry, rural women tend to become more conscious and diligent about saving. According to Paul-Majumder (1998), the tendency to save increased over the years and, although female workers in general are less educated than male workers, the women open bank accounts in disproportionate numbers (Paul-Majumder and Johir 1995). Garment work and wages have ensured a secure present and hopeful future for the majority of women workers. About 19 percent have used their discretion to open bank accounts without the knowledge of their husbands and families. The Impact of Migration on Womens Social Status Migration to work in the export-oriented industries is a physical severance of the individual from the familiar support of family, on one hand, and emancipation from the traditional shackles of society, on the other. In many cases, women who migrate to work in the garment sector are affected by societal condemnation of exportoriented wage work for women. The effects of migration are inextricably linked to the constant pressure, on the individual, of balancing the economic gains against the modified social environment and altered civic ranking in the rural and urban areas. Almost all the workers in the export-oriented industries have had delayed marriages if they have joined the jobs while still single. According to the Bangladesh Demographic and Health Surveys (1993-94), more than 70 percent of the girls in the 15-19 age group were married, while among the migrant garment workers only a quarter were married in this age group (survey of 1997). Many studies have documented that women get spoiled in the export-oriented industries as they have to work late at night (Paul-Majumder and Mahmud 1994; Paul-Majumder and Zohir 1994; Zohir and Paul-Majumder, (1996). In the case studies in Paul-Majumder and Begum 1999 Longer version of this paper, only one women says that her status in the village has increased because of her garment job. Md. Joynal Abdin mdjoynal@gmail.com
The respondents unanimously concede that they have benefited immensely from employment in the export-oriented garment industry. Workers Remittances The majorities of unmarried migrant female workers in the export-oriented garment industry remit their earnings and sacrifice for their families in the rural areas. According to at least two studies parents often depend on their daughters income and are reluctant to permit marriage until the family has become more secure (PaulMajumder and Zohir 1994 and Naved et al., 1997). Structure of, and Changes in, the Female Labor Market: These far-reaching impacts on the garment industry are not confined to the economic sphere. The RMG industry is a female dominant industry. According to the latest Census of Manufacturing Industries (CMI), females accounted for 66.5 percent of industry employment in 1999/2000 (Table 1). The female concentration in the RMG industry is much higher than the 35 percent average for manufacturing as a whole. Although the RMG industry is generally considered to be a female-intensive industry, in the historical and cultural context of Bangladesh, the massive entry of female workers into the formal industrial sector was a totally new phenomenon and bore important social, cultural and political implications. Historically, the labour market in Bangladesh, as in most other countries, has had two characteristics: segregation based on gender and segregation based on class. Table 1. Gender-wise employment status in RMG industry (1999/2000, persons)
Source: Compiled from Bangladesh Census of Manufacturing Industries 1999-2000, Table 16. The gender-based difference implies that womens participation in production is more limited than mens. Table 2 shows the wide gap that exists between the male and female labor participation rates. Bangladesh womens labor participation is lower than most of the other countries listed here, except for Pakistan and Turkey. Needless to say the low participation rates do not imply that women do not work. Md. Joynal Abdin mdjoynal@gmail.com
Revising the definition of work increased more than double the rate of female labor participation, in 2000, for instance, from 23.9% based on the usual definition to 55.9% based on a broadened definition. In contrast, male participation rates remained more or less the same at 84.0% and 87.3%, respectively. Womens work has been underestimated because it has been mainly unpaid. The broadened definition of work includes household economic activities such as the care of poultry and livestock, threshing, cleaning, boiling, drying, processing and preservation of food etc. with or without pay or profit. In 2000, some 56 percent of total female labor was engaged in these household economic activities (Labor Force Survey 2000). Table 2. Labor participation rates of selected countries (above 15 years, %)
Source: Compiled from LABORSTA Internet. From the above figures, therefore, it can be stated that while a majority of women are at work, the number of women who have entered the labor market as wage labor is still limited. The main impediment to womens participation in wage labor is considered to be a social norm called purdah (seclusion of women. The term literally means curtain). Although the actual compliance and interpretations vary from person to person, particularly in relation to the individuals religion, class, age, position in the family and living environment, purdah is an integral part of society as a system and as a symbol and is deeply related to evaluation of status, ownership and inheritance of property, arrangement of marriages, division of labor, and female sexuality (Papanek 1973:290). As an integral part of the value system, purdah and associated notions of female space, role and behavior serve as powerful weapons to control womens choice of work. Thus women have been excluded, whether forcibly or voluntarily, from public spheres, including the labor market. Another element which characterizes the female labor market in Bangladesh is class. There are some occupations like teacher and doctor that priorities women because they serve the maintenance of purdah of woman in general as well as that of the actual women working in those occupations. Women who work in these womens occupations are from middle or upper-middle class backgrounds. As a whole, however, employment opportunities for women have been severely limited both in numbers and types of employment. In particular, for those who come from the lowermiddle and lower class with little or no academic qualifications, few jobs are available except in occupations of an informal nature, such as domestic service, petty trade, daily labor on construction sites and as sex-workers. Md. Joynal Abdin mdjoynal@gmail.com
While economic imperatives have indeed made many women transcend traditional roles, the social norms and ideologies governing the gender-based division of labor and space and the subordinate position of women as a gender have generally remained intact. Consequently, despite the fact that new patterns of sexual division of labor have been created, it is questionable whether womens subordinate position has improved, and if it has, in what way. The shift in the norms and values that accrue to the gender roles was not in conformity with the shift that occurred in the actual role performances. The norm of purdah as a system of social control over women is still a relevant and significant basis for gender identity and gender relations. It not only functions as a norm controlling behavior and attitudes of women, but also sets the value standard with respect to social status9. This implies that a woman who takes up employment outside the home risks losing social prestige for herself as well as her family. However class plays a role in the impact of employment on status. Recently an increasing number of educated women from the upper and the upper-middle classes have begun to participate in non- traditional employment, for instance, as officials and professionals both in the government and private sector, in competition with male counterparts. Their social status has in fact improved, since those occupations are perceived as socially prestigious. The social status of poor women, on the other hand, is degraded by the very fact of taking employment outside the home, despite their contributions to the home in terms of labor and income (Khan 1992: 178-199). This is mainly due to the fact that jobs available for poorer woman are accorded low social prestige. Therefore, for woman of the lower strata of the society, a choice between pay or purdah still has to be made. The fact that of all classes middle class women have the lowest economic participation rate indicates that they are placed in the dilemma of choosing between economic gain and loss in social status10. In short, in the female labor market, there is a strong co-relation between types of employment and class, social prestige, and social acceptance of working women. Now let us examine the structure of the labor market on the basis of statistical data. It has been reported that the shift in the conventional division of labor has been accelerating since the early 1970s (Feldman and McCarthy 1983: 955; Hossain, Jahan and Sobhan 1990: 26). The economic crisis that followed the independence war of 1971, a war which caused huge losses in human and physical assets, was further aggravated by a severe famine in 1974. The consequences of the worsening economic conditions marked by increasing landlessness and impoverishment were more severely felt by women then by men. Many women lost their male custodians through death or migration to urban areas by males in search of work, and for poor households the decline in family income meant that women had to contribute economically to meet the familys subsistence needs. An increasing number of women from the lower echelon of society began to participate in economic work outside the home, such as the rural construction work organized under the state sponsored Food for Works Program (FFW). Figure 2 shows the changes in the size of the labor force over the past 40 years. The size of the female labor force, which stagnated between 1961 and 1974, began to make a substantial increase after independence. Between 1974 and 1999/2000, the female labor force increased at an annual average of 10 percent in contrast to the 3 percent and 2 percent registered by the total and the male labor force, respectively. Md. Joynal Abdin mdjoynal@gmail.com
Figure 2. Growth of labor force (10 yeas and above) between 1961 and 1999/2000
Note: Based on the usual definition. MPS=Manpower survey, LFS=Labor force Survey Source: Report on Labor Force Survey in Bangladesh 1984/85, 1995/96, 1999/2000 The majority of the female labor force lives in rural areas (Table 3). The issue of wage earning opportunities for women was first addressed in the rural context. Besides the FFW program, various NGOs incorporated income-generating activities targeting poor women in their development programs. There were two approaches, production enhancement based on womens traditional skills and employment expansion (Chen 1986). The production enhancement scheme was mainly conducted within the sphere of rural womens everyday life and was based on skills already existing among women in the fields of horticulture, animal husbandry, poultry rearing, fish culture, paddy husking, and so forth. The employment expansion scheme, on the other hand, tried to expand womens skills and work traditionally bound by gendered norms. It sought new markets beyond the womens communities and external expertise was hired for things like product design, skill upgrading and merchandising. While the second type of scheme generates steady income, returns to the producers are said to remain relatively low, and independent production by women is highly unlikely to succeed, without an institutionalized program network (Feldman and McCarthy 1983: 217). Also, the number of beneficiaries could never reach the actual number of needy women because this type of program requires close monitoring at each stage of production up to marketing, necessitating large operational costs. The first type of scheme is less costly because it utilizes the existing skills and markets in and around the potential beneficiaries. It is this type of self-employment work that has been promoted by Grameen Bank and other micro-credit providers that followed, and this has become the major approach to addressing the issues of poverty and empowerment of women. Table 3. Distribution of labor force by residence.
Note: Labour force 15 years and above based on usual definition Source: LFS 2002/03 Md. Joynal Abdin mdjoynal@gmail.com
The positive impacts on women of micro-credit have been extensively researched. Here let us investigate the implications for womens work and the rural labor market. The implied mechanism of micro credit as a tool for reducing poverty is the generating of self-employment among the poor. Most studies emphasize a positive impact of micro credit programs on womens self-employment and labor participation. There are numerous anecdotes describing how the programs have enabled women to take up various income-generating works (Yunus ed. 1982, Counts 1987, Bornstein 1997, to mention a few). Rahman and Khandker (1994) have examined the impact of micro credit program placement on the employment situation of the poor. Studying three such programs by Bangladesh Rural Development Board (BRDB, a semiautonomous government agency), BRAC (the largest NGO in Bangladesh) and Grameen Bank, the paper states that micro credit programs have increased employment in terms of labor participation rates and employment per worker12. Both indices are higher among program participants than among the target group population in the control area. Also, self-employment per worker is much higher and, conversely, wage employment is lower among program participants than among non-participants. Thus selfemployment has taken the place of wage employment among participants. This study also found that the impact of programs extends to non-participants in the area as well. Reduction in the supply of labor hours to wage employment by program participants creates an upward pressure on wages. A higher wage rate has influenced the level of wage employment in two ways: it has attracted labor from nonparticipating households and it has induced replacement of hired labor by ones own labor. Thus, program placement induces an increase in labor use among all groups of households. Rahman and Khandker found that the micro credit program has contributed to a net increase in the level of overall employment. The increase in self-employment in the rural labor force at the national level is reflected in labor force survey data (Table 4). Between 1983/84 and 1999/2000, the self-employment share increased both for males and females, but the increase was larger in the case of male labor. On the other hand, the employee share declined substantially in the case of female labor while remaining almost the same for male labor. A noteworthy gender-based difference is observed with respect to unpaid worker employment. Whereas the share of unpaid workers among male laborers declined during the decade of the 1990s after an increase in the preceding period, that of female labor has continuously expanded. In 1999/2000 the largest numbers of rural women were working as unpaid workers. Therefore while it can be said that the rural female employment situation has seen a positive shift from employee to self-employment status, there is a larger increase of employment as unpaid workers. In addition, there are discernible differences in the shift of employment status between male and female labor. As stated above, the number of self-employed males has increased on a larger scale than that of females, and the information in the table suggests that the incremental change in male self-employment results from shifts from the employer and unpaid laborer groups. Although these tendencies need further in-depth investigation to elucidate the implications, the limitations of microcredit in employment creation should be noted.
Table 4. Employment status in rural areas (10 years and above)
Note: Figures may not add up to 100 due to rounding. Source: LFS 1983/84; 1990/91; 1999/2000 Another noteworthy limitation of micro-credit is the exclusion of the poorest households from the programs. The failure of micro-credit programs to reach the poorest has become an issue of concern in recent years (Wood and Sharif 1997; R. I. Rahman 2000; Rahman and Razzaque 2000). Inclusion of non-target or non-poor households, generally defined in terms of land-holding size, is said to be on the rise. Between 27and 71 percent of new members of various credit programs in Bangladesh are found to come from non-target groups (R. I. Rahman 2000: 50-51). The largescale inclusion of non-target households in recent years is in stark contrast to the situation reflected in a 1985 survey which found that only 4.2 percent of Grameen Bank members belonged to non-target groups (Hossain 1988: 44). And exclusion of the poorest has become a rather general phenomenon of micro-credit schemes in other countries as well (Hulme and Mosley 1997). The constraints of micro credit schemes in extending services to the poorest have been grouped by R.I. Rahman (2000: 54-67) into two sets of factors, those on the client side and those on the lender side. On the client side, lack of labor, land (a homestead, at least), and capital discourage the poorest to borrow money. A micro credit program is basically a banking service, although the scale of each transaction is small and the mode of transaction is quite different from the ordinary banking system. Thus the money borrowed has to be invested in a way that will produce some profit and ensure repayment. In order to invest the borrowed money in a viable venture, one must have labor as input. In a household with a good number of income-earning members there is a good balance of dependents and laborers, while destitute households usually have more dependents than laborers. Land (homesteads or houses) is necessary to undertake self-employed work like livestock rearing, paddy husking or providing storage space for a rickshaw. Possession of ones own capital to use in addition to loans broadens the scope of investment. Moreover, the weekly/fortnightly/monthly repayment installments, which start shortly after the loan disbursement, are difficult to meet unless there is extra capital and flow of income because loan-financed activities may take some time to get off the ground or may not have a high return. The constraints on the lender side are concerned with the overriding objectives and terms of services offered by the micro-credit programs, the group-based credit Md. Joynal Abdin mdjoynal@gmail.com
system and the management procedures. First, the very mission of micro-credit programs, i.e., poverty alleviation and extension of credit services to the poor, prompts the lender to accept as clients those just below the poverty line, not the hardcore poor, because economic improvement is more easily attained with the former than with the latter. Furthermore, financial sustainability of the program, about which donors are becoming increasingly vociferous, can be more easily maintained with the better-off poor, since they are good borrowers and reduce the operation costs for the micro-credit organizations. Interest rates and repayment schedules are also often criticized for creating entry barriers for the poorest. The second constraint is that the system of group responsibility, although effective in many ways to overcome the problems of transaction costs that arise when dealing with large numbers of poor clients, works against the inclusion of the poorest. The group screens out the poorest from the time of group formation because of their high financial risks. The third constraint is concerned with the personnel management of the micro credit institutions. Instead of emphasis on conscientisation or social awareness of the members, quantitative results such as loan recovery rates have increasingly become the central concern, especially at the field level. As a result, field workers in the micro credit programs tend to shun the poorest and admit non-poor members instead. The tendency of exclusion of the poorest has an important bearing on women, for a woman without male family members of active working age is likely to be left out of these programs. The proportion of female-headed households varies in the different population studies. An official estimate suggests that around a tenth of households are headed by women (BBS 1999). The extensive poverty survey conducted by the Bangladesh Institute of Development Studies in 1990/91 estimated that 9 percent of rural households were managed or headed by women (Hamid 1995) 13. Others take the view that the actual proportion could be around 20 to 30 percent (Asian Development Bank 2001: 19). These studies corroborate the view that poverty is more severe among female-headed households than male-headed households. Female-headed households have a lower number of income-earning males than male-headed households. The income level of female-headed households was only 55 percent of that of theaverage household (Hamid 1995: 180). The degree of access to micro-credit for female-headed households with few active males has not been substantiated through surveys, but our general understanding of the situation of the female-headed household would suggest their under-representation among microcredit clients. It is an undeniable fact that many poor women have to seek some means other than micro-credit to alleviate their poverty. D. Impact of MFA withdrawal: Before going into an analysis of findings from the survey, let us take a look at the RMG export performance after the MFA withdrawal. As was expected, China and India recorded robust growth in both the US and EU markets. In this highly competitive context, the performance of Bangladesh was mixed. Table 22 shows the changes in export value of Bangladesh garments in the US and EU markets over the corresponding periods in 2004. The data up to October or November 2005 displays several distinct tendencies in export performance: better performance in the US market, and better performance by knitwear than by woven Md. Joynal Abdin mdjoynal@gmail.com
garments in the EU market. The negative growth of exports in the EU market does not bode well for the future prospects of the Bangladesh RMG industry. Although knitwear is Bangladeshs major export item in the EU market, it too entered a decline after April. Table 22. Export performance of Bangladesh garments in EU and US markets in 2005
Note: Each figure gives the growth percentage of the period between January and a particular month over the corresponding period in 2004. Source: Compiled from World Trade Atlas It is beyond the scope of this paper to investigate the decline in exports to the EU market. Here I would like to identify from our sample data changes being experienced by workers. (1) Changes in workloads and wages All the workers, whether current or retrenched, reported a decrease in the workload after January 2005 in terms of working hours, overtime and production targets. A large decrease in workload was reported by 90 percent of retrenched workers and 55 percent of current workers. On the other hand, 11 of the current workers reported a slight increase and 30 said there was no change in the workload. Asked if they had experienced a wage change after January 2005, 87 of the current workers said there was no change and the remaining 13 (2 quality controllers and 11 operators) stated that their wages had increased. The range of increase was less than Tk 200, with most (7 workers) reporting an increase of Tk.100. Except for one worker who works in a factory with 400 workers, these workers are employed in relatively large factories with more than 1000 employees. (2) The timing and reasons for quitting the RMG factory Almost all the retrenched workers left their factories within less than one year. The majority of them had been unemployed for two to three months at the time of the survey (Table 23). Contrary to what I had expected, a majority of them said that the decision to quit was their own (Table 24). Twenty-seven had been dismissed by the factory. Further investigation would be needed to determine whether this figure is significant. Although the above replies must be interpreted cautiously, my general observations Md. Joynal Abdin mdjoynal@gmail.com
lead me to believe that the workers basically want to continue their work in garment factories as long as possible because their earnings are the most important source of their power at home and in society. However, due to the lack of formal structures for leaves and for pursuing career advancement, including wage increase, many workers have little choice but to quit. Table 23. Time since leaving factory
Table 24. Reason for leaving factory
The distinction between leaving on ones own volition and being dismissed is not always clear-cut. A look at reasons for dismissal (Table 25) shows that there was only one case of dismissal due to factory closure. Most respondents said they were dismissed after being absent due to sickness. From their answers alone, it is difficult to determine whether or not declining production influenced the management decisions to fire them. Their responses do, however, indicate the insecure employment status of RMG workers. But workers own behavior may contribute to some extent to the informal or illegal style of management. My field observations lead me to believe that workers often take leave without giving prior notice to management. While this may be due to the lack of a formal system for leaves, it is the workers, not management, that suffer negative consequences. Besides the one case of factory closure, in which 500 workers were fired, three respondents cited relocation of the factory as reason for dismissal. Recently many larger factories have begun to move from congested Dhaka to suburbs such as Savar where larger plots are available and buildings with better physical facilities can be constructed. This enables expansion of production lines and also satisfies social requirements increasingly emphasized by foreign buyers by providing a better working environment. Two of the three respondents had worked in the same factory. Both the factories were located in Rampura, Dhaka, an area where RMG factories are Md. Joynal Abdin mdjoynal@gmail.com
concentrated. Factory relocation is a survival strategy for management in the postMFA competition, but it has significant impacts on the livelihoods of individual workers.
Table 25. Reason for dismissal by factory
(3) Livelihoods impacts The immediate impact that losing a factory job has had on former workers livelihoods is a decrease in earnings. Sixty-six workers still have wages due them. In many factories basic salary and overtime are paid separately, and overtime payment is often delayed to keep workers from leaving for other factories and to retain working capital. In all 66 cases overtime is yet to be paid, and in 20 cases both basic salary and overtime are outstanding. On average, Tk.1191 is due per person, with the highest outstanding amount being Tk 5000. Of the 100 retrenched workers, 81 are currently unemployed. The other 19 are engaged in work such as embroidery at home (15 cases), embroidery in a shop (3), as domestic servants (2) and other (1) (Two are engaged in more than one job.). Their current jobs entail less working time and less income than their former RMG factory jobs, so their income level has significantly declined, ranging now between Tk.200 and Tk.700 per month. Due to the loss of income, only 11 said they could contribute to family income, while in the past 87 of them had been able to contribute. Moreover, their contributions now are substantially reduced, whereas before the income of 49 of the workers (56 percent of those who made financial contributions to their families) accounted for more than half of total family earnings. How has the reduced income level affected their livelihoods? Except for one woman who said she experienced no problem, 99 cited negative effects. Ninety-six of these stated that reduced food intake was the most serious. As second most serious consequence, housing condition (68) lead, followed by education of family members (10), savings (10), medical expenditures (5), remittances (4) and relations with family members other than husband (2). As the third-ranking negative consequence, taking loans from others was mentioned by 40 samples. This was followed by impact on savings (27), remittances (7), relationship with husband (5), housing condition (4) and relationship with family members other than husband (3). These replies show that the loss of their factory job has affected the workers in multiple ways. The most severely felt problems are related to basic needs such as food intake and housing conditions, and their worsened financial situations have forced many Md. Joynal Abdin mdjoynal@gmail.com
retrenched workers to borrow from others. It will take a long time for the workers as well as their households to improve their financial conditions, for the job loss also interrupted the dynamic of the poverty reduction mechanism mentioned in section 3 by making investment in education of family members and savings difficult, if not impossible. In the past at least 28 of the ex-workers had savings ranging between Tk.3000 and Tk.30000 which were used for various purposes, including lending to others, purchase of furniture, their own or their childrens marriage and investment in a family business. However now only three said that they had savings, in contrast to the current workers, 67 of whom can save on a regular basis. (4) Social effects of job loss Family members of 58 of the 100 retrenched workers were interviewed to seek their opinions regarding the job loss of the RMG worker in their family. Fifty-three of them are husbands of ex-workers and the others are brothers (3), father (1) and mother (1). As was the case for the families of the currently employed, these family members were asked to give negative effects in order of significance. For these respondents too, food intake was overwhelmingly mentioned as the area most seriously affected (50 answers), followed by education of family members (6). Housing condition topped the list (32 answers) of second-order significance, followed by savings (8), education (7) and medical expenditures (7). In the third order, having to take a loan was mentioned by 21 family members, followed by impact on savings (15) and remittances (8). These answers by family members coincide with those given by the workers themselves. The only notable difference is the reference to relationships with family members, including spouse. Although five ex-workers had said that their relationship with their husbands had turned bad and another five referred to worsened relationships with family members other than husbands, only one family member, and that a workers brother, mentioned a worsened relationship with the ex-worker. General discussions with the ex-workers indicate that many workers, whether young or old, agree that money makes family relationships peaceful. When asked if they knew of any case of a husband leaving after a woman lost her job at an RMG factory, they answered in the affirmative. Information about marital relationships is hard to obtain in the context of a formal interview. The ten ex-workers who cited worsened family relationships may represent what is in fact a more general problem of deterioration of gender-relationships in retrenched garment workers households. In recent years many foresaw a gloomy future for Bangladesh in the post-MFA era, experts frequently predicting a loss of 1 to 1.5 million jobs in the Bangladesh RMG industry (International Confederation of Free Trade Unions 2004; Steps Towards Development 2004; Fritsch 2003; Siddiqi 2003). In August 2005, when I visited Bangladesh in order to prepare for this survey, Professor Mustafizur Rahman, a reputed expert on the RMG industry, stated that Md. Joynal Abdin mdjoynal@gmail.com
information about closure of factories and retrenchment of workers remained anecdotal. In his opinion, smart factories, which account for 10 to 15 percent of all the RMG factories, are expanding their production. They have already completed repositioning of production in the form of factory restructuring, increase in production machinery and expansion of their design sections, targeting high-end markets. According to him, it will be the sub-contracting factories which will first face closure, and this will have gender implications because the share of female workers is particularly high in those factories. He also mentioned that the growing importance of knitwear exports would likewise work negatively against women. This is because knit RMG is more male-intensive, and a capital-intensive restructuring is in progress in which machinery with multi-skills is being introduced. Male workers are generally employed to operate such machinery. In another interview conducted in August 2005, an owner of woven RMG factories and an executive of BGMEA pointed out the sharp reduction of Cutting and Making (C & M) charges after the MFA withdrawal. Under the MFA regime, quotas gave Bangladesh factories a bargaining edge in negotiations on C & M with buyers. After the elimination of quotas, the scope for maneuverings was severely limited, buyers often threatening to shift their orders to China. Asked whether the reduction of C & M would lead to reduction of wages, the owner stated that so far they had not cut wages but that if the situation did not improve, at least the simultaneous payment of basic salary and overtime might be suspended. At the end of the first year in the non-MFA world, the Bangladesh RMG industry is generally considered to have performed much better than expected. Our findings from the survey also show that retrenchment due to factory closure was minimal. The majority of the ex-workers left their jobs on their own. Nevertheless, as already stated, the workers responses have to be interpreted with caution. In many cases working conditions forced workers to decide to leave their jobs. It is not possible to definitively state at this point to what extent the MFA withdrawal directly or indirectly affected the business environment in the individual factories at which individual decisions of workers were made. The decrease in workload after January 2005 mentioned by 90 percent of the ex-workers and 55 percent of current workers may be interpreted as a direct consequence of MFA elimination. A comparison of current and retrenched workers suggests a widening gap between those who are able to keep their job and those who are forced to leave. Among the current workers at least, none mentioned a decrease in wages after January 2005. On the other hand, the adverse consequences of job loss are affecting the basic needs of ex-workers and their households. The deterioration of the economic conditions of their households is likely to cause deterioration in family relationships and particularly in terms of a weakening of the position of the women workers. From the pre-dominance of the RMG industry in the manufacturing sector as a source of female employment, we can see that a job in an RMG factory is still a better option than others and, especially for less educated women, may be the only option. The vulnerable position of women workers makes possible the informal and arbitrary practices found in what are formal sector factories. Nevertheless, we should not overlook the fact that the workers own arbitrary behavior, while it can be interpreted as a coping strategy under harsh working conditions, reinforces the persistence of informal and arbitrary management practices. Md. Joynal Abdin mdjoynal@gmail.com
It remains to be seen how the Bangladesh RMG industry will carve out a share in todays highly competitive market. The relocation of factories being carried out by forward-looking factory owners may lead to creation of new jobs but it also implies retrenchment of old workers who cannot cope with the change. Future actions by firms and policy makers should therefore be carefully observed in terms of their impacts, not only on the firms and the industrys survival, but also on the workers as well. Bangladeshi RMG sector in Post-MFA Era: The expiry of the Multi-Fibre Arrangement (MFA) regime has brought a great deal of uncertainty about Bangladesh's future export earnings and sustainability of macro balances with potential adverse consequences on economic growth. Taking advantage of the MFA quota system, Bangladesh demonstrated a spectacular export performance, with exports of readymade garments (RMG) rocketing from just $10 million in FY 1985 to about $6,400 million in FY 2004-05. In the mid-1980s, only about 0.1 million people were employed in the RMG industry, but over the next 20 years it grew rapidly to reach 1.9 million (or, 35 percent of all manufacturing employment in the country) 80 percent of whom being women. There is some suggestion that if jobs created in the complementary enterprises as a result of the growth in this sector are considered, the number of people either directly or indirectly depending for their employment on the existence and expansion of the RMG sector will rise to three millions. The growth of RMG exports has had favorable effects on macroeconomic balances. The trade deficit has declined from around 10 percent of GDP in the early-1980s to around 5.5 percent in 2004. The rising share of export trade in the economy brightly contrasts with the declining significance of foreign aid, which now constitutes only about 3 percent of GDP down from 7 percent of the mid-1980s. It is in this context that the RMG-led export growth is thought to have transformed the country from a predominantly aid-dependent country to a largely trade-dependent nation. Being a labor intensive sector coupled with provider of employment mostly to women, the RMG sector has had a strong influence on poverty alleviation and human development in Bangladesh. The abolition of MFA quotas has exposed Bangladesh to fierce competition from a large number of countries whose exports have so far been severely constrained by quantitative restrictions imposed by developed countries. During the first six months into the post-MFA period, for which data and information are available, Bangladesh has somewhat managed to maintain a modest growth of its RMG exports, largely due to a robust performance of knitwear exports. Notwithstanding this, it may still be too early to predict anything about the country's future export prospect. China, the main threat in the global quota-free apparel market, continues to face export restrictions in the EU and the US. A particular clause embodied in the Protocol of China's accession to the WTO enables the US to restrict imports of textile and clothing products from the former until 2008 and fearing that many other countries (like the EU) could take advantage of this precedent, importers in important markets might not want to rely wholly on China for procurement immediately after the MFA-phase out. However, from 2008, when keeping restrictions on China will be difficult as per the WTO rules, only then the real competitive pressure in the market will be realized. It needs to be mentioned here that most academic empirical studies predicted adverse Md. Joynal Abdin mdjoynal@gmail.com
consequences of MFA phase-out on Bangladesh and convincing arguments to defy those predictions have not yet been found. The post-MFA period has coincided with Bangladesh's reinvigorated policy efforts in reducing poverty, as reflected in the preparation of its Poverty Reduction Strategy Paper (PRSP). Although critics regard the poverty reduction strategy as a donor driven initiative without any apparently significant policy shift that would make a difference in the PRSP regime, the attainment of Millennium Development Goals (MDGs) is expected through the implementation of the PRSP. The first target under the MDGs is to have the number of people living in poverty (from the level of 1990) by 2015. In recent times, Bangladesh has made some progress in reducing poverty. Along with an annual average GDP growth of 5 percent over the decade of the 1990s, the proportion of people living below the poverty line declined from 59 percent in 1991-92 to 50 percent in 2000. That is, on average poverty fell by one percentage point per annum. This apparently impressive performance is overshadowed by a frustrating fact that despite the fall in the proportion of people living below the poverty line, the absolute number of poor people actually remained virtually unchanged, at about 63 million. For any low-income developing country, the best way (and most often the only feasible way) to reduce poverty is to achieve and sustain higher economic growth rates. Analysts suggest that if Bangladesh has to make any significant impact on the existing poverty incidence, GDP growth at 6-8 percent will be needed. Under an optimistic scenario, a sustained growth rate of 6 percent will barely let the country achieve the target of halving the number of poor people by 2015. The objective of accelerating economic growth will critically depend on channeling increased resources into productive investment. Considering the experience of the past 20 years or so, it can be inferred that a growth rate of 7 percent would require an investment-GDP ratio of 31 percent as against of the current level of 23 percent. If investment is to be made out of domestic savings, it would imply that the current consumption is being sacrificed for future growth. When the overall income of a country is low, curtailing current consumption is a very difficult option. However, investment from foreign sources (such as FDI) can greatly help a country achieve higher growth without constraining the current consumption too much. For Bangladesh, raising the level of investment appears to be a critical necessary first step for improving the poverty situation. The post-MFA regime could make the task even more challenging. A fall in RMG exports would lead to loss of employment and output thereby adversely affecting the poverty situation. One important factor in determining the prospect of higher investment is the socioeconomic environment that influences returns from investment by private enterprises. When profitability of investment is hampered by such factors as macroeconomic instability, poor infrastructural facilities, deteriorating law and order situation, etc., potential investors will be discouraged from putting their resources into productive investment. Under such circumstances, only limited benefits can be materialized at the national level by the accumulation of resources by individuals. Given this backdrop, a lot of emphasis has been given to the importance of creating a sound investment climate in Bangladesh.
Investment climate is an idea, which is easy to perceive but difficult to define precisely. According to the World Development Report 2005, investment climate is the set of location-specific factors shaping the opportunities and incentives for firms to invest productively, create jobs, and expand. Clearly, this definition is very broad, which encompasses government policies, institutions and behavioral environment that have significant influence on costs, risks, and barriers to business. It has been emphasized that a good investment climate is the one that serves the society as a whole on the one hand (through its impact on job creation, lower prices, and broadening the tax base) and serves all firms, including both large and small, on the other. A sound investment climate not only encourages more investment but also promotes higher productivity because of increased competition. Consequently, the amount of investment required to achieve a desired level of growth may be less than what the previous experience suggests. Many think that the investment climate is related to FDI only, which is not correct at all. For countries to achieve and maintain high levels of income and employment what is important is the total amount of investment irrespective of its foreign and domestic sources. According to the World Investment Report 2004, during the period 1990-2003, world FDI flows accounted for 8 percent of world domestic investment, suggesting that such flows only complement domestic investment. Even for China, which received an FDI flow of $53 billion in 2004, FDI comprised only about 12.4 per cent of gross fixed capital formation. This is not to undermine the importance of FDI, particularly when it reduces the pressure for curtailing the domestic consumption, but to emphasize the point that investment climate is equally important for mobilizing resources from domestic sources. Macroeconomic factors, infrastructures (both physical and financial), and governance related issues, are considered to be the three main features of the investment climate. Over the past decade or so, Bangladesh performed well on macroeconomic indicators and achieved a steady economic growth with the record of an impressive macroeconomic management. It is now generally recognized that governance and infrastructure related issues act as more serious impediments to doing business in Bangladesh than macroeconomic environment. The role of financial infrastructure is critical in the development of private sector enterprises. Finance is required to enable firms undertake productive investment in order to initiate and/or expand a business, to introduce new products and to market them. Availability of investment funds also facilitates acquiring better technology to promote competitiveness. However, one of the most important problems facing the firms in Bangladesh is the access to finance. In a recent private enterprise survey, as many as 58 percent of the surveyed firms reported the problem of lack of investment funds, while in the World Bank investment climate survey it was revealed only 30 percent of working and investment capital was sourced from banks and financial institutions. The significance of the constraint related to finance was also reflected in a survey of some selected export-oriented firms, undertaken under the Bangladesh Export Diversification Project (BDXDP), in which as high as 90 percent exporters reported the problem of accessing export finance.
The state of physical infrastructure in Bangladesh is considered to be one of the biggest causes for concern. Given the poor infrastructure, business enterprises spend more resources, both in terms of time and money, on such tasks as gathering information, acquiring inputs, and marketing their products. All this can undermine the competitiveness and returns to investment. There are two dimensions of poor infrastructure problem one is the unavailability of certain services or utilities (such as telephone, water, electricity, roads and highways, etc.) and the other is the unreliability of the services provided. A firm-level investment climate survey carried out by the World Bank in different countries confirms that the quality of infrastructure services is a more acute problem in Bangladesh, with electricity being the worst problem. Ports and transportation are serious infrastructure problems. Bangladesh's main seaport, Chittagong, has long been considered as one of the most expensive routes to international trade due to labor problems, poor management, and lack of equipment. According to the World Bank investment climate survey, the Chittagong port container terminal handles about 100-05 lifts per berth a day, which is far below the productivity standard of 230 lifts a day suggested by UNCTAD; Ship turn around time is five to six days as against of just one day in more efficient ports; and the port faces serious congestion. Inland transportation also suffers from such problems as illegal toll collection, bad road communication, congestion at ferry-ghats, and frequent disruption in transportation due to political programs. All this contributes to costs of doing business in Bangladesh. Port and transport related infrastructural problems may have far-reaching implications. Recent research works on economic geography and international trade suggest that, as the geographical distance (hence transportation costs) between two partner countries increases, traded volumes tend to decline. A 10-percentage point increase in transport costs is found to reduce trade volumes by about 20 per cent. Consequently, increased transport costs due to unfavorable geographical location alone can make a country's exports uncompetitive. The implication is that only because of their geographical location, some countries will experience much higher gains from trade and foreign firms might be reluctant to move or relocate their production to those countries that are far from their main export markets even when the wages in those countries are low. For the two major markets of the EU and the US, there are competitors, which are geographically better located compared to Bangladesh. Therefore, while geographical location puts Bangladesh at a disadvantaged position, inefficient ports and inland transportation further imposes penalties on firms' accessing foreign markets and acquiring imported inputs. Exportoriented firms, critically dependent on imported inputs, are the worst victim of these double disadvantages. Governance is a big problem for firms in Bangladesh. Firms are often subject to excessive regulatory burdens while in other times there is a complete lack of regulation and monitoring both inappropriate for ensuring equity, establishing the rules of the game and protecting the consumers. Corruption is pervasive and according to the cross-country comparative index prepared by the Transparency International, Bangladesh ranks worst on measure of corruption amongst a set of global economies. More than half of the private enterprises covered in World Bank Investment Climate Survey in Bangladesh recognize corruption as a major or very severe obstacle to business and production. When cross country data are compared, Md. Joynal Abdin mdjoynal@gmail.com
proportionately more business firms in Bangladesh compared to those in Cambodia, China, consider corruption and crime, theft, and disorder as severe constraints. Enforcement of contracts and property rights are two important issues in private investment, but investors in Bangladesh have little confidence that the legal system can support them in case disputes concerning these two aspects arise. According to the cross-country survey data from the World Bank, while only 17 percent firms in Bangladesh reported of having some confidence in the judiciary system, the corresponding figures for India and China were respectively 70 and 82 percent. Destructive political activities, which are manifest in frequent disruption in production by political protests and strikes are also a big problem adversely affecting the investment climate. Apart from the issues mentioned above, other important factors influencing the investment climate in Bangladesh are: weak human resource base, use of obsolete technology, poor technological innovation, lack of free flow of information, and lack of entrepreneurship and management skills. In the context of Bangladesh, there is some evidence of small and medium scale enterprises (SMEs) facing greater investment climate difficulties than their large counterparts. According to the World Bank survey, while about 34 percent investment funds of large firms come from the banking sector, the comparable figure for SMEs is only about 20 percent. The same survey also revealed that smallest firms tend to make unofficial payments (or bribes) at nearly five times the level of payments by large firms (as percentage of total costs). While a vibrant SME sector is often considered as one of the principal driving forces in the development of a market economy, higher investment climate costs could constrain their growth and development.
It follows from the above discussions that, Bangladesh will have to go a long way to improve its investment climate not only to attract FDI but also to mobilize more resources for investment from domestic sources. Improvement in infrastructural facilities and governance should be given utmost priority in bringing about a real change. In recent times some notable improvements in the customs and ports procedures in Chittagong have been accomplished as a result of which each export consignment now requires only 5 signatures by different officials as compared to 17 signatures required previously. Freight-forwarding charges have drastically been reduced. And, most importantly, waiting time for ports and customs clearance has declined significantly. Presently, the average typical wait for export is about 4.5 days compared to 9 days recorded during the World Bank invests climate survey in 200102. Similarly, the average typical wait for imports is now about 6 days as compared Md. Joynal Abdin mdjoynal@gmail.com
to 12 days in 2001-02. All this should have greatly contributed to reducing costs of business and is a pointer to the fact that it is possible to make things change in positive directions. A number of attractive fiscal and financial incentives are currently available for investors, particularly for investing in 100 percent export-oriented units. However, there are formidable difficulties in actually accessing them. Therefore, along with the development of infrastructural facilities, there is a need for streamlining the management of the incentive systems. One pragmatic way to improve the investment climate in Bangladesh may be to consider a well-devised integrated approach. Under this approach, actions required at different levels are brought together to make intervention measures or support systems comprehensive. Considering the problems faced by the business firms, various appropriate measures can be devised at three levels: (i) strategic or policymaking level; (ii) institutional level; and (iii) enterprise level. At the highest level, the policy makers with inputs from stakeholders may design appropriate short-, medium-, and long-term strategies to overcome the difficulties with the investment climate and to provide firm policy directions without any sense of uncertainty. Resource constraints would imply that some kind of prioritization will have to be determined at this stage in implementing the actions. The policy decisions will have to be implemented by the institutions. Operation of an effective and supportive legal and regulatory framework, effective management of public services, improvement of the managerial and entrepreneurial skills, development of human resources, etc. are the areas where the role of institutions is indispensable. Finally, there is no denying that the ultimate success in business depends on the efficiency of individual firms. Therefore, enterprises will have to be dynamic, innovative, and amenable to new ideas and ways of managing things.
Limitations of this study:

Nothing & nobody is 100% perfect. So this paper is also not supposed to be completely perfect. As an undergraduate student I may have several limitations in this study. These limitations are may be from various points. At first, RMG is the single largest foreign currency earning sector of Bangladesh. To have a perfect judgment about this sector a large comprehensive long-time as well as close study is required. At the same time opinion collecting from BGMEA members as well as garments owners is a completely tuff task. Because of without a small portion of them, none have helped to collect data for any purpose. Secondly, research is an expensive matter today. Because to conducting a massive survey it is necessary to reach every resort relating to the topic. Here I collect data mainly from Dhaka & Narayan Gong area of course some workers interviews are taken those are working in several garments in Chittagong. As a single student I try at my best to conduct a generalized survey & took help from several previous surveys have done by World Bank, UNDP, Australian National University, Dhaka University Research community and others. Maximum garments worker are not familiar with questionnaire or survey, they are afraid of giving any interviews to any unknown person. So, any single form of conducting survey is not applicable in this case. Sometime I collect data through making gossiping with them, through maintaining any relatives reference or by consulting them about my objective of the study. Thirdly, this paper has been taken three month only to complete it. It is a very limited time to do any research in a large sector like RMG. Because of there are around 4,500 garments factories in the country. To have a complete scenario about the sector anybody will have to work with the sector at least six eight months with proper authority and financial support. Fourthly, any massive study needs human resource I mean a team to conducting survey, making judgment, sorting data any interpretation, any the rest. But I only alone have conducting the survey, and as an undergraduate student I tried at best to have the real scenario of the sector. With so many limitations I think this is the single largest paper on the topic ever before on Bangladeshi RMG sector. This paper includes almost every aspects of the sector. I am hopeful that this paper will help a lot to know Bangladeshi RMG industry its past, present and future in a single arrangement. Almost every data, table or quotations includes in this paper with references as well as period. Me self have conducting the survey for its present state and present it with the others. So with so many limitations it holds authentic and realistic information about the present state of nature of Bangladeshi RMG sector.
Findings of the research on my topic:

A. Problems, way of solutions & government initiative to solve these problems of Bangladeshi RMG industries This vital and vibrant export oriented industry has been facing some problems from local forces, which may be termed weaknesses (or the Nation's weakness), and some problems caused by forces beyond our geographical/political boundary, which may be termed as threats to our industry. The Readymade Garment Industry is already 20 years old but during the last two decades no planned, fruitful policy to build up a backward linkage textile industry to feed the RMG industry has been taken by the authorities. Even the existing textile industries are not capable of producing high standard fabrics to offset the foreign ones from the market. Shortage of capital necessary to develop local sources for quality fabrics/yam is a major weakness. The reason behind the shortage of capital, however, can be attributed to the socioeconomic condition of the country; enabling foreign direct investment could however, compensate for this. Furthermore although the Government has responded to the RMG industry's requests for devaluation of the local currency the Taka from time to time, it has failed to decrease the current rate of interest. At the same time, our financial policy measures are not sufficient to attract entrepreneurs to invest in the textile industry. Anomalies in the banking sector, problems at the port, vindictive political environment, bureaucratic shackles, electricity crisis, currency adjustment policy pursued by the country, and the lack of some policy support from the government to sustain the country's falling competitiveness against its competitors in the international market are other serious weaknesses. Without miscellaneous expenditures no file moves, no UC is cashed, no imported raw material released. There are many eager hands in the public service agencies that the industries have to fill with ready cash. Without this practice no job can be done timely. The public service agencies work very slowly and speed money becomes the only solution to hasten the procedure. This is however done increasing by miscellaneous expenditures. The raw materials the industry imports, say, within 7 days, take an additional 15 days to reach warehouses from the Chittagong port. About 54 formalities (with miscellaneous expenditure) have to be observed to release a shipment of raw materials. These formalities increased the industry's lead-time against overseas competitors. The weaknesses, which have been mentioned above, could be classified in following categories: 01. Unstable political environment and unfavorable law and order 02. Insufficient development of political measures for the RMG sector 03. Inadequate financial measures 04. Infrastructural bottlenecks 05. Inefficient service support Md. Joynal Abdin mdjoynal@gmail.com
06. Inappropriate development management and institutional initiatives Political Instability Due to the last non-cooperation movement in 1995-96 the industry suffered a loss of about Tk. 4,500 crore (Tk. 45 billion) and about 300 factories were forced to take loans of over Tk. 200 crore (Tk. 2 billion). Due to hartal (general strike) and other such political programs, problems such as order cancellations and stock-lot gluts arose in the ready-made garment industry. Banks started showing its reluctance to open L/Cs. Ultimately many affected factories were on the verge of winding-up and declaring bankruptcy. The export oriented garment industry bore production losses equivalent to Tk 6-9 crore (Tk. 60-90 million) per hour. During the last three years, the country went through about 200 working days of hartal. In the interest of 1.5 million workers and owners of over 3000 garment factories, the political differences should be solved politically in the parliament. Unfavorable Law and Order Situation The disrupting law and order situation is another heavy constraint which hinders not only the development of the national economy but also the development of the export- oriented RMG sector. Due to the depreciating law and order situation, the interest of both the employers and the employees are being affected. In this relation it should be mentioned that the Factories' Act and labor laws of the country are old and do not support the development of the export-oriented RMG sector. The changed environment must be reviewed and in this process all interested and involved parties should be integrated. Inefficient Development of Political Measures for RMG Unsuccessful Initiatives for Foreign Direct Investment in the Export Oriented RMG Sector The proper authorities have duly resolved that the Board of Investment (BOI) would not approve any Foreign Direct Investment (FDI) proposal in the RMG sector without seeking recommendation from the BGMEA. However, it is being observed that the BOI continues to decisions without seeking any BGMEA recommendations. Any further foreign investment in the garments industry must be considered in light of the technological modernization in this sector, i.e. whether the foreign investment is promoting technology transfer. The export-oriented RMG sector would welcome foreign direct investment and encourage foreign financial and technical assistance in the backward linkage textile sector as there is a dearth of fabric, both in quantity and quality, in the country. Inefficient Efforts to Increase Quota in USA and Other Important Countries This is a topic that is not only an integral part of US Senator Harkin's personal political agenda but is also an issue of vital importance to the fate of Bangladesh's readymade garment industry. BGMEA has been trying to enter the US market with an additional 30% quota over the present level. Although, on the face of it, a 30 percent raise might seem too large Md. Joynal Abdin mdjoynal@gmail.com
in actuality it would comprise an increase of less than one percent of the total amount of imports entering the United States. The increase would, however, be very vital and beneficial for Bangladesh. The increase is being pursued so as to compensate the apparel export losses Bangladesh suffered due to the anti-child labor propaganda that followed the introduction of the Child Labor Deterrence Act, popularly known as the Harkin's Bill. After suffering export losses since 1992 with the signing of the historic MOU on elimination of child labor from the garment industry of Bangladesh, the country's RMG industry started recovering in late 1996. Due to the Bill, it has been roughly estimated that the industry lost its market in the USA and other parts of the world by about 15-20% annually. While the BGMEA is trying for such a compensatory quota increase, the US House of Representatives has passed a Bill liberalizing trade with Sub-Saharan Africa (SSA) by a vote of 233 to 186, a smaller majority than the 350 votes projected by the Bill's backers. The measure now goes to the Senate, while there are doubts whether the body would even act on the Bill this year. The measure is aimed at 48 SSA countries that have committed to market-based economic reforms and trade liberalization, and grants them free-access to the US market for a range of products. The US would also lift the textile quotas currently imposed on Mauritius and Kenya. As a direct result of the SSA (Sub-Saharan Africa) Bill, Congressman Philip Crane, a backer of the Bill, estimates that Sub-Saharan African countries will immediately be able to double their present volume of export to the USA. SSA countries presently share about 1% of the USA's apparel imports. Within a decade, they will be able to triple their present export to the USA. If the SSA Bill is passed, the benefits to the SSA countries will be at the cost of developing countries like Bangladesh. Experts say the Bill would encourage textile and apparel producers in China and other Asian countries to flood the US market with garments partially assembled in Africa from Asian fabrics, as well as to Transship apparel made in the Far East to the US market via SSA. Experts see in the legislation a rule of origin requirement that is far weaker than the rule of origin in effect between NAFTA partner countries. That is, by means of transshipments and other unfair means other textiles exporting countries will try to enter the US market through SSA countries. LDC like Bangladesh that lack in sound backward linkage industries will suffer terribly. Considering all these points, the BGMEA has been pursuing for a 30% quota increase for the US market. It will provide the garments industry in Bangladesh with an opportunity to export apparel worth about US$ 400 million and to employ another one million workers. Although BGMEA representatives have initiated a strong drive towards achieving this target, visited the USA and met key Congressmen, Senators and other government representatives, it is still not considered sufficient effort to achieve such a large national interest issue; concerted efforts from the proper levels of Government are needed. Accordingly during the March 2000 visit to Bangladesh by President Bill Clinton of the United States, both the Government of Bangladesh and the BGMEA had requested for an increase in the textile quota and for the merger Md. Joynal Abdin mdjoynal@gmail.com
of certain categories, inline with the formal proposal submitted to U.S Government in November 1998. It is certainly a step in right direction. Insufficient International Marketing Support In order to expand the market share and survive in the up coming free global competition in the international market, product diversification appears to be an indispensable strategy. The more varied the product line and range, the better the competitive strength. As for our access to other markets, efforts are being made to enter Japan and other far east markets, however, presently we are mainly dependent on EU markets and the U.S. We know that if we put all our eggs in one basket, our risk is higher. We can reduce the risk by putting our eggs in several baskets. When the GSP crisis arose we knew that our whole EU market was going to be disturbed, when quota matters created a problem we had to give extra efforts to keep our export earnings from falling. The EU market share accounts for 50% and the U.S. market shares for over 40% of our RMG exports. The above statistics justifies further market diversification. The government should ensure assistance from international organizations like WB, IMF, UNDP, WTO and international Chambers to support the export-oriented RMG sector. Inefficient Financial Support For Backward Linkage Industries Since 1974 international trade in textiles and clothing has been guided by various restrictions on a global or regional basis under MFA. The entire business in apparel and garment industry has been subjected to bilateral quota negotiated under MFA. The arrangement of bilateral quotas and restrictions on import under MFA has begun phasing out from January 1995 and the process will be complete by 2005. Therefore there will be no more quotas and the only barrier to import penetration will be the normal rules of competitiveness such as price, quality, service, fashion and tariff. Again, the GSP scheme is keen on the basic rules of origin and to meet this rule we need to mobilize the textile sector to feed the RMG sector. Investment in a textile industry will not be viable unless the government reforms its policies for financial support. The cost of financing the linkage projects must be brought down, as was done by India and other competitors of Bangladesh during the initial period of developing their textile sector. Cash incentives should continue. In addition, long term loans must be available at reasonable interest rates. Although the current nominal rates are around 12%, the actual cost of fund to the entrepreneurs amounts to between 20% and 24% after various adjustments. This is quite high a rate and discourages investment in this sector. The Commercial Banks need not maximize its profits at the cost of the RMG industry. The government may direct the Banks to make reasonable profit and lessen the rate of interest for the RMG sector substantially, say, to 6% to 7%. This of course does not mean that the Bank should not take necessary precautions against possible defaulters. Investment in backward linkage industries for greater supply of raw materials to the RMG sector, particularly in composite textile mills, is quite large. The entrepreneurs will need equity capital from financial institutions. Currently a 50:50 debt-equity ratio is enforced. To encourage investment in this sector, the Government should moderate the ratio to a reasonable 80:20 level. Md. Joynal Abdin mdjoynal@gmail.com
If all the backward linkage industries in spinning, weaving, dyeing, printing and processing are to be developed by 2004, a total of Tk. 210 billion will be needed for investment. The Government should create a special fund of at least Tk. 150 billion to provide equity capital to sound entrepreneurs who can come up with the balance 20% equity. It is worth mentioning here that similar support is available in many countries including India. Given the investment needs and future uncertainty, it is questionable if Bangladesh will be able to invest Tk.210 billion in order to develop the total capacity in the backward linkage industries required to meet the RMG demand in 2005. To be selfsufficient in the production of export quality yam and fabrics is neither necessary nor feasible nor wanted. The traditional supply of cotton yarn and fabrics from foreign countries may decline due to the phasing out of MFA. Some of Bangladeshs fabric supplying countries, facing the competition of total globalization after 2004, may not have the surplus to export while others may find it more profitable to expand their own garment industry. Subsequently Bangladesh must create opportunities to generate a certain new capacity to spin yarn, weave cloth and process Grey fabric. Like Hong Kong and Singapore, which trade quite normally, RMG will have to remain partly dependent on imported yarn and fabric. This, however, should not create a serious problem for Bangladesh to remain competitive in the world market after 2004. Therefore the RMG industry needs to be restructured only partially; a limited number of composite mills, a large number of independent spinning mills and processing units need to be established. One of the easier avenues of gaining success in this respect may lie in modernization of dying or decadent mills. Unfavorable Taxes and VAT for RMG Exports The tax burden on the export oriented garment sector is reducing the competitiveness of Bangladesh-made garments in the international market against products from competing countries. In Addition to incentives for aggressive marketing, several countries, including our neighboring ones, are totally exempting their export sectors, including RMG, from all export taxes to help supplement competitiveness and boost exports in the international market. Although included in the 1996-97 Export Policy, the export oriented RMG industry has not yet been brought within the purview of taxation. While the world is in transition from MFA to GATT to WTO, the country is still being constrained further, partly through old ideas. The industry has got to take its best lead before the international players in the industry are at full pace, otherwise there will be little scope for recovery. Unfavorable Tax for New Investment in RMG Export Sector International experiences show that facilities like a tax holiday could promote national and foreign investment. For the sake of a healthy economic development of the country, it is expected that with proper taxation policies in place investment in the export-oriented RMG sector in the country can be canalized. Inadequate Adjustment of the National Currency with the Currency of International Competitors Md. Joynal Abdin mdjoynal@gmail.com
With Bangladesh's competitor countries adjusting their currencies downward, ranging from 25 percent to even as high as 550 percent, the downward adjustment of our local currency the Taka has become imperative. Considering currency devaluation by competitor countries like Indonesia, Thailand, Korea, Philippines, India, Pakistan, Sri Lanka etc., to successfully pursue the exportled growth, our government should have a similar strategy to increase the countrys external competitiveness. Against aggressive currency devaluation by our competitor countries, our real trade-weighted effective exchange rate is still insufficient to maintain competitiveness vis--vis our neighbors and potential competitors in the world export market. It must be properly adjusted. We cannot back step from steadily adjusting our currency by observing the strategy our competitors are taking. If devaluation is not conducive to the general national economic development of the country, an alternative must be worked out which best make more of our exporters competitive in the international market. Unfavorable Value Addition for High Valued RMG Exports Just because of the rigidity in the Value Addition criteria, high value items manufactured in the country are failing to enter the international market. For example, the margin that we can retain by producing one gown may not be secured by producing even 10 basic shirts. We had potential but because of our rigid value addition policy we are losing a huge amount of foreign currency. Besides earning foreign currency for the nation, relaxing this criterion could further develop the skill of the workforce, which in turn would not only support the economic development of the country but would make it one of the nations most valuable resources. Anomalies in the Functions of the Banks The RMG sector has been one of the main catalysts contributing to the tremendous development of the banking and insurance sector of the country. While foreign banks, under different heads, charge only 0.25% for first the US$50,000 + 0.125% for whatever rest amount, our banks charge rates from 10-16% straight. Presently our commercial banks are earning over Tk 2,000 crore (Tk. 20 billion) per year from the export-oriented sector. Over the years some bank charges have increased to even three times the charges from 1985. Even now there are some regulations and services which hinder performance of the export-oriented RMG enterprises. These are: 1. Regulating approval from the Bangladesh Bank for creating Forced/Demand Loan by lien banks. 2. Considering of Back-to-Back PAD/Forced Loans as default loans. 3. Considering overdue FBP against the liability of any UC as default loans. 4. Enforcing mandatory compulsions in the ECG policy. 5. Regulating the obtaining of prior permission from the Bangladesh Bank for exporting goods against stock-lot. 6. Regulating prior approval for discount from the Bangladesh Bank and EPB. 7. Allowing 45 days from the date of document negotiation for fund remittance in the event of remittance being delayed. 8. Allowing private commercial banks to charge "UC Acceptance Charges" fees which the Nationalized Banks do not. Md. Joynal Abdin mdjoynal@gmail.com
9. Applying the Banking Companies Act, passed by Parliament on 13 March 1997, also for the export-oriented Readymade Garment Sector of the country. 10. Holding the readymade garment exporters responsible if the proceeds against their exports are not realized owing to the reasons beyond the exporters control. 11. Banning of the Realization Clause when opening L/Cs. Inadequate Cash Support and Export Performance Benefit The disbursement of alternative cash assistance has increased recently. This should not be a cause for alarm, however, stringent measures to ensure that genuine users of local yarn are being benefited should be put in place. Till date, less than 15 percent of the yarn and fabric demand in the RMG industry is being met from local sources. Hence the Alternative Cash Assistance scheme deserves to be continued until the industry achieves a sustainable development in the backward-linkage industry. In the past, the Alternative Cash Assistance was used to give garment manufacturers and exporters help to increase garment exports. But since early the 1990s it has been given to the local fabric producers to encourage direct export or use of local yarn fabrics in the RMG industry. Appreciating the Government's gesture toward the local yarn and fabric manufacturers, our observation are that since the garment manufacturers and exporters are the ultimate exporters of local yarn and fabrics, if they were encouraged to use local yarn and fabrics under the same scheme, as in the past, the ultimate objective of this scheme would be achieved through further usage of local yarn and fabrics. While transaction and overhead costs have increased considerably, the garment manufacturers and exporters are still buying local fabrics and yam at higher prices in comparison to the prices of imported fabrics/yarns. In the international market, we are losing our market share to our competitors, who besides enjoying several exportbenefits also enjoy tax-free status for all their export income. Moreover, in the past, the Export Performance Benefit (XPB) used to be provided to the RMG manufacturers and exporters to encourage export earnings. Presently in the international market, competition has been intensified due to the entry of new competitors. Without such a benefit scheme, garment manufacturers and exporters of Bangladesh are losing their competitiveness in the international market. Inadequate Exchange of Views between BGMEA and the Board of Directors of the Nationalized Commercial Banks BGMEA, the single largest trade organization, has been leading the RMG industry to become the biggest export-earning sector in Bangladesh. This sector has propelled the financial sector of the country to new heights. The sector also involves a huge amount of capital investment from the Nationalized Commercial Banks (NCB). The Bank's recovery of loans from this sector has been positive and the sector's contribution to the Bank's earning has been quite considerable. But the financial activities of the NCBs are not sufficient to fasten the export-import procedure for this industry. Moreover, the government's policy to reform the public sector banking institutions has not been working to simplify the complex system.
If representatives from the BGMEA could be included in the Board of Directors of Nationalized Banks and the Bangladesh Bank, this would help solve the different banking problems faced by the garment industry and thus help the economy in a positive way. Unequal Opportunity for RMG Export Oriented Industry The government's policy to attract foreign investment in Bangladesh is quite impressive. This policy, however, show some inequalities. Under the bonded warehouse system every export oriented garment factory is an EPZ, but factories in the EPZ enjoy more benefits than those outside the EPZ. Even in Japan, all exportoriented factories enjoy such benefits. If these inequalities were eliminated and export oriented garment units outside the EPZ were provided with similar benefits to those industries in the EPZ, it would certainly support to increase export and earn more foreign currency for the country. Port Congestion and Crisis Due to unchecked interest by a section of politicized dock laborers, the Chittagong Port has remained closed for about 30 days during the last three years. Go-slow and congestion are chronic problems. Chittagong port being the largest seaport in the country contributes to 80% of import and 75% of export of the total international trade. As the normal activities in export and import are hampered due to the complexity created by various reasons like dock labor unionism, go slow principle, strike etc. usage of the seaport by traders has been disturbed and declining. This is definitely influencing the national economy negatively. The Garment Exporters and Garment input importers have been facing problems in export and import for years. It is worth mentioning that due to delay in unloading of raw materials for the Garment Industry, it is not possible for the entrepreneurs to produce the garments within the Letter of Credit (L/C) period. Thus the L/C becomes invalid and the exporters face great financial loss. Consequently, buyers are losing interest in trade with Bangladesh. Moreover the entrepreneurs have to take the responsibilities of the loss on their own shoulders. A large number of garment factories are classified as sick as they have been unable to recover from the stock-lot problem, which is also one of the causes for bottlenecks in the port area. Heavy congestion in the Chittagong port has been prevailing for the last four years. This congestion affects the normal activities of the port. Loading and unloading of goods are always delayed and ships remain in the outer anchorage for long periods of time. As a result, port utility has been lessened which is also damaging the reputation and image of the port internationally. The handling equipment at the port is insufficient to cope with the rising volume of the export-import business from the garment industry and other export oriented industries. The country should start setting up new jetties immediately to increase the loading and unloading capacity of the Chittagong Port because an average size jetty takes about 4 years to be set up. The port is taken hostage by a handful of people for their egotistic interest, posing a serious threat to the export-trade of the country. The government should play a stronger role in addressing the port crises. Handing over port activities to private sector enterprises perhaps can ensure a sustainable solution.
Frequent Interruption in Energy Supply For nearly the last two years the electricity crisis has been unparalleled. To better describe the situation it would be safe to say that the power grid has been at its peak capacity for the last decade or two. A survey in the RMG sector in May 1997, indicated that in Jan-May 1997, the RMG sector had already suffered losses in excess of Tk.1700 crore (Tk.17 billion). Presently on an average, we are losing production worth about US$ 1.6 million per day (or, US$ 46.4 million per month and US$ 561.6 million per year) just owing to the electricity crisis alone. For obvious reasons the chain-effect is more serious. RMG production could be increased by 10-15 % if reliable power supply was available. Congestion in Road and Railway Communication and Traffic Jam A good transport system is a prerequisite for economic development. A lack of it creates road congestion, as a result it may take a longer time to get imported raw materials from the port and transport the finished product to the port from the factory. It also causes additional transport costs. A congestion-free road and rail communication, especially between Dhaka and Chittagong, linking the garment industry is vital for further development of the export-oriented RMG sector. Inadequate Service Support Unfavorable Service Charges for Air Cargo It is a common practice that garment factories import goods by air, paying very high freight rates, only when the speedy delivery of finished goods is the prime requirement of the buyer. Thus, damage, misplacement, dislocation of raw materials and delay in clearance thereof grossly affect the delivery schedule of the finished goods. The replacement of damaged or missing raw materials is not only expensive, but also time consuming and involves onerous Customs/Bank formalities. The irony of the whole system is that the importer is not spared from the onus of paying duties/taxes for non-export of finished goods due to damage in fabric. In the seaport at Chittagong, the Port Authority acts as Bailee on behalf of all carriers and thus goods land under the port's tally along with remarks as to the condition in which goods have out-turned, stored consignment-wise/shipping mark-wise etc., no such system prevails at ZIA. Neither the Civil Aviation nor Bangladesh Biman act as "Bailee" and as such there remains a vacuum of accountability for misplacement and/or damage to goods. Unlike the seaport at Chittagong or Mongla, at ZIA the importer or their C&F agents are unable to see the condition or storage position of the goods and have to depend on Biman Loaders for "produce of goods". In the examination section a highly irregular practice is being followed by Biman when certain a percentage of goods are required to be produced for inspection purpose, the C&F agents are made to sign that all goods have been duly produced before the actual inspection. Only then does Biman produce the goods. Therefore at the time of delivery if the loaders fail to detect any goods, in that case only tally marks are made on the reverse side of the photocopy of Air Way Bill which Md. Joynal Abdin mdjoynal@gmail.com
is retained by Security and only an entry for short received is made in their Delivery Register. The C&F agents are not given any official documents for the short receipt. Even inside the canopy area there are storage tracks where goods are required to be stored according to the last digit of Air Way Bill Number, but the loaders for obvious reasons scatter single consignments in different tracks while stacking. Incompetent, Slow and Corrupt Custom Services It is obvious that with the rapidly expanding export business of the country the pressure on customs office has increased immensely. The globalized export business demands not only prompt but qualified services, because missing documentation could cause loss of international customers. Therefore it is not enough to employ sufficient personnel in the custom office but they must also be trained. The custom office must be provided with modern technical support and its services must be computerized. The government has already taken some steps in this direction, but it has to be strengthened. Bangladesh's readymade garment loses 30 pct output due to power shortage: Bangladesh's readymade garment (RMG) sector is facing severe crisis due to inadequate and irregular power supply that pushed the potential export-oriented sector to cut off its production by at least 30 percent on a regular basis since February. "We are forced to stop our production due to frequent power interruptions resulting production loss by about 30 percent of our total production," Tipu Munshi, President of Bangladesh Garments Manufacturer and Exporter's Association (BGMEA) was quoted as saying by local daily The Independent on Wednesday. According to the daily, during a meeting with State Minister for Power Iqbal Hasan Mahmood on Tuesday, the BGMEA president, along with his colleagues, also submitted an 8-point demand and urged the minister to start planned load shedding program for the RMG sector to minimize the production and export losses. Their suggestions include introducing a relatively lower and flat power tariff dealing with the existing peak and off-peak hour rates, issuing notice prior to the start of load-shedding and installing PFI (power factor improvement) devices at the garment factories by the government and allowing factories to consume up to 75 kilowatt electricity without any installing and sub-stations. The state minister assured the BGMEA team that the utility department will henceforth follow a schedule load shedding chart for the RMG sector. Though there is a power staggering program chart but the utility departments failed to follow it due to huge and often unpredictable power shortage. To reduce extra burden from their shoulder, the BGMEA representatives demanded withdrawal of the off-peak hour and peak- hour rates for the RMG sector. At present, the rate of per kilowatt hours electricity in peak hours is 5.36 taka (7.66 U.S. cents) against the off-peak rate of 3.05 taka (4.36 U.S. cents). Source: Xinhua Other problems of the RMG sector in Bangladesh: Today our RMG sector is going through a crucial period; it has many long term problems as well as it is facing some short term and new arrival problems also. If we try to make a list of these problems it can be as follows: Md. Joynal Abdin mdjoynal@gmail.com
The entrepreneurs are discouraged to invest to very high debt - equity ratio. (ii) The long-term interest rates on loan for new industries in Bangladesh are very high (Bangladesh 9-12%, Pakistan 5%, India 6%) compared to competing countries. (iii) Present worker unrest is making the sector limbs at the same time our glorious image is downward in the international market. Which caused some buyers is really worried to place new order. (iv) Exploiting mentality of some garment owners is also a major problem to have a sustainable RMG industry & continuing of its current growth. (v) Political instability is another major problem for this sector. Day long strike or so call uncompromised strike may be cause of undue shipment of product. It hampers the transportation of product from factory to sea port. (vi) Long bureaucratic jam is another major problem for every industry in Bangladesh. As a result we are loosing FDI in our country which may help to establish backward linkage of RMG industry in Bangladesh. (vii) Leakage from Bonded warehouses and smuggled fabrics deter the growth and development of RMG. (viii) Due to provision of subsidy and other incentive at different stages of production process by the competing countries, their products are more competitive than ours in the international market. (ix) Dearth of trained manpower of international standard. (x) Scarcity of use of modern technology is resulting a long period of shipment as a result our products are uncompetitive in international market even though the labor costs are low. (xi) Due to operation of obsolete production techniques and acute shortage of technically sound manpower, weaving and weaving-dyeing-finishing subsector could not make significant headway. (xii) Production capacity of some factory is extremely low due to use of obsolete technology. This was compounded by poor quality of manufacture. Worker Unrest in May 2006 In late May and through June this year, there has been a wave of fierce class struggle in the Bangladesh garment industry. To illustrate the scale of events: around 4000 factories in Dhaka went on wildcat strike, 16 factories were burnt down by strikers and hundreds more ransacked and looted, pitched battles were fought with cops and private security forces in workplaces and workers' neighborhoods, main roads were blocked. Casualties include 3 workers shot dead, thousands injured, several thousand jailed. The Government eventually felt compelled to bring in the Army to restore 'order'. It was a working class revolt that spread beyond the workplace and generalized to involve the wider working class community. At present (early July) the struggle continues in the garment zones on a lesser scale. (Note; figures quoted from different sources vary - I have generally taken the most commonly quoted.) Md. Joynal Abdin mdjoynal@gmail.com
(i)
The Dhaka explosion The revolt began on Saturday 20th May in Sripur in the Gazipour district of Dhaka. 1,000 garment workers gathered at FS Sweater Factory, refusing to work until 3 arrested fellow workers were released from custody. The factory bosses locked the striking workers in the factory, cutting the power and water supplies. Eventually, the sweltering heat proved too much and by 11 am the workers fought their way out, then gathered on the Dhaka-Mymensingh highway. Now joined by locals, they barricaded the highway for 6 hours and fought pitched battles with the cops.[1] One person was killed and 70 others, including cops and journalists, were injured. On the morning of Monday, 22 May at Savar Export Processing Zone (EPZ), a suburb of Dhaka, workers at Universal Garments Limited gathered in front of the factory to demand payment of 3 months owed back wages. They were attacked by factory security staff. In response the workers went to neighboring factories and called out other garment workers for support. The growing group of workers then went from factory to factory calling on other workers to join them; 20,000 workers are reported to have joined this angry procession. By the afternoon hundreds of other factories in Savar EPZ and New EPZ had joined the strikes . Two factories were torched and 100s more ransacked, over 300 hundred company and management vehicles wrecked. The main roads going through Dhaka were blocked. Eventually the clashes with police escalated and the cops responded with bullets. The news of the escalation spread among the workplaces and drew out most other workers into participating. "The day the 'riot' broke out I had been on my way to office. Its not new these agitations here in my locality (lot of RMG [Ready Made Garment]factories are situated here)... I have been witnessing this from a year or more.What struck me most was how this sort of happening readily unified street vendors, rickshawwallas in one single angry 'mob', which was throwing stones, crashing cars, setting fire on big VOLVO buses. If its sort of an anarchy, I am for it with some fears inside.." - eyewitness, 26/May/06 By Tuesday (23rd) the revolt spread to more factories as more workers were picketed out and the industrial areas of Dhaka were shut down by a generalised strike. Workers took the revolt from the industrial suburbs, where factories were now being looted, into the capital city itself, destroying cars and attacking commercial buildings. Mass demonstrations demanded an end to repression, release of arrested workers, higher minimum wages, weekly time off, overtime pay for extra work, public holidays, payment of wages due etc. (All these demands have since been agreed to.) Press photographers were attacked, roads were blocked and clashes with security forces continued. Thousands of strikers descended on factories, torching 4 and ransacking hundreds more. The Bangladesh Rifles were recalled from their normal duties as Border Control and deployed across the areas of unrest. By the evening 3,000 soldiers and armed cops were in occupation. Md. Joynal Abdin mdjoynal@gmail.com
The garment industry bosses were now urging the government to protect all factories with troops. The garment owners also staged their own quite pathetic little demonstration, lying down in the road in protest at the attacks on their business. For news footage of the revolt and meetings of panicked bosses, see; http://www.shuchinta.com/2006/05/25/some-clips-from-the-atn-news-on-theattack-on-garments-industries/ On Wednesday (24th) things calmed down in face of the massive police/army presence. The bosses were showing signs of being willing to make some concessions, though still refusing to allow the right to organise trade unions. It is at present difficult to know if this is a demand voiced by the unions or if it has much support among workers themselves. Union leaders were brought in to negotiate a deal with the bosses. This was a breach of the garment bosses' longstanding opposition to union recognition; also a recognition of unions' useful potential role in containing struggle. Throughout June, clashes in the garment producing areas have continued, the main issues being victimisation of militants, back pay, non-implementation of previously agreed concessions. Strikes continually break out at individual factories, workers nearby stop work to join in the spontaneous demonstrations. Clashes with police, army and factory security continue, as do attacks on company property. Bosses have also sometimes locked out workers from factories when the breakdown in workplace discipline has become too explosive. At times whole EPZ areas are closed off by troops. This is made easier, once the workers have been driven out, as these industrial zones are fenced off and have their own checkpoints - complete with customs posts - due to their exceptional economic and tax status. The garment owners are dragging their feet in implementing the concessions, so workers remain continually in conflict with the bosses. The garment bosses have estimated their losses from the revolt so far at $70 million (and rising!) in a compensation claim submitted to the government. They have critcised the government's indecisiveness in dealing with the revolt.The BGMEA have demanded that a permanent industrial police force be set up to protect factory property in the event of future unrest. At present the Rapid Action Battalion, an armed police/paramilitary grouping is fulfilling this role. As the strikes at individual factories continue and often spread to neighbouring workplaces, the RAB are rushed in to attempt to disperse the angry crowds. But this does not encourage a return to work and invites sympathy and similar action from neighbouring workers. A recent report states: "The owners declared suspension of work at the apparel manufacturing units at Jamgorah, Zirabo and Ashulia in Savar on Tuesday amid an escalating labour unrest that left at least 100 people injured and 20 vehicles damaged. The crisis came to a head as workers of Irish Fashion started a furious demonstration in front of the garment factory over a rumoured murder of a co-worker on Monday night and closure of the factory for indefinite period since Tuesday morning. The angry workers went on the rampage, clashed with police and damaged about 20 vehicles, including two staff buses of a factory, during the mayhem.... Witnesses said Md. Joynal Abdin mdjoynal@gmail.com
following the Monday night's violence at Irish Fashion, hundreds of workers of the factory came to work at around 7:00am. But, they found a notice hung on the main gate saying the factory was closed for indefinite period. Enraged, the nearly 6,000 workers of the seven-storey factory immediately tore the notice into pieces, went on the warpath and started demonstrating. Fearing attack, police stationed inside the factory remained silent and did not come out to disperse the agitating workers. The mob pelted brickbats at and forced some other factories to close, and chanted slogans, urging workers of those plants to join forces with it. Most of the factories in the areas declared closure of work. Within a few minutes, the majority of workers of those factories joined hands with their agitating fellows and brought out a procession.... Fearing further vandalism, the authorities announced closure of over 50 factories located in the areas adjoining to the Dhaka Export Processing Zone for indefinite period..... A tense situation is prevailing in the areas, with many contingents of police, the paramilitary Bangladesh Rifles and the Rapid Action Battalion deployed in front of the DEPZ and at others key points." - New Age, 5 July 2006 "The government agreed to release arrested workers and union officials, and to drop the cases against them. It also promised to set up a "minimum wage board for the garment sector and take steps to meet the demands of garment workers," and -- in a bow to the manufacturers -- to investigate the causes of the riots." "Following the unrest in the garment sector, the factory owners at a tripartite meeting late last month accepted almost all demands of the garment workers, including the right to form trade unions, weekly holiday, maternity leave and issuance of appointment letter and identity card (these letters and cards are proof of employment and are often withheld to prevent workers later claiming back pay when they are dismissed). The meeting formed a minimum wage board comprising representatives from the government, the garment factory owners and SKOP[workers' representatives] as the workers demanded increase of minimum salary from Tk 940 [7. 59/Eur10. 97/$14. 03] to Tk 3,000 [22. 24/Eur 35. 03/$44. 79] because of the unprecedented price hikes of essentials." New Age, 29 June 2006) So far, as unrest in the factories continues, the bosses are resisting agreeing to a minimum wage of Tk 3,000 - an average 30% wage rise. The globalize sweatshop below we will briefly describe general working conditions and some background to the revolt: "Bangladesh is endowed with abundant and cheap labor force that is easily trainable and convertible into semi-skilled and skilled work force. Price, heavily weighted by the labor cost, is one of the main determinants of comparative advantage in the labor-intensive garment industry. The price of labor in our country is lower compared to some of our neighboring countries as well as some other garment producing countries in South-East Asia and East Europe. Obviously, existence of Md. Joynal Abdin mdjoynal@gmail.com
such cheap but easily trainable labor is one of the advantages that Bangladesh enjoys and will be enjoying over a considerable period in the context of international trade on clothing."(Bangladesh Garment Manufacturers and Exporters Association [GMEA] website.) "The garment workers of Bangladesh may be the most deprived labor force in the world. Most are paid between US$14 to US$16 per month, the lowest salary in the world". - Amirul Haq Amin, Coordinator of the Bangladesh Garment Workers Unity Council (BGWUC), 2005. "I get Tk 900 [7. 27/Eur10. 50/$13. 43] For a month of hard labor which is not enough to even cover my food bills,' said a worker at Tejgaon. 'Can you show me one worker who runs his family without a hitch with the money he gets?" - Sagar, who works in SS Sweater factory. "Bangladesh's apparel sector now employs 2.5 million in more than 5,000 factories and the largest industrial sector contributes more than 75 per cent to the country's export earnings." (New Age, 30/June/06) [2.5 million Is the highest and most recently quoted figure for workers - most sources saying 1.5 -1.8million.] In February 2005, the International Textile, Garment and Leather Workers' Federation found that the [official] monthly minimum wage for Bangladesh's garment workers was some $33 ten years ago, but that came down to $16 in real value due to devaluation of Bangladesh Taka against dollar. The Brussels-based organization shows that in India and Pakistan, an apparel worker gets at least 20 cents per hour, in China 23 cents, in Sri Lanka 40 cents while in Thailand the worker is paid 78 cents. (Bangladesh Trotskyism Democratic Workers Party.) This is the modern face of 'Globalization'. Capital goes where there is surplus labor to be had cheapest, installs its plant machinery and begins to extract profits. Equally, local capital sees an opportunity to utilize cheap local labor for the global market. In 1978 the Bangladesh government set up Export Processing Zones (EPZs) to attract foreign capital and earn export dollars. (100% foreign ownership, 65%; joint venture, 13%; 100% local venture, 22%.) In 1993 the Bangladesh Export Processing Zone Authority (BEPZA) was set up and a blanket ban on trade union activity imposed. An attractive investment location for investors, also including tax breaks and other incentives. The EPZs now employ 70,000 workers, mostly in the garment and shoemaking industries (though most of the garment industry exists outside the EPZs). National labor laws do not apply in the EPZs, leaving BEPZA in full control over work conditions, wages and benefits. The garment industry is the life blood of the Bangladesh economy. Garment factories in Bangladesh provide employment to 40 percent of industrial workers. More than three-quarters of the $7.8 billion of Bangladesh's export earnings comes from exporting garments. Despite falling prices, export volume has grown, and business is booming at present as the Bangladesh garment industry takes advantage of comparatively cheaper labor costs and World Trade Organization restrictions put on China, the world's largest Ready Made Garment (RMG) exporter. Bangladesh RMG imports to the US have increased 25% this year so far.[2]
In its negotiation of trade agreements with the US, the Bangladeshi garment industry is attempting to box clever in the arena of geo-politics; "Dhaka raised the issue that most of these countries rely heavily on the export earnings of textiles and apparel which are subjected to some of the highest US tariffs, averaging 17 percent. "Any debacle in the apparel industry would lead to massive unemployment of women, creating economic and social instability, and have other possible ramifications," the Ambassador said, conveying his country's apprehension to his American audience. Elaborating on Bangladesh's achievement in this sector, Chowdhury pointed out that in a society where women empowerment is so deeply entrenched there is no scope for religious radicalism. "This must be sustained," he emphasized." (Bangladeshinfo.com, July 06) The implication being that lucrative duty-free access to the American market will encourage social conditions that lessen the possibility of a rise in Islamic fundamentalism. It is true that the so far limited emergence of fundamentalism in Dhaka has led to attacks on unions for their attempts to organize the predominantly female RMG workforce. In the generally stagnant economy of Bangladesh, the ready made garment sector is the only significant economic force. This sector is entirely export oriented and is composed of over 5000 units - most working for international buyers, some owned by international companies. Most of the garment units are clustered in industrial areas and EPZs in and around Dhaka - Ghazipor, Savar, Ashulia, Mirpur, Tejgaon, Mohakhali, Uttara, Wari and Tongi etc. The textile and garments export constitute over 75% of a total of $7.8 billion exports from Bangladesh. Most of the garment workers have migrated from the poorest rural areas into the city slums. The slum population of Dhaka has doubled in the last 10 years. "More than 90 per cent of the slum dwellers have income below poverty line, which is Tk 5,000 a month a household. The dwellers are mostly transport workers, day laborers, garment workers, small vendors, hawkers and domestic helps..." (New Age.) It is this wider community that joined in the clashes and rioted with the garment workers. The 2 million or so workers in the Bangladesh garment industry work for little more than starvation wages, under conditions closer to those endured by European workers 150-200 years ago. 90% are young girls and women from 12 years upwards: physical and sexual abuse in the workplace is common. Average rates of pay in the EPZs are $20 a month, less than half the supposed official minimum wage, overtime is often compulsory and wages are sometimes withheld for months. Outside the EPZs, where over 80% of garment workers labor, conditions are worse. "Some of these garment workers earn as little as eight cents an hour, while the top wage for an experienced sewer is just 18 cents. ... Helpers earn: 8 cents an hour; $3.64 a week/ $15.77 a month/ $189.28 a year. Senior Sewing Operators earn: 18 cents an hour/ $8.40 a week/ $36.40 a month/ $436.80 a year." (National Labor Committee, www.nlcnet.org, 2004) Md. Joynal Abdin mdjoynal@gmail.com
"The bourgeois media reports that the industry currently owes $US300, 000 in back pay, a staggering amount considering the miserly wages." There are no guaranteed weekly days off, no holidays, no guaranteed maternity leave, and no annual leave. Employment is also often insecure; workers change jobs frequently due to wage arrears, lay-offs, ill health or harassment from the bosses and their security guards. The workplace is a highly dangerous place in this industry: in February and March this year 2 fires killed over 100 workers and injured hundreds more, provoking strikes. As is common, most exit doors were locked, increasing casualties greatly. Also in February, a multi-storey factory collapsed: originally built as a 2 storey building then over-extended, 19 workers were killed and around 50 injured. Thousands of workers have died from employers' neglect of safety procedures. Unions and workers though there are 16 unions representing garment workers, according to the Democratic Workers Party "...the level of unionization among workers is very low. Where unions are involved, they act more like extortionists, taking money from management to keep the employees in line while at the same time collecting dues from their members, with whom they have virtually no contact. Most of the unions have direct or indirect links with local and foreign NGOs, and receiving lucrative grants seems to be their main goal." Most of the trade unions appear to be tools of one or other of the political parties, strikes being used more as vehicles for pursuing political goals against rival parties than improving workers' conditions. The Nation Garment Workers Federation [3] apparently is an exception to this, being a more grass-roots organization, closer to an expression of workers' self-organization emerging from their own struggles. It would be too easy and simplistic to apply critiques of modern western business unions to such an organization. 11 years ago the NGWF was an organization with 3 workers paid a basic garment workers wage operating out of a shed in a workers slum. Working in conditions more similar for workers in Europe a century or two ago, basic organization for defense and improvement of working conditions is a matter, sometimes, of whether one starves or not. With rapid large-scale pro-letarianisation of rural workers in many parts of Asia (China, India etc) struggles for unionization are likely to follow. How institutionalized and bureaucratized organs like the NGWF might have become is unclear at present, and will be partly determined by their success as negotiators. One can predict that official recognition, with a greater budget and status to manage and protect, would accelerate that process. NGWF was at one time (though apparently no longer) in an alliance with the BGWUC , which has recently shown an eagerness to promise an obedient workforce to the bosses. [4] Though organizing trade unions was banned by employers in the EPZs, this is changing, as one of the concessions won by the revolt. This is anyway a convenient concession for the bosses; a Bill is being introduced into the US Senate which, if passed, would ban all imports produced in sweatshops. This is a form of US trade protectionism and corporate image management expressed as concern for workers' conditions. The Bill would penalize Bangladesh, Jordan etc and America's big rival China in, for example, the garment industry, by attempting to undercut their present advantage of cheaper labor costs. "... The Greater Los Angeles area ... has surpassed the New York area as the center of the North American garment industry. Home to more than 1,000 manufacturers who Md. Joynal Abdin mdjoynal@gmail.com
employ an estimated 90,000 workers, most of them immigrant, the garment and related industries account for as much as 10 percent of Los Angeles' economy, according to "Sweatshop Slaves." Nearly one in five local employees today work in the garment industry, making it Los Angeles' leading manufacturing sector." (Review of "Sweatshop Slaves: Asian Americans in the Garment Industry", Various, 2006.) As well as the dire conditions of employment, the low level of unionism is one likely reason for the ferocity of the workers response. When it erupts, unmediated class war is generally conducted more brutally on both sides. The Bangladesh state finally realized this when it brought in union officials to mediate and negotiate an end to the rebellion. In the long term, union representation is usually granted by the bosses as a necessary safety valve mechanism and tool of management for the stability of the production process. Riot as struggle some commentators, from the bourgeois media to the ultra-left; have considered the working class's use of riot as a sign of organizational weakness. On the contrary, we see their use of riot [5] and fire as brave and intelligent in a situation where they faced brutal repression by a determined body of employers and the armed forces of the state. Property damage combined with withdrawal of labor is a time-honored tactic of proletarians. Rioting also opens up an opportunity for the wider working class community to become involved in the struggle and immediately spread the perspective beyond isolated sectional activity. When the cops and army invade workers' living areas it is anyway inevitable that the neighborhood is drawn into the struggle. The extensive use of this tactic is also an inspiring example of effective collective self-organization that, for the garment workers, has been far more successful than all previous struggles. These events are part of a wider situation where, with so many workers in Bangladesh working at or below the level of a minimal wage necessary for survival, the class struggle more readily takes extra-ordinary forms. Thousands of primary school teachers have last week called off a hunger strike to the death in a struggle for higher wages. 15 said they would 'self-immolate' (set themselves on fire) if their demands were not met quickly. Negotiations are ongoing. (New Age, Dhaka.)[6] The economics of exploitation The workers' revolt led to a sharp drop in share prices as international investors panicked at reports of a 'workers' insurrection' in the garment industry. At a meeting between the garment owners and the major international buyers (Gap, Walmart, Asda, Carrefour etc) on June 29th, they were criticized for their handling of labour relations. The bosses responded by saying that the agreed concessions such as wage rises would be passed on to the buyers and retailers abroad. One buyer's representative, claiming fake indignation at low wages in the industry, (which never captured their interest till now when it jeopardized smooth supply and cheap price) replied by asking; why had wages not risen in 12 years when prices had? (In the same period the cost of living for workers had doubled.) First Secretary and Chief Economic and Commercial Officer of the US Embassy in Bangladesh David W Renz said it was not enough to just increase the workers wages.Improving the competitiveness is vital to compete in the global market." "Meaning: claw back the wage increases by pushing for higher productivity.
The ruling class in Bangladesh should be worried by this expression of workers' power - a major revolt forcing major concessions in the only significant export industry. Some Western analysts are already classifying the country as 'a failing state' and it is rated as the most corrupt in the world (in whatever way the ruling class calculates such things). This is causing international concern at the potential destabilizing influence on the region. "The geopolitical significance of the riots lies in the fact that they reveal the weakness of the Bangladeshi state. The failure of the government to contain the violence quickly and opting instead for half measures that satisfied neither side and did nothing to bring them to an agreement points to an implosion of govern ability and indicates that Bangladesh is drifting toward the status of a failed state. This has implications for the stability of the South Asian region." (pinr.com) The political system in Bangladesh is a vicious mess of instability and regular political assassinations. There is no cohesion within the ruling class, only warring factions perpetuating an economically and politically vulnerable state. For capital, the competition in the global RMG sector grows fiercer. Upward wage pressure, such as the Dhaka revolt expressed, will lead to demands for greater productivity to compete with those countries that have managed to keep the lid on wage demands. Competition for a bigger share of the market will cause market saturation and price drops. The possibility of new regulations outlawing or regulating sweatshop conditions by western buyer countries, as a form of protectionism and to ease concerns about corporate image, is another factor, as is import quota restriction by both the EU and US. The neo-liberal globalizing project has exported new forms of trade and production and, consequently, new forms of class struggle. The readymade Garments Industry is the key export earning sector for Bangladesh, which brings to this developing country $6 billion yearly revenue. The industry has over 4,000 export oriented factories and thousands more small scale sub-contractors which employ nearly three million workers most of whom are women (80%). All hell broke loose last weekend as a riot broke out in and around the capital Dhaka city when a garments worker was shot in Savar, an industrial zone 30km away from Dhaka as police was trying to control the angry protesters. The death sparked more violence as thousands of garments workers took to the streets in Savar, creating chaos and huge traffic deadlocks around the capital. A section of 800-1000 violent protesters with sticks lead by motorcycle processions resorted to widespread damage of vehicles, attacked about 300 garments factories, and torched many of them. Widespread lootings were also reported and finally extra security forces were deployed to prevent this from going further. From the Washington post: One thing I can say that we love our machines because they feed us and protect us from starvation. How can one with a sane heart destroy them? - female worker Masuda Begum. The Bangladeshi bloggers had different opinions on this issue. Change Bangladesh Blog wonders are Bangladeshis stupid enough to kill the duck laying golden egg? In Suchinta blog there is one video clip from the ATN News on the attack on Garments Industries, which provides visuals of the rioting and the views of the owners and the government. Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the owners association claimed This is part of a conspiracy Md. Joynal Abdin mdjoynal@gmail.com
to ruin the nations economy. They and the government are pointing to political manipulation citing that almost all protesters were men while the majority of the workers in the industry are women. Shafiur shades a light that there is no one union, one industry scenario here. The workers unions fall in line behind party politics and no doubt they can easily be exploited by the confrontational political parties. Like some parties were dumb enough to blame neighboring India behind this. All these beating around the bush neglect the prime issue, the exploitation of the workers. He also blames the Garments owners for demanding the use of force to deal with the issue. Rumi of Drishtipat supports the workers cause but is troubled with the anarchy the protests produced. Journalist Tasneem Khalil points to the fact that the workers are deprived from fair wage, fair working hour arrangements, weekly holiday, maternity leave etc. The monthly minimum wage for Bangladeshs garment workers was some $33 ten years ago, but that came down to $16 in real value due to devaluation of Bangladesh Taka against dollar. The labor organizations are pressing for increasing the workers minimum monthly wages to Tk 3,000 (18 cents an hour). Owners of RMG factories have subverted a government plan to fix a minimum national wage for workers in the private sector and continue to pay one of the lowest remuneration packages in the world. In my opinion, it is true that currently the wages are low but this small wages are also blessings for most of the workers as they would have no option to fall victim to more abuse as housemaids if there were no garments factory jobs. Using this leverage, the owners have been able to continue the slavery and exploitation. Its a pity that the government failed to uphold the rights of the workers by ignoring the minimum wages demand. The other political parties are also guilty to the same extent as they also do not fight for these causes. In reality, Bangladeshi politics are held ransom by leaders, who do not stem from the workers community but are wealthy entrepreneurs. The exploitation issue actually starts with the globalization and the growing competition. Dateline NBC investigates: In Bangladesh, a female worker, Masuma gets more like 17 cents for sewing as much as 80 stripes on pants in an hour, a perfectly legal wage, and more than many Bangladeshis like her earn. But she can barely live with that wages. If she was paid 25 cents an hour instead of 17, a 50 percent raise, she could lead what she considers a decent life. When a Walmart customer in US was asked in front of Masuma, whether she would by the pant (selling price $12.84) if it was 8 cents more, she declined. One Bangladeshi garments executive claims: A few years back, I told Wal-Mart, Give me one cents more a piece, one cent. I will use that money for these poor people. Wal-Marts reply was, No, give us two cents less. However consumers in the global economy seem to have no objection to Wal-Mart CEOs $27,207,799 pa salary for encouraging such exploitation.
Actually the Bangladeshi entrepreneurs have also little option and are forced to keep the wages low in order to survive. It is like the master-slavery chain. Whether we accept it or not, we all are chained humans, there is a master above us and we are a master of someone. And the exploitation continues. The truth is no hero or revolution is going to break the chain saving us anytime soon. Bangladesh: Industrial Chaos Worsens Political Instability Bangladesh has already been grappling with political instability due to the prevailing confrontational politics in the country. The situation was made worse when the countrys major industry and its main foreign exchange earner Ready Made Garments (RMG) industry got embroiled in labour unrest. The industry owners and political leaders initially tried to sweep the grievances of labour under the carpet by floating various conspiracy theories. But the problem has refused to die down as its roots lie within the industry and in the exploitation of labour. Garment Industry of Bangladesh Bangladesh earns nearly $7 billion a year by exporting textile products, mainly to Europe and the United States. This is about 70 percent of total export earnings of the country. The RMG industry has around 4,000 units across the country. It employs around 2.5 million workers, 90 percent of whom are poor women. Whenever the country is criticized for its high level of corruption and confrontational politics, its garment industry is held up as a success story. Dark Side of the Garment Industry This most flourishing industry of Bangladesh has its dark side. A large number of the units are located in dilapidated buildings. In April 2005, an entire building, housing hundreds of mainly female workers in the outskirts of Dhaka, collapsed. Sixty-four laborers, at work on their machines, were crushed to death, and 84 injured. What is worse, most of these buildings do not have adequate fire escapes. On February 24 this year, more than 50 people were killed and about 100 injured in a fire at a textile mill in Bangladesh. The industry leaders unite together to get support and benefits from the government, but they are not equally willing to look after the welfare of workers. In the RMG industry in several places in Bangladesh workers are paid their salaries two moths late. Overtime is imposed and in some cases not rewarded. The rising inflation has reduced the value of wages. But the industrialists say that its the job of the government to control inflation. Exploitation of Workers Unions say garment workers are angry over low pay and long hours. Wages in Bangladesh's garment factories can be as little as $20 a month. Thanks to poor working conditions, employer-worker clashes have been recurring in the textile industry. Workers often take to the streets with complaints of poor pay and working conditions.
Uncertain Future of the Industry After the end of the Multi-Fiber Agreement at the beginning of 2005 and the changeover to the new World Trade Organization regime, it was feared that the Bangladesh's booming textile industry would suffer as it would loose business to countries like China and India. But fortunately for Bangladesh, so far this prediction has been proved wrong. In fact, the industry has continued to grow at a healthy rate of 20 percent. However, this does not indicate that the Bangladesh garment industry has become more competitive. The reality is that this increase has been largely due to restrictions imposed on China by the Western nations than to the ingenuity in Dhaka or Chittagong. The Chinese cannot be held back after 2008, which means a completely different picture might emerge after that. Industry also faces various infrastructural problems. Due to shortage of power and diesel industries are not able to work to their full capacity. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) fears that production in RMG industry might fall by 50 percent and production cost might go up by about 25 percent due to the crises. Due to power shortage shipments are sent through air, thereby increasing its cost. Unfortunately the government has not taken any step to improve the situation. On the other hand, people have been shot dead for demanding regular supply of electricity. Worst Industrial Rioting in the RMG Industry The spiraling labour unrest in the Bangladesh RMG industry started on May 23 after a knitwear factory owner rejected an 11-point charter of demands. The factory was completely gutted in the blaze. Protesting workers forced their way into an exclusive industrial zone for foreign investors and damaged machinery. These workers demanding unpaid wages and a weekly holiday smashed scores of vehicles and burn down factories in Savar, an industrial town near Dhaka. Among the 250 damaged units, at least 30 were owned by foreign investors in the Savar Export Processing Zone. According to Bangladesh Garment Manufacturers and Exporters' Association (BGMEA) vice-president (finance) Shahadat Hossain Chowdhury Arun nearly 300 factories, including 21 factories in the Savar Export Processing Zone (EPZ), were damaged during the three-day crisis. The total loss of the garment industry is around four billion taka (nearly $70 million). Many vehicles were also set on fire during the unrest, which left three workers dead and hundreds others wounded. This is reportedly the worst industrial rioting in Bangladesh in the ready-made garment industry which is the country's biggest export earner. The violence also dealt a serious blow to the industry's image apart from causing huge losses. A Rights activist and trade union leader Shrin Akhter blamed the outbreak on accumulated anger of workers, who even do not have any weekend. She alleged that some garment owners even do not pay the worker their salaries and overtime regularly. And in some cases, the employees loyal to owners cut 2 percent from the salaries and overtime allowances. Conspiracy Theories The violent outburst of the workers crippled the industry for many days. Several quarters saw sabotage behind this development. But interestingly all of them found the involvement of different actors according to their own convenience. Government Md. Joynal Abdin mdjoynal@gmail.com
ministers and leaders of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) alluded to an Indian role, alleging that the violence was the result of "conspiracy from across the border." Finance Minister M Saifur Rahman said the attack on the readymade garment sector was influenced from outside to hamper growth of the industry. He said, "What happened in the past few days is very frustrating, but I don't believe that it can be carried out by workers." Commerce Minister M Hafiz Uddin Ahmed, in a meeting with the Bangladesh Knitwear Manufacturers Association (BKMEA), also called the happenings "sabotage". State Minister for Home Lutfozzaman Babar termed the outburst in the garments sector as a subversive act. He also thought that it was a part of a conspiracy against the country. But the same minister had seen a "conspiracy from across the border" last year as well, when about 500 explosions occurred across the country on August 18. Very soon the issue also acquired political overtones. Main opposition leader Sheikh Hasina demanded the government's resignation. The opposition also alleged that the government has created the trouble in order to shift the peoples attention from its various failures. On the other hand, the ruling Bangladesh Nationalist Party (BNP) said it would mobilise the public against "attempts at spreading anarchy". Former president and Jatiya Party chief Gen (rtd) HM Ershad blamed "vested quarter" behind the violence and mayhem, but did not specify. Leading economists of Bangladesh have criticised both the employers and the government for their sheer negligence to overcome the present anarchic situation in the country's readymade garments (RMG) industry. According to Bangladesh Economic Association (BEA) president Quazi Kholiquzzaman Ahmed the current situation in the RMG sector is an explosion of anger that remains unresolved for long. Agreements with Garment Workers not honoured A study by Bangladesh Institute of Labour Studies (BILS) has indicated that garment manufacturers and exporters in Bangladesh have yet to implement four agreements signed between 1997 and 2005 to defuse problems following labour unrests. A number of labour leaders believe that owners reached accords with workers just to defuse troubles whenever there was unrest. Instead of implementing deals, the owners even filed a writ petition against the government notification about minimum wages for labourers circulated in 2001. The factory owners also did not implement the 24-point suggestion offered by the Department of Inspection for Factories and Establishment in November 2000. The department pointed out 24 kinds of irregularities in the garment industry that went against labour laws. Inspection by the department also found that nonimplementation of labour laws resulted in discontent and anger among the workers. Garment Workers' Unrest Flares Up Again Protests over low wages and other exploitative conditions continued in the month of June too. The garment workers continued to hold rallies and clashed with law enforcers, leaving many people injured and few dead. Defying a 'red alert' imposed by law enforcers at the Dhaka Export Processing Zone (DEPZ) and its adjoining industrial areas, workers were involved in clashes in the Savar, Ashulia and Gazipur areas. Md. Joynal Abdin mdjoynal@gmail.com
The deepening unrest in the garment industry forced the foreign investors to announce on June 4 that they have shut their units as fresh violence flared up in the Export Processing Zone (EPZ). Investors of 92 units in the EPZ said that they will not reopen the units until the government gives guarantee of law and order in the area. They also requested the EPZ authority to declare the EPZ closed indefinitely to cool off the situation. Leaders of the garment factory owners' also urged the government to form an industrial police force to ensure a secure working environment for the apparel industry. They felt that the overall security situations in different industrial hubs were not risk free despite the governments deployment of huge security forces. Speaking to media on May 25 acting president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said, "We need permanent solution to overcome this situation." The Bangladesh government on June 5 dismissed Mohammd Zakir Hossain, chairman of Bangladesh Export Processing Zones Authority (BEPZA), for failing to adequately respond to violent protests at clothing factories. The government also promised disciplinary action against several other executives. Labor Unrest amidst Political Instability Unfortunately for Bangladesh, this labour unrest has taken place at a time when the main opposition party is also leading a movement for political reforms in the country. The 14-party opposition alliance led by former Prime Minister Sheikh Hasina Wajed called a 36-hour shutdown on June 13 and 14 to press home its demands for electoral reforms, resignation of the chief election commissioner (CEC) and two 'politically appointed' election commissioners, and to protest 'police atrocities' on opposition leaders and workers during the Dhaka siege on June 11. The countrywide shutdown disrupted normal life, affecting communications and economic and other activities. Hundreds of people have been injured in clashes between protestors and the law enforcers. Increased political activity in the form of political agitation was expected in the runup to the upcoming elections in Bangladesh given its history of confrontational politics. But the political instability has been made worse by the simultaneous labour unrest in the economic lifeline of Bangladesh that is its garment industry. Initially the government and the industry leaders underestimated the magnitude of the problem and tried to brush it aside by floating various conspiracy theories. But these theories were bound to fail as the problem lied in the exploitation of workers. It is preposterous to blame India for a labour unrest in Bangladesh. If the leading industry of Bangladesh collapses it would directly affect India as the economic chaos in its neighbourhood will lead to large-scale exodus. This would create a bigger problem for India. Bangladeshi industrialists have been exploiting workers, sometimes to increase their profit margins and sometime to keep their industries competitive in the face of increasing international competition. Thankfully, they have now realized the root cause of the unrest and are trying to deal with it. However, only time will tell whether the deals struck even this time would be implemented.
Tripartite meetings for competitiveness in the garment industry: Labour unions, employers and government In order to respond to this need for an open dialogue among the actors of the industry, The Asia Foundation (TAF) launched, toward the end of last year, a regional project on Building Competitiveness through Economic Reforms in the Garment-Exporting Countries, with financial support from the United States Agency for International Development (USAID), in Bangladesh, Cambodia and Sri Lanka. Through this project, The Asia Foundation, with the assistance of a local consultant, facilitated tripartite meetings among representatives of employers and employees of the ready-made garment (RMG) industry, and public authorities to discuss countryspecific agendas for domestic reforms that will enhance the ability of Bangladesh to compete with other nations in maintaining a share of the global garment trade. The eight-month program implemented simultaneously in the three countries builds upon active engagement by the international community involved in this sector. Consulting with other stakeholders Prior to organizing the tripartite meetings, The Asia Foundation carried out consultations with a number of stakeholders knowledgeable about and involved in the RMG sector. Discussions were held with representatives of factory owners' associations, labour federations, government departments, non-governmental organizations (NGOs), research organizations, and donor agencies for eliciting information on the state of the garment industry in Bangladesh and identifying the key actors in the RMG sector of the country. The stakeholder consultations and preparatory meetings helped in building rapport with the three parties -- employers, employees and public authorities -- and set the stage for holding the tripartite dialogues. Discussions with them highlighted the key issues and concerns of these groups and provided a basis for shaping the agenda for the tripartite meetings. This consultation with the other stakeholders also led to the development by The Asia Foundation of a matrix on Who Is Doing What in the RMG Sector. Developing and updating this matrix is an on-going process aimed at keeping track of the main activities that donor agencies, NGOs, civil society, and government departments have undertaken in the recent past or are currently conducting in order to support the garment industry of Bangladesh. Engaging the actors In Bangladesh, the program was launched at a pressing time of high tension and deteriorating industrial relation between employers and employees. However, the first tripartite meeting was held on April 3, 2006, with members of labour unions, representatives of business associations and of the main relevant ministries. During the meeting, all sides of the sector agreed upon the importance of creating a venue for an open and constructive dialogue among the main actors. All parties agreed that since other venues, facilitated by international organizations or organized by the government, are specifically aimed at tackling issues such as Md. Joynal Abdin mdjoynal@gmail.com
labour compliance or labour dispute, these tripartite meetings should avoid such controversial issues to concentrate on building understanding among the three parties and on discussing areas of reform where a consensus may easily be reached. This first meeting was thus designed to enable the three parties to freely exchange views on the status of the industry in general and how to make it competitive under conditions resulting from the expiry of MFA in particular. In this meeting, the participants identified and discussed key issues that affect the RMG sector. These issues cover a wide range of areas where improvements and reforms have to be made in order to make the garment industry more competitive. These include inadequate infrastructure (e.g. poor quality of roads, railways and ports, and erratic supply of electricity and gas), inefficient and corrupt facilities (e.g. port and customs procedures), insufficient business support (e.g. high bank interest and charges), low level of labour standards and compliance (e.g. low wages and inadequate compensation, unsafe working conditions, low level of productivity and skills, non-implementation of labour laws), and ineffective policy support (e.g. lack of government initiative to promote setting up of backward linkage industries and "garment villages"). On most of these issues, there was consensus amongst the participants and a willingness to work together for the betterment of the industry. In the second tripartite meeting held on May 22, 2006, prior to discussing potential activities to be carried out to better address the issues identified earlier by the three parties, and in order to avoid potential duplication, The Asia Foundation presented the matrix on Who Is Doing What in the RMG Sector. The participants then suggested a number of activities that The Asia Foundation and other stakeholders could undertake to improve the competitiveness of the RMG sector of Bangladesh. The suggested activities cover a wide range of areas relating to awareness raising, social compliance, training of managers and workers, campaigning for fair prices, institutionalizing tripartite meetings, facilitating discussions with development partners on their projects, etc. The participants agreed on two activities that The Asia Foundation could conduct or commission as part of its present program in Bangladesh. Acknowledging the fact that creating an informal venue where the three parties could meet on a regular basis to exchange information and discuss issues facing the industry was helping the process of creating a better environment for the industry in Bangladesh, the participants agreed that the first activity should focus on how to continue these tripartite meetings after the end of the current USAID-sponsored program, in July 2006. The second activity consists in "publicizing" the outcome of the tripartite meetings through a series of articles in order to raise awareness about the reality of the situation of the post-MFA RMG sector in Bangladesh. The third tripartite meeting, held on July 13, 2006, focused on the implementation of these two selected activities. Participants confirmed their will to continue this informal dialogue among the three parties and agreed on general guidelines for continuing the tripartite meetings after the end of the program and discussed the content of the articles to be published. This meeting was also the occasion to invite other stakeholders such as international organizations and NGOs, to present them with the outcome of the tripartite meetings and share views about possible activities. The series of tripartite meetings facilitated by The Asia Foundation between January and July 2006 have provided an opportunity for the participants to frankly exchange Md. Joynal Abdin mdjoynal@gmail.com
views and discuss difficult and sometimes controversial issues in a professional manner. The participants have been sincere in their efforts to understand the problems confronting the industry in general and each party in particular. Despite the recent workers unrest and agitation, which often became violent and led to widespread disruptions in many factories, or because of this conflict situation, the participants to the tripartite meetings acknowledge the importance of continuing this informal and constructive dialogue. The participants all clearly stated that these tripartite meetings do not aim to create a venue for negotiation or dispute settlement but rather to establish a regular forum for exchanges and discussion on issues that all parties agree need to be reformed to improve the competitiveness of the Bangladeshi RMG sector in the post-MFA era. How should set the minimum wages in RMG sector? Need is not only the materials essential to live but also it contains the standard of living of the particular country even it is same to the poor and lower income group. Need allows that rights also which are common to live in a minimum standard. Bangladeshi RMG industries have a great contribution in our GDP it is about 9% (according to the Center for Policy Dialogue) & it earns about 75% of export currencies. Twenty laces of labor are working in this sector with 70% women workers. This sector had to fight with various problem time to time. Such as infrastructural insufficiency, international quota facilities withdraw in 2005 but its growth was upward woven 13.5% & knit 35.4% in 2005 2006 fiscal year. Recently labor unrest raise a major problem for this sector, any harm of this sector may influence our national economy also. This problem includes 01. Working environment in the factories, 02. Working hours, 03. Weekly holyday and 04. Minimum wages of the worker. Rests of the issues were discussing promptly but the main problem is the settlement of minimum wages for the labor. I would like to recommend some ways this problem can be solved but I can not recommend what should be the minimum wages of the labor. Steps to solve the problem & current situation: To stop the labor unrest in RMG sector raises from May 2006, a contract has been signed among the worker leaders, owners & government in 12 June 2006 with ten articles. The contract includes the following matters: 01. To be sorrow in the damage of wealth & taking necessary actions to stop labor unrest immediately. 02. The labor being faced cases in Gazipur, Asulia & Saver these cases have to withdraw. 03. Relief of the arrested labors & no labor can be fire from his job. 04. Opening the factories being stopped. 05. Issuing of appointment letter & identity card of each worker. 06. Owners have to allow Trade Union & their bargaining. 07. One weekly holyday & other holidays according to the rules of the country. Md. Joynal Abdin mdjoynal@gmail.com
08. Overtime have to pay according to the labor law. 09. Maternity leave have to permit with salary. 10. A board has to arrange to set minimum wages of the labors. To set the minimum wages government declared a board with the owners, labor leaders & neutral representative at 31 May 2006 with six members. This committee declared a minimum wages & request to implement it within three months. The owners & labor did not agree to implement these recommendations. Wants of the labors: To declared minimum wages the labors have raised some issues like a. Minimum main salary should be 3000 BDT and different scale should be mentioned with different salaries for each grade. b. 35% of the main wages have to pay as house rent. c. 300 BDT as medical allowance. d. 400BDT as transportation cost. e. 200 BDT as attendance bonuses & 100BDT as washing cost. f. According to this statement minimum wages can be 5050 BDT. Offerings from the owners: The owners try to set five grades in state of present seven grades, they offer only 1230 BDT for the grade 5, according to this statement a labor with get 1900BDT at the end of a month. According to the different news published in different national dailies the owners can be provide up to 1300BDT as minimum wage. Another neutral representative offers to both the parties 1800BDT main salary & 2650BDT as minimum salary. When did minimum salary setup in Bangladesh? There are no national minimum wages in Bangladesh. There was a board to declare minimum wages for any sector was established at 1961 by the 34 Ordinance namely (minimum wages ordinance). This board can setup minimum wages for any sector when requested. In the November, 1990 government requests them to setup a minimum wages for the labors working in the RMG sector. This board recommended a minimum salary to the government in 1993 for implementing from January 1994. Previous 12 years followed that minimum wages notice & no change were there. Bangladesh did not agree with the minimum wages related ILO convention 138. RMG workers wages in different countries: We can compare minimum wages of some countries equal socio-economic country like Bangladesh. It can be based on their economic condition, social standing and others but minimum wages can be compared with the countries as follows: Country Area Minimum wages Sri-lanka EPZ $ 50 US Bangladesh EPZ $ 30 US Pakistan $ 43.25 US Cambodia $ 45 US China Ziang Zee $ 22 US Md. Joynal Abdin mdjoynal@gmail.com
Bangladesh Methods of setup minimum wages:
$ 10 US
Different ways of setup minimum wages can be describe here, followings should be considered to set a minimum wages: I. Basic Needs of the workers: Minimum wages should be set up by considering the basic needs of a worker. The daily needs & required services should be meeting up with this salary. It can be calculated by considering house rent, food needs, medical allowance, transportation & recreation etc. his family size, income of such families & sources of income should be known to select minimum wages for the labors. II. Capacity to bear the wages expenses for the employers: It should be considered how much minimum salary can be paid up by the RMG owners. In this can the rate of profit & its ratio is important. Rate of income depends on, size of the factory, product, productivity, marketing expenditure & international demand etc. III. Comparing minimum wages of the other sectors of Country: It should be considered that, what are the minimum salaries of the other sectors of this country. Minimum salaries should be increased in RMG sector comparing to the international value chain like lather product. IV. Balanced Economic Development: Minimum wages should be set up by considering the matter of balanced economic development. It should not be so high that our RMG sector will not be competitive in the international perspective. At the same time it should not be as lowest as present. Re setup present minimum wages: The main issue of current labor unrest in Bangladeshi RMG sector is minimum wages issue. Minimum wages should be revised based on current cost of living & other factors. It was estimated in 1994 but costs of living have increased a lot today. So it also should be revised. To do this followings should be considered: a. Inflation in the Economy: Currently a great inflation has occurred in our economy. Price of each material has increased up to 100%. So minimum wages should be setup based on rate of inflation & its effect in the consumer price index. Minimum wages should be calculated up to 100% of the inflation. Not more than that or less than that. Because more wages increase may be cause of another inflation, on the other hand less increase of wages may be cause of poor living as well as another labor unrest in the RMG. b. Growth of National Income: Minimum wages should be set up based on national income otherwise it will be value less. It should be considered that, with the growth of national income labors income should be increased.
c. Exchange Rate: There will have to be equilibrium among the exchange rate as well as minimum wages of labor. In this case in can be calculated based on U.S. Dollar price with BDT. It should be considered that, benefit of BDTs devaluation should be enjoyed by the labors as it is enjoying by the exporters. d. It should be upper than poverty line: Minimum wages should be upper than national poverty line, otherwise revision of minimum wages will be value less. In fine it should be considered that, a labor provide his / her service against wages. To fulfill his / her & there family lives what should be faire & decent wages it is mater of dialogue. According to Carl Marx Minimum wages should be capable to fulfill labor & his family lives & cultural needs to make him fit for the next time labor. We should remember that, minimum wages is the least amount of wages according to law. To set up a faire & decent minimum wages owners & government can play a pivotal rule. It should be increase yearly so that twelve years load can not be jam at a time. How much BDT should be the minimum wages in RMG sector? Minimum wages is not a competitive salary. It is fixed up for the labor those are not skilled at all; it can save his from the exploitation of the owners. In the recent face I discuss various methods of set up minimum wages for RMG workers in Bangladesh. Now I would like to explain how much money should be the minimum wages in RMG sector: 01. According to the poverty line method: According to the eating cost study of 2000 the poverty line was 708 BDT or $14 US. Its exchange value with US Dollar at June 2006 it is equal to 975 BDT. It is quite impossible to select a minimum wages less than this poverty line. But RMG is a modern export oriented global business. In this sector minimum wages should not be selected based on poverty line. 02. Equilibrium method with the current minimum wages & rate of inflation: If we make it equilibrium with the minimum wages of 1994, i.e. 930 BDT it is equal to 1778 BDT according to the inflationary changes. It is not an international standard scale because according to economic law it should be selected based upon exchange rate & economic growth of the country also. So it will higher than that of the equilibrium method. 03. According to the method of exchange rate: In 1994 it was $1 US = 40 BDT, at that period minimum wages was 930 BDT. With the devaluation of BDT now in June 2006, $1US = 69.7 BDT. So, minimum wages should be about 1500BDT if we remain unchanged the minimum wages of 1994. But should it be remain unchanged in 2006 after a great deal of inflation in each price list? 04. According to the economic growth method: If we think about the growth of economic indicator / index it will be 2818 BDT instead of 1770 BDT. On the other hand labors consumer index increase into 2156BDT from 1433BDT so according to this method minimum main wages should be upper than 2156 BDT.
05. According to the productivity method: In this case it have to remember that, in our country a unskilled worker became a skilled labor in a factory and a owner train up him for his own interest. After being train up a labor can shift from this factory to the others. So this mater also should be considered when a non-skilled labors minimum wages set up. If the wages level of this workers do not differ from their seniors then a half skilled labor will be dissatisfy to his / her work. On the other hand productivity of the private labor is more than that of the public labors (Government factory labors). In a government factory minimum wages of a labor is 2450BDT. So wages of RMG sector should be more than that of them, because it is proven true that RMG workers are more productive than that of a government factory. 06. Minimum Standard of Living Method: Minimum wages of the labor can be set up based on any of the above methods. But it is essential that this wages will satisfy workers basic needs & daily demands. To fulfill daily demand a worker needs how much money it can be shown according to different researches: a. According to the study of Seba Nari o Sisu Kalyan Kendra 2006 single labor needs 1950BDT for his own lives in Dhaka city. It is done to calculate only his expenditure. His family members or others are not included here. b. According to Trade Union Kendraw it is 9300BDT for a five members family. But if we calculate it only for four members in a family than it should be less than that of above mentioned. Probable pressure on RMG sector if increased wages being implemented: It is true that Bangladeshi product loss its price after quota facility being withdraw in America & Europe. According to the data of BGMEA one pants or shirts C.M was $20 - $30 US in 2004, but it is only $8.5 $12.00 today. This decrease is less in the European market than that of the America. As a result owners are facing less profit. According to BGMEA statement if this decrease continue then owners can not implement increased wages of the labor thus many factory can not continue their operation in so competitive market. It is true that CM has decrease but it should not be considered only but it also be considered that yearly number of work order has increased than that of the previous time. In the 2005 2006 fiscal year growth of oven sector was 13.5% and knit sector 35.4%. so it is easy to understand from that growth rate that profit can be declined per pieces of product but yearly profit is not declined. It is also considerable that large factories gets lots of orders at the same time they earns hues profit but it is less in both the cases for the small factories. It has to be considered that, workers are getting more salaries in a large factory comparing that in a small factory. But national minimum wages should be representing all the maters. At the same time it is also be considered that, labors should be issued appointment, identity cards, weekly leave, maternity leave with wages, and right to trade union. As a result productivity will increase when a labor is satisfied. Md. Joynal Abdin mdjoynal@gmail.com
B. Prospects of Bangladeshi RMG Industries Forces behind the Development: The success story of the Readymade Garments sector of Bangladesh is based on employment generation and increasingly high value addition, thus smoothening the path for growth and development of the country. The apparel and garment industry propels sectors such as banking, finance and insurance, cargo, shipping and transport, entertainment and hospitality, research and education and a lot more. The mentioned performance of the industry has been possible due to: 01. The Government of Bangladesh has always been concerned about the sector's growth and has played an active role as a catalyst to solve various complexities, whenever intervention was necessary. 02. The cheap but disciplined and regimented workforce has been key for the success of this industry. 03. The entrepreneur class has been dedicated and motivated to the country's economic prosperity. 04. The quality of the manufactured apparel, which has been increasingly recognized by our international buyers and end users all over the world. 05. Buyers' response has been encouraging through repeat orders. The industry has been producing all sort of apparels for all seasons and has managed to get repeat orders for every season. 06. The import policy of Bangladesh has been flexible and friendly for import of accessories. 07. Although there are accountable anomalies, the financial institutions, both nationalized and private, have been serving to assist this sector. 08. Readymade garment industries have managed to maintain the confidence of the buying class and others in the business. 09. Although the backward linkage textile industry is not adequate for the needs of the RMG industry, it has been supporting regular manufacturing and supply systems to some extent. Global Ready Made Garment Industry Global Ready Made Garments exports have experienced extraordinarily high rates of growth, along with the continual entry of new suppliers. Global export of textiles and ready-made garment (RMG) exceeds US $ 300 billion per year, well over one-third of which is accounted for by developing countries. Growth was particularly dramatic in China with exports increasing several times over previous years, for Mexico and Turkey, for Mauritius and Jamaica, as well as the better known cases of East and South-East Asia. Md. Joynal Abdin mdjoynal@gmail.com
The value of world garments exports is estimated to have been $166 billion in 1996 (WTO 1998, vol. 2, p. 132).4Until the end of the 1980s the top four garment exporters were Hong Kong, Italy, Republic of Korea, and Taiwan. China emerged as a leading exporter in the second half of the 1980s and today occupies the number one position in the world. In 1995 China and Hong Kong together had a share of 21.2 per cent of the world markets, and they pose a formidable challenge to other developing countries. The United States and the EU together imported more than 70 per cent of world's clothing imports in 1996. In that year the United States and the EU imported clothing worth $43.3 billion and $80.9 billion respectively (WTO 1998, vol. 2, p. 133).5 China emerging as a major supplier of clothing is a big worry. It is the largest garment exporter in the world and its share in the world garment exports amount to 20 per cent. Several developing countries such as India, Thailand, Bangladesh, Indonesia, Sri Lanka, Pakistan, East European countries and Turkey are all becoming sizeable producers of ready made garments. Experts believe that the 2004 phase out of apparel export quotas currently in place under the multi-fiber agreement (MFA), garment manufacturing will shift to China at such a scale that it will become the producer of half the world's garments by the end of 2005. RMG Industry as a Source of Alternative Income for Women Men who can not find a viable source of income frequently resort to migration to urban centers. This is not such an easy option for women, however. Migration is a highly gender-differentiated population movement. There are differentiated responses based on gender towards individual factors concerned with migration, entailing different consequences. There are diversities in migration patterns in different countries and regions, reflecting diverse macro as well as micro structural forces along with individual agencies.14 although a preponderance of males in the migration stream prevails in most of the world, some countries such as the Philippines and those of Latin America have demonstrated female dominance, especially in migration to urban areas. Conversely, in South Asia it has been reported that independent female migration to towns is still rare. According to Chant and Radcliffe (1992: 4-7), the differences in female migration are caused by the lack of employment opportunities in low-wage industry and service sectors in towns and cultural barriers such as female seclusion which prohibit any independent movement of women. Bangladesh was considered to be a typical example of low incidence of female migration. This is corroborated by the high sex ratio (number of males per 100 females) in urban areas compared with rural areas (Table 5). Nevertheless the gap has been closing over the years, as shown in the same table. The sex-ratio of Dhaka also decreased from 150 in 1961 to 123.4 in 2001, indicating a relatively greater increase in the female population in Dhaka in recent years. Table 6 also indicates the large decrease in the sex-ratio for the age groups between 20 to 40 over the period between 1981 and 2001, with the largest decline for the 25 to 29 age group. This is considered to be a clear indication of increasing migration of women of working age. Md. Joynal Abdin mdjoynal@gmail.com
This is corroborated by labor force survey data. The urban female labor force demonstrated the highest rate of increase throughout the period between 1974 and 1999/2000 (Table 7). Table 5. Sex-ratio of rural and urban population
Source: Analytical Report of Population Census 1991 and Population Census 2001: National Report (Provisional). Table 6. Changes in urban sex-ratio by age group
Source: Computed from figures obtained from Analytical Report of Population Census 1991 and Population Census 2001: National Report (Provisional). Employment in the garment industry has played an instrumental role in the increase of independent migration of women (Afsar 2000: 123). Table 8 presents a list of the major female occupations in urban areas. Doctor, teacher and other professional jobs, which are socially recognized as suitable for women, constitute only a small segment of the urban female labor market. The tailor, dressmaker category, which Md. Joynal Abdin mdjoynal@gmail.com
covers jobs in garment factories, constitutes the dominant occupation, accounting for 30 percent of the total female urban labor force. Table 7. Annual average growth rate of labor force, 10 years and above (%)
Source: Calculated from LFS 1995-96; 1999-2000 This is followed by housemaid, and the two occupations together make up half of urban female employment. These are also the few occupations in which female workers outnumber male workers. Male employment in the tailor, dressmaker category is 2,68,000, compared with 7,18,000 for females. In the case of housemaids, the difference is much larger, 62,000 male and 4,54,000 female workers. The predominant position that the RMG industry occupies in urban female employment is indicated by the fact that 78.3 percent of female employment in the manufacturing sector is provided by the RMG industry alone (Census of Manufacturing Industries 1999/2000)15. This figure is significantly higher than that for male workers, which is 21.2 percent. (For males, the next highest occupation is in the manufacture of bricks, tiles and non-clay products (13.5%).) For both male and female workers in the manufacturing sector, RMG is the largest source of employment. But while male employment is distributed across various sub-sectors, female employment is highly concentrated in the RMG industry. Thus the performance of this sector has an extremely important bearing on the employment prospects and welfare levels of women.
Table 8. Major female occupations in urban areas (10 years and above)
Source: Compiled from LFS 1999/2000 Needless to say, the RMG industry has brought significant economic benefits to poor women who were previously deprived of any means of income generation or had only limited choices with low economic and social remuneration, for instance, as domestic servants, construction workers and sex-workers (Zohir and Paul-Majumder1996; Kabeer 2000). In addition to immediate improvement in income levels, resulting in the improvement of diet, housing conditions, and purchasing power, the steady income provided by RMG employment has contributed to a longer term improvement in their living conditions. The dynamics of the poverty reduction mechanism for RMG workers functions through savings, accumulation of assets such as land and housing, investment in business and education of children and siblings.
The role of the RMG sector in our national economy The role of the RMG sector in our national economy can hardly be over-emphasized. There has been a steady development in our RMG export field during at least the last decade and a half but in the last few years it has been unique. The export of RMG recorded an average growth of 21.53% since 1994-95. The growth of export in the RMG sector from 1993 to 1999 shows that in 1993 it amounted to 61.4% of the countrys total export income, and by 1999 the it was 76.05%. This indicates how rapidly the export of the RMG has grown (see Table 1) Table-1: Development of the Export of RMG Sector Md. Joynal Abdin mdjoynal@gmail.com
YEAR 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999
Export of RMG (in Mln. Total Export (in Mln. Share of RMG's to Total US$) US$) Export 1555.79 2533.90 61.40 2228.35 3472.56 64.17 2547.13 3882.42 65.61 3001.25 4418.28 67.93 3781.94 5161.20 73.28 4019.98 5312.86 75.67 2810.38 3695.46 76.05
Source: Bangladesh Export Statistics, Export Promotion Bureau (EPB) (Compiled). The share of annual national export income from other sectors such as frozen food and jute goods together is not more than 12% of the annual national export income (see Table 2). Table-2: Development of the Export (in Million Taka) of different Sectors from 1993 to 1999
Commoditi 1993-94 es Amoun % t Woven 51 47.21 50.97 1994-95 1995-96 1996-97 1997-98 1998-99 Amount % 14320.8 56.18 0 4967.67 19.49 19288.4 75.67 7 1316.17 5.16 184.99 0.73 344.14 1.35 380.19 1.49 807.20 1457.78 25491.1 0 3.17 5.72 100.0 0
Amoun % Amoun % Amoun % Amoun % t t t t 7360.53 52.85 7970.65 50.20 9529.18 50.65 12900.1 55.09 8 Knit 1052.58 10.42 1577.37 11.32 2447.12 15.41 3250.11 17.28 4266.17 18.22 Total RMG 6199.79 61.40 8937.9 64.17 10417.7 65.61 12779.2 67.93 17166.3 73.31 7 9 5 Frozen 638.91 8.31 1225.93 8.80 1283.01 8.08 365.65 7.26 1333.13 5.69 Food Tea 152.14 1.51 131.54 0.94 135.51 0.85 162.39 0.86 21 5.36 0.92 Raw Jute 227.23 2.25 318.74 2.29 371.12 2.34 495.29 2.63 488.94 2.09 Chemical 21 6.73 2.15 431.65 3.10 402.68 2.54 461.89 2.46 363.21 1.44 Product Leather 670.16 6.64 810.52 5.82 865.86 5.45 832.35 4.42 863.21 3.69 Jute 1130.89 11.20 1278.62 9.18 1345.29 8.47 1353.45 7.19 1276.82 5.45 Grand 10097.5 100.0 13928.4 100.0 15879.0 100.0 18813.0 100.0 23416.3 100.0 Total 9 0 6 0 9 0 4 0 7 0
Source : Bangladesh Export Statistics, Export Promotion Bureau (EPB) (Compiled). Back in the 80s, a large number of private sector initiatives were taken in manufacturing sectors like the RMG industry. The RMG industry has enjoyed a meteoric rise from less than 50 factories in 1983 to over 3000 in 1999. In between this period, the level of employment has increased from some 10,000 to approximately 1.5 million today (see Table: 3); with its share of employment in the manufacturing industry increasing from a mere 2% to over 15%. Table-3 Year No. 1983 of 50 1987 629 1991 934 1995 2268 1999 3000 Md. Joynal Abdin mdjoynal@gmail.com
Factories Source: Bangladesh Statistics, EPB Women are the most disadvantaged section of our population, whereas in the apparel and garment industry they are the prime movers of this labor-intensive industry. About 90 per cent of the workers are women, comprising of almost 70% of all female employment in the nation's manufacturing sector. This industry has also created a vast scope for employment at all levels of production including management, supervision, etc. This sector has uplifted the neglected section of the population, thus radically transforming the socio-economic condition of the country. Bangladeshi entrepreneurs took advantage of the Multi-Fiber Arrangement (MFA) and the Generalized System of Preferences (GSP) to successfully capture a significant market share for Bangladeshi garments in Europe and the US. A substantial number of entrepreneurs, managers, supervisors, technicians, and workers, etc. are reasonably proficient in all relevant aspects of the industry. Almost all major retailers, brands and importers of Europe and the US buy garments from Bangladesh, and many have set up offices here. They have invested time and money in transferring critical know-how, and establishing strong and long-term relationships. Even in trading, Bangladeshi entrepreneurs have made their slow but sure entry. Under these circumstances Bangladesh must look at the future of RMG exports after 2004 with strong optimism. The human capital and customer preference must be leveraged to its full potential, rather than lost due to illogical and unnecessary pessimism about the future.
Recommendations
Recommendations to ensure optimum realization of the potential of the exportoriented RMG sector to increase the export income of the country: To ensure the expected development of the export-oriented RMG sector and use its full potential to increase the foreign exchange income of the country, the following measures must be introduced: National political Measures a. Introducing measures to ensure national political consensus so that the exportoriented sector would remain unconditionally unaffected under any political circumstances. b. Introducing measures to ensure a sound law and order situation so that all operations of the export-oriented factories can take place without any kind of interruption and hindrance. Developmental Political Measures 01. Introducing attractive financial as well as other kinds of incentives to promote investment in the export-oriented RMG sector. 02. Introducing non-bureaucratic and easy operating practical policies to encourage foreign direct investment in the export-oriented RMG sector. Marketing Support Measures a. Ensuring trade diplomatic measures to convince the USA and other such developed politically important trade countries to increase its RMG export quota for RMG export from Bangladesh. b. Providing international-marketing support for export-oriented RMG manufacturers, i.e. helping exporters from the RMG sector to visit international Trade-Fairs and buyers abroad. c. Supporting quality management, proper export documentation, and, in cases of difficulties, ensuring payment from abroad. Fiscal Measures 01. Providing financial, legal, institutional and all other kinds of support for backward linkage industries in the export-oriented RMG sector, so that this sector can grow relatively independent from imports and improve its competitiveness in the international market. 02. Exempting taxes and VAT for RMG exports, so that exports could become more competitive in the international market. 03. Providing long term Tax Holiday in export-oriented RMG sector to encourage new national and foreign investment. Md. Joynal Abdin mdjoynal@gmail.com
04. Carefully adjusting the exchange rate of the national currency to the currencies of the international competitors so that national economic development is not affected but the export-oriented RMG sector gets the necessary financial incentives and the support. 05. Making value addition for high value items flexible, so that high valued RMG exports can become competitive in the international market. 06. Removing all anomalies from the functions of the Banks and introducing the following steps to support export-oriented RMG enterprises: Requirement of obtaining approval from Bangladesh Bank for the issuance of Forced/Demand Loan by the lien banks should be withdrawn. Back-to-Back PAD/Forced Loans should not be considered as default loans. Loans of this nature should be converted into interest-free Block Accounts and amortized against future export proceeds. Overdue FBP created against the liability of any VC should also not be considered as default loans. Mandatory compulsions set forth in the ECG policy should be waived. Procedure of obtaining prior permission from Bangladesh Bank for exporting goods against stock-lot should be withdrawn. Negotiating Banks should be authorized to consider discounts up to 20%. Condition for obtaining approval for discount from the Bangladesh Bank should be relaxed and discount approved by the EPB should be treated valid. Forty-five days, from the date of document negotiation, should be allowed for fund remittance. Overdue interest should not be charged in the event that the remittance is delayed. Private commercial banks should immediately cease charging "VC Acceptance Charges" as done by the Nationalized Banks of the country. Laws should be enacted announcing that the Banking Companies Act passed by the Jatiya Sangshad (the Parliament) on 13 March 1997 is not applicable to the export-oriented Readymade Garment Sector of the country. Readymade garment exporters should not be held responsible if proceeds against their exports are not realized owing to the reasons beyond their control. Opening of UC based on Realization Clause should be re-introduced. Working out policies, in cooperation with BGMEA, to provide cash incentives to encourage better export performances. Infrastructural Supporting Measures Measures To Remove Transport Congestion I. Removing port congestion so that export-import operation can take place without any kind of delay, a holding export schedule is not only a precondition to satisfy the buyer but also to improve the business image of the country abroad. II. Ensuring a rush-free and well-developed Road and Railway communication, so that urgent transport between the export-oriented RMG enterprises can take place without delay. Md. Joynal Abdin mdjoynal@gmail.com
III. Ensuring prompt transportation of export goods to the port and transport of import goods from the port to the corresponding enterprises. IV. Regulating air cargo charges so that it does not affect the competitiveness of the export-oriented RMG sector. V. Ensuring the delivery of air import shipment so that delivery without any delay is assured. Measures To Ensure Uninterrupted Power Supply Introducing measures to ensure uninterrupted power supply to all exportoriented RMG enterprises, so that they can operate normally and at its full potential and capacity. Measures To Ensure Appreciating Customs Service A. Computerizing custom services and equipping it with a modern communications system, to ensure prompt services. B. Freeing the custom procedure and services from all anomalies and corruption. Development of Managerial and Institutional Measures i. Integrating BGMEA representatives in the Board of the nationalized Banks to ensure prompt financial operation in the export-import business of the export-oriented RMG enterprises and to speed up and promote investment in the export-oriented RMG sector. Providing the export-oriented RMG sector similar facilities given to the enterprises in the EPZ; essentially there is no difference between these two groups of enterprises. Establishing RMG villages so that unhindered operations of the exportoriented RMG enterprises can be ascertained and the productivity increased by providing healthy accommodation to the employees of these enterprises. This will help keep the capital city free from environmental pollution, which is partly done by these enterprises. This will also relieve city from the unbearable traffic jam. Establishing an Apparel Board composed of persons from the policy making and implementing body of the government to ensure support and assistance for the export-oriented RMG sector. Forming a Cabinet committee headed by the Hon'ble Prime Minister, which should meet quarterly to solve especially unforeseen problems of the exportoriented RMG sector instantly. Privatizing EPB or permitting a parallel private institution for the services that are provided by EPB so that prompt and qualified services are ensured.
ii. iii.
iv. v. vi.
Measures To Ensure Development of Human Resource 1. Creating educational facilities for the labor force from export-oriented RMG enterprises. 2. Providing training opportunities for labor and management from exportoriented RMG enterprises. 3. Organizing workshops, seminars and symposiums to explain the necessity and importance of discipline, qualified workers, and improved productivity for Md. Joynal Abdin mdjoynal@gmail.com
export, national economy development & the welfare of the workers themselves.
From Labors Perspective: It should be like the followings:1. Labor Laws : The Government of Bangladesh should devote resources to enforce existing labor laws, particularly regarding occupational safety. It should increase the number of labor inspectors and random inspections and develop incentives for inspectors and employers. In addition, it should enforce punishment for noncompliance with labor laws. Resources should also be devoted to modifying existing laws and formulating new laws where necessary. Many female garment workers are excluded from the application of existing labor laws, because their jobs are temporary or seasonal. Moreover, many existing labor laws do not comply with the dynamic needs of export-oriented industrialization. For example, because the laws limit women to working in a factory from 7 a.m. to 8 p.m., many garment employers are reluctant to employ women. Such laws need to be reformulated to accommodate equal participation of men and women. 2. Labor Rights: Less-educated and new workers do not know much about labor laws. For example, the survey of 1990 shows that most employers do not give maternity leave because workers do not ask for it. The Bangladesh Garment Manufacturers and Exporters Association, together with trade unions and NGOs, should conduct educational programs for workers so that laws can be enforced through popular demand. 3. Export Processing Zones: The study has shown that both terms and conditions of employment and working conditions in the factories established in the Dhaka Export Processing Zone (DEPZ) are better than those established outside the DEPZ. Gender relations in DEPZ factories are better than those in non-DEPZ factories. Hence, expansion of export-processing zones should help to balance the gender impact of export-oriented industrialization. In setting up its export processing zones, Bangladesh should impose precautionary labor and environmental provisions to combat the adverse effects of growth of EPZs. 4. Training and Education To successfully compete in the global apparel market, Bangladesh has to translate its comparative advantage of womens cheap labor into sustainable competitive advantage. This will require technological development in the garment industry. However, the findings show that female workers are ousted from the garment industry when there is technological improvement. This problem can be effectively solved by training female workers. Education plays a dominant role in balancing the gender impact of export-oriented garment manufacturing. However, more-educated women are reluctant to undertake jobs in the garment Md. Joynal Abdin mdjoynal@gmail.com
industry because they have to join as helpers, the lowest-paying jobs. Highercategory jobs require skills that, at present, must be acquired through on-the-job training as a helper. Establishing training facilities outside the firm would effectively raise female garment workers educational base. 5. Support Services The provision of safe, secure, and inexpensive services would alleviate the gender imbalance against women. First, provision of separate bus services would relieve much of the female workers' stress. Paul-Majumder and Khatun (1997) show that, female garment workers are willing to pay more for safe and secure transport. Second, supplying cheap, secure, and hygienic housing facilities for female garment workers would help eliminate the gender imbalance arising from the growth of export-oriented garment manufacturing. Third, the government should establish health centers at the locations where the garment factories are clustered. Health centers in these locations would help the garment workers to gain access to medical facilities without spending much time. Additional services that would greatly help eliminate the detrimental effects of export oriented industrialization on women include health insurance services, financial services for savings and credit, day-care services, and legal services that meet the specific needs of women as workers. Empirical evidence suggests that investment in support services brings profits to employers by raising the productivity of female workers (Paul-Majumder 1998). 6. The Two-shift Working System The survey findings showed that one of the most dominant factors affecting the health status of the garment workers is long working hours that drastically curtail the female garment workers' time for leisure and sleep. Hence, a policy recommendation follows that steps should be taken to eliminate overtime work from the garment industry by establishing a two-shift working system. 7. Issues for further Research Researches should be undertaken on the following issues in order to enhance our understanding of the relationships among gender, export-oriented industrialization and change in Bangladesh. 1. Long-run employment prospects for women in the export-oriented industries. 2. Long-term impact of garment workers poor health. 3. Export-oriented industrialization and violence against female workers. 4. The role of support service in eliminating gender imbalances. 5. The impact of return migration on poverty. 8. Indecisive regional Re-location Policies for Export-Oriented RMG Enterprises: To help reduce the environment pollution in the city and provide garment workers with adequate residencial facilities, garment factories need to be shifted to the outskirts of the city. Government's "khas" (own) lands beside the Dhaka-Chittagong highway could be allocated for setting up of garment villages and to accommodate the workers of the export oriented garment industry. This could relieve not only the pressure on the environment of the city but also traffic jam and population and other related pressures. Md. Joynal Abdin mdjoynal@gmail.com
9. Acknowledgement for the Needs of a Cabinet Committee for export-Oriented RMG: A cabinet committee headed by the Hon'ble Prime Minister of the country should be formed to solve specific and unforeseen problems in the export-oriented RMG sector. The committee may meet quarterly to review the overall situation of the export-oriented RMG and take necessary measures to promote RMG exports. 10. Recognition of the Necessities of Delegation of Responsibility of the Government: Export-led development has become imperative for survival in the changed environment of the world economy. To respond to the demands of the export business, the establishment of a Private Export Promotion Bureau has also become imperative. In view of the recent quota bungling by the corrupt EPB officials and quota brokers, it must be considered whether EPB activities relating to quota matters should be handed over to BGMEA. Recent international development in this respect supports this view. Pakistan's new textile quota management policy for 1998 to 2004, for example, has been deregulated. Conceding to the call for quota and duty free trade in textile and clothing by the year 2005, the country's quota management has been dramatically shifted, almost in tote, from the official agency Export Promotion Bureau Pakistan to the 15 private sector associations dealing with knitwear, woven garments, made-ups and yarns & fabrics. 11. Recognition of the Necessity for an "Apparel Board": Solving specific and unforeseen problems of the exporters of the RMG sector from policy making to implementation in every phase needs prompt service from the Government. Following the example of the Tea and Jute Board, the setting up of an "Apparel Board" has become very essential to free the industry from time wasting bureaucratic shackles and make it more dynamic. 12. Recognition of the Role of Education and Training to Improve Labor Productivity: The experiences of the industrialized countries of the world show that improvement in working conditions and work organization can result in increased productivity and competitiveness. This has been also been demonstrated in Bangladesh by entrepreneurs of small and medium sized enterprises who have taken voluntary action to improve working conditions and labor productivity. Improving the productivity in this industry could thus result in making these enterprises more competitive. In Bangladesh, the garment industry is the major employer of the disadvantaged section of the population the women. Increased competitiveness in the industry will also bring economic advantage for the women and make them socially safer. The work force contributing to this sector comes mostly from the disadvantaged areas and thus workers lack the proper education and training. These workers are not highly skilled and their contribution sometimes results in more rejected products. It is the skilled laborer and technicians who play the vital role in the development of the industry. The employment of a disproportionate number of unskilled labor by the garment factories in Bangladesh results in low productivity and comparatively more expensive apparels. Measures to enhance worker contribution should take place Md. Joynal Abdin mdjoynal@gmail.com
immediately. Vocational training for increased labor productivity should include graduation/diploma programs at the plant level to ensure sustained improvement of the industry's productivity. As a means, conventional vocational training institutes all over Bangladesh should be developed to teach the base level human resource for advanced technology. Moreover, necessary steps should be taken both by the government and the private sector to establish more fashion and technology institutes according to the spirit of the age. The work force in this sector should be well aware of the modern technologies as well as the fashion of the buying countries. 13. The debt-equity ratio is fixed at 70:30 or at least to a favorable range. 14. To reduce the demand-supply gap of fabrics and yarn an investment of Tk.160000.00 million shall have to be made in the backward linkage industries in the textile PTS in the next 5 years. Half of this may be provided by the entrepreneurs as equity or agents for foreign direct investment. Rest half may be provided by banking channel on the basis of bank-client relationship. 15. Workers unrest should be stopped for ever by arranging a logical feedback to their claims. 16. Worker rights fixed by the International Labor Organization (ILO) should be strictly maintained in this global sector so that these types of labor unrest never come back. 17. Government should form a special tribunal those who will inspect the working environment as well as labor owner relationship. This is doing by the BGMEA from owners side. 18. National political leaders should be aware about their harmful activities like strike. They should be compromised to keep national & economic interest first. 19. Necessary instruction is issued by the Bangladesh Bank to finance the following backward linkage sectors on priority basis. a. Dyeing and finishing of woven fabric Weaving b. Composite knit c. Specialized spinning (manmade fabric-based) d. Spinning (Ring and Open-end) Priority may be given to those units which will be employing the retrenched/terminated workers of RMG units closed down due to adverse impact of MFA phase-out. 20. A special fund of Tk.80, 000.00 million shall be made available at an interest rate of 7%, 2% less than the present bank interest rate. The 2% difference is subsidized by Bangladesh Bank (Central Bank) under a refinancing scheme. 21. Import of textile spares, dyes and chemicals and sizing materials is made duty free. Md. Joynal Abdin mdjoynal@gmail.com
22. Rebate may be allowed to utility bills like electricity and gas etc. subject to regular and timely payments. 23. Cash assistance at 15% is given for using local yarn/fabrics for export of apparels to make them competitive in the post MFA regime. 24. Training program be introduced to produce efficient and experts workforce and personnel in the field of textile production, so as to keep pace with growth of the sector as a whole. In this regard new training institutes are set up and program to upgrade the existing institutes undertaken. 25. The National Institute for Textile Training Research and Design (NITTRAD), a training institute under public sector having necessary infrastructures be upgraded and run under public-private joint partnership with BGMEA & BTMA. This will then be effective and result-oriented. At the moment its performance is below the satisfactory level. If possible this may be affiliated with foreign training institute to impart training to meet the demand of the present day. 26. Go for capacity building of the textile related trade bodies.

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Acknowledgement

Md. Joynal Abdin mdjoynal@gmail.com

History of Bangladeshi Ready Made Garments (RMG) Industry:

A Statistics of Bangladeshi RMG Industry:

TOTAL APPAREL EXPORT IN MN.US$ WOVEN KNIT TOTAL

TOTAL APPAREL EXPORT IN MN.DZ WOVEN KNIT TOTAL

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MAIN APPAREL ITEMS EXPORTED FROM BANGLADESH

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COMPARISON OF APPAREL EXPORTS TO MAJOR MARKETS

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KNIT July - June 2003-04 July June 2004-05 Export % incr./decr.

TOTAL July - June 2003-04 July June 2004-05 Export % incr./decr.

Australia % of Australia Other Countries % of Other Countries GRAND TOTAL

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% OF RMG'S TO TOTAL EXPORT

GROWTH OF MEMBERS OF BGMEA

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Dollar Source: Bangladesh Economic Review, Ministory of Finance, various issues..

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Table 9. Female sample by residence

Table 10.Type of factory

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Table 13. Distribution of sample by employment size of factory

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Table 21. Average monthly wages including overtime (Taka)

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Table 4. Employment status in rural areas (10 years and above)

Table 24. Reason for leaving factory

Table 25. Reason for dismissal by factory

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Limitations of this study:

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Findings of the research on my topic:

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Bangladesh Methods of setup minimum wages:

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YEAR 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999

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