Close to five years after plunging into an existential crisis,Bangladesh's textiles-apparel industry is close to turning over a new leaf,writes Subir Ghosh.
The Rana Plaza disaster of 2013 has been cited so often when talking about the state of Bangladesh's garment industry, that it has virtually become a clich. It has also, for the same reason, remained a blot on the industry-one that refused to go away. But four years since the global textiles-apparel-fashion industry was shook to its very core, things are probably beginning to look up, and the bloody stains of 2013 that resulted in the official death toll of 1,134 is slowly starting to fade into history.
Consider just a handful of developments only in the month of January. On January 22, trade unions representing Bangladesh's textile workers reached a $2.3m settlement with an unnamed multinational fashion brand that was accused of postponing the process of fixing life-threatening hazards in factories. This came barely a week after the government announced the formation of a new wage board that would formulate a salary structure within six months.
The watchwords are gradually changing; those are now safety, compliance and welfare. For a country whose exports are heavily reliant on how much of apparel is manufactured and sent to the Western countries, the readymade garments (RMG) sector needed a new face: one that is human.
Settlements to start with
The announcement of January 22 revealing that a well-known brand would be coughing up a huge amount was a turnaround in many ways. All these days, since the Rana Plaza tragedy, efforts seemed to have been allegedly slack in ameliorating matters for workers. But this was a victory, and for once it was neither the Bangladeshi government nor its industry were in the dock.
The settlement of course had taken time in being inked, after a two-year arbitration process under the legally binding Bangladesh Accord for Fire and Building Safety that was instituted after the Rana Plaza incident. The brand, which cannot be named under the terms of the settlement, will pay $2 million to fix issues at more than 150 garment factories in the country. An additional $300,000 will be paid to the two unions-IndustriALL Global Union and UNI Global Union. This amount will fund their joint "supply chain worker support fund," an initiative that supports union backed efforts to improve pay and conditions for workers in global supply chains.
The landmark case was heard at the permanent court of arbitration at The Hague, and had been filed in October 2016 after the two unions alleged that basic safety features at factories, such as the presence of locked gates, structural faults and a lack of fire doors and sprinkler systems, had not been addressed despite pledges to the contrary. Even while the case was on, one factory went and hiked its remediation rate of 56 per cent to more than 90 per cent in October 2017. Others bided their time, waiting for the case to reach its natural conclusion.
The unions stand vindicated. IndustriALL's general secretary, Valter Sanches, remarked: "This settlement shows that the Bangladesh Accord works. It is proof that legally binding mechanisms can hold multinational companies to account. We are glad that the brand in question is now taking seriously its responsibility for the safety of its supplier factories in Bangladesh. Their financial commitment serves as an example for other brands to follow." Christy Hoffman, UNI Global Union's deputy general secretary, went on to assert, "This proves the validity of the arbitration process. It's a turning point for business and human rights."
That, it certainly is, and comes only a month after an earlier arbitration wherein another big brand that had been sourcing from over 200 factories was nailed. That brand too escaped adverse media coverage under the confidentiality clause, and even the settlement amount was not disclosed.
According to the two unions, "Accord inspectors have so far carried out inspections on more than 1,800 factories supplying over 200 brands, identifying over 118,500 fire, electrical, and structural hazards. Eighty-three percent of workplace dangers identified in the Accord's original round of inspections have been remediated, and 500 Accord factories have completed 90 per cent or more of the necessary fixes." That is a lot, considering the mess that things were in.
The second Accord, signed last year, will go into effect when the original agreement expires in May 2018 and extends the Accord's protections until May 31, 2021. This will hold unless "a joint monitoring committee (comprising Accord brand signatories, Accord trade union signatories, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the International Labour Organization (ILO), and the government of Bangladesh) unanimously agrees that a set of rigorous conditions for a handover to a national regulatory body have been met prior to then."
The arbitration development is being described by many as a much-needed lesson. "Brands have never really accepted responsibility for the working conditions or said sorry for the numerous accidents that keep occurring in these factories," according to Sultan Uddin Ahmed of the Bangladesh Institute of Labour Studies. He told the Thomson Reuters Foundation shortly, "This is a good example because brands need to contribute to the improvement of workers' conditions."
Pressure on brands is mounting from influential quarters too. Just days after the arbitration, a group of socially responsible investors whose collective assets are valued at around $3.7 trillion exhorted 160 major retailers to back the extension of the Accord. The Bangladesh Investor Initiative, whose members are shareholders in several retailers themselves, urged the companies to support the three-year extension of the Accord. It pointed out that only 60 of the 220 companies in the Accord have agreed to extend the programme until 2021.
The brands that have shied away from supporting the extension of the Accord can now keep doing so only at their own peril. They can either clean up their act, or simply lose their hub.
Alleviation of lives
The 2013 disaster had been so gut-wrenching that most of the discourse after the incident hovered around the issue of safety and working conditions, primarily the first. The subject of saving lives naturally dominated, but that of living wages too would crop up time and now.
The issue of workplace hazards being addressed to a certain extent, the focus has now turned on wages of workers. But, it has taken some time to chart a course, and come after trenchant criticism in the last few years from labour groups over the pittance being paid to workers that form the backbone of a global industry that is one of the most affluent in the world.
It was in December last that the Bangladeshi government initiated moves to revise the minimum pay for workers in the garment industry, in the face of incessant pressure from worker groups. The existing minimum monthly wage of 5,300 taka ($65) was formulated in the wake of the Rana Plaza incident, and has been in effect since January 1, 2014. The RMG workers' organisations are demanding Tk16,000 as minimum wage, citing rise in cost of living owing to inflation. Around 4 million workers, mostly women, are employed in the $28 billion industry in Bangladesh.
On January 14, the state minister for labour and employment Mujibul Haque Chunnu announced the setting up of a panel to revise wages. Earlier, even the BGMEA had made a request to form a new wage board. BGMEA president Siddiqur Rahman and women's affairs secretary of the Jatiya Sramik League Shamsunnahar Bhuiyan are in the board along with four other permanent members. The panel will submit a report with a set of recommendations within six months after scrutinising the present salary structure of RMG workers. The government will thereafter finalise the rates. Siddiqur Rahman promised that the panel will try to come up with a 'perfect' salary structure.
The developments on this front will be keenly watched, especially after what was pointed out in the run up to the World Economic Forum (WEF) meet in Davos, also in January. Campaigning group Oxfam International, in its report titled Reward Work, Not Wealth, revealed that a chief executive office from one of the world's top five global fashion brands has to work for just four days to earn what a garment worker in Bangladesh will earn in an entire lifetime.
The Oxfam report rekindled interest in the subject. An article in Quartz pointed out, "Cheap fast fashion has made some of the richest men on the planet, while relying on some of the world's lowest-paid workers, most of whom are women. In Bangladesh, for instance, about 80 per cent of garment workers are women, frequently working in order to feed their families." This was much in line with a 2016 study by the Fair Labor Association (FLA) which had found that the purchasing power of average compensation in Bangladesh was the lowest of any country under assessment, falling below the World Bank poverty line for a three-adult-equivalent household.
The new wage board therefore has its task cut out, but it will not be easy doing a balancing act between demands and compulsions. The Dhaka Tribune spoke to a number of stakeholders after Mujibul Haque announced the government's decision on wages.
Nazma Akter, president of the Sommilito Garments Sramik Federation, told the Tribune: "The minimum wage should be increased as the current wage is not sufficient enough for savings especially because they do not have pension benefits. The reason for that is mainly a high level of worker migration from one factory to the another, which is why an allocation for savings is crucial in their salary as they miss out on pension funds that only kick in after spending a few years in one factory. During the formation of the last wage structure, the owners very slyly managed to reduce the basic income of workers. This new board should protect workers' rights and structure their salary accordingly."
On the other hand, former BGMEA president Abdus Salam Murshedy remarked: "The Bangladesh RMG industry is going through a period of low investment. We should first think about this industry being able to afford a new pay scale for RMG workers. The wage board should also consider the interest of all factories, because there are small, medium and large factories which have varied financial capabilities. Otherwise a small investor will be hurt by high wages and that in turn will hurt the growth of the industry. While, the production costs went up because of improving safety standards, the brands and buyers cut prices. In reaching an effective solution, focus should be given on the global supply chain as the business is consumer driven."
Either way, the board will have to tread carefully.
Tiding over the times
Bangladesh is a top exporter of garments to the rest of the world, particularly the West. But the going has not been easy of late in the face of rising production costs, lower prices from buyers and dwindling global demands.
Different numbers here tell different stories.
Production cost in the country has increased by 18 per cent over the past two years. At the same time, prices in Europe and the United States have fallen by 7 per cent.
In 2016, apparel prices in the European Union (EU) declined by 4.77 per cent, and in the US by 3.71 per cent. All this while global apparel consumption too has fallen, according to the World Trade Statistical Review 2017 of the World Trade Organization (WTO). The dollar value of world textiles and apparel exports totalled $284 billion and $443 billion respectively in 2016, decreasing by 2.3 per cent and 0.4 per cent respectively from a year earlier. This was the second year on a trot since 2015 that the value of global textiles-apparel exports grew negatively.
Adverse or trying situations, however, do not mean that the industry is in a spot. Not yet, certainly. In fact, Bangladesh has been bucking the trend. The country's overall export earnings saw a 7.15 per cent increase to $17.91 billion in the first half of the current fiscal year, with the credit for this being attributed to the RMG sector. Statistics released by the Export Promotion Bureau (EPB) in the first week of January indicated that the sector, which contributes over four-fifth of the country's exports, earned $14.77 billion in July-December of the current financial year registering a 7.75 per cent increase over $13.70 billion in the same period the previous year. Knitwear products were $7.60 billion, an 11.47 per cent increase, and woven garments $7.18 billion, a 4.08 per cent growth over $6.81 billion and $6.9 billion respectively.
Overall, however, export earnings from woven garment products saw a 2.35 per cent decline in the last fiscal year to $14.39 billion. A number of factors are said to have brought about the change including dependence on fabrics imports, no policy support on gas-power supplies, and poor backward linkages. For Bangladesh's industry to remain competitive, it would need to cut down its dependence on imports and invest in technology upgradation. One of the reasons why the knitted products have been doing better than wovens is the segment's less dependence on imports, thereby saving out on lead times; wovens, on the other hand, have higher lead times.
The dependence on imports becomes crucial in the case of high-end products, since local suppliers can only provide very basic fabrics/fibres. Moreover, only 30-35 per cent of the fabric demand can be met locally. This costs heavily in terms of lead times. Right now, on an average, it takes 35 days to ship goods to the US from Bangladesh, while in the case of China and Turkey it is 20 and 15 respectively. The result is that a Bangladeshi exporter cannot accept urgent orders.
The onus of beefing up infrastructure lies with the government, which will need to take a hard look at its textiles as well as industrial policies. The recent wage board decision aside, the government has undertaken a number of measures over the last one year or so.
In November last, the country amended its labour law and the Bangladesh Export Processing Zones Authority Law to comply with EU recommendations urging Bangladesh "to show tangible progress on labour rights to avoid temporarily losing the generalised system of preferences (GSP) benefit that allows the country duty-free export to the former." It also adopted standard operating procedures (SOPs) relating to unfair labour practices and trade union registrations.
Much has been done, and much remains to be done too.