IMPRESSIONS from a Cross-section

Ø             Global view on RMG sector:

The global textile and apparel trade has grown at a decent pace by around 6% annually in last two decades. The industry has the potential to grow up to US$ 800bn by the year 2015.

Apparels constitute the biggest category of global trade with 60% share. US is among major apparel markets and constitutes about 23% of global textile imports.  EU is also among major apparel trade destinations with share of around 47% of global apparel trade. The biggest exporting countries are China, India and Turkey. In recent years low cost countries like Bangladesh, Vietnam and Cambodia have also emerged as significant exporters of apparels.

Ø             RMG sector in India:

The Indian textile and apparel market is estimated to be US$80bn approx.  In the last five years the industry has grown at a rate of more than 10% annually.  The industry is expected to grow at a much faster pace in the future, as it is fuelled by a strong domestic consumption which is rapidly growing due to brand awareness and increase in purchasing power.

India’s exports are expected to grow substantially going forward.  This positive outlook is mainly driven by the following factors:

1.    Increase in domestic consumption and subsequent opportunity in new markets like China, Russia, and Brazil.

2.    Sourcing shift of buyers in US, EU and Japan from nearby countries towards lower cost countries in Asia.

3.    Opportunity provided by sourcing shift of buyers from China.

India has emerged as an attractive sourcing destination in the past five years for many top global apparel retailers like GAP, M&S, and Target etc. who have their sourcing network in India. India has emerged as one of the main sourcing destinations in the global market due to cost effective manufacturing processes and supply of quality products. 

Ø                   The key area in which the strategic interventions is needed is the labour issues in the RMG Sector which is adversely hampering the growth prospects:

·         Domestic Scenario

Irregular or low payment of wages is common in RMG sector.  Basically, the manpower employed in the RMG sector is from the lower income group. They learn the basic concepts of tailoring and work on contract basis / full time basis in RMG factories. With an ulterior motive to have control over the workers, the factory owners suppress the workers with lower wages payment.  Workers' agitations, union strikes are frequent phenomenas that occur in the RMG sector.  In most of these cases, the government fail to resolve the labour wages problem leading to distrust among workers. This void has been filled by labour unions whose credibility has long been questionable.  Increasing productivity is the only mantra to flourish. Therefore, paying more in wage will reward the factory owners by increasing productivity.

As an established industry RMG is capable of implementing this pay hike, and thereby enhancing their competitiveness in world market if rightly supported by requisite government policies and regulations protecting the rights and welfare of the workers.

·                     Globally

Most of the analysts and business people usually focus on US and EU market dynamisms; there are surely other crucial issues that are appreciably shaping global trade.  Particularly in the context of Bangladesh, India & China where RMG industries is booming, one of the key issues that need to consider with importance is labour problems arising primarily due to low wages paid. The raging controversy over labour wages in the readymade garments (RMG) sector continues. This is happening at a time when the industrial structure in China, the world's largest exporter of apparel products and one of the major competitors of Bangladesh, is undergoing rapid transformations.

Further, most countries in Europe are announcing a series of austerity measures that could slash their demand for imported goods and services significantly. Both Europe and the US remain Bangladesh's major exports markets. With the global financial crisis Bangladesh's apparel exports have not had much impact largely owing to the massive fiscal stimulus packages in the advanced world.  This indeed limits the RMG owners in Bangladesh revising labour cost upward, particularly at the scale the workers have been demanding.

China is increasingly focusing on the development of high-end manufacturing, satisfying the structural needs of its economy.  With the rise in unit labour cost and upward adjustment in its currency means that a surplus of low-end manufacturing jobs will eventually be moving out from China. Many jobs have already moved inland from China's coastal areas and some low-end manufacturing units are relocating to Vietnam.

India's economic openness bars its apparel sector taking the currency advantage -- undervalued exchange rate - which the Bangladeshi RMG sector enjoys, given the huge capital inflows in the country that makes the Rupee exchange rate highly volatile. Moreover, India's labour market is highly inflexible, a major problem in its industrial structure.

This situation in the global economy should be researched carefully. The government cannot escape its responsibility by merely announcing a minimum wage and letting the law enforcers go after the protesters. To summarize, governments in Bangladesh, India and China have failed to provide the requisite regulations and policies, making per unit production cost expensive than if one isolates the wage cost effects.

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