Executive summery
More than 78% of Bangladeshs export earnings come from the garment industry. The ready-
made garments (RMG) sector has a greater potential than any other sector in terms of
employment and foreign exchange earnings to reduce poverty and make a contribution to the
national economy. However working conditions in this vital sector are poor. Bangladeshs
RMG factories fall short on 'social compliance1 '. That is, they do not comply with labour
practices that ensure the social welfare of their employees. This article reviews the literature
on working conditions in Bangladesh's RMG sector and the failure of its existing labour laws.
It proposes that impediments to establishing social compliance in the sector can be overcome
by a combination of international pressure, better monitoring and better human resources
management (HRM).
01.Introduction:
The readymade garments industry acts as the backbone of our economy and as a catalyst for
the development of our country. We take pride in the sector that has been fetching billions of
dollars as export earnings and creating jobs for millions of people in the country.
The Made in Bangladesh tag has also brought glory for Bangladesh, making it a prestigious
brand across the globe. Bangladesh, which was once termed by cynics a bottomless basket,
has now become a basket full of wonders. The country with its limited resources has been
maintaining 6% annual average GDP growth rate and has brought about remarkable social
and human development. After the independence in 1971, Bangladesh was one of poorest
countries in the world. No major industries were developed in Bangladesh, when it was
known as East Pakistan, due to discriminatory attitude and policies of the government of the
then West Pakistan. So, rebuilding the war-ravaged country with limited resources appeared
to be the biggest challenge for us.
The industry that has been making crucial contribution to rebuilding the country and its
economy is none other than the readymade garment (RMG) industry which is now the single
biggest export earner for Bangladesh. The sector accounts for 81% of total export earnings of
the country. When our lone export earner the jute industry started losing its golden days, it is
the RMG sector that replaced it, and then, to overtake it.
1.1 Origin:
This report is prepared as a requirement of the course curriculum of International
Relations by studying the past, present scenario of garment sector in Bangladesh. After
studding on those, we came to know about- what will be the challenges and the
opportunities and the future of the garment industries.
1.2 Objectives:
The objective of this report is to provide an overview of the Garments Industry of
Bangladesh, its past history and to analyze the background of early garment industries,
their work process, the present socio-economic status of the garments workers of
Bangladesh.
Some Other Specific Objectives of this report are:
Broad discussion about the Garment Industry
To discuss the History
To know the present situation of garment Industry
To know the exporting Condition of Garment Industry
To identify the growth of Garment sector
1.3 Methodology :
For the research of the proposed study, data have been collected from secondary sources.
Secondary source:
Secondary source: Secondary sources are company website, brochure, outlets, other
research reports, literatures/magazines and the internet.
1.4 Limitations:
Insufficient data set the limitation for the report on Garments sector of Bangladesh. While
making the report we couldnt find the supportive data and enough information.
2.0 The Bangladesh Garment Industry:
For Bangladesh, the readymade garment export industry has been the proverbial goose 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 resilient or sturdy that sector is, is a matter of
policy concern. We 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.
3.0 History, Present and Future of garment sector:
3.1 History:
Within a single decade garments industry in Bangladesh has emerged as the single
dominant industry in export area. The industry set its profile with four billion dollars in
gross value terms and employment scopes of more than million skilled and semi-skilled
women workers. This compelling successful economic development path was initiated in
Bangladesh during 1978. At that time there were only 9 export-oriented garment
manufacturing units, which generated export earnings of hardly one million dollar. Some
of these units were very small and produced garments for both domestic and export
markets. One of such units was Reaz Garments established in 1960 asa small tailoring
outfit, named after Reaz store in Dhaka. After serving only domestic markets for 15 years
in 1973 it changed its name to M/s Reaz Garments Ltd and initiated new dimension in
Bangladesh export industry by shipment of 10,000 pieces of Bangladesh made garments
(mens shirts) worth to 13 million Francs to a Paris-based firm in 1978.The 130 Desh-
selected trainees returned home after a six-month training period to form the nucleus of
the RMG sectors technology and its core human resource base. Consequently, Dashs
modern factory constructed with Daewoos specification and technical assistance with
capability of 6 lines, 600 workers, and 5 million pieces per year capacity worth $1.3
million investment goes into operation. Another South Korean firm, young ones
Corporation formed the first equity joint-venture garment factory with a Bangladeshi
firm, Trexim Ltd in 1980. Bangladeshi partners contributed 51 percent of the equity of the
new firm, named Young ones Bangladesh. It exported its first consignment of padded and
non-padded jackets to Sweden in December, 1980.
3.2 Present:
With about $15 billion in exports in 2010, ready-made garments are the country's most
important industrial sector; they represent 13% of GDP and more than 75% of total
exports. Recent surveys carried out by the consulting firm McKinsey and the accounting
firm KPMG identified attractive prices as the most important reason for purchasing in
Bangladesh. Price levels will remain highly competitive in the future, since significant
efficiency increases will offset rising wage costs.
3.3 Manpower and RMG export:
Without any doubt, the two major forces that are driving the economy of Bangladesh
forward for the last couple of decades are export earnings and inward flow of remittance.
However, remittance inflow has not shown much promising sign for the near future as
during the last fiscal year, it recorded a negative growth (-1.6 per cent) for the first time
since fiscal year 2001-02. In addition, according to the Bureau of Manpower,
Employment and Training (BMET) data, in 2013 only 4,09,253 persons were employed
overseas which is almost 33 per cent lower than the number of 2012. This sharp decrease
in overseas employment is supposed to be reflected in the remittance earning in upcoming
years. Even the overseas employment during the first seven months of 2014 does not
make us optimistic about the situation as only 2,39,808 workers migrated during this
period. At this rate, total number of migrants might be slightly above 4,00,000 at the end
of 2014. So it is safe to infer that wage earners remittance is not going to increase sharply
in coming days.
3.4 Growth of RMG and employment:
3.5 Exporting Condition of Garments Industry:
The Ready-Made Garments (RMG) industry occupies a unique position in the
Bangladesh economy. It is the largest exporting industry in Bangladesh, which
experienced phenomenal growth during the last 20 years. By taking advantage of an
insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it
attained a high profile in terms of foreign exchange earnings, exports, industrialization
and contribution to GDP within a short span of time. The industry plays a key role in
employment generation and in the provision of income to the poor. Nearly two million
workers are directly and more than ten million inhabitants are indirectly associated with
the industry. Over the past twenty years, the number of manufacturing units has grown
from 180 to over 3600. The sector has also played a significant role in the socio-economic
development of the country.
The export made by Garments Industries of Bangladesh is improving year after year
except some of the year. Strike, layout, shutdown of company, political problem,
economic problem, inflation etc. are the prime cause of decreasing export in this
important sector. But above it, Readymade Garments Industries is the leading sector in
export sector.
Year Export (in US $ million) Percentage change
1991 92 624.16 32.49
1992 93 866.82 38.88
1993 94 1182.57 36.43
1994 95 1445.02 22.19
1995 96 1555.79 7.67
1996 97 2228.35 43.47
1997 98 2547.13 14.11
1998 99 3001.25 17.83
1999 00 3781.94 26.01
2000 01 4019.98 6.29
2001 02 4349.41 8.19
2002 03 4859.83 11.74
2003 04 4583.75 5.68
2004 05 4912.12 7.21
2005 06 5686.09 15.83
3.6 Contribution of RMG to National Export
It was recorded that in FY 1983-1984 RMG sector contributed only 3.89% (RMG export
value was 31.57m USD and total export value was 811.00mUSD) of total export of
Bangladesh. But it changes phenomenally in last three decades. In FY 2012-2013 RMG
contributed 79.63% (RMG export value was 21515.73m USD and total export value was
27018.26m USD). In the month of July13 to Apr14, it contributed more than 80% of
total export value. So In fiscal year 2013-2014 hopefully it will contribute more than 80%
of total export of Bangladesh.
Export of major products of Bangladesh in FY 2012-13 (July-December).
Comparative Statement on RMG and Total Export of Bangladesh.
].
3.5 Future:
An eminent Economist made a thought provoking comment today about the future of the
Ready Made Garments (RMG) industry in Bangladesh, which earns us the majority of our
foreign export income. He said that the Global Value Chains of RMG will soon squeeze
the SME (Small and Medium Enterprise) RMG factories out of business as they are
mostly inefficient and non-compliant with Labor Laws & Buyers Codes of Conduct.
Even though it does mean that a lot of workers will be losing their jobs, and will have to
find alternatives livelihoods, this is an economic reality that any mature industry will go
through. The larger companies will remain because they are efficient, offer more cost
effectiveness which means better prices for Buyers. Those large factories might hire some
of the more productive workers and ultimately this will be beneficial for the economy
and the industry image in importing countries. He was surprised that some of the panelists
and participants were arguing in favor of the inclusive growth and more supportive
working conditions and better benefits for RMG workers.
4.0 Bangladesh Garments sector has some short comings:
To become the hotspot and sustainable this sector needs to be developed in different areas.
4.1 Accidents:
Rana Plaza collapse and Tazreen Fashions fire are two serious and catastrophic
occurrences damaging the reputation that Bangladesh has earned in the global RMG
sector previously. These events are brought into question about the safety and
infrastructural standards of the factories of Bangladesh. Subsequent to these occurrences
the committed orders are left withheld in this FY 2013-2014. The factory safety concern
is the reason why foreign buyers, especially Western brands, are cancelling their orders
from Bangladesh. So RMG sector needs to improve infrastructure. In CPD meeting,
Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association
(BGMEA), acknowledged that the apparel sector has a significant deficiency in
productivity.
4.2 Working conditions in Bangladeshs RMG sector:
In Bangladesh, working conditions are often deplorable. Although the garments industry
belongs to the formal sector, the recruitment procedure is largely informal compared to
western practice. As there is no contract or appointment letter, millions of garments
workers are vulnerable to losing their jobs at a moments notice without benefits. The
termination of an employment relationship is likely to be a pathetic and miserable
experience for a worker and loss of income badly affects his or her family. Furthermore,
gender issues in majority garments factories are undermined causing job insecurity,
irregular wage payment, deprivation of minimum wage and promotion exposure. In fact
compared to other employment sector in Bangladesh, job insecurity is higher in the RMG
sector (Majumder and Anwara, 2000; Priyo, 2010).In order to protect workers rights and
job security.
4.3 Gender discrimination:
The majority of garment factory workers are young women In the RMG sector female
workers are considered low skill, low workers Mostly abundant cheap labor and its low
opportunity cost lead to low wage levels, providing a comparative advantage to female
labor in particular operations in the RMG production sector.
Categories Of Workers Male Wages Female Wages
Tk/pm Tk/pm
Operator 2,254 1,536
Cutting Master 3,935 ____
Ironer 1,894 1,106
Sewing Helper 1,200 762
Cutting Helper 1,512 837
Finishing Helper 1,209 1,023
Folder 1,528 1,157
5.0 Monthly wage Vs Productivity of different countries:
6.0 SWOT ANALYSIS:
Strength
1. Biggest foreign currency earning industry
2. Low labor cost
3. Efficient and effective worker
Weakness
1. Backward linkage industry
2. External raw material supply
Opportunity
1. Next apparel sourcing number one hotspot
Threat
1. Physical infra structure of garments factory
2. Political instability
3. Less concern on human
7.0 New project on workers safety:
Apparel brands launched two major worker safety initiatives after Rana Plaza. Over 100
companies, mostly European but joined by a few American firms such as PVH (parent
company of Calvin Klein, Tommy Hilfiger and Izod), American Eagle, and Abercrombie&
Fitch, signed on to an initiative called the Accord on Fire and Building Safety in Bangladesh
(the Accord). Over 20 American retailers, including Wal-Mart, Gap, Target and JC Penny,
declined to join the Accord but formed a similar initiative called the Alliance for Bangladesh
Worker Safety (the Alliance). Together, the apparel brands and retailers in the Accord and
the Alliance source from approximately half of the active garment factories in Bangladesh.
The firms in the Accord source from about 1,500 factories and the Alliances members source
from nearly 700 factories; the two share about 350 factories. Both programs are developing
inspection standards for fire and building safety in supplier factories, and have harmonized
their standards with each other and the government of Bangladesh. Both programs will last 5
years, require membership fees, perform full inspections of all factories, provide safety
training for all workers and managers, and have mechanisms, such as low-cost loans, for
remediation of non-compliant factories. Each of these initiatives will spend millions of
dollars pursuing improved safety object-their supplier factories. Some observers are
concerned that factory owners may refuse remediation mandated by Alliance or Accord
members and source to a less scrupulous buyer. It will be critical for the government of
Bangladesh and BGMEA to impose effective sanctions in these situations.
8.0 Labor Law Reform:
On July 15, 2013, Bangladeshs Parliament passed reforms to the countrys labor law, and the
government is now writing the implementing regulations. While the reforms changed 87
sections of existing lawa number often cited by Bangladeshi officialsit fell short of
expectations, and most observers agree that Bangladesh did just enough to allow the ILO to
approve a Better Work program (discussed below). The ILOs initial review of the legislation
found that, among other things, the new labor law eliminates the requirement for the
government to send factory owners the names of union leader registering unions in their
factories, allows union leaders to call on outside experts for advice during collective bar-
gaining, and improves several provisions on workplace safety and health.
9.0 Recommendation:
1. Building should be constructed with fire resisting materials
2. Adequate exits and proper escape routes should be designed
3. Protection against fire and smoke should be ensured
4. Electrical wiring must be properly designed, installed and maintained
5. Escape routes should be lighted at all times, kept clear, be indicated by signs
6. Regular fire drills should be held
7. Doors should be protected and should open along the direction of escape
8. Doors should not open on the steps and sufficient space should be provided.
9. Smoke/Fire alarm systems must be installed
10. Unskilled workers
11. Improper working environment
13. Gendered division of labor
14. Insufficient of loan
15.Unit labor cost
16. Poor accommodation facilities
17. Political crisis
Conclusion
Social compliance may be compromised by current HR and IR practices. An approach that
pays attention to labour rights, global labour standards, fair labour practices, safety workplace
as well as decent work in improving working conditions is needed. Further the Fair Labour
Act, the Factory Act, the Occupational Health and Safety Act, Core Labour Standards, Code
of Conduct, the ILO and the WTO Conventions are all contribute to a better work
environment.
Source of information;
Export Promotion Bureau Compiled by BGMEA
Export Promotion Bureau
Export Promotion Bureau
Export Promotion Bureau
