12:48:24 local time PAKISTAN
* Workers demand punishment to Balida factory culprits:
Bereaved families of Ali Enterprises fire victims have demanded not to play political blame game on the dead bodies of their loved ones, but give a severe punishment to the cruel culprits, irrespective of who they are.
Addressing a press conference at Karachi Press Club (KPB) here Thursday, leaders of National Trade Union Federation (NTUF) and Baldia Factory Fire Affectees Association along with some victims’ families said the Balida factory fire tragedy has once again captured the attention of whole country after filing of a probe report about the tragedy in Sindh High Court (SHC).
However, different political, religious and ethnic parties and outfits are busy in disgracing the blood of the martyrs to achieve their vested interests.
They said they want to present the point of view of the heirs and the real representatives of workers regarding this new development.
They said after 29 months of this tragedy a report has been filed in Sindh High Court (SHC) in which the identity of the involved culprits and their group is revealed.
However, on the basis of this report different political parties are busy in blaming one another, but no political party has taken solid steps for solving the problems of the bereaved families and deterring repetition of such incidents in Pakistani factories and industries.
This negative attitude of these political parties is also condemnable because during last two and half years they have not raised the voice inside or outside parliament for solving the problems of the affectees.
Today also they are doing nothing for the affectees but issuing fiery statements to settle score with their political rivals, which prove beyond doubt that all these
parties are anti-worker in their character.
They said the court would decide if the fire was accidental or arson, but our demand is to give severe punishment to the culprits and their patrons.
We also apprehend that making the JIT report a plea, the vested interests would try to save the real culprits including the factory owners, International Brands and Social auditing company of this sad incident and if so we would fully resist such a bid.
They said it is the basic question if the factory was burnt in accidental fire or arson, but it is also important to see if the factory had all precautionary arrangement to cope with such an incident and save the lives of its innocent workers.
So far all reports and facts show that this factory was not registered under the Factory Act, and thus was working illegally.
All its emergency exit gates were closed, and windows covered with heavy iron grills. Its passageways were closed with goods, which resulted in the martyrdom of 80% workers.
Therefore, the affectees and the labor movement think that those running this factory illegally were equally responsible for these deaths as they ignored the local and international health and safety laws and standards.
These culprits include the owners of the factory, international brands for which they worked, international company that gave them audit certificate and other institutions related to the labor affairs.
More than 90% of the factory workers were contract laborers, not registered with EOBI and other social security institutions.
They used to work 12 to 14 hours daily in this sweat shop under third party contact system “Thakedari”.
They said the government and State institutions should have learnt a lesson from this tragedy and have taken serious steps for improving working conditions of millions of workers of Pakistani factories and industries and securing their lives; however, the federal and provincial government adopted a criminal silence on this issue.
Even today 90% Pakistani factories are not registered.
Ninety-five factories are run under the contractual labor system.
Only 5% labors are registered with social security and EOBI.
In private sector, particularly textile and garment industries, only 2% workers enjoy the right to make their labor unions.
The labor inspection system, necessary to assess the real working conditions inside factories, has been hampered, allowing the factory owners to treat their workers worse than slaves.
Sindh, which houses more than 60% of Pakistan’s factories, has even no proper labor minister.
The international companies are violating local labor laws and international labor standards in Pakistan and earning billions of dollars through brutal exploitation of Pakistani workers.
Its worst example is the German brand KIK, whose fault created the tragedy of Ali Enterprises Balida Karachi, taking lives of 259 workers.
Moreover, the so-called international audit firms are continuously issuing certificate to the factories that exploit their labors, compelling them to work in very dangerous conditions.
Thus these audit certificates are proving “death warrants” and “license to kill” for these workers. Italian company, RINA, is such a company that had issued such the certificate to the Baldia factory just two weeks before the sad incident.
This company has already issued about 100 such certificates to other factories.
The heirs of Ali Enterprises fire victims even today are struggling for their rights on streets and in courts.
However, the apathy of the government and all political parties could be seen from the fact that the heirs of 17 martyrs have yet to get DNA report and claim and bury their loved ones.
Pakistan got special concessions in 2014 under GSP Plus, under which it would earn the foreign exchange of more than 1bn US$ yearly for selling its exports in the European markets and more than one million new jobs are expected in the textile and garment sectors in the years to come.
However, despite this huge profit and revenue the factory owners and the government are ignoring their promises and commitments regarding the GSP Plus, under which they had to follow and respect 27 conventions on labor and human
However, the speakers paid rich tribute to outgoing chief justice of Sindh High Court for doling out justice to the affectees.
The victims’ association and the NTUF had decided to sue International brand KIK in Germany and auditing company RINA in Italy and for this legal process group of international lawyers had had visited Karachi last week and attended the general meeting of the victims’ families on 8 feb at PMA House Karachi.
They demanded that a judicial commission should be established to probe into the Baldia factory fire which should issue its report in three months.
They demanded that the Punjab government should immediately release the compensation as announced by the then opposition leader Mian Muhammad Nawaz
Sharif, who is Prime Minister today.
The compensation as announced by Malik Riaz of Bahria Foundation is not paid to all heirs, and it should be paid to the remaining heirs.
The chief minister of Sindh had announced to give a government employment and a plot to every bereaved family and this promise should be implemented.
The report of Justice Qurban Ali on the Baldia factory fire should be made public. DNA certificates should be issued to remaining bereaved families.
All international brands getting products from Pakistan should be compelled to follow the local and international labour standards and laws.
All the promises made to follow the labor laws under GSP Plus should be fulfilled.
German brand KIK and Italian audit company RINA should accept the responsibility of the incident and give the affectees and heirs compensation as per international standards.
Labor inspection system should be revived, and lives of workers secured by ensuring proper health and safety systems at workplaces.
Those spoke included Nasir Mansoor deputy general secretary National Trade Union Federation (NTUF), Muhammad Jabbir president Baldia Factory Fire Affectees Association, Rafiq Baloch vice president Pakistan Workers Confederation, Abdul Aziz general secretary Baldia Factory Fire Affectees Association, Gul Rehman convener Workers Rights Movement and Zahra Khan General Secretary Home-based Women Workers Federation (HBWWF) and labour leader Riaz Abbasi.
13:48:24 local time BANGLADESH
A 10-‐Point Reform- Roadmap for a Sustainable Bangladesh RMG Sector
* Emerging from the Rana Plaza Tragedy:
A 10-‐Point Reform- Roadmap for a Sustainable Bangladesh RMG Sector:
June 6 2013, article in the Daily Star:
Is the Bangladesh safety accord enough?
Following the worst industrial accident ever seen in Bangladesh, the loss of 1,131 lives and many more maimed and injured, it is not surprising that the rest of the world wants to step in and help Bangladesh solve its problems.
There has been a need for garment buyers, international trade unions and governments to be seen doing something in the aftermath, and consumers from around the world have been calling for safer factory conditions in Bangladesh.
It is in this context that the Bangladesh Fire and Building Safety Accord, more commonly called the Geneva Accord or the EU Accord, has been put together. In fact, planning for this accord had started some time ago, initially as a GIZ plan; the work was then expedited following the Tazreen factory fire. read more here.
At the end of the article is a reference-link to “merging from the Rana Plaza Tragedy: A 10-‐Point Reform Roadmap for a Sustainable Bangladesh
RMG Sector” , here or below.
Dr. Syed Tarique-Uz-Zaman, Coordinator, SAPRODEW, Dhaka- Bangladesh, wrote a comment:
Increase of inspectors –
When the recruitment of new Inspectors will take place not yet known. Then to make them capable they will have to be trained, and concerned law needed to be changed with empowering the Inspectors.
The process must be geared up by the Govt.
The Cabinet passed a new Labor Law that makes unionization in RMG easier – not correct. It has made more difficult.
Mid-level management training –
This is a really weak area now in Garment sector.
In 70’s and 80’s we had two types of Institutions, 3 /4 IRIs (Industrial Relations Institute) for giving round the year training / running different courses mainly on labour laws and 1 BIM (Bangladesh Institute of Management) at Dhaka for giving General admn / accounts and related training to Industrial management people.
At that time we did not have garment factories and number of manufacturing
Industries was quite less.
So those institutes could cater needs of the Industrial sector.
Now we have many more industries and need many more institutes.
But so far I know it is not increasing and existing ones do not run as many courses as they used to organise at that time.
Hence Garment mid-management people have really a lack of knowledge on
Industrial management and very weak skilled in Human Resource Management.
Govt., and BGMEA, separately and jointly could found some more institutes and run many courses round the year. It will be very very useful.
In the IRI, like before Trade Union leaders should also be invited to get training together with management people, it will help develop common understandings and relations.
*On 10 Points*
1. Factory Classification –
2. Factory Health & Safety standards/ Ongoing Compliance Monitoring –
3. BGMEA Responsibilities/Reforms:
Very good, especially “they should require all of its members to ensure that the owners or their designated representatives, directors and managers of production units attend week long training programs, for example, which focus on worker rights, workplace safety, facility inspection and corrective steps, compliance requirements that go beyond a simple checklist, legal obligations towards workers, etc.”. This is really a weak area in the Garment sector, hence this step would be very much useful.
a. “No new factories must be allowed to come into existence, be given BGMEA membership (and hence an ability to export), without rigorously
checking their full compliance.
Indeed, we would strongly recommend that BGMEA should ensure that all new
factories (exporters or sub-contractors) must be of Tier 1 category.
Otherwise they should not be entitled to a license or to enjoy BGMEA
membership. To do otherwise would undermine the credibility of BGMEA as an
organization and create a wrong impression of that member.”
– very good proposal.
4. New RMG Economic Zones/Unsafe Factory Relocation:
This is also necessary, but will take time. Yesterday Labour Minister said they have identified 500 acres of land in Munshigong abut 30-40 km east of Dhaka to
be given for Garment relocation, but given our experiences if proper attention and close supervision is not given it would take long time.
5. Strategy for Financing RMG Reforms:
It is good to point out that main solution should be from domestic sources. However, Financing is comparatively a complex issue and needs more examination before giving comment.
6. Minimum wage increase/increased efficiency/productivity gains:
It seems that they are very much conservative on wage increase.
Well to make competitive of BD garments they should pay at least 10% less than Nepali / or Sri Lankan Garment factories, but not less than that.
Is it OK? And if they can not implement new wage rate from 1 May 2013 let them pay from 1stJuly, OK?
And in the mean time they should announce Tk. 1000 (Euro 10) PM for May and June as lump sum payment and declare it immediately.
Otherwise current high labour unrest could not be contained.
7. Trade Unions/Better Worker Representation, BRIDGE and Affiliation: Bridge cannot be a substitute of Trade union; it will remain an ineffective measure like Participatory Committee. If representatives are not elected and selected by workers themselves and if they do not have rights given in Labour law workers in any committee remain as show-boys. So they must accept basic Trade union at factory level and at the same time these leaders should also be sent to Training Institute for training on Labour laws. This was in practice in Bangladesh in other traditional industries like Jute, Textiles etc.
8. Formation of new fund for Worker Welfare:
Their understanding is good and realistic, “The resources generated in this way may also be used for setting up contributory provident / pension fund which will help tie workers more to the RMG firms they are currently working and reduce the extremely high turnover of workers in this sector”.
However, the existing profit sharing law by which 5% of net profit to be distributed among the workers at the end of each year and in practice in some other industries must be complied with in the Garment Industries.
It will encourage workers to hard working sincerely, productivity will rise. Owners will not be losers.
9. Moving up the value chain/worker productivity:
10. Branding and International PR management strategy:
Good business ideas. If they comply with all rules, regulation on OHS, give decent wages then people like Dr. Younus, Fazley Hossain Abed etc., would agree to work for Branding their items.
Compliance and Political Stability Have Risen to the top of the Global Buyer Agenda: Yes correct.
* RMG 10 point manifesto- Part-1:
by Irfan Chowdhury, Farhad Mahmud and Zia Hassan
Since the collapse of Rana Plaza that killed over 1100 garment workers, news reports, opinion pieces, analyses, recommendations and implacable public sentiment at home and abroad keep pressure on the government and the industry to act.
For its part, the government has set up a 10 member cabinet committee under its Labour Ministry which has announced a minimum wage board and has started discussions with Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the International Labour Organisation to deploy 200 inspectors to review at-risk factories, of which some are currently closed. The Cabinet also passed a new Labor Law to make unionisation easier in the RMG sector.
The BGMEA’s actions in the past and in the wake of Rana Plaza were extremely defensive and self-serving. However, perhaps as a response to intense pressure to do something, a set of recommendations from a group of eminent RMG owners has come out.
Titled Emerging from the Rana Plaza Tragedy: A 10 Point Reform Roadmap for a Sustainable Bangladesh RMG Sector , (Download here: RMG Sector 10 Point Plan) the report outlines a 10 point reform agenda/roadmap that the group believes should be implemented.
While there are suitable and sensible ideas in this report, at first sight appearing to be attractive and well-meaning, there are significant gaps, especially in relation to the owners’ financial contribution to reform agendas and promoting workers’ rights and entitlements. The proposed roadmap also fails to acknowledge the subsidies and export incentives already received from the government.
A fundamental debate at present appears to be to decide where the primary responsibility of the reforms lies – is it at home or abroad? It is encouraging to see that the roadmap suggests that a domestically led solution is preferred, but only if this aims first at sorting out issues within the industry, directly involving the government, before we ask outsiders to contribute.
The proposal to source finance for the reforms primarily through Government of Bangladesh (GoB) aid, investment by foreign buyers and contribution by foreign consumers may appear reasonable, but it is overly optimistic to expect such large-scale investment from foreign buyers.
It is imperative that the reforms focus on the improvement of working and payment conditions of the RMG workers, who have so far been neglected. Disappointingly, while the roadmap names sensible initiatives – e.g. hostels for workers, health and safety checks, free schools/childcare facilities, a BRIDGE to act in addition to the workers’ union – it lacks practical reasoning and we consider that the suggestions may be too far-fetched, given the plight of the workers and the track record of the RMG owners’ current non-contribution to such initiatives.
Our analysis of the proposed roadmap is as follows:
1. Public scrutiny and governance should complement classifications of factories
THE proposal to use classification to identify factories at immediate risk is a good one; it is known that there is a mix of ‘good’ and ‘bad’ factories, and categorising them would help to prioritise urgent restorative action or closure of at-risk factories. Formation of an independent body to oversee this task through a National Action Plan (NAP) and a comprehensive audit also make sense.
However, maintenance and administration of risk classification will be the key to success – some factories in Rana Plaza were compliant. We suggest that a public risk database be created, stemming from a comprehensive risk audit, so that workers are aware of potential risks. We further suggest that NAP reports to a high level steering committee, disclosing progress in removing risk to workers on a monthly basis and including the updated risk database, so that the governance of the reform is transparent and open to public scrutiny.
There must be an enhanced focus on compliance and rigorous monitoring. Highly regulated and strictly monitored industries in the developed world still try to use loopholes, but overt public scrutiny and criticism discourage regulators as well as industries from taking risks.
We would also like to highlight that there is an increasing trend for top tier producers in the country to become order-procurers, taking orders in the name of their factory, then passing the manufacturing to third tier or high-risk factories, with the manufactured goods being delivered to their warehouse prior to shipment.
The problem lies in the fact that these producers thrive on profit made from a lower cost production function such as outsourcing to third tier factories, meaning that products are not made in the first tier ‘good’ factories but in third tier factories that are subcontracted or literally run as their own.
The recommendations must include a way to overcome this trend so that uniform acceptable factory conditions can be achieved.
2. BGMEA Responsibilities have to be binding
WHILE the roadmap lists a set of necessary actions by BGMEA such as a directors’ and managers’ training program, compliance requirements and random fire evacuation drills and verifying building compliance, these are merely commonsense and BGMEA as an apex body should already be doing them.
It is surprising that actions such as BGMEA requiring its members to check compliance of factory-buildings have not become standard procedures for a billion dollar industry.
Change has to happen within BGMEA, within its owner groups and in their conduct. Otherwise, as discussed above, these so-called regulations will fail to achieve much needed improvement of work-safety conditions, ‘In December 2012 a rare BGMEA inspection identified four factories judged to be dangerous as they had been built in breach of construction regulations, including Rose Dresses Limited in Ashulia, owned by Ariqul Islam. Three months later, he was elected BGMEA president. Given that garment manufacturing businesses openly flout the law, there are suspicions that the sole aim of the inspection was to give the protectors of the future president leverage over him’ .
We do not understand the preference for hearing out only the bigger voices either: ‘Voters with only US$ 500,000 and above in export should be allowed to make policy decisions in BGMEA committees’. Is it because they are the biggest employers? The next set of solutions, government or owner driven, should be inclusive and should not leave out any players.
We suggest that roles and responsibilities of BGMEA are revisited; any proposed roles by the industry peak body must be binding in nature. Only through application of strict industry legislations coupled with sustained public scrutiny can progress be monitored in terms of the implementation of the promised changes.
3. Owners must share the cost of relocation of factories and proposed reforms
UNDER Point 4, the roadmap casts a need for relocation of factories, already a well-canvassed idea, and strategies to create a fund for reform through budgetary allocation and an export tax. Although it is stated that the reform should be financed by GoB and BGMEA members, one needs to read carefully to find that, while the recommendations point out what is needed, they ask the government (and thus the citizens of Bangladesh) to bear the whole cost. It is proposed that the government allocate Tk 3000 crores in the upcoming budget and ‘khas’ lands but fails to specify the contribution of BGMEA or its member/owners.
We imagine a sentiment amongst the owners is that they have built this industry by employing so many people without any help from the GoB and now the industry needs support to avoid further accidents and to remain competitive. Yet it would be a fair assumption that few owners would probably admit to the business loans that they have sourced through GoB initiatives or various domestic and foreign financiers — some of which are defaulted.
Our entrepreneurs have worked hard to build their empires and to employ four million people. They have not, however, become successful by selling garments, but rather in essence by trading cheap labour. Therefore, government investment must focus on the welfare of the RMG workers, who work tirelessly, contributing to the economy and to entrepreneurs’ profits.
Idea no. 5 recommends, ‘World Bank, IFC, Asian Development Bank, Islamic Development Bank and bilateral development partners (EU, DFID, JICA, USAID, SIDA, CIDA, NORAID etc) to fund a $1 billion RMG Sector Transformation Fund at concessional interest rates that can be accessed by BGMEA members to finance either relocations or other necessary compliance/safety measures.’ It even demands local funds, ‘…Funds from local banks will also be needed. The interest rate should be on concessional terms under a special discount facility of Bangladesh Bank. Money allocated in the budget may be partly used to finance the discount operation. Bangladesh Bank is currently operating several discount facilities and this may be an additional one but its implicit costs should preferably be fully financed through the budgetary allocation…’.
Our immediate reaction is why would anyone give the factory owners or their peak body another set of loans, significant soft loans, when its members have a history of treating workers abysmally and hogging profits? What guarantee can it give us that this massive investment won’t go astray and would largely benefit factory owners although designed to help the workers?
There are so many instances where government, private entrepreneurs and individuals have misused funding – in some cases funds have been used for totally different purposes (read: for personal gain). Our domestic banks, industry owners and even petty businesses have earned a bad reputation and the mistrust of international financiers: for example, the Inland Bill of Lading, a banking instrument later used by the Hallmark Group for fraudulent practice, as was recently exposed.
The industrialists have to provide concrete evidence how these funds will be managed, and by whom. It is one thing to be arguing why these funds are needed but quite another to ensure their proper use.
We do not suggest that owners are left without assistance. The relocation of RMG factories is definitely a good idea, but it should not be funded solely by government aid. Doing so would be seen as rewarding and protecting the interest of owners who have not adhered to basic safety, cramming thousands of workers into unsafe buildings to take advantage of low operating costs. Loans secured by appropriate collaterals could be available to factories which are performing well, have potential to grow and, above all, manage workers with dignity and humanity.
4. A just wage is needed and is possible
A WAGE rise retrospectively from 1st May is perhaps unreasonable. However, the fact is that without a substantial wage rise the situation is unlikely to improve. Pre-existing contracts should be fulfilled within the next three months and a readjustment of wages by the end of the year with an immediate announcement seems to be a more pragmatic approach.
The arguments put forward in favor of a cautious wage rise for the workers are one-sided – in particular, the use of a quote from a retail-sourcing consultant Mike Flanagan, stating that there would not even be 4000 workers left if the minimum wage is raised by a miserly 50 cents, is unnecessary. That statement cannot be supported by the fact that when minimum wages were doubled in 2010 there was not a single case of factory closure and widespread unemployment reported, despite warnings from the then BGMEA president of such impending doom. Unless, of course, one accepts the assumption, which is without any basis, that with that increase the wages will have suddenly reached optimum in less than three years.
The government and the general public appreciate the industry in that it employs a large number of people and brings in income. At the same time, exploitation, unfair treatment and unsafe working conditions are what promote criticism and concern.
The extremely low wage for workers gives rise to tensions. This has now gained international media attention and it could be argued that it is harming brand Bangladesh. Further, there are economic analyses and views that support much fairer options for the workers without drastic effects on the owners’ profit. Munir Quddus, a professor of economics and dean of the business school at Prairie View A&M University in Texas, argues that a minimum wage of Tk 6000 per month is roughly equivalent to $0.22 per hour and claims that Bangladesh will still be competitive in its global exports and his suggested raise will help to bring Bangladesh garment workers up to par with Vietnam ($0.23/hour), India ($0.28/hour) and Cambodia ($0.32/hour), all close competitors in the global garment export business.
And it is widely accepted that fairly paid happy workers are more productive, which is most desirable.
To support his claims Professor Quddus further states, ‘One can argue that raising the minimum wage too high and too soon will create disruptions in the rest of the economy. For example, the maid-servants — another major employment for younger women workers in the city — still receive around Tk 1,000 to Tk 2,000 per month (plus room and board) and drivers of private cars receive Tk 5,000 to Tk 10,000 per month, an employment available only to men.
Certainly, a lot more maid servants will attempt to find jobs in factories, and the flow of labour from the countryside seeking such employment will also rise. The imbalance between jobs available and jobseekers may further increase. However, this is not expected to be a negative in the long-run’. 
Other sources also suggest that buyers are attracted to countries such as Vietnam – where wages are some three times higher than Bangladesh – which shows that it is possible to have strict labour laws, fair wages and a healthy garment industry. This stands in sharp contrast to our industry that has grown quickly, specialising in low cost production and embracing the sweatshop model rather than investing in technology and upgrading. 
The attitude that owners need all the funds, subsidies and donations, but restricting the workers’ wage, hitherto irregularly paid, would not help the situation. In fact, this could be interpreted as the usual exploitative behavior, especially if living cost is considered. One cannot survive for long with Tk 3000 per month, let alone on the current Tk 1662.50, last increased in 2010.
Just as in any business the owner group’s intention to raise the wage as little as possible is evident. Yet it is to the industry’s long-term benefit that wages are increased justly and this can be achieved without making exporters uncompetitive.
5. BRIDGE must not undermine proposed workers unions/collective bargaining
EFFECTIVE collective bargaining is the right way as suggested BRAC’s founder Fazle Hasan Abed. Workers should have the right to negotiate collectively for their pay and conditions. We acknowledge that the plan rightly agrees with the workers’ right to form unions. It also suggests BRIDGE, an owners’-workers’ platform could be formed, which would act as a supplementary entity to the trade union/workers’ participatory committee. This seems like a good idea.
However, we remain cautious in our optimism noting that although collective bargaining is the much-needed first step, desperate workers do not enjoy a position of power. And there are ways to circumvent regulations and procedures. With very limited job opportunities and abundant labour supply the effectiveness of labour unions is doubtful.
To be continued.
AlalODulal.org, June 11, Irfan Chowdhury is an opinion columnist. Zia Hasan is a small business owner and a writer. Farhad Mahmud is the founding Managing Director of ETV and an entrepreneur in the carbon consulting industry.
1 RMG Sector 10 Point Plan
2 http://mondediplo.com/2013/ 06/06bangladesh
4 http://www.france24.com/en/20130502-fast-fashion-fair-wages-vietnams- lesson-bangladesh?utm_source=dlvr.it&utm_medium=twitter
* RMG 10-point manifesto- Concluding Part :
by Irfan Chowdhury, Farhad Mahmud and Zia Hassan
6. Fund for Worker Welfare
Iin idea no. 8 it is suggested that foreign consumers and buyers chip in 0.25% of Freight On Board and promises that the supplier would match the amount, but the concept is left at surface level without specific analysis and proposed mechanisms. Who will set up and administer such provident funds for vulnerable workers (some of whom could be old and illiterate)? It is certain, however, that this would open further funds for the keepers to play with. And when poor workers reach pension age who would guarantee that they will get superannuation?
Apart from the challenge of convincing foreign buyers to contribute, it is critical to ensure honest and sincere management of these funds so that all workers are entitled to the superannuation scheme. As wide spread corruption has been part of the economy, guarding this fund from abuse could prove to be yet another difficulty, unless of course the scheme can be guaranteed by government underwriting.
7. Progressing through the value chain and promotion of brand Bangladesh can be improved by real reforms on the ground, rather than by hollow promotional activities
MOVING up the value chain is mentioned in idea no. 9, indeed a noble and much needed action – but again, who will train and up-skill the labourers? A revamped Bangladesh Fashion Institute of Technology and a Business Development Studies Team could go some way, but it is unlikely to fully address this.
We agree that economies and industries go through development phases, for example, from an agricultural export base to electronic goods, or within an industry there could be technological advancement and economies of scales achieved. And though there are precedents when desperate workers had been absorbed in an industry before nations/industries moved up to the next level of production, we would expect that a roadmap included a comprehensive plan to invest in the training and development of its existing labour force. It would be unwise to wait until all the surplus labour force is absorbed before the industry increases wages or moves up the value ladder, as argued in the plan.
In idea no. 10, PR strategies, campaigns and promotional videos to highlight that working conditions are safely providing jobs for many poor people are argued as a way of improving the brand Bangladesh.
This is necessary given the coverage of the disaster, but promotion of brands should only happen if remedial actions have been taken and only after working conditions have improved throughout the industry. It will otherwise be a misleading promotion to pursue buyers.
8. Infrastructure and other constraints
WE AGREE with the roadmap that political instability and inadequate infrastructure are significant challenges facing the industry, and have been for some time. The government should try to address infrastructure issues. Our entrepreneurs face undue disadvantage due to incessant political turmoil and bottlenecks caused by insufficient infrastructure; while lip service is always paid, the real actions are never in sight.
This could potentially harm the industry in the long term as buyers may look to competitors for consistent services. The relocation of factories to new export zones set up close to ports and redevelopment and modernisation of ports are urgently needed. Government and other political parties could significantly help the industry in this area by investing in infrastructure development and by being sensitive to business activities when announcing programs.
9. What was left out
WE EXPECTED a roadmap from the RMG owners that would not only look ahead from the owners’ perspective but also allow ideas to offer compensation for the victims of its blatant and cruel negligence. It was disheartening to find that this set of ideas has no room for any compensation scheme for injured survivors, many without limbs, or for disabled or victims’ families which are as usual left to GoB and compassionate donors.
The roadmap, however, carefully smoothed over inconvenient issues such as the rampant practice of over-invoicing on back-to-back material import and under-invoicing on garment selling price, by which factory owners regularly siphon off undeclared profits abroad; this practice has been popular among factory owners since the inception of the industry in 1980s. Prices are not real prices, neither are the declared profits, rendering attempts to rationalise a wages-profit distribution based on declared numbers practically useless.
The roadmap deliberately avoids issues which were prevalent even before the collapse of the building: paying workers on time, reasonable working hours with proper breaks, or the option of refusing overtime as time is of the essence in order to earn and maintain business in the industry.
And then there is the issue of delegation of risks by established contractors onto sub-contractors who cannot afford to maintain reasonable work-safety:
‘There is an established trend to delegate the risk onto the contractors and sub-contractors, who have to meet the deadlines by any means. Buyers must acknowledge that they benefit from the system of subcontracting to factories that won’t, and sometimes can’t, afford to let people work on healthy terms.
The buildings that collapse or catch on fire often belong to factories that don’t make much profit to begin with, and can’t take risk. So they gamble on workers’ lives. Survival with compliance, for these factories, will have to be subsidised by the people higher up in production chain – either the local garment producer from which they are sub-contracting or the foreign buyers that have awarded the contract to the local garment producer’. 
Anu Mohammed, economics professor at Jahangirnagar University, summarised the history of the industry: ‘Bangladesh hasn’t always been under the thumb of the clothing industry. Until the mid-1980s, jute was the main earner. Then the IMF and the World Bank arrived. Under their aegis, privatisations and public spending cuts caused unemployment to rise and led to massive dependence on imports and the decline of local industries. Bureaucrats in the main parties, army officers, the upper echelons of the police and the sons of prominent families jumped at the opportunities. The incentives to invest in textiles were irresistible: low labour costs, unions weakened by the privatisation of state enterprises, and the elimination of import duty on machinery for export industries. Corruption did the rest’. 
The roadmap also wrongly interprets Adam Davidson’s suggestion in a recent New York Times article as ‘once the factories have absorbed all the desperate farmers, they need to find a new competitive advantage’. In reality few countries wait that long, i.e., until all the surplus agricultural labour force is absorbed before they increase wages and move up the value ladder. Empirically, instead we see that wages are not left to market forces alone, but to a host of other factors that act as socio-economic drivers that push a country forward.
Adam Davidson had argued that ‘Race to the Top’ should ideally start before ‘Race to the Bottom’ hits rock bottom and ends his article with this concluding remark, ‘For now, Bangladesh might be where this centuries-long T-shirt journey ends, which means that their race to the bottom may be rooted in a misunderstanding. The country’s manufacturers can afford to take a step or two up the value chain. Not only can they pay their workers more, treat them better and house them in safe and clean factories, but there is also a significant economic incentive to do so’. 
Intentional omissions such as these will not only make the general public skeptical of the proposed reform agenda but will also hinder the engagement of stakeholders in the process.
THIS document came across as self-interested promotional material trying to woo stakeholders by using the plight of the industry and poor workers so that big owners do not lose their business and profit margins and do not have to absorb costs of reform to the industry.
The recommendations overlooked BGMEA’s many failures including its inability even to produce a credible list of victims and months of unpaid wages for the victims’ families, but the authors did not hesitate to mention that they have worked on the recommendations on a pro-bono basis to develop these germs of ideas. We appreciate their work as they are bound to be busy individuals with tight business schedules. However, along with the nation’s good it is their stakes that are in balance.
We also note that the roadmap tries to use findings from a consultancy report (we dare say aided by industry owners), the McKinsey CPO survey, which only focuses on the benefits of the owners and their potential for further earnings, and should not be a guide to improve the situation of poor workers. We suggest that the owner group look into research and economic arguments put forward already which indicate that improvement and redevelopment of the industry is possible without much damage to the owners’ revenues and profit margins.
A decent minimum wage and collective bargaining is a fundamental tenet of capitalism. This is how the system works in other capitalist countries. Bypassing those standards inflames labor unrest, oppression, and a wealthy class with a harmful monopoly.
Despite its vagueness and the omission of contributions from the owner group, we acknowledge that this manifesto has some good ideas which could work if, and only if:
* a balance is found between GoB and other contributors’ investment; in particular, private and public investment has to be clearly outlined and monitored by a third independent party/body that would have no stake in the industry except from ensuring project implementation and governance; and
* cronyism, corruption and short cuts to make quick and easy profits are countered – this is a big if, as we are overburdened with red tape and lack of due diligence in all sectors, but mostly in government and large bureaucracies such as BGMEA.
Many nations and many industries before us have faced epic challenges. As a consequence some perished, some came out stronger and more prosperous. Even though it is tempting to choose an easier path involving minimum investment and lesser responsibilities, inevitably it is the honest intention (to contribute rather than to protect self-interest) and the generosity of taking the harder path that have been the keys to improvement.
AlalODulal.org, June 11, Irfan Chowdhury is an opinion columnist. Zia Hasan is a small business owner and a writer. Farhad Mahmud is the founding Managing Director of ETV and an entrepreneur in the carbon consulting industry.
* Emerging from the Rana Plaza Tragedy: A 10-‐Point Reform Roadmap for a Sustainable Bangladesh RMG Sector:
In this paper, we first highlight the current state of the Bangladesh ready-made garment (RMG) sector and highlight some recent reform initiatives from various stakeholders, which are aimed at improving the situation.
We then outline our 10 point reform agenda/roadmap that we believe covers the key issues, both in terms of the immediate Post-Rana Plaza safety and compliance, as well as some broader strategic issues that, in our opinion, the industry needs to take in order to ensure the next phase of growth.
We believe that by urgently implementing measures around these key issues, workers quality of life will be improved with higher standards in the workplace, manufacturers will improve efficiency through better compliance and regulation, and the country’s RMG sector will enhance its competitiveness and economic sustainability in the global market.
Furthermore, global brands and their consumers can be confident that the Made in Bangladesh products remain affordable and of a high quality, whilst being ethically and responsibly sourced.
The key issues, which we outline in this paper, which make up our roadmap for sustainable reform, as we see them are as follows:
1) Factory Classification
2) Factory Health & Safety Standards/ Compliance Monitoring
3) BGMEA Responsibilities
4) New RMG Economic Zones/Unsafe Factory Relocation
5) Financing RMG Reforms
6) Minimum Wage increase/Increased Efficiency/Productivity Gains
7) Trade Unions/Better Worker Representation , ‘BRIDGE’ and Affiliation
8) Formation of New Worker Welfare Fund
9) Moving Up the Value Chain/Worker Productivity
10) Branding and International PR/Engagement
Emerging from the Rana Plaza Tragedy: A 10-Point Reform Roadmap for a Sustainable Bangladesh RMG Sector
I. Background and Context
As the nation continues to mourn the 1120+ lives lost, and thousands more maimed, injured, traumatized and orphaned in the aftermath of the Rana Plaza tragedy, our collective focus must urgently shift to asking what lessons have been learned and urgently set a path for a much better way forward for the RMG sector. Not only does RMG account for more than $20bn of Bangladesh’s $120 bn GDP and make up 80% of exports by revenue, but critically the livelihood of more than 4 million workers, the majority of whom are female, directly employed in the industry and the near 20 million people who rely on incomes from the sector
are at risk if we fail to get the reform process right.
What a difference 6 months makes! In April 2012, the world’s leading strategy consulting firm McKinsey & Co. published “Bangladesh’s Ready Made Garments Landscape: The Challenge of Growth”. McKinsey forecast that Bangladesh RMG could reach $ 30bn by 2015 and $ 50bn by 2021 and noted that ‘While China is starting to lose its attractiveness in this realm, the sourcing caravan is moving on to the next hot spot. With Bangladesh having developed a strong position amongst European and US buyers, many companies are already eager to evaluate the future potential.’ But McKinsey also sounded a note of caution which
was to some degree prescient about the inherent tensions in such a rapidly growing industry stating that ‘However, the lure of competitive prices, available capacities, and supplier- capabilities offered is being cautiously weighed against a prevailing insecurity created by the challenges inherent in Bangladesh’s ready-made garments (RMG) market.’
We suggest that it is imperative we consider a more holistic and broad ranging plan to ensure that the long- term growth of the RMG sector persists.
The moral outrage, both domestically and internationally, has triggered a whole range of reform initiatives and proposals from a broad range of industry stakeholders at home and abroad.
• The Government of Bangladesh (GoB) has responded to the populist backlash (if anything more rapidly than we might have expected) with a 10 member cabinet
committee specifically for RMG and set up under the auspices of the Labour Minister.
• The preceedings of the Committee resulted in the announcement of the reformation of a ‘minimum wage board’ that has instructed any new wage agreement to by retrospectively applied to May 1.
• The GoB, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and International Labour Organisation (ILO) reached a tripartite agreement which, among other things stated that the ILO and its partners will “assess by the end of 2013 the structural building safety and fire safety of all active export-oriented ready-made garment factories in Bangladesh, and initiate remedial actions, including relocation of unsafe factories”.
• The number of inspectors has been increased to 200 with immediate effect, with a goal to further increase this to 800 by the end of this year.
• There have been a number of inspection teams under joint-secretaries deployed to review factories that are at risk, where a significant number have been closed. The BGMEA has announced an immediate compliance audit of all factories.
• A number of the largest European buyers, led by H&M, Inditex, Tesco and PVH have responded by agreeing to sign the Accord on Fire and Building Safety in Bangladesh (which was proposed by international and local labor organizations); a condition of the Accord is that all the retail signatories’ Bangladeshi suppliers also sign onto and become parties to the Accord.
• The Cabinet passed a new Labor Law that makes unionization in RMG easier and also provides for mandatory insurance for businesses with more than 100 employees.
* Walmart has instituted its own compliance programme/requirements. Abercrombie has joined PVH are the only two U.S. retailers who have so far agreed to sign this Accord.
II. A 10-Point Reform Roadmap
The formulation and implementation of a meaningful and urgent reform process is far from easy. Given the nature of the problems we believe it’s important to start from first principles.
As we outlined above, we recognize a number of very good initiatives are already under way, some of which echo the points below, but we still thought it would be helpful to pull together the key issues and to provide some structure. We therefore outline below our thoughts on a 10-point plan for transforming the RMG sector in Bangladesh.
1) Factory Classification:
An review of the structural integrity of factory buildings needs to be carried out urgently and to classify them accordingly: we need to ensure that an effective and wide-ranging audit of all the RMG factories is carried out within a realistic but sensible timeframe. An independent body assisted by BGMEA/BKMEA, BUET/DUET under the monitoring of a neutral ‘chair’ may form a National Action Plan (NAP) and undertake this task.
In terms of ongoing compliance monitoring, we need to establish this independent
inspectorate. The NAP team could be bolstered with coordinated inspection initiatives from global buyers requiring compliance with industry recognized ethical and regulatory standards. For further legitimacy and expertise, the ILO can play an important coordinating role and offer technical assistance. Effectively a joint stakeholder initiative we feel is best and most realistic.
The NAP Team must urgently classify factory buildings and adopt an easily recognizable and acceptable classification such as Tier 1, Tier 2 and Tier 3. A database of factories cataloguing compliance could be established in order to better keep track of issues in the RMG sector and to list factories, which are compliant in terms of structure, practice and documentation. In that respect the council building departments could provide lists of planning permissions granted to factories and the extent to which those permissions have in fact been complied with. These types of audits would identify compliance infringements such as the one alleged to have occurred at Rana Plaza where the number of floors were apparently built in excess of that approved as structurally sound and stand a greater chance of averting disasters.
2) Factory Health & Safety standards/ Ongoing Compliance Monitoring: Compliance covers a broad range of issues but these can be largely broken down into building safety; other factory safety (fire exit, electrical); and work space health issues (ventilation and toilet quality). The factory tiers that we propose for compliance could encompass the following:
Tier 3 factories should be thought of as having ‘high risk’ or ‘imminent risk’ which need immediate remedial action. For example they may likely lack basic fire and safety equipments, have no fire exits and are set up in what can only be described as ‘risky’ as factory buildings.
Such an audit could also identify that the worker production lines are over-congested, and in place of a ‘safe’ 3-line set-up there is a 4th , in which case, the floor environment would not leave adequate space for operators to evacuate in the event of an emergency or fire. Such an audit could also reveal a grim picture of the wiring in the factory where power load has not been calculated properly creating a electrical risk, or the electrical distribution board could have wires exposed on the walls that host these boards.
Tier 2 factories could be in old buildings or shared tenancy, where ‘less risky’ issues may arise like the generator or the boiler on the floor, or it may also have a few worker’s rights compliance issues such as working extra hours that might be considered excessive or a one- day rest policy which may be considered insufficient. Those would be seen as more easily remediable than Tier 3 banded non-compliant factories.
Tier 1 factories could likely have no material ‘high risk’ or ‘imminent’ issues but may have other responsibilities to address, improve and undertake on general welfare issues.
IMPLEMENTATION: The initial audit findings could be shared with BGMEA and the applicable ministries (Industry, Environment, Labour, etc.). With every audit, the corrective action plan should also be listed. Inspections and audits to be carried out on the first riskiest 1000 Tier 3 factories are to be followed by more rounds of audits/inspections at later stages.
3) BGMEA Responsibilities/Reforms:
BGMEA can also play a complimentary role in self- monitoring and ensuring/enforcing compliance through conducting compulsory training programs. They should require all of its members to ensure that the owners or their designated representatives, directors and managers of production units attend week long training programs, for example, which focus on worker rights, workplace safety, facility inspection and corrective steps, compliance requirements that go beyond a simple checklist, legal obligations towards workers, etc. BGMEA should also conduct unannounced fire drills, after giving fire training to the factories for at least 3 months. BGMEA could also require its members who are leasing facilities to check the property and building documents of the facility to verify whether the property/building is in compliance with the local zoning/building codes – non-compliant facilities are to be vacated within a specified period.
We also believe that the BGMEA itself should seriously consider incorporating internal reforms:
• Factories, which are (allegedly) essentially paper-based or ghost factories, must be eliminated if verified as such through inspection.
• No new factories must be allowed to come into existence, be given BGMEA
membership (and hence an ability to export), without rigorously checking their full compliance. Indeed, we would strongly recommend that BGMEA should ensure that all new factories (exporters or sub-contractors) must be of Tier 1 category. Otherwise they should not be entitled to a license or to enjoy BGMEA membership. To do otherwise would undermine the credibility of BGMEA as an organization and create a wrong impression of that member.
• Also only voters with minimum USD 500,000 and above in exports should be allowed to make policy decisions in BGMEA committees.
4) New RMG Economic Zones/Unsafe Factory Relocation:
We believe that relocation will likely pose the next big issue that requires a medium and long-term solution. Out of the factories that we have, almost 33% have 100% compliance problems or can be identified as Tier 3 factories. For example, out of 1568 factories that exist in Dhaka metro area, 647 factories have direct export, obtaining Utilization Declaration (UD). However, another 500 could also fall under the Tier 2 group of compliance. Therefore, we can with relative caution assume that at least 1000 factories are likely going to need relocation. Since green buildings save expenses later, the relocated factories should also have the option of being “green”.
IFC/GIZ could help in this issue.
This relocation need not be done in one instance nor relocated to just one place. The relocation of these 1000 factories could be split in 2 phases and across 2 or more different locations for example. That could mean that 700 factories could start being constructed in the Dhaka area from 2014. This process can be replicated in the Chittagong area for another 300 factories so that the total 1000 factories can be relocated across two major metro areas within a possible 3-4 year period.
The approximate cost of setting up a 25,000 sq ft for basic shirt/blouse factory would be Taka 10 crores. If 1000 factories are identified as Tier 3, then the riskiest 500 factories of that same tier should be able to shift immediately by locating a land of around 375 bighas (@ 0.75 bighas for 1 factory basing on 4 storied industrial buildings).
The government should seriously consider a number of “state aid” measures for this particular industry sector as a kind of economic rescue aid package.
Firstly, the government could identify and earmark suitable raised land for construction purposes at the cost price, which can be paid by the manufacturers. Secondly, the total requirement for 1000 factories we estimate could be in the region of 10,000 crores which could be initially funded by the government under special arrangements as loans to the enterprises and adjusted gradually from the exporters’ export proceeds. Thirdly, related infrastructure and utilities could be
provided and authorized on a priority basis by the government. With these measures in mind, we reasonably estimate that the government should very kindly allocate 3000 crores in the upcoming budget for implementation of the “state aid” project, if possible basing on the government’s own, “khas” land.
As suggested, such relocation can be carried out in phases and can be set up in different clusters based on the availability of suitable land. Relocating to lands of 40-50 bighas is also possible. This relocation should be made compulsory for the factories in Dhaka-Chittagong- Narayanganj metro areas, and selected by a specific committee suitably appointed. The government and the factories should allocate resources to developing and implementing an industrial development plan for the new locations and structure the design of the factory buildings, with due consideration (by order of priority) given to (a) ensuring that access roads to any factory entrance/exit being at least 30 feet wide to allow fire service vehicle access, (b) all generators/utility equipment being on the ground floor/separate structure, (c) limiting heavy manufacturing to only the first 3 floors, (d) separate dormitories for men and women workers, and (e) shared health and child care facilities.
5) Strategy for Financing RMG Reforms:
Following on from the above cost analysis of factory relocation (and subject to the government providing land and ‘state aid’ measures), as well as the safety and compliance audits, there is a healthy debate and divergent thinking on who among the major stakeholders – GoB, BGMEA members, global buyers, foreign governments, donor agencies, even consumers – should pay for the needed reforms. We strongly believe that the process needs to be a domestically led solution and hence the GoB and BGMEA members should finance a major portion of the reforms bill. We suggest the GoB allocate a min initial BDT 3000 crore in the upcoming budget or as a special RMG Support Fund.
We would also recommend consideration of a modest export tax of perhaps 1% -2% of the FOB (freight on board) value that could be time bound (say 3 years for the period of reforms) and also earmarked for the ring-fenced Tier 3 factory relocation/refurbishment. We understand that export tax is not a desirable instrument but we are proposing this instrument as a mechanism for collecting from the buyers this 1% – 2% of the export value for the benefit of the RMG industry and its workers. Although it is often referred to in the debate that RMG buyers should pay “Fair Price” for their purchases in order to enable the manufacturers pay better wages to the workers and upgrade their factories. In reality however it would never be possible to enforce this concept of “Fair Price”. Furthermore, even if one benevolent buyer decides to pay better prices for their orders, there is no guarantee that that money will be used for its intended purpose. The proposed time-bound export tax will serve as a substitute for the so called Fair Price and through appropriate earmarking it would also ensure that the collected amount—estimated to be about $220-$440 million in the first year and
higher thereafter—would be used for upgrading of the RMG sector and ensure better wages and working conditions.
We would also recommend that the GoB requests the multilateral (World Bank, IFC, Asian Development Bank, Islamic Development Bank) and bilateral development partners (EU, DFID, JICA, USAID, SIDA, CIDA, NORAID etc) to fund a $ 1 billion RMG Sector Transformation Fund at concessional interest rates that can be accessed by BGMEA members to finance either relocations or other necessary compliance/safety measures. This fund will be utilized over a 4 year period and development partners may contribute this fund over a 3-year period.
This could follow the same structure as the IPFF administered by Bangladesh Bank for lending in the Energy sector. We also believe US, EU, UK and Japanese official development agencies are willing to contribute to such an initiative. There is public outrage in developed markets and the governments of such countries could translate that sentiment into genuine and helpful financial assistance.
Funds from local banks will also be needed. The interest rate should be on concessional terms under a special discount facility of Bangladesh Bank. The money allocated in the budget may be partly used to finance the discount operation. Bangladesh Bank is currently operating several discount facilities and this may be an additional one but its implicit costs preferably fully financed through the budgetary allocation. Other countries also offer similar facilities to achieve certain targeted objectives. Currently the Indian Government is assisting
the Indian Technology sector by way of the ‘Technology Upgradation Fund Scheme’ since it sees this as important to the nation’s overall economic health.
GoB could provide 3% relocation incentive for three years to (a) the factories, which relocate to any new zone, and (b) to the factories, which are unable to obtain concessional funds from elsewhere.
6) Minimum wage increase/increased efficiency/productivity gains:
Minimum wages in the RMG sector need addressing. The government has already announced an immediate review of the minimum wage applicable in the garment sector and has formed a wage board committee under the Labor Ministry, which will fix the minimum wage to be applicable from May 1. The wage board raised the minimum monthly pay for garment workers to Tk. 3,000 from Tk. 1662.50.
We believe that raising wages retrospectively from May 1 while a populist measure, is unfairly punitive on the RMG manufacturers given that costing for current shipments were made several months in advance. Realistic consideration needs to be given to balancing the needs equitable to workers while ensuring that manufacturers are not priced out of the market where production could shift to Vietnam, Cambodia and even to India and China.
Even if costs in BD remain lower than in competing RMG countries (after minimum wage hikes, supply disruptions, and reputational risks from compliance post-Rana), we suggest our costing will need to stay at a discount to remain competitive. Above all, the proposal of minimum wage should be linked to productivity because that is the only sustainable way to increase wages in real terms in any industry and country.
Mike Flanagan, a retail-sourcing consultant, stated that if Bangladesh raised its prices even 50 cents, the results would be devastating. “There won’t be four million garment-making jobs in Bangladesh,” he wrote in an e-mail. “There probably won’t be 4,000.”
7) Trade Unions/Better Worker Representation, BRIDGE and Affiliation:
As Sir Fazle Hasan Abed, BRAC founder, noted in his Apr 24 New York Times article: “The solutions start with the workers themselves; they must be allowed by their employers to unionize, so they can engage in collective bargaining and hold their employers responsible for basic standards of pay and safety. Their organized power is the only thing that can stand up to the otherwise unaccountable nexus of business owners and politicians, who are often one and the same.”
In the meantime, BRIDGE, an owners’-workers’ platform could be formed, which could act as a supplementary entity to trade union/workers’ participatory committee. The owners could engage in a bi-monthly exchange of ideas and could interact with workers and workers’ representatives directly. BRIDGE could include initiatives like: free schools/education for workers’ children, talent contests, training centers for improvement of skill and to raise awareness on rights and issues, and establishment of outlets on a profit sharing basis.
These good practices should eventually encourage factories to affiliate with bodies like the United Nations Global Compact (UNGC). This could be an opportunity to be endorsed by international organizations.
8) Formation of new fund for Worker Welfare:
We think appealing to the consumers through the retailers to pay a few cents more to build a fund for the Workers Welfare Trust is an idea that can be floated with all stakeholders. We can alternatively, of course, ask the buyers to contribute a certain percentage (perhaps 0.25%) of FOB and at the same time, the suppliers matching the amount to build a trust fund for the workers. The resources generated in this way may also be used for setting up contributory provident/pension fund which will help tie workers more to the RMG firms they are currently
working and reduce the extremely high turnover of workers in this sector. It is worth bearing in mind that a number of buyers do recognize a certain degree of this type of financial assistance as part of their broader corporate social responsibility and is more likely to provide immediate financial assistance when something goes wrong – this would merely extend that
principle and would be demonstrable in Annual Reports to shareholders.
9) Moving up the value chain/worker productivity:
As we have highlighted later in this report, the long-term growth in the industry, and sustainably higher worker wages requires moving up the value chain in terms of increasing the design/fashion component in RMG garments, improving the technology and also developing Bangladesh brands that will be marketed internationally and capture a greater proportion of the value chain. To that end we
recommend a revamped Bangladesh Fashion Institute of Technology with technical assistance from both leading Fashion Institutes overseas and international buyers. We would like to suggest establishment of a Business Development Studies Team that could monitor the Fashion Institute, the quality development, and optimize manpower.
10) Branding and International PR management strategy:
Quality/Ethical assurance marks can provide all stakeholders with confidence that a product has met compliance and regulatory standards.
Made in Bangladesh with PRIDE is an example of a campaign which aims at achieving fair prices both for millions of workers employed by the sector and thousands of entrepreneurs who have created those jobs while making sure the factories are compliant, people are working in a safe environment, workers are productive and ultimately, a superior product is created. This in turn should lead to manufacturers and buyers being rewarded for their commitment and investment to corporate social responsibility by ensuring ethical and regulatory compliance and, therefore, to take pride in that garment, including the global consumers who wear them. This is a win-win situation for everyone. With this campaign we must attract manufacturers to share their best practices which will be the guiding light for
others to follow, for global brands and retailers to support this effort and for the ultimate consumers to recognize the intention to dress themselves up with clothes made by people with sincerity, honesty and pride.
We need to develop an independent certification process for products to earn the “Made in Bangladesh with Pride” label much like Fair Trade. But the objective is to reward compliant manufacturers and encourage global buyers to select them over lower cost options.
Promotional video on Bangladesh RMG: BGMEA should appoint lobbyists and launch a PR campaign for this branding. This would lead to an effective engagement not only in the immediate term to tackle the Post-Rana damage to the industry’s reputation but also to maintain an ongoing lobbying and PR engagement. We need to make sure a positive message is conveyed in the global and domestic media about the positive reforms and changes in the aftermath of the unfortunate Rana Plaza event as well as the contribution of the sector in areas such as poverty alleviation and women’s empowerment.
The post-Rana steps, remedies and the corrective action plan undertaken by factories in Bangladesh could be portrayed in a half-minute ad to be telecasted in international media, cost of which to be borne by the funds generated from above-mentioned sources.
III. Final Thoughts and Case for RMG Reform
It’s also important that the RMG sector develops an effective communications and lobbying strategy in key export markets not only with buyers but also with regulators/governments.
Although the EU threat on removing GSP looks unlikely to be carried through, the US government seems more serious about taking some action on GSP. As the McKinsey report also noted “ In addition to price, capacity, and capability, a high share of European CPOs strongly emphasize the advantages of sourcing in Bangladesh due to favorable trade agreements. The broadening of the EU Generalized System of Preferences (EU-GSP) rules on duty-free imports of garments from Bangladesh to include products with two- stage processing made sourcing from Bangladesh even more attractive. A shift from the currently
dominant knitwear (70 percent of import value to the EU-15) to a more balanced sourcing product portfolio can be expected (e.g., the US sourced 26 per- cent knitwear and 74 percent wovens in 2010).”
Maintaining capacity during RMG Reform process is important In the McKinsey report, it was noted that half of the international CPOs interviewed mentioned capacity as the second-biggest advantage of Bangladesh’s RMG industry. With a
current 5,000 RMG factories employing about 3.6 million workers from a total workforce of 74 million, Bangladesh is clearly ahead of Southeast Asian RMG suppliers in terms of capacity offered (e.g., Indonesia has about 2,450 factories, Vietnam 2,000, and Cambodia 260 factories).
But we also need to balance volume with moving up the value chain. The McKinsey report also noted that “European and US CPOs aim to significantly grow their share of sourcing in Bangladesh. Companies focused on a value segment plan expansion from a current average 20 per- cent to a 25 to 30 percent sourcing share in 2020. Mid- market brands, which generate around 13 percent of their sourcing value in Bangladesh today, plan to grow their share to 20 to 25 percent in the medium term. This growth will be driven not only by an increase of volumes in current product categories but, as stated by 63 percent of CPOs interviewed, by broadening the sourcing strategy to more complex, more
fashionable, or more sophisticated items (e.g., the most frequently mentioned categories are outerwear and formal wear for value markets, and an expansion of existing products as well as flat knits for mid-market players). This means that the value market will be the key volume contributor, while the mid-market will demonstrate more dynamic growth.”
RMG reform process and relocation will entail some disruptions but we must not allow that to impact our export potential. This process needs to be carefully managed. Only by maintaining capacity during the transition phase and adding to that capacity over time Bangladesh would be realize McKinsey projections.
Bangladesh Needs to Move up the RMG Value Chain and out the “T-Shirt Phase”
Economist Adam Davidson writing in the New York Times recently noted that: “Nearly every rich country has gone through a “T-shirt phase” — an economic period in which there are a significant number of poor farmers who, rather than toil on unproductive land, accept harsh work conditions and low wages in textile and apparel factories… Britain started its T- shirt phase in the late 18th century; the United States had two — New England in the 19th century, then the South in the 20th. During the last 80 or so years, many Asian countries — first Japan, then Korea, Taiwan and China — progressed from the T-shirt phase into broader
economic development. Cambodia, Vietnam, parts of India and Sri Lanka (and of course Bangladesh) are passing through this now.”
But he goes on to note that once the factories have absorbed all these desperate farmers, they need to find a new competitive advantage. That usually involves making better products.
When the T-shirt phase ends, a “race to the top” usually begins. Factories often shift to finer clothes, like dress shirts, which require skilled workers. This phase often involves the growth of unions and rising wages. It’s typically followed by one in which factory owners, forced to pay more, seek out ever more profitable lines of business. That can mean the move to low- end electronics assembly, then auto plants and maybe even airplane manufacturing. At the high end of the spectrum, you begin to see what the U.S. manufacturing economy is going through now — expensive products, like medical devices, which are often made by machines
that are operated by highly skilled workers.
Compliance and Political Stability Have Risen to the top of the Global Buyer Agenda
It’s also interesting to note what the major issues that were on CPOs minds in the McKinsey survey. Infrastructure was number 1 followed by compliance. Political instability was number five. But given Rana Plaza and hartals, compliance and political instability are likely to be number 1 and 2 if a poll was taken today although infrastructure bottlenecks are still one of the most significant long-term constraints. The Industry has expanded from $ 3 bn less than a
decade ago to $ 20 bn + now, but the supply and logistics routes in terms of roads and port handling facilities are almost unchanged.
Source: McKinsey CPO survey, September – November 2011; interviews
Encouraging and Rewarding Compliance
We need to develop a culture where the most compliant factories with best practices are also those that are most successful and are rewarded with the largest and most consistent global buyer client base. They will then positively influence and incentivize other less compliant factories to reform. As McKinsey noted in its report, “As one buyer of a mid-market brand puts it, you would be “impressed by how good the compliance is in the good factories.” Some of the best factories have even started to increase transparency by implementing CSR
reporting. However, only 50 to 100 manufacturers out of around 5,000 that are active are mentioned as having achieved very high standards…
The most developed suppliers understand that compliance is a key factor in achieving business success. As one interviewee stated, “things are changing and if I do not comply, I cannot get the orders.” Therefore, it is the responsibility of the buyers to choose their suppliers consciously and manage compliance
– not only via on-site control but also by rewarding good compliance standards.
Increasing Productivity by Improving Middle Management
Within the McKinsey survey, when they were interviewed, all types of stakeholders mentioned the lack of skilled middle management as a key factor limiting productivity improvement at suppliers. It was also noted that educational institutions for technical skills are few or nonexistent. Vocational training needs to be developed and the appropriate institutions must be established either by the government or via public-private partnerships.
McKinsey also recommended that the RMG factory owners do the following:
1) Provide structured in-house training for both workers and middle management;
2) Pursue lean workshops, certification, and automation of production;
3) Incorporate enterprise resource planning systems, production planning systems, and continuous productivity monitoring.
As the chart below from the McKinsey report illustrates, just over one year ago, Bangladesh was the most favored destination for shifting production from China, and ahead of Vietnam and Cambodia. The challenge for the industry is how to handle the reforms needed in the aftermath of the Rana Plaza tragedy in order to put the sector back on most-favored sourcing destination status.
Source: McKinsey CPO survey, September – November 2011; interviews
The current environment of confrontation and blame between all the key stakeholders needs to be replaced by a spirit of collaborative and dynamic partnership. We need to balance rapid compliance and safety related reform and the need to improve worker conditions and pay with measures that improve the longer-term competitiveness and growth in the sector including productivity-enhancing measures and moving up the value chain. This remains the
long-term source of sustainable increases in living standards for the workers in the industry and for Bangladesh to achieve the milestone of $ 30bn of exports by 2015.
We are glad that the complacency and lack of action, which we saw in the aftermath of the Tazreen factory fire in November 2012, has not been repeated. However, there is a need for careful assessment of the key elements and timing of a RMG sector reform plan that balances the need for urgent action to assuage domestic and international ire to avoid another Rana, with avoiding hasty, reactive, or rushed direction of travel. We believe our 10-point roadmap—with appropriate modifications based on stakeholders’ feedback–would help avoid such a risk. If appropriately implemented in a collaborative manner with support from all stakeholders, the proposed Road Map will ensure long-term health, competitiveness and growth of the RMG industry that plays a critical role in the country’s economy and will help poverty alleviation in Bangladesh.
Finally we believe that follow-up is critical and to this end we would recommend establishing4-5 working groups with relevant and experienced members to ensure the development and effective execution of the ideas outlined in the 10 point plan.
Accordingly we commend this paper for wider stakeholder engagement.
The recommendations in the above paper were developed by a group of stakeholders and civil society members concerned about the RMG sector in the aftermath of Rana Plaza. They include:
Rubana Huq ( MD, Mohammadi Group); Annis Huq (Chairman, Mohammadi Group); Ifty Islam (Managing Partner, Asian Tiger Capital); Ahsan Mansur (Exec Director, Policy Research Institute); Asif Ibrahim (MD, New Age Garments); Samantha Morshed (CEO, Hathay Bunano/Pebbles); S Faruque (MD, Winners Creations); Masud Khan( Legal Circle); Peer-jada Qureshi (Independent Lawyer, UK); Nazim Farhan Choudhury (DMD, Adcomm); Shariful Islam (Bangladesh Brand Forum); Saif Kamal (Dhaka Tribune).