Ongoing unrest a bad omen for RMG

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Moazzem Hossain
The country's readymade garment (RMG) sector, is in fresh troubles, sending some worrisome signals about its sustained growth.
The sector, the key export earner for the country, witnessed some rowdy scenes in and around Dhaka and at the Chittagong Export Processing Zone (CEPZ) last Saturday and Sunday.
Troubles have been going on in the sector for quite some time over the wages issue. Workers are pressing for effecting hikes to their compensation packages, in line with the latest recommendations by a government-appointed commission about the minimum wages and other fringe benefits, -- and perhaps also beyond those, in some cases.
On the face of it, the workers' demand has a strong rationale, in view of the non-adjustments of their wages for long and also in consideration of inflationary rates during this period.
The owners of RMG units do need to take note of such realities, however unpatable they are, and should be pro-active on implementing the wage structure. Labour costs have already gone up markedly in China, Vietnam, Cambodia and a number of other countries competing with Bangladesh's RMG exports to the global market.
The trade promotion bodies of the owners of RMG and knitwear units - Bangladesh Garments Manufacturers & Exporters Association (BGMEA) and Bangladesh Knitwear Exporters & Manufacturers Association (BKMEA) - have otherwise claimed that most of their members complied with the provisions of the new wage structure for the workers.
But the lingering restive situation in the RMG involving the workers that led to suspension of operations at times in a number of units, does suggest a different picture. Is the claim of the trade promotion bodies about 'compliance' factual? Or, are the 'workers' who are resorting to acts of 'vandalism' or 'rowdyism' - whatever way one prefers to term the incidents - on a wrong course of action that hurts the interest of their factories that provide them jobs and inflicts severe wounds on the national economy?
And there are more points for consideration particularly in the context of last Sunday's statement of the chief of YoungOne, a South Korean company that has made large investment in the RMG sector in Bangladesh and is one of its largest garment exporters, to the press. He was quite firm about involvement of 'extraneous' elements or 'outsiders' in incidents that took place in YoungOne units in the CEPZ.
This is not for the first time that such an allegation has come. Similar allegations were also made on earlier occasions of 'labour unrest' in other parts of the country - at the EPZ in Savar and other sites of RMG units in and around the capital city of Dhaka.
It is high time for the authorities concerned to find out the real reasons for a prolonged restive situation in the RMG sector. The mitigation mechanism needs also to be put in place effectively without any further delay so that the reconciliation process works to address the concerns of the labourers at the enterprise level and the owners of the RMG units, no matter where these are located. Mere promises will not serve any useful purpose.
One finds it surprising that some modern and large RMG units which do otherwise have a good track record in matters relating to management, production techniques, payment of labour wages, working conditions and export performance, have turned out to be the sites from where labour troubles originate and then spread to adjoining factories. Something is wrong somewhere. Either the track record, as mentioned earlier, is not in what the realities are or better performing units are being purportedly made targets. Who are then doing this?
Whatever the reasons or grounds for workers' unrest, the prolongation of such troubles will be too costly for Bangladesh at this stage when the global apparel market is witnessing some notable demand-switching trends. Thus, China and some other leading exporters are trying to move up to the higher value-added segment of RMG products that are less labour-intensive, because of wage-push factors. Bangladesh is still operating - and will, in all possibility, continue to do the same for the foreseable future - in the lower-end segment of RMG items that are largely labour-intensive. And the export performance of the country's RMG sector has so far been impressive this year, notwithstanding its some lingering problems in areas of labour-management relations.
Exports from Bangladesh have also partly been boosted by duty-free access to the European Union (EU), Canada, Norway and a number of other developed countries. The US does not provide duty-free access to Bangladesh exports and only a few goods -- 0.62% of its exports to the US market qualify under the US Generalised System of Preferences (GSP).
But gains that the RMG sector has reaped so far, will hardly be sustainable if it comes under stresses and strains, again and again, in the way the things took shape in Chittagong EPZ and in and around Dhaka. If export growth of RMG sector is impacted adversely in the short- and medium-terms, that will be too serious for its overall economy. This is because its current export structure remains extremely one dimensional. Almost no notable progress has been made toward developing other export-oriented, labour-intensive industries in the country.
The RMG sector in Bangladesh is the single largest employer in organised sectors of its economy. The industry provides direct employment to 3.0 million workers and supports the indirect employment of another 10 million to 15 million workers or roughly 10% of the country's population.
Any prolonged unrest in the sector and its adverse fall-outs, leading to disruptions to production, will put a very large number of jobs at stake. If that becomes the reality, a reversal of the situation about participation of women in gainful jobs and, thus, development will also be unavoidable in the foreseeable future. Women now make up more than 80% of the RMG workforce in Bangladesh.
Already the unemployment situation is critical in the country. It is still a guestimate about how many among its working age population is unemployed. According to one estimate, the effective unemployment (including 'disguised unemployment') rate was 40% in 2009. Hence, Bangladesh's most pressing economic challenge remains generating jobs for its approximately 80 million labour force. And this force for will swell to 125 million by 2050, if the current population growth rate and demographic features remain unchanged.
Efforts for massive job creation will, thus, be needed if Bangladesh is to become a middle income country, as envisaged by the government under its Vision 2021. Studies suggest that Bangladesh will require to reduce its existing unemployment level to 14% to reach Vision 2010 targets.
But creation of job opportunities on a massive scale can only come from investments and a significant expansion of its manufacturing base. There is no magic wand to attract investments, both local and foreign. For that, enabling conditions through a synergy of actions, will have to be created. But jolts or shocks to an otherwise existing thriving sector like RMG, whatever the reason or reasons for it, will hardly give any positive signal to the investors, actual or potential.