Sub-contracting RMG units forced to ignore compliance issues

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Syful Islam The country's sub-contracting ready-made garment (RMG) factories hardly get more than half of the cutting and making (CM) charges, which the main exporters receive from the buyers. With their paltry earning these units are struggling hard for survival and thus failing to meet compliance requirements, stakeholders say. "First of all, Bangladeshi exporters get the lowest prices from the buyers. The sub-contracting factories get only 50 to 60 per cent of the amount for manufacturing the apparel goods," said a factory owner who works on sub-contract. "Besides, our factories remain shut for nearly six months of a year. So, we can't make much profit to maintain compliance," he said. Failing to get adequate work orders, at least 10 sub-contracting factories were declared laid off during the last one month in the capital's Malibag area. Of the ten closed factories, one is owned by a big group of companies which has several compliant factories. "I also pay almost the same wages as a compliant factory does. Our operational cost is nearly similar to them. But we don't get the same prices since we are the 'second party', and don't get work orders directly," said another sub-contracting factory owner. He said any compliant factory might slip into the 'sub-contracting category', if once or twice it fails to make shipments, or needs to make air shipment of goods. "If these happen, the owner loses his capital, fails to get bank loans and cannot open letters of credit, and thus it does not get work orders directly from buyers." He said foreign buyers should raise the CM prices, some portion of which will go to the sub-contracting factories helping them meet compliance requirements. Another factory owner said of the country's total 20-billion-dollar apparel exports, almost 50 per cent products are being manufactured at non-compliant and sub-contracting factories. "One compliant unit is being supported by 10 non-compliant factories," he said. The ministry of commerce (MoC) recently drafted a policy for the country's sub-contracting apparel factories aiming to make those compliant, and improve their working environment and ensure workplace safety. The draft said sub-contracting apparel factories would have to be members of either Bangladesh Garment Manufacturers and Exporters Association (BGMEA) or Bangladesh Knitwear Garment Manufacturers and Exporters Association (BKMEA). It said only the complaint factories would be allowed to operate on sub-contract basis. Exporters would not be allowed to sign deals with the sub-contracting factories if those are found to be non-compliant. The sub-contracting factories will have to strictly follow the Bangladesh Labour Law. Vice president of BGMEA Shahidullah Azim told the FE that sub-contracting factories were given 70 per cent of export prices for cutting, making and finishing of apparel goods. "But sometimes the work can be done by paying 60 per cent of export prices if the main contractor gets enough time for shipment,' he said. Mr Azim claimed that almost 50 per cent of Bangladeshi apparel factories were considered A-grade factories, 30 per cent B-grade, and 20 per cent C-grade factories. He said the government was formulating a policy for the sub-contracting factories. "These factories will have to be fully compliant and members of recognised associations," Mr Azim added. President of Exporters Association of Bangladesh (EAB) Abdus Salam Murshedy told the FE that various reasons were there which had made even a fully compliant factory non-compliant. "Then those factories engage in work on sub-contract basis for other big factories," he added. "When compliant factories slip into non-compliant ones, buyers do not give them work orders directly. They find no other options but to be dependent on others," he said. Mr Murshedy added if the international brands really wanted to improve work environment in Bangladesh factories, they would have to look into the situation prevailing at the sub-contracting factories. "Bank loan at low interest rate and international assistance are needed to improve financial conditions of sub-contracting factories which will help them meet the compliance requirements," he added. Mr Murshedy claimed that almost 50 per cent RMG factories in the country were compliant ones. He said factories which export apparel items to the newly found markets like Brazil, United Arab Emirates, Russia, and the Kingdom of Saudi Arabia do not need to meet compliance requirements.