Budget and sustainable garment industry

The readymade garment (RMG) industry is crucial to the economy of Bangladesh as a source of employment generation and export earnings. The industry accounts for 80 per cent of the total export earnings of the country and is a source of livelihood for around 4.4 million workers, mostly poor rural women.  
Over the last three decades, our apparel industry has achieved a phenomenal growth due to policy support from the government, dynamism of the private sector entrepreneurs and extremely hardworking workers. The export earnings reached US$ 23.5 billion in the last calendar year and people of around 130 countries of the world are the consumers of 'made-in-Bangladesh' knit garments and woven products.
Moreover, a more glittering future is waiting for the ready-made garment industry of Bangladesh. At least facts and figures have made us believe so. A McKinsey report forecast export-value growth of 7 to 9 per cent annually within the next ten years, so the market will be double by 2015 and nearly triple by 2020.
But at present, the mightiest pillar of our economy is under threat and facing unprecedented challenges posed by some unfortunate incidents in the sector. With challenges on one side and huge opportunities for further growth on the other, we are now at a crossroads. One of the biggest challenges for the sector is to make our factories safer and ensure better working conditions for millions of garment workers. However, following the unfortunate incidents a number of initiatives have been taken to improve building and fire safety of Bangladesh's garment industry.
Platforms such as Alliance, Accord and National Plan of Action have been formed to ensure RMG factories safer and compliant. They have already started inspecting the garment factories and shut down a number of them due to safety concerns. However, have we ever thought of how these workers would lead their life after losing their livelihood? The country does not have the capacity to provide jobs to this huge number of workers in any other sector. This will surely halt our march of development.
Now only one option is left for us to save our RMG industry: improving building and fire safety at the garment factories to prevent further catastrophic collapse or fire. Of the 3,600 garment factories now in operation in Bangladesh, 40 per cent are housed in shared and converted buildings employing around 1.5 million people; the rest operate in purpose-made buildings. We need to retrofit and, if not possible, relocate all the factories that are housed in shared and faulty buildings with poor safety standards.
Given the fact that we have to address the workplace safety issue within a stipulated time frame, using prefabricated materials is the best alternative to ensure building safety as they are easy to build within the shortest possible time and ensure quality at the same time. It requires a year to build a 90,000-100,000 square feet concrete-built building, while a steel building can be raised only in two months. Apparel makers want to use the steel buildings to set up their factories on their own or leased lands with prefabricated materials to relocate their factories. But the government currently imposes up to 61 per cent duty on imports of prefabricated building materials. In this regard, we need special support from the government to protect the country's leading foreign exchange-earning industry. We demand that the government in the upcoming budget will withdraw all the duties on prefabricated building materials to help the garment factories that are now housed in shared buildings relocate themselves to steel-made structures.
Apart from building safety, we also need to ensure fire safety in all garment factories. There is no alternative but to install fire safety equipment at the garment factories to reduce the risk of fire accidents. But acquiring and installing fire equipment require a huge amount of money as they are very costly due to high duty on their import. It is difficult for the RMG factory owners to bear such a high cost of installing safety materials, including fire hydrant, extinguishers, fire doors, sprinklers and smoke detectors. Considering all these, the government should allow duty-free imports of fire and building safety materials.
Both factory remediation/relocation and installing fire safety equipment would require a huge amount of money. In this regard, we think 'term loan' could be a good option to help the factories become safer and compliant. But it is difficult for RMG entrepreneurs to take term loans due to the existing high interest rate on it. As the RMG industry earns money in foreign currency, the Bangladesh Bank can advance foreign currency to the commercial banks so that they can provide term loans to the RMG entrepreneurs at a low rate and on easy terms. It would be a great support to the RMG industry if the Bangladesh Bank and the commercial banks give term loans to it at a lower rate and on easy terms. The government can also bring about some changes to the Export Development Fund (EDF), including permission for import of capital machinery under the EDF and increase in the ceiling of the EDF and its time. We urge the government to set up a special Equity & Entrepreneur Fund (EEF) for the RMG industry. As locally borrowed fund is far more expensive than that sourced from abroad, foreign currency (FCY) loan would be a good support for us. But less than one-year term FCY borrowing in the form of U-Pass is not helping us much. So we urge the government to increase the time of foreign currency (FCY) loan from one year to five years. Considering the need for ensuring a safer garment industry, the government should keep an integrated solution in the budget to protect the sector.
The inspection of RMG factories by Alliance, Accord and National Plan of Action will be complete at the end of this year. We apprehend that a number of garment factories may be closed down following their inspection due to safety concerns while many will not be able to run their factories paying off bank loans, house rents etc. Moreover, they are facing problems like back-to-back liability, project loan, stock lot, term loan, customs liability etc. Under these circumstances, we demand a provision of moratorium on the Company Act for at least a period of two years (like Chapter 11 of America or UK's Company Law) so that these RMG entrepreneurs can make exit from their business safely and with honour.
To ensure better living of the apparel workers, we have increased the minimum wage of garment workers by 77 per cent. The consolidated increase in minimum wages for RMG workers in the last five years is around 219 per cent. But our workers have not been able to enjoy the real benefit of the wage increase due to price spiral of daily essentials and exorbitant house rent. So we urge the government to take special projects in the upcoming budget under its Social Safety Net to improve the life of backward communities by ensuring their education, health and accommodation.
We cannot afford to let down the industry that has kept turning the wheels of our economy, brought glory for the country through its 'Made-in-Bangladesh' tags, created employment for millions of people, lifted them from the abyss of poverty, and  ensured a safer and brighter future for their children. We cannot afford to let the glory of our RMG industry, which we have built gradually with our dedication and years of hard work, fade away in a day. We firmly believe that with the support of all stakeholders, especially the government, we would be able rise to all the challenges and ensure a safer and sustainable RMG industry in Bangladesh.
The writer is the President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).  
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