Labor unrest in the RMG sector--reasons and remedies
Thursday, 7 October 2010
Abul Quasem Haider
The prevailing worsening situation in readymade garment (RMG) sector is not good for country's feeble economy. RMG sector accounts for 76% of our total annual foreign exchange earnings. Once, Jute was the only foreign exchange earning item. But the golden age of Jute is now over. At present, the RMG is our only dependable export item. The textile sector has emerged as a backward sector to this RMG sector. Spinning, weaving, Knitting; dying, finishing etc have emerged as a backward linkage industry. These areas of the of the textile sector are contributing to the economy of the country. So, if the RMG sector suffers any crisis, the repercussion will be felt everywhere in the rickety economy. Now, there are 350 spinning mills operating in the country, which is catering to the demand of the RMG sector and thus saving huge amount of foreign exchange. At present, the capacity of the spinning mills is 1.6 billion metres. There are 180 dying-finishing mills in the country with a capacity of 120 million metres per year. The production capacity of the knitting mills is 41 billion metres. What is important here is that they are capable of meeting local demand. The total workforce engaged in this sector is about 2.5 million, of which 60 percent is women. The total production is being exported to foreign countries.
The reasons and the remedies of the present crisis:
All of a sudden, labour unrest has increased in our country. But, it will be unjustified to say that this labour unrest has grown overnight. It has a long history too. Labour unrest got impetus towards the end of the 4-party led coalition government and in the immediate past care taker government it reached its peak. We shall now turn to the reasons for labour unrest as well as its remedies.
1. The main reason of the RMG labour unrest was the demand for raising workers' salary. In the year 1984, the RMG sector started flourishing when foreign buyers started coming to Bangladesh due to political unrest in Sri Lanka. And day by day, the RMG sector became the single largest sector of our country's economy. During that time, there was no wage scale for the workers of this sector. No specific rules and regulations regarding the RMG sector were framed. Gradually, a pay scale came into being .The present government took an initiative for revising the existing wage structure against the backdrop of the labour unrest; and a new revised wage structure was declared by the Labour Minister concerned with Tk3,000 for the lowest grade for workers. An apprentice will now get an amount of taka 2500. The new wage structure has seven grades for general workers and four grades for staff. The percentage of increase is huge. Despite that some worker resorted to movement with the argument that the lowest amount for a worker's salary should be at least Tk5000 and be effective from August, 2010. This is a reason why the labour unrest gaining wind despite the declaration of a revised wage. Now, the RMG owners are saying that they can not help but close down their factories if arson and anarchy continues further. So, what is the ultimate remedy of this crisis? Whatever may be the reason, the situation now remains subdued as the workers have started working and production is in full swing everywhere.
2. A few days earlier, leading politicians, distinguished citizens of the country made adverse comments regarding the RMG sector. They pointed out that the workers are leading an inhuman life as they were ill paid. With the poor salary given to them, they fail to get two square meals for sustaining their souls let alone the other bare necessities of life. The aspersions, however, added fuel to the already overcharged and highly volatile situation in the sector; and the turmoil took a new dimension. Though a revised wage structure is declared, peace is yet to come to the RMG sector. It is expected that the workers should be cautious about their role in the matter. For the greater interest of the country, the workers should reconsider their stand and change their negative attitude to the matter and try their best to maintain peace in this sector as it might further escalate and affect other sectors too. So, our export earnings will fall sharply if law and order situation deteriorates in the sector.
3. There should be a significant change in the mindset of the owners as well. Only a slogan like "owners -workers are brothers" will not bring any significant change. The owners should meet the justified demand of the workers and implement the agreed points as early as possible. We all know that with incurring losses no owner of a factory will continue with his business. But at the same time it should be borne in mind that the owners should also make money from their business. But the dilemma is that many of our RMG owners like to make huge profit and intend to become millionaire overnight. Such mentality should be given up. We should bear in mind that RMG owners are to meet minimum requirement of a labourer.
4. Political stability is a prerequisite for rapid industrial growth. At this moment, there is no anti-government movement by the opposition in the country. But the development in the Industry sector is almost zero. No significant FDI is pouring in. An uneasy political situation is prevailing in the country. It should be changed.
5. At present, industry sector is severely hit by the power and gas crisis. Many factories have suspended production for want of power and gas. In some cases, some factories are running their factories in the night instead of day. It is very unusual for both the owners as well as for the workers .This is why the total production has fallen0; the cost of production increases dramatically, earning has slimmed down. The government has to come forward with practical and pragmatic decisions to overcome the crisis.
6. The RMG owners as well as other entrepreneurs are counting losses because of high bank interest rates. Nowhere in the world entrepreneurs pay interest rate at 13 percent except for Bangladesh. In addition to that, the banks realise another 13 percent as service charge. To many entrepreneurs, the bank interest rate is too high to cope with; and ultimately leaving them in a vulnerable situation in a competitive market. It is expected that the bank interest rate should be reduced to 7 percent .The government should come forward to save the entrepreneurs form the exploitation of the banks. If it can be done, the total scenario will be changed and the RMG sector will be able to give the minimum benefits as expected by the workers.
7. The productivity of our worker is much lower compared to that of the workers of Korea, China, and Hong Kong. The gross production rate per hour of these countries is two times higher than that of our worker. So, we are to train our workers to increase their per hour productivity. If it can be done, our production will be increased to a great extent and we will be able to compete with our rivals.
8. The cost of production is increasing day by day as the price of raw material is rising. As the prices of essential raw materials are increasing beyond the control of the RMG owners, hence the pay increase is not possible. The price of essential raw materials must be kept under control. This has to be done by the government. It is a major reason for labor unrest. The government should focus on increasing the local production rather than depending on import.
9. We know that in the year 1983 Bangladesh exported $31.57 million worth of garments, which constituted 3.89 percent of our total export revenue. This figure increased drastically due to the several initiatives taken by the then government to $298.67 million in 1986-87, which constituted 27.74 percent of our total export revenue. In 2009-10, the RMG sector earned $12.35 billion, which accounted for 79.33 percent of our total export revenue. In 2008-09, the RMG contributed to 10 percent to the country's GDP. The total investment in RMG sector and Textile sector is worth Tk406 billion. The total number of workers in these two sectors is 4.0 million, which is 65 percent of the people engaged in manufacturing sector. The livelihood of 20 million people is directly or indirectly dependant on these two sectors alone. Based on these two sectors, backward linkage sectors like banking, services sector, transport sector, have developed. So, the government must come forward to do all what is possible with a view to flourishing the unexplored potentials of the RMG sector.
The writer is the founder of the Eastern University and former vice president of the FBCCI . Dated-5-09-2010
The prevailing worsening situation in readymade garment (RMG) sector is not good for country's feeble economy. RMG sector accounts for 76% of our total annual foreign exchange earnings. Once, Jute was the only foreign exchange earning item. But the golden age of Jute is now over. At present, the RMG is our only dependable export item. The textile sector has emerged as a backward sector to this RMG sector. Spinning, weaving, Knitting; dying, finishing etc have emerged as a backward linkage industry. These areas of the of the textile sector are contributing to the economy of the country. So, if the RMG sector suffers any crisis, the repercussion will be felt everywhere in the rickety economy. Now, there are 350 spinning mills operating in the country, which is catering to the demand of the RMG sector and thus saving huge amount of foreign exchange. At present, the capacity of the spinning mills is 1.6 billion metres. There are 180 dying-finishing mills in the country with a capacity of 120 million metres per year. The production capacity of the knitting mills is 41 billion metres. What is important here is that they are capable of meeting local demand. The total workforce engaged in this sector is about 2.5 million, of which 60 percent is women. The total production is being exported to foreign countries.
The reasons and the remedies of the present crisis:
All of a sudden, labour unrest has increased in our country. But, it will be unjustified to say that this labour unrest has grown overnight. It has a long history too. Labour unrest got impetus towards the end of the 4-party led coalition government and in the immediate past care taker government it reached its peak. We shall now turn to the reasons for labour unrest as well as its remedies.
1. The main reason of the RMG labour unrest was the demand for raising workers' salary. In the year 1984, the RMG sector started flourishing when foreign buyers started coming to Bangladesh due to political unrest in Sri Lanka. And day by day, the RMG sector became the single largest sector of our country's economy. During that time, there was no wage scale for the workers of this sector. No specific rules and regulations regarding the RMG sector were framed. Gradually, a pay scale came into being .The present government took an initiative for revising the existing wage structure against the backdrop of the labour unrest; and a new revised wage structure was declared by the Labour Minister concerned with Tk3,000 for the lowest grade for workers. An apprentice will now get an amount of taka 2500. The new wage structure has seven grades for general workers and four grades for staff. The percentage of increase is huge. Despite that some worker resorted to movement with the argument that the lowest amount for a worker's salary should be at least Tk5000 and be effective from August, 2010. This is a reason why the labour unrest gaining wind despite the declaration of a revised wage. Now, the RMG owners are saying that they can not help but close down their factories if arson and anarchy continues further. So, what is the ultimate remedy of this crisis? Whatever may be the reason, the situation now remains subdued as the workers have started working and production is in full swing everywhere.
2. A few days earlier, leading politicians, distinguished citizens of the country made adverse comments regarding the RMG sector. They pointed out that the workers are leading an inhuman life as they were ill paid. With the poor salary given to them, they fail to get two square meals for sustaining their souls let alone the other bare necessities of life. The aspersions, however, added fuel to the already overcharged and highly volatile situation in the sector; and the turmoil took a new dimension. Though a revised wage structure is declared, peace is yet to come to the RMG sector. It is expected that the workers should be cautious about their role in the matter. For the greater interest of the country, the workers should reconsider their stand and change their negative attitude to the matter and try their best to maintain peace in this sector as it might further escalate and affect other sectors too. So, our export earnings will fall sharply if law and order situation deteriorates in the sector.
3. There should be a significant change in the mindset of the owners as well. Only a slogan like "owners -workers are brothers" will not bring any significant change. The owners should meet the justified demand of the workers and implement the agreed points as early as possible. We all know that with incurring losses no owner of a factory will continue with his business. But at the same time it should be borne in mind that the owners should also make money from their business. But the dilemma is that many of our RMG owners like to make huge profit and intend to become millionaire overnight. Such mentality should be given up. We should bear in mind that RMG owners are to meet minimum requirement of a labourer.
4. Political stability is a prerequisite for rapid industrial growth. At this moment, there is no anti-government movement by the opposition in the country. But the development in the Industry sector is almost zero. No significant FDI is pouring in. An uneasy political situation is prevailing in the country. It should be changed.
5. At present, industry sector is severely hit by the power and gas crisis. Many factories have suspended production for want of power and gas. In some cases, some factories are running their factories in the night instead of day. It is very unusual for both the owners as well as for the workers .This is why the total production has fallen0; the cost of production increases dramatically, earning has slimmed down. The government has to come forward with practical and pragmatic decisions to overcome the crisis.
6. The RMG owners as well as other entrepreneurs are counting losses because of high bank interest rates. Nowhere in the world entrepreneurs pay interest rate at 13 percent except for Bangladesh. In addition to that, the banks realise another 13 percent as service charge. To many entrepreneurs, the bank interest rate is too high to cope with; and ultimately leaving them in a vulnerable situation in a competitive market. It is expected that the bank interest rate should be reduced to 7 percent .The government should come forward to save the entrepreneurs form the exploitation of the banks. If it can be done, the total scenario will be changed and the RMG sector will be able to give the minimum benefits as expected by the workers.
7. The productivity of our worker is much lower compared to that of the workers of Korea, China, and Hong Kong. The gross production rate per hour of these countries is two times higher than that of our worker. So, we are to train our workers to increase their per hour productivity. If it can be done, our production will be increased to a great extent and we will be able to compete with our rivals.
8. The cost of production is increasing day by day as the price of raw material is rising. As the prices of essential raw materials are increasing beyond the control of the RMG owners, hence the pay increase is not possible. The price of essential raw materials must be kept under control. This has to be done by the government. It is a major reason for labor unrest. The government should focus on increasing the local production rather than depending on import.
9. We know that in the year 1983 Bangladesh exported $31.57 million worth of garments, which constituted 3.89 percent of our total export revenue. This figure increased drastically due to the several initiatives taken by the then government to $298.67 million in 1986-87, which constituted 27.74 percent of our total export revenue. In 2009-10, the RMG sector earned $12.35 billion, which accounted for 79.33 percent of our total export revenue. In 2008-09, the RMG contributed to 10 percent to the country's GDP. The total investment in RMG sector and Textile sector is worth Tk406 billion. The total number of workers in these two sectors is 4.0 million, which is 65 percent of the people engaged in manufacturing sector. The livelihood of 20 million people is directly or indirectly dependant on these two sectors alone. Based on these two sectors, backward linkage sectors like banking, services sector, transport sector, have developed. So, the government must come forward to do all what is possible with a view to flourishing the unexplored potentials of the RMG sector.
The writer is the founder of the Eastern University and former vice president of the FBCCI . Dated-5-09-2010