RMG: Our golden goose
steady growth in garment industry is mor | Saturday, 9 April 2011
steady growth in garment industry is mor
Saief Mahmood Recently, Bangladesh has been ranked second in exporting Ready Made Garment (RMG) products in terms of volume, as it outperformed Turkey. Bangladesh exported 7.78 billion pieces of RMG products in 2010, whereas Turkey exported 7.74 billion pieces. Though, Turkey is ahead of us in terms of values ($6.92 billion last year in comparison to Bangladesh's $6.19 billion), it is a big achievement nevertheless in the period of global crisis and in consideration of our remittance crunch. After the world cup, where the performance of our cricket team was inconsistent, beating a nation by any means would be satisfactory to the people. Unlike cricket, we have a rich history in fiber and garment. The root of our success in this arena is more than a century old. The cloth of Bangladesh achieved fame even in Mughal and British period. The royal families and elites in Europe and other countries used 'Muslin' and 'Jamdani' as their luxurious wears. The garment industry is by far the country's most important manufacturer, generating over $5 billion cash flows annually and accounting for about two thirds of the country's total exports. There are more than 3000 garment factories and around 10 million livelihoods dependent on it directly or indirectly. About 70 per cent of garment workers are women and most of them come from rural areas. So, the RMG sector deserves some credit for poverty alleviation and women empowerment, and it has more potential than any other sector to contribute to the reduction of poverty. One may argue that this sector dominates in export mainly because of the cheap labor. Labor is not as cheap anywhere in the world as it is in Bangladesh. Women contribute to the working force in this sector, as their wages are relatively cheaper than men. It has given women a steady income, economic independence, self-reliance and dignity, because they are earning their own livelihood and managing their family expenses. Many experts were skeptical about the future of this industry when there was no quota system. As we know, the 1974 Multi-Fibre Agreement (MFA) set up a quota system to govern the garment trade. Many thought India and China were likely to benefit most from the end of the MFA by capitalising on economies of scale. Experts once said the slide in exports was likely to force hundreds of factories to close, and warned that replacement employment could prove hard to find. In December 2005, Christian Aid published a report warning that as many as a million jobs could be lost in Bangladesh as a result of the end of the MFA. Post MFA era started in January 2005 and we know the rest of the story; experts were wrong and our garments industry survived. As we know, remittance flow is likely to be affected because of political turmoil in the Middle East and Africa. Under this situation making a steady growth in garment industry is more than indispensable. Apparel export growth has been impressive with 40 per cent in current fiscal. Despite the remarkable success of the RMG sector, the working conditions and wages of workers in the industry are causing dispute and disaster. The growth has been hindered by a number of factors, leading a possible uncertain future growth expectation. There are many conspiracy theories about this sector. One of them is the involvement of competing countries in damaging Bangladesh's image of this sector. There is anecdote that these forces are causing and financing chaos in the industry. And, it is not an unrealistic assumption, may be the theory has some ground. Now, let us evaluate the different arguments, expectations and responsibilities of various stakeholders. Finding new markets for RMG after the MFA era was a big barrier. The tribute should be given to the entrepreneurs who have found the buyers all by themselves most of the times. We can proudly say now our products are all over the globe. While discussing the issue, one of the young entrepreneurs once joked that if we were this much successful in earlier periods the USA flag in the moon might have a 'Made in Bangladesh' tag. But we need to make sure the quality is ensured, or else, few renegade ones may spoil the party. Because of e-commerce and introduction of IT in the apparels trade, the buyer-customer relationships and the nature of apparels business are undergoing significant changes. In coming days, producers and buyers will have direct interaction with each other. As a result, producers will be expected to take more accountability in terms of design and quality of the apparels products. The owners should consider the fact that our reputation is at stake when they transact. Over the years, perilous working conditions have resulted in the deaths of many workers through factory fires and collapses. Again, in many cases the prime reason of dispute to the workers has been the minimum wage rate. The minimum wage for garment workers has been raised to Tk.3,000 a month, or about $43, from Tk.1,662.50 though the workers' groups and unions demand was Tk.5,000. The new wage includes an allowance of Tk.200 for medical expenses and 800 for housing. Still, one can understand, it would be very difficult to survive with this amount of money, by any standards. The workers deserve a better living condition; they need a better wage rate. The owners may argue that it may cause rise in the prices of the products. This is not true because if they share a little amount of profit from their portion, economies of the low labour can still sustain. Though that does not permit the workers to vandalize in the streets; all the problems of the earth can be solved with a sound and fair discussion. In such discussions presence of sufficient numbers of workers representative should be ensured. The garment workers have reasonable causes to voice their demands, but they have to realize the ability of their employers and they should be motivated to avoid anything that will harm the industry by making them unemployed. Government must also take utmost good care of all the parties involved. A right balance between workers' demand and entrepreneurs' return must be maintained. Workers deserve a better living condition and entrepreneurs need an attractive return on investment. Yes, it is a tough task but that is why a government is elected; to solve difficult issues. One thing we must keep in mind that we are highly dependent on this RMG sector. More than three million people work in the garment industry, which accounts for a vast majority of the country's exports. If anything like prolonged violence or undesired policy implementation happen to this sector there would be hundreds of other problems. We must take optimum care of our golden goose. We know the entire story and the moral of the story. We hope all the concerned also do. The writer is from the Department of Finance, University of Dhaka, and can be reached at e-mail: saief.mahmood@gmail.com
Saief Mahmood Recently, Bangladesh has been ranked second in exporting Ready Made Garment (RMG) products in terms of volume, as it outperformed Turkey. Bangladesh exported 7.78 billion pieces of RMG products in 2010, whereas Turkey exported 7.74 billion pieces. Though, Turkey is ahead of us in terms of values ($6.92 billion last year in comparison to Bangladesh's $6.19 billion), it is a big achievement nevertheless in the period of global crisis and in consideration of our remittance crunch. After the world cup, where the performance of our cricket team was inconsistent, beating a nation by any means would be satisfactory to the people. Unlike cricket, we have a rich history in fiber and garment. The root of our success in this arena is more than a century old. The cloth of Bangladesh achieved fame even in Mughal and British period. The royal families and elites in Europe and other countries used 'Muslin' and 'Jamdani' as their luxurious wears. The garment industry is by far the country's most important manufacturer, generating over $5 billion cash flows annually and accounting for about two thirds of the country's total exports. There are more than 3000 garment factories and around 10 million livelihoods dependent on it directly or indirectly. About 70 per cent of garment workers are women and most of them come from rural areas. So, the RMG sector deserves some credit for poverty alleviation and women empowerment, and it has more potential than any other sector to contribute to the reduction of poverty. One may argue that this sector dominates in export mainly because of the cheap labor. Labor is not as cheap anywhere in the world as it is in Bangladesh. Women contribute to the working force in this sector, as their wages are relatively cheaper than men. It has given women a steady income, economic independence, self-reliance and dignity, because they are earning their own livelihood and managing their family expenses. Many experts were skeptical about the future of this industry when there was no quota system. As we know, the 1974 Multi-Fibre Agreement (MFA) set up a quota system to govern the garment trade. Many thought India and China were likely to benefit most from the end of the MFA by capitalising on economies of scale. Experts once said the slide in exports was likely to force hundreds of factories to close, and warned that replacement employment could prove hard to find. In December 2005, Christian Aid published a report warning that as many as a million jobs could be lost in Bangladesh as a result of the end of the MFA. Post MFA era started in January 2005 and we know the rest of the story; experts were wrong and our garments industry survived. As we know, remittance flow is likely to be affected because of political turmoil in the Middle East and Africa. Under this situation making a steady growth in garment industry is more than indispensable. Apparel export growth has been impressive with 40 per cent in current fiscal. Despite the remarkable success of the RMG sector, the working conditions and wages of workers in the industry are causing dispute and disaster. The growth has been hindered by a number of factors, leading a possible uncertain future growth expectation. There are many conspiracy theories about this sector. One of them is the involvement of competing countries in damaging Bangladesh's image of this sector. There is anecdote that these forces are causing and financing chaos in the industry. And, it is not an unrealistic assumption, may be the theory has some ground. Now, let us evaluate the different arguments, expectations and responsibilities of various stakeholders. Finding new markets for RMG after the MFA era was a big barrier. The tribute should be given to the entrepreneurs who have found the buyers all by themselves most of the times. We can proudly say now our products are all over the globe. While discussing the issue, one of the young entrepreneurs once joked that if we were this much successful in earlier periods the USA flag in the moon might have a 'Made in Bangladesh' tag. But we need to make sure the quality is ensured, or else, few renegade ones may spoil the party. Because of e-commerce and introduction of IT in the apparels trade, the buyer-customer relationships and the nature of apparels business are undergoing significant changes. In coming days, producers and buyers will have direct interaction with each other. As a result, producers will be expected to take more accountability in terms of design and quality of the apparels products. The owners should consider the fact that our reputation is at stake when they transact. Over the years, perilous working conditions have resulted in the deaths of many workers through factory fires and collapses. Again, in many cases the prime reason of dispute to the workers has been the minimum wage rate. The minimum wage for garment workers has been raised to Tk.3,000 a month, or about $43, from Tk.1,662.50 though the workers' groups and unions demand was Tk.5,000. The new wage includes an allowance of Tk.200 for medical expenses and 800 for housing. Still, one can understand, it would be very difficult to survive with this amount of money, by any standards. The workers deserve a better living condition; they need a better wage rate. The owners may argue that it may cause rise in the prices of the products. This is not true because if they share a little amount of profit from their portion, economies of the low labour can still sustain. Though that does not permit the workers to vandalize in the streets; all the problems of the earth can be solved with a sound and fair discussion. In such discussions presence of sufficient numbers of workers representative should be ensured. The garment workers have reasonable causes to voice their demands, but they have to realize the ability of their employers and they should be motivated to avoid anything that will harm the industry by making them unemployed. Government must also take utmost good care of all the parties involved. A right balance between workers' demand and entrepreneurs' return must be maintained. Workers deserve a better living condition and entrepreneurs need an attractive return on investment. Yes, it is a tough task but that is why a government is elected; to solve difficult issues. One thing we must keep in mind that we are highly dependent on this RMG sector. More than three million people work in the garment industry, which accounts for a vast majority of the country's exports. If anything like prolonged violence or undesired policy implementation happen to this sector there would be hundreds of other problems. We must take optimum care of our golden goose. We know the entire story and the moral of the story. We hope all the concerned also do. The writer is from the Department of Finance, University of Dhaka, and can be reached at e-mail: saief.mahmood@gmail.com