The issue of compliance in the RMG sector

It's better to face the reality upfront when meeting compliances with a set of standards is essential to retain Bangladesh's apparel market globally. None of the market players denies the compulsion either, but we are still far short of an objective assessment of the state of compliance in garment factories. While taking a position in the debate, stakeholders distance themselves from each other's demands and responsibilities. As a result, the sector stands on the edge of losing competitiveness despite steady progress made in this US$ 22-billion export industry.
In a study focusing on ready-made garments (RMG) sector, which is yet to be published, Dr. Binayak Sen, a Research Director at the Bangladesh Institute of Development Studies (BIDS), has tried to portray a clearer picture of the industry, including improvements and challenges in the aftermath of the Rana Plaza tragedy of 2013.
The "state of compliance" has emerged as a major policy concern in recent years after the growth of the RMG sector in a haphazard fashion. And the economist has found it extremely complex to assess the compliance standards as it is 'often exceedingly difficult to get an access to the inner world of a RMG factory'.
Already, the increased focus of international brands on ensuring that garment producers comply with codes of conducts in their supply chain, has created a stronger linkage between labour standards and trade than before. The industry cannot achieve a sustainable growth depending on 'competitive labour cost only', the economist cautions in the report. In this backdrop, he suggests, there is no point in avoiding the labour and work environment compliance issues.
There has been significant improvement in the social attitude and self-esteem of the female workers as 54 per cent expressed their 'satisfaction' about their jobs compared to dissatisfaction rating of only 15 per cent. A survey of both compliant and non-compliant factories, conducted as part of the study, has also reflected improvement in working conditions. In the list of workers' concerns, "unsafe work environment" has been identified as a "problem" only by 4.0 per cent while 7.0 per cent referred to fire-related accidents in the past.
The compliant factories (meaning members of the Bangladesh Garment Manufacturers and Exporters Association or BGMEA) perform better than the non-compliant ones (non-members of BGMEA). Accordingly, 98.0 per cent of the workers from compliant factories said about the presence of a fire alarm system for workers engaged in compliant factories, as opposed to 72.0 per cent for workers engaged in non-compliant factories. Workers in compliant factories reported higher building safety (69.0 per cent vs. 33.0 per cent), safe work environment (85.0 per cent vs. 69.0 per cent), emergency staircase (98.0 per cent vs. 69.0 per cent), and preventive safety measure by keeping main gates open during production (61.0 per cent vs. 28.0 per cent), in comparison with the ones in non-compliant factories.
However, issues relating to job security seem to be a major concern of the female workers. Misbehaviour of supervisors/managers has been highlighted by at least 58.0 per cent of respondents, followed by the concern over the threat of termination from jobs (32.0 per cent) and job insecurity (29.0 per cent). There is scope for improving work arrangement. For compliant factories, system of issuing appointment letter as a norm is observed among 59.0 per cent of the workers as opposed to 28.0 per cent in the non-compliant ones.
A functioning complaint box was found in 47.0 per cent of responses from the compliant factories (as against 35 per cent for the workers from non-compliant factories). The existence of a "grievance hearing committee" is reported by only a quarter of responses obtained from workers engaged in compliant factories. The ready availability of physicians is reported only by 67.0 per cent of workers in compliant factories. Even the presence of a mandatory "compliance officer" is not found to be universally true: only 48.0 per cent of the workers engaged in compliance factories have reported such presence.
So, given the room for improvements in many aspects of compliance, Dr. Sen has recommended that Bangladesh should pursue an idea of "good enough" compliance that would focus on core issues of humane governance, and issues relating to safe work environment, minimum compliance with regard to hiring and firing of workers, regularity in payment of dues to the workers, and smooth functioning of workers' grievance and welfare committees.
Even if approximately 1800 or one-third of 5,500 RMG factories are affected by rules of compliance, be it fully or partially, Binayak Sen estimates, an amount of Tk.54,000 millions (one crore=10 million) would be required when average compliance cost is calculated at Tk.30 million per factory (excluding the costs of land required for possible relocation). The aggregate cost for the RMG sector as a whole then stands at 2.2 per cent of the total annual budget of the Bangladesh government for 2014-15 financial year.
The main challenge to promoting compliance issues, as the economist has pointed out, is the weak capacity of the government to ensure compliance with the labour laws and other relevant laws. While attaining capacity to improve the labour compliances and working conditions, the government 'could get the necessary technical assistances from international donor countries and global brands as the issue attracts international attention now-a-days'.
In this context, he has referred to the proposal mooted by Nobel Peace laureate Muhammad Yunus for an international minimum wage for garment workers in each country, as part of a global effort to solve labour issues and to be accepted by buyers and suppliers without making it a subject for price negotiations. Binayak Sen has floated another idea of creating "compliance challenge funds" with sources such as tariff revenues earned by the USA on account of Bangladeshi RMG exports.
Interestingly, the aggregate amount required for compliance is, US$675 million, equivalent to almost 85-90 per cent of annual import duties paid by Bangladeshi exporters. "Spread over 2-3 years, the compliance costs for "fixing the problem" in the RMG sector look reasonable even under most liberal assumptions," adds the economist.

Khawaza Main Uddin is the Executive Editor at ICE Business Times.
khawaza@gmail.com