Garment Industry in Bangladesh: Global Competitiveness Drives Need for Alternatives

By Amy Chang

The ready-made garment (RMG) industry has been the main contributor to transformative growth in Bangladesh in the last four decades, but in more recent years it has drawn international attention for its poor working conditions. In 2013, collapse of the Rana Plaza building in the capital city of Dhaka killed 1,130 people, putting Bangladesh in the international spotlight for labor reform. The response to this incident, however, has been largely PR-based and failed to create long-term change. In many ways this is unsurprising, as unfortunately international retailers are faced with increasing global competitiveness, creating difficulty in pushing for higher standards and regulation.

As exploitative as the current situation can be, the industry has created jobs for millions and produced extraordinary economic activity in a once poverty-ridden country. Since the arrival of RMGs in the 1970s, the poverty rate in Bangladesh has fallen from 70 percent to 40 percent. Clothing manufacturing accounts for almost 80 percent of exports and generates more than $20 billion in revenue annually. Apart from creating employment for more than four million people, the RMG industry has also made great strides in empowering women financially. In the industry, 90 percent of workers are female; unlike many developing countries where women can still obtain a role in the agricultural sector, women in Bangladesh typically do not work outside the home. The arrival of RMGs has changed this and spurred an exodus of poor rural women into cities to become crucial financial providers for their families, and prevented many young Bangladeshi women from marrying underage.

RMG

A worker spins yarn onto bobbins in the Wooltex Sweaters Limited factory in Shewrapara, Dhaka. In 2008, the Asian Development Bank loaned $50 million to the Bangladesh Ministry of Education to improve the skills of millions of workers in the ready-made garments and textiles, light engineering, and construction industries. Photo courtesy of the Asian Development Bank.

Bangladesh is currently the world’s second largest clothing exporter behind China. This will likely change in the future as China starts phasing out of textile and clothing manufacturing, with as much as 80 percent of American and European clothing companies planning to outsource to Bangladesh. Rising wages, coupled with a stronger currency, and the adoption of more automated, high-tech industries in China have caused many retailers to shift production orders into South Asian countries with cheaper manufacturing costs—these include Bangladesh, Vietnam, Cambodia, Myanmar, and Indonesia. Even with raised wages after the Rana Plaza collapse, Bangladesh is still home to some of the lowest paid when compared to competitor countries. Minimum worker income is $68 per month in Bangladesh, up from $39 per month prior to 2013. In comparison, Cambodia has agreed to pay its garment workers a minimum of $150 per month, and Vietnam raised minimum wages to between $107 and $156 per month for 2016.

After the Rana Plaza tragedy in April 2013, fairly little has been achieved despite the heightened interest in ethical sourcing. The most successful immediate accomplishment was perhaps the establishment of the Rana Plaza Donors Trust Fund, a fund set up by H&M, Mango, Primark, Gap, Walmart, and a dozen others; to award compensation to victims and their families. A host of European countries and two U.S. companies (PVH, parent to Calvin Klein and Tommy Hilfiger, and Abercrombie & Fitch) agreed formally to improve working conditions, but many others refused. Gap claimed that the agreement presented substantial potential legal risks, while other American retailers stated that they preferred to follow their own inspection systems. Gap, Walmart, and Target signed a separate safety pact later in June, but labor organizations have criticized that this document provides loopholes in enforcement due to its nonbinding nature.

It is not difficult to understand why western retailers may be reluctant to introduce significant reform. Bangladesh still presents itself as a great option for their garment production needs—with low wages, government subsidies, and tax concessions—while the country is too dependent on this industry to push for momentous change. The government recognizes that costs need to be kept low to encourage retailers to fulfil orders in Bangladesh, as international companies always have the option of transferring operations to other countries that suffer from similar, but perhaps lesser-known, conditions. In 2015, Human Rights Watch released disappointing results showing how garment workers who tried to form trade unions or fight for labor rights in Bangladesh were intimidated by their employers. Unlike in the New York Triangle Shirtwaist Factory fire in 1911, workers who are dependent on the RMG industry for their livelihoods cannot simply unionize by restricting supply, as the global market has created alternatives in neighboring competitors.

Those calling for ethical sourcing need to be cautious of its potential to fuel withdrawal of business-minded firms, as western-led boycotting will likely worsen the situation for many whose employment in RMGs is their best alternative. With enough attention, PR-minded firms may consider suspending operations—Walt Disney, for example, withdrew from Bangladesh altogether due to not wanting to be associated with the country’s history. In the year following Rana Plaza, thousands were laid off after inspectors found working conditions to be unsafe; these low-skilled workers likely ended up unemployed or struggling to find income in ways that are even less safe than garment factories. The World Bank has cautioned that one of the most pressing challenges for Bangladesh lies in rebuilding the image of the garment sector to sustain economic activity, as despite exponential growth prior to 2013, employment in garment factories has largely plateaued since the Rana Plaza incident.

Rather than grappling with the current impasse with regard to regulations and inspections, there are still many ways for the development community to contribute by focusing on the livelihoods and long-term empowerment of Bangladeshi workers. The Asian University for Women in Chittagong, for example, began offering garment workers with free university classes in March of this year, providing needed skills and training for them to advance on the career ladder. Government and foreign investors can similarly contribute by investing in workforce training and development of higher value-added sectors. These investments help hasten the transition out of textile and clothing industries while still providing an economic assurance for those currently employed.

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