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Branding Bangladesh through RMG

by Dr Aminul Islam Akanda

THE readymade garments industry of Bangladesh has grown, despite multifarious problems and challenges. The country has become the third largest Ready-Made Garments (RMG) exporter in the world, with annual export rising from $116 million in 1984-85 to $18 billion in 2010-11, accounting for more than 78 per cent of its total export. The quantum index of RMG production increased to 1,643.19 in 2009-10, as compared to the base year 1989-90. If RMG can be branded, people across the world will know Bangladesh as the country of choice for garment items, be it woven (shirting, sheeting, suits, jeans, trousers, curtains, etc) or knitwear (t-shirts, jumpers, socks, tracksuits, underwear, swimwear, etc). The marketing guru, Philip Kotler, called for branding Bangladesh through RMG at the World Marketing Summit 2012.
According to the Export Promotion Bureau, the RMG industry started in the late 1970s with woven garments, expanded heavily in the 1980s and boomed in the 1990s with knitwear. From only 0.12 million workers in 384 RMG factories in 1985, the number of factories increased to 5,150 and employment to 3.6 million, within 25 years. The unemployment problem of the country would be severe without such a flourishing labour-intensive industry. Indeed, this RMG industry also contributed greatly in empowering women by employing about 80 percent of the total female workforce. The chief of the World Trade Organisation, in his recent visit to Bangladesh, has pointed out that our RMG industry has sufficiently flourished with limited capital combined with low cost unskilled labour.
In 2010-11, garments export was spread across 90 countries with 58 percent to EU, 26 percent to USA, five percent to Canada, three percent to Turkey and eight percent to other emerging markets. Such a market concentration in EU and USA came about due to a quota-based market access, under the provision of Multi Fiber Arrangement (MFA) of the General Agreement on Tariffs and Trade (GATT). However, the WTO chief clearly acknowledged, the RMG industry has performed better after phasing out the quota in world textile and clothing trade in 2005. Due to the cost advantage, export to Japan has increased from $74 million to $248 million during 2008- 2011, as per the EPB. Our RMG sector looks bright and immense in the world market. Its export may be tripled (between $36 billion to $46 billion) by 2020 according to a global management consultant firm, McKinsey & Company. Meanwhile, our RMG industry has been competent to produce smoothly for names like Wal-Mart, JC Penny, Gap, Levis, Nike and many other global brands.
The prime beneficiaries of this booming RMG industry are the factory owners, buyers and workers. The factory owners earn adequate profit, which helps them to own apartments, luxurious cars and to lead a life with foreign comforts. The foreign buyers of RMG are happy with low priced products and cheerful reception from factory owners. The workers are expected to get handsome salaries through a proper trickle-down effect. However, they receive the lowest salary in world as stated in an article in the daily New Age on August 13, 2010. Minimum wage per hour in the garments sector was reported to be $0.22 in Bangladesh, $ 0.44 in Sri Lanka, $ 0.51 in India and $ 1.88 in China, in 2010. Such a situation has kept labour at a comparatively disadvantageous position in the face of ever-increasing expenses for livelihood.
Garment workers work long hours in congested environments without sufficient rest, and live sub-standard lives in city slums. During the food price inflation of 2008, the issue of salary hike gained momentum when their minimum salary was Tk 1,662 per month. Following months of violent demands for higher wage, the minimum wage was fixed at Tk 3,000 in August 2010. However, the workers’ groups wanted a minimum of Tk 5,000 and the government was in favour of it too. However, the leader of the BGMEA argued for a 15 to 20 per cent rise in cost of production to comply with the floor wage fixed at Tk 3,000. Economic theory here says that such a wage rigidly creates unemployment, because of lower demand for and higher supply of labour. In this regard, it is not justified to compare our wages with that of China or Hong Kong, as their labour productivity is almost twice as high as ours. Conversely, our workers could be paid higher wages by making them more productive through training.
Many analysts expressed anxiety about conspiracy theories regarding the RMG labour unrests in the past. The theory claims that the management of a factory agitates the workforce of its rival factory, with misinformation, to create unrest. However, a domestic conspiracy cannot be ruled out in our case, as unanimous unrest spread to almost all RMG factories. On the other hand, some foreign financed NGOs have also been blamed for instigating the workers, a plan allegedly masterminded by some regional competitors to paralyze the sector. Regardless, the evidence suggesting any domestic or external conspiracy is very weak. Labour unrests may reappear because of
intolerable inflation for low-income city
dwellers. When livelihoods suffer for lack of food, shelter and medicine, slogans like
‘owners -workers are brothers’ cannot sufficiently stop any unrest. In this regard, the factory owners need to tackle such unrest with kindness, to meet the justified demand of the workers.
The extent of our achievement in our RMG sector was not perceived in its beginning. The RMG-led export growth has transformed Bangladesh from a predominantly aid-dependent country to a largely trade-dependent nation. This RMG provided jobs to unskilled women, who might have otherwise been unemployed in any formal sector. Low cost of cheap labour is the only arsenal for survival and progress of this labour-intensive industry. Bangladesh has a comparative advantage on RMG over India. Due to a gradual increase in labour costs and appreciation of the currency, China has been losing its competitiveness as well. This would make our RMG a dominant industry in the world. Instabilities in our RMG industry, either from labour unrest or power shortage or policy barriers, are not expected anymore. Presently, the livelihood of 20 million people is directly or indirectly dependent on the garment sector through backward linkage and supportive industries. Any disturbance in the RMG sector would create repercussion everywhere in the rickety economy. In this regard, both the public and private sectors must come forward to solve any problems to flourish the unexplored potential of our RMG sector in the world.
When we can envisage ‘Made in Bangladesh’, like another WalMart, such branding of RMG would offer benefits to the producers. There must not be a delusion among factory owners to become millionaires overnight. The government may strategically proceed by scrutinizing the wage policies of some leading factories, which will insist on creating wage-leadership, which would later be rationally followed by other factories. This is a very favourable time to promote branding of our RMG sector, as our main competitor China is expected to become an importer as part of its on-going shift to high-end products. In this regard, all the beneficiaries of the RMG industry, including government, must be pro-active and cooperate to mitigate all sorts of instability related to labour, power or conspiracy, to maintain a favourable export climate to ensure the branding of our Bangladesh.
Dr Aminul Islam Akanda is associate professor and chairman, Department of Economics, Comilla University. akanda_ai@hotmail.com.

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Branding Bangladesh through RMG

THE readymade garments industry of Bangladesh has grown, despite multifarious problems and challenges. The country has become the third largest Ready-Made Garments (RMG) exporter in the world, with... Full story
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