Saturday, January 7, 2017

Bangladesh garment-making success prompts fears for wider economy

Bangladesh’s garment-making sector has rebounded so strongly following the Rana Plaza disaster that economists and labour leaders are warning it risks holding back the country’s economy as a whole.
Nearly four years after the collapse of a factory in Dhaka, the country’s capital, in which more than 1,100 garment workers were killed, western clothing companies are buying more from Bangladeshi factories than ever before.
But while the booming garment industry is contributing to an overall growth rate of 7 per cent, economists say it is suppressing wages and crowding out higher value sectors.
“There is no diversity in the economy,” warned Rashed al Mahmud Titumir, economics professor at Dhaka University. “Bangladesh has not been able to produce more lucrative products — there are barely any exports except ready-made garments.”
In the 1983-4 fiscal year, Bangladesh garment sales abroad made up 3.9 per cent of its total exports and were worth $31.6m, according to data from the Bangladesh Garment Manufacturers and Exporters Association. By 1989-1990 that had risen to 32 per cent, worth $624.2m. At the time of the Rana Plaza collapse — the country’s worst industrial disaster — garment exports had reached 80 per cent or $21.5bn. 
Despite the tragedy, the sector has continued to grow, hitting $28.1bn in the last financial year and accounting for 82 per cent of total exports.
Industry representatives say the continued growth is the result of the unprecedented action it took in the aftermath of the disaster, agreeing to independent safety checks and including workers and unions on inspection teams.
In the year after Rana Plaza, the number of clothing factories in Bangladesh shrank by 1,654 — 615 of which were related to the new safety measures, according to the BGMEA. 
More than 200 foreign brands have signed up to two different safety schemes — the Bangladesh Accord on Fire and Building Safety and the Alliance for Bangladesh Worker Safety — and have promised to spend tens of millions to improve factories.
“Buyers have regained trust in Bangladesh; that is why business is growing,” said Mohammed Nasir, vice-president at the BGMEA. “There are no measures like this anywhere except Bangladesh.”
Others, however, say the industry has thrived by cutting prices and wages. 
Mark Anner, associate professor at Pennsylvania State University, found that since Rana Plaza, the dollar price for a pair of cotton trousers — Bangladesh’s top export to the US — has declined 9.3 per cent in real terms. “The sector is continuing to grow based largely on its cost competitiveness,” he said. 
Despite the growth in sales and the overall Bangladeshi economy, the minimum monthly wage has remained at Tk5,300 — about $67 — since 2013.
Nazma Akter, founder of the Awaj union for women garment makers, said: “Economic growth has increased but workers’ rights are not improving. The economy could be growing even faster but this is holding it back.”
Pointing to the crowded shanty town beneath her Dhaka office, she added: “That’s where the workers live — children are separated from their parents and people don’t eat properly. The factories have improved but not the living conditions.”
There is also evidence that workers’ rights are being eroded even as their safety has improved. Last week Bangladeshi police said 1,500 garment workers had been dismissed following week-long strikes at dozens of factories supplying top western brands.
Mr Nasir acknowledged that factories struggled to pay their workers fair wages. But he said this was because western clothing retailers were paying less since the Rana Plaza collapse.
“The buyers go to each factory and get a detailed quote for the work,” he said. “Then they take the cheapest deal offered for each part of the work and demand that factories meet that overall price. Factories are desperate, so they agree. It means retailers pay around $5 for a piece of denim clothing that would sell in the west for $60.”
But he added that the industry represented the best hope of employment for millions of poor, uneducated Bangladeshis — especially women, who make up 70 per cent of the workforce, according to the BGMEA’s calculations.
“There is no better option, so people go into the ready-made garment sector,” said Mr Titumir. “It means return on labour is low — lower than the return on capital — and there is real wage repression.”

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