The Challenges of the RMG Sector of Bangladesh

The Remarkable Success

We have observed a meteoric rise in the country's RMG sector. In 1983 we had less than 50 factories where at present, we have around 5400 factories with 6 million workforce working around different regions of the country. We are the third largest RMG manufacturer and own 2% share of world's apparel business. 16% of country's GDP and 76% of our export is backed by our RMG sector. This sector has dramatically uplifted the under privileged section of the country and ensured a strong participation of women in nation's economic growth. (Tasin, 2013)

The key reason of this rise is the abundance of low-priced workforce. In fact, the Bangladesh's RMG industry maintains the cheaper wage rate (hourly) than the other industries of the country as well.

Country	Hourly Wages (in USD)	Remark
Bangladesh	0.21	The lowest hourly wage of the world
Cambodia	0.24
Pakistan	0.37
Sri Lanka	0.46
Vietnam	0.52	The second largest RMG manufacturer
India	0.55 - 0.68
Thailand	0.56
Malaysia	0.73
China	0.93	The largest manufacturer
Philippines	0.94 - 1.00
Honduras	1.02	The lowest hourly wage of South America
UK	7.58 - 9.11
USA	8.25 - 14.00

Source: IGLG, 2010

In this highly competitive international market price and quality are the key determinants of success. Pricing is determined by the cost of production. Due to high unemployment rate, the industry is having the unique competitive advantage of cheapest workforce and enjoying the opportunity of bidding the winning price.

The Problems

Poor Working Condition

Lack of alternative employment option along with widespread poverty is forcing the workers to accept poorly paid jobs and to work in a place where basic requirements for health and safety precaution are compromised. The poor legal structure of the country is making the situation even worse. As an outcome of this, we have observed the death of more than 1500 workers in past 13 years (Tasin, 2013). The continuous failure for ensuring a safe work environment has questioned our ability  to deal with international pressure of meeting the increasing demand.

Labor Practices in the Industry

A study on Bangladesh's RMG sector shows that,  20% workers in a sample enterprise are unskilled, 30% of the workers are semi-skilled who mainly are the junior operators. . Among the senior operators less than 50% are skilled. In total workforce only 5% are found to be skilled. Due to lack of skill and education we are failing to cope with the pressure from foreign buyers for compliance with their code of conduct and again failing to ensure a safe work environment. Unfavorable wage condition, inadequate overtime allowance, longer work hours, dishonoring agreement with worker, gender discrimination, child labor etc. are common practices in the industry (Hossan, Sarker & Afroze, 2011). Bangladesh's RMG sector is a labor intensive industry while we are working with a group of unskilled workers who have very low job satisfaction.

Power Shortage

Power shortfall is a key drawback of the industry's productivity. Researchers have found that, presently we are losing production worth of USD 1.6 million per day due to electricity crisis (Zadeed, 2013).

Tax Burden

Where many of our rivals and neighbor countries are exempting export tax to encourage export, our government is proposing tax hike on the export oriented industries including the RMG sector. This hike is not only associated with RMG industry but also with the relevant supportive instruments. For an example- the government often provides cash support to garment owners and producers for meeting different aspects of financial needs . In budget 2012-13 the government imposed 5% tax on this cash support (Financial Express, 2012). This kind of unusual tax burden discourages the investors to invest in the sector.

Political & Legal Issues

The political unrest, complicated policies, backed by corrupted administration are badly damaging the productivity and goodwill of the RMG industry (Hossan, Sarker & Afroze, 2011). The weak law and order situation is one of the key reasons behind the poor working condition in the garments industry. As an outcome of this, occurrences like - factory building collapse, accidents from faulty fire safety measures, accidents from faulty electrical connectivity have become very frequent in the industry and causing national humiliation.

References

TASIN, F. 2013. The garment sector: strength, prospects and challenges [Online].The Daily Star. Available: www.thedailystar.net/beta2/news/the-garment-sector-strength-prospects-and-challenges

IGLH.2010. Bangladesh Garment Wages the Lowest in the World--Comparative Garment Worker Wages[Online].Institute for Global Labor And Human Rights. Available: http://www.globallabourrights.org/alerts?id=0297

ZADEED, R. 2013.Environmental Forces and SWOT Analysis of Garments [Online]. Available: http://issuu.com/zadeed/docs/environmental_forces_and_swot_analysis_of_garments?e=8245881/3561752

HOSSAN, C. G. SARKER, M.A.R., AFROZE, R. 2011.Recent Unrest in the RMG Sector of Bangladesh: Is This an Outcome of Poor Labor Practices? [Online]. Available: http://www.ccsenet.org/journal/index.php/ijbm/article/download/11212/10086

FINANCIAL EXPRESS.2012.BGMEA, BKMEA oppose hike in tax at source [Online].The Financial Express. Available: http://www.thefinancialexpress-bd.com/more.php?news_id=132370&date=2012-06-09