Impact of Rana Plaza in Bangladesh economy

Aftermath of Rana Plaza, a negative image of the RMG sector has been consigned in the world through the global media. This tragedy with the more than 1120 workers died and about 1500 injured was create a downbeat situation for Bangladesh RMG sector. A robust and effective solution is critical not only to avoid unnecessary and tragic human loss, but also to safeguard what is undoubtedly the primary growth driver for the Bangladesh economy - the sector recorded exports of more than $19bn (80% of the total) and which, along with remittances, is one of the twin pillars of the $120bn GDP. Six months ago, McKinsey was forecasting the RMG sector to reach $30bn of exports by 2015 as the major global buyers such as Walmart and H&M continued to look to take advantage of one of the lowest labour wage rates in the world and an ability to meet the large scale production with 5,000 factories. The China relocation trade saw Bangladesh benefit from shifting production as well as sourcing and if anything, it was happening even faster than optimists expected. But Rana Plaza, the Tazreen fire before that, and politically motivated strikes (hartals) disrupting production this year, has seen a rapid swing from optimism to pessimism. Only two major brands, PVH Corporation (which owns Tommy Hilfiger and Calvin Klein) and the German retailer Tchibo were willing to sign a fire and building safety agreement to help protect workers according to an article by Steve Greenhouse in the New York Times. Dozens of consumers in the US spoke out against unsafe working conditions found in the factory building. People also unleashed their anger at retailers that did not have any connections to that specific building, but are known to source from factories located in Bangladesh Many Western companies which have activities in Bangladesh have engaged in significant public relations campaigns to minimize the fallout from revelations about their worker's inhumane conditions. Joe Fresh will send representatives from Canada to inspect their supply chains in Bangladesh. The Irish brand Primark will offer compensation to the victims of the collapse and will also review the structural integrity of buildings making its clothes. Leading UK brands have been urged to sign up to the Bangladesh Fire and Building Safety Agreement, which provides for independent structural inspections of factory buildings, with the reports to be made public. But so far only two groups have done so, the US-based PVH which owns Calvin Klein and Timberland, and German retailer Tchibo. UK brands say they are following the lead of the Ethical Trading Initiative, which is instead supporting a Bangladeshi government national action plan launched in March. That plan does not involve structural inspections. Walmart Stores, J.C. Penney and labour activists have been considering an agreement to improve factory safety in Bangladesh for at least two years. In 2011, Walmart rejected reforms that would have had retailers pay more for apparel to help Bangladesh factories improve safety standards.

At a meeting of retailers and NGOs a week after the collapse, a new Accord on Factory and Building Safety in Bangladesh was created and a deadline of May 16 was set to sign it. Walmart, along with 14 other North American companies, refused to sign the accord as the deadline passed.As of May 23, 2013, thirty-eight companies had signed the accord. It also threaten by USA and European Union that RMG sector will not get the benefit of GSP facility which may slow the growth rate of the RMG sector. RMG sourcing is global by nature, and if Bangladesh is the only country that demands global buyer attention, then they will be more reluctant to source from us relative to other alternate producing countries such as Vietnam, Cambodia, and even India.

Source: Ifty Islam Emerging from the wreckage of Rana Plaza

Executive Summary
Corporate governance is the way a corporation polices itself. In short, it is a method of governing the company like a sovereign state, instating its own customs, policies and laws to its employees from the highest to the lowest levels. Corporate governance is intended to increase the accountability of a company and to avoid massive disasters before they occur. The issue of integrity, are the boards and management of companies carrying out their duties in an ethical way.

Bangladesh corporate sectors are still in its initial stage. CG practices in Bangladesh are gradually being introduced in most companies and organizations. 66.7 percent of the companies have adopted CG and 43.3 percent have compliance policy with national or international benchmarks. A considerable percen tage of the top management does not fully understand the concept of CG. One reason for this slow progress in adopting CG is that most companies are family oriented. Motivation to disclose information and improve governance practices by companies is also felt negatively. There is neither any value judgment nor any consequences for CG practices. The current system in Bangladesh does not provide sufficient legal, institutional and economic motivation for stakeholders to encourage and enforce CG practices.

The need for wide-ranging reforms for ensuring transparency, accountability and fairness in all corporate bodies- public and private organization. Corporate governance is nothing but good governance in its true meaning. As Bangladesh lacks in proper corporate guidelines and their effective enforcement, scams like Hallmark, the Destiny, Rana Plaza and the Stock Market collapse.

The Hall mark scam and the Rana plaza both effected our economy with a huge strike. While economy needs a boost performance, these incident may slow the economy growth. So corporate governance must be ensure in both public and private organization, and enforced the law to stop this type of event.

Impact Hallmark scam on our Economy

Countrys Central bank which has a sort of truncated responsibility of overstating the activities of the state owned banks could not also ignore the problem because of its possibility negative impact on overall banking sector. Usually, banks collect money from depositors and provide loan to business entities and other Borrowers. After this huge Sonali Bank scam common people might lose their trust in the banks. They will not find it secure to keep their money in the banks. Many of them may even be tempted to withdraw their deposits in fear of a collapse of the banking sector like the share market collapse. If common people shy away from the banks this may cause shortfall of money in our banking sector as well as other financial sectors like investment, trade and commerce. If people withdraw money from banks then entrepreneurs would not get money from banks to invest in productive sectors. Since banks are very important institutions in financial intermediation in economic activities, the lack of trust in banks has a pervasive effect on the whole economy. Confidence of the International Institution is decreasing. As a result we are suffering from insufficient investment. Thousands of workers of hallmark group have lost their jobs and passing hard time for their livings .(14th nov, newage) It also reduced the confidence of the banks on their customer; as a result customers are facing many difficulties. Banks are now less confident to open LC as a result the import of goods and machinery are decreased, eventually which decreased the economic growth.