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Overall Problems and Prospects of Bangladeshi

Ready-Made Garments Industries
ARTICLE in SSRN ELECTRONIC JOURNAL JANUARY 2008
DOI: 10.2139/ssrn.1117186

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Acknowledgement
Bangladeshi Garment Industry is the largest industrial sector of the country. Though
the history of Readymade Garment Industry is not older one but Bangladeshi
clothing business has a golden history. Probably it started from the Mughal age in
Indian subcontinent through Dhakai Musline. It had global reputation as well as
demandable market around the globe especially in the European market.
After industrial revolution in the west they were busy with technological
advancement & started outsourcing of ready made garments to meet up their daily
demands. Many LDCs took that chance & started ready made garment export at that
markets. As an LDC Bangladesh took this chance enjoyed quota & other facilities of
them. Thus ready made garment industry started to contribute in our economy from
late eightys (1977).
The history of the garment industry dates back to 1977 when the first consignment
was exported to then West Germany by Jewel Garments. The number of units,
however, remained a meager 46 until the end of 1983. From a humble beginning the
sector has thus made phenomenal growth over the last two decades, the number of
units growing to around 4500. The RMG industry achievement is noteworthy,
particularly for a country plagued with poor resource endowments and adverse
conditions for industrialization. Exports increased from approximately 32 million US
dollars in 1983/84 to 1.4 billion dollars in 1992/93. In 1987/88, the RMG export
share surpassed that of raw jute and allied products. The figure further rose to 5.7
billion dollars in 2003/04, representing a contribution of about 75 percent of the
countrys total export earnings in that year4. The employment generated by the
sector is estimated to be around 1.5 million workers.
Several factors account for the outstanding success of the RMG industry in
Bangladesh. At the same time this industry had faced & till facing many problems
also. These problems & prospects of RMG industry in Bangladesh is my topic to find
out as well as to make critical analysis on these. The importance of my study has been
raised up by recent labor unrest in RMG sector.
To analyze this board topic a took fulltime guidance from my dissertation guide Mr.
A. K. M. Abduj Jaher in preparing questionnaire, operating field survey, presenting
the survey report as well as constructing the report as a whole. So I am grateful to
him.
Here I use data from different sources like, BGMEA, BKMEA, CPD, World Bank,
UNDP, Lmd Journal Published by Australian National University, CIA Report,
ADB, Bureau of Economic Research- University of Dhaka, The University of Chicago
Press & many other sources stated in reference section. Thus I am obliged to all of
them at the same time I would like to offer my warm thanks to all of them.
Many Garments owners, workers, & buyers have helped my by providing their
valuable opinion on the topic or through interview. So I am grateful to them for
helping me by providing primary data. Again I would like to offer my warm thanks
to all of them for helping me a lot in construction of this dissertation report.

Md. Joynal Abdin

mdjoynal@gmail.com
Electronic copy available at: http://ssrn.com/abstract=1117186

Executive Summery
The Readymade Garment Industry of Bangladesh has become the largest foreign
exchange earning sector, exporting apparel of all sorts to the USA, Europe and other
developed countries. The Readymade Garment (RMG) industry of Bangladesh tells
an impressive story about the leadership of private enterprise and the countrys
successful transition to a major export-oriented economy. The country registered its
first apparel export in 1978, but the progress since the early 1980s has been simply
phenomenal. It has by now become a colossal industry, earning the lion's share of the
country's foreign exchange and providing the nation's women with the largest formal
employment.
With the first garment exporting unit, Reaz Garments in 1978, and along with that
initiative, Desh Garments, led by the visionary entrepreneur, Mr. Noorul Quader,
Bangladesh stepped into a new promised land of prosperity.
The success story of the Readymade Garments sector of Bangladesh is based on
employment generation and increasingly high value addition, thus smoothening the
path for growth and development of the country. The apparel and garment industry
propels sectors such as banking, finance and insurance, cargo, shipping and
transport, entertainment and hospitality, research and education and a lot more. The
mentioned performance of the industry has been possible due to: A. The cheap but
disciplined and regimented workforce has been key for the success of this industry.
B. The entrepreneur class has been dedicated and motivated to the country's
economic prosperity. C. The quality of the manufactured apparel, which has been
increasingly recognized by our international buyers and end users all over the world.
D. Buyers' response has been encouraging through repeat orders. The industry has
been producing all sorts of apparels for all seasons and has managed to get repeat
orders for every season. E. The import policy of Bangladesh has been flexible and
friendly for import of accessories.
This vital and vibrant export oriented industry has been facing some problems from
local forces, which may be termed weaknesses (or the Nation's weakness), and some
problems caused by forces beyond our geographical/political boundary, which may
be termed as threats to our industry. The Readymade Garment Industry is already 20
years old but during the last two decades no planned, fruitful policy to build up a
backward linkage textile industry to feed the RMG industry has been taken by the
authorities. Even the existing textile industries are not capable of producing high
standard fabrics to offset the foreign ones from the market. Shortage of capital
necessary to develop local sources for quality fabrics/yam is a major weakness. The
reason behind the shortage of capital, however, can be attributed to the socioeconomic condition of the country; enabling foreign direct investment could
however, compensate for this. Furthermore although the Government has responded
to the RMG industry's requests for devaluation of the local currency the Taka
from time to time, it has failed to decrease the current rate of interest. At the same
time, our financial policy measures are not sufficient to attract entrepreneurs to
invest in the textile industry. Anomalies in the banking sector, problems at the port,
vindictive political environment, bureaucratic shackles, electricity crisis, and
currency adjustment policy pursued by the country, and the lack of some policy
support from the government to sustain the country's falling competitiveness against
its competitors in the international market are other serious weaknesses.
Md. Joynal Abdin
mdjoynal@gmail.com
Electronic copy available at: http://ssrn.com/abstract=1117186

Foreword:
Being connected with other parts of the world through the movement of capital,
goods and people is nothing new for Bangladesh. In the pre-colonial period, Bengal,
the eastern half of which constitutes the present Bangladesh, was once a centre of
cotton textile and silk manufacturing. During the Mughal period, these products
were exported to meet the demands of the Asian and European markets2. Bengali
people, meanwhile, went to England as the servants of East India Company officers
and as sailors on British ships (Gardner 1995: 36). And women were by no means
excluded from the influence of the globalization of that period. While womens labor,
in high demand for production of home spun yarn during the eighteenth century, lost
its value when textiles made in British factories began to flood the Indian market
(Hossain, Jahan and Sobhan 1990: 14-17), the rise of the export-oriented readymade
garment industry (hereafter referred to as RMG industry) has given Bangladesh
women a predominant position in the economic and social space opened up by
globalization.
The RMG industry in Bangladesh has grown phenomenally over the past twenty
years, belying the initial scepticism about its long-term sustainability. In 2004/05
garment exports amounted to approximately 5.4 billion US dollars, accounting for 66
percent of the countrys total export earnings3. In its main export markets, the US
and the EU, Bangladesh ranked 10th and 3rd, respectively, in terms of export value
at the end of 2004.
Despite this seemingly remarkable performance, however, in the decade from 1995
there was much discussion of the uncertainties looming over the future of the
industry. In December 1994, with the conclusion of the Uruguay Round, the Multi
Fibre Agreement (MFA) which had governed global trade in textile and clothing since
1974 was succeeded by the Agreement on Textile and Clothing (ATC). The ATC called
for a gradual phasing out of all MFA restrictions by the year 2005. As will be
discussed in the following section, the MFA regime provided an opportunity for the
RMG industry to be implanted in Bangladesh by inducing a structural shift in the
sourcing of global exports of textiles and clothing and ensuring guaranteed access to
some markets.
There were opposing views about the prospects of the RMG industry of Bangladesh
in the post-MFA era. The optimistic view emphasized the solid position Bangladesh
had held over the years as a reliable source of cheap garments produced with an
abundant supply of skilled, cheap labour. The pessimists, meanwhile, saw no chance
for Bangladesh to survive in the global mega-competition. What was certain,
however, was that performance of the industry as a whole would to a substantial
extent depend on worker performance and that workers lives would be profoundly
affected. The main objective of this paper is to assess the actual impact of MFA
withdrawal on RMG workers lives through a sample survey of workers.
The tremendous success of readymade garment exports from Bangladesh over the
last two decades has surpassed the most optimistic expectations. Today the apparel
export sector is a multi-billion-dollar manufacturing and export industry in the
country. The overall impact of the readymade garment exports is certainly one of the
most significant social and economic developments in contemporary Bangladesh.
With over one and a half million women workers employed in semi-skilled and
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skilled jobs producing clothing for exports, the development of the apparel export
industry has had far-reaching implications for the society and economy of
Bangladesh.

History of Bangladeshi Ready Made Garments (RMG) Industry:

The history of the Readymade Garments Sector in Bangladesh is a fairly recent one.
Nonetheless it is a rich and varied tale. The recent struggle to realize Workers' Rights
adds an important episode to the story. Below, I present a detailed narration of the
evolution of the RMG sector from its humble origins to the present day.
The shift from a rural, agrarian economy to an urban, industrial economy is integral
to the process of economic development (Kaldor, 1966, 1967). Although policymakers
in the least developed countries (LDCs) have, at various times, attempted to make
agriculture the primary engine of economic growth and employment generation, this
approach has not worked, not least because of the contributions of the Green
Revolution, which has had the dual effect of increasing agricultural productivity in
the LDCs and displacing the rural labor force at the same time. Led by the example of
the East Asian economies, most LDCs now accept the need for greater
industrialization as the fastest path to economic growth. In particular, countries such
as Japan, Taiwan and South Korea have demonstrated that an export-oriented
industrial strategy can not only raise per capital income and living standards in a
relatively short time; it can also play a vital role in modernizing the economy and
integrating it with the global economic system.
Bangladesh, one of the representative LDCs, has also been following the same route
for the last 25 years. Once derided as a bottomless basket-case by Henry Kissinger,
the country stumbled across an economic opportunity in the late 1970s. New rules
had come to govern the international trade in textiles and apparel, allowing low-cost
suppliers to gain a foothold in American and European markets. Assisted by foreign
partners, and largely unaided by the government, entrepreneurs held the opportunity
and exploited it to the fullest. Over a period of 25 years, the garments export sector
has grown into a $6 billion industry that employs over a million people. In the
process, it has boosted the overall economic growth of the country and raised the
viability of other export-oriented sectors.
The ready-made garments (RMG) sector has a venerable history of about 25 years.
This period cannot simply be termed as "long" as this would be the understatement
of the decade. This history is one of success, endeavor, and the continuous struggle of
the class of entrepreneurs who remained focused on achievement and challenges.
With the first garment exporting unit, Reaz Garments in 1978, and along with that
initiative, Desh Garments, led by the creative thinker entrepreneur, Mr. Noorul
Quader, Bangladesh stepped into a new promised land of prosperity.
Upon seeing the advertisement for recruits, the country wondered in awe and
questioned Mr. Quader's plans of sending 129 graduates and engineers to be trained
in Korea. Why would simple sewing operations need high tech applications? Many
even suspected something naughty in this venture. But after rigorous training in
Korea, these graduates returned home, qualified and efficient, bringing to the land a
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new discipline of "line management" which elevated our tailor status to standardized
manufacture.
Hence, RMG took birth in this land with the help of financial institutions and the
limited financial resources of the family of the young entrepreneur who respected in
him a dream to set up an industrial unit allowing him global access and exposure.
This is how RMG experienced lift off, and till date, with the exception of a few
government policy directions, the sector can boast of not resorting to large public
funding and can assert its base being in the core of purely private initiative.
Every owner turned out to be the provider of hundreds of jobs for the semi-skilled
work force, of which the majority happened to be women. Manufacture of a single
shirt required 42 workers, a pant almost 48, a jacket almost 60. This is how this
industry utilized the people and carried their torch of ambition and prosperity since
the inception of this industry.

Literature Review:
Several authors have analyzed aspects of the garment industry in Bangladesh. Of the
various aspects of the industry, the problems and the working conditions of female
workers have received the greatest attention. There are several studies including the
Bangladesh Institute of Development Studies (BIDS) study by Salma Chowdhury and
Protima Mazumdar (1991) and the Bangladesh Unnayan Parisad (1990) study on
this topic. Both of these studies use accepted survey and research methodology to
analyze a wealth of data on the social and economic background, problems and
prospects of female workers in the RMG sector.
Professor Muzaffar Ahmad looks at the industrial organization of the sector and
discusses strength and long-term viability of apparel manufacturing in Bangladesh.
Wiig (1990) provides a good overview of this industry, especially the developments in
the early years. One of the few studies on the Bangladesh apparel industry to be
published in a reputed journal in the U.S. is that of Yung Whee Rhee (1990) who
presents what he calls a catalyst model of development. The Bangladesh Planning
Commission under the Trade and Industrial Policy (TIP) project also commissioned
several studies on the industry. Hossain and Brar (1992) consider some laborrelated issues in the garment industry. Quddus (1993) presents a profile of the
apparel sector in Bangladesh and discusses some other aspects of the industry.
Quddus (1996) presents results from a survey of apparel entrepreneurs and evaluates
the performance of entrepreneurs and their contribution to the success of this
industry. Islam and Quddus (1996) present an overall analysis of the industry to
evaluate its potential as a catalyst for the development of the rest of the Bangladesh
economy.
The 1998 Floods
The floods that affected Bangladesh between July and September 1998 were among
the worst natural disasters impacting Bangladesh in recent history. With the benefit
of hindsight it is apparent that the damage to the manufacturing base and the general
infrastructure was neither as severe nor as permanent as was estimated at the time of
the crisis. Once again the spirit of entrepreneurship and survival that characterizes
the ordinary citizens of Bangladesh brought about a remarkably quick recovery in the
economic and commercial lives of the people. This was also true for the apparel
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export sector that has in the past repeatedly demonstrated its resilience and
sturdiness.
The floods directly impacted thirty million people for three long months, caused 1100
deaths, and destroyed partially or completely 15,000 kilometers of roads, 14,000
schools, hundreds of bridges and as many as 500,000 homes. The total damage to
private and public property is estimated to be about $3.4 billion. In addition, the
shock to the economy may reduce GDP growth from about 6 per cent to 2 per cent.
The total loss to the economy was estimated to be at least Tk. 12,000 crore.
The manufacturing sector was disrupted because many urban areas were inundated
by floodwaters for a long period.
The floods affected many areas where
manufacturing is concentrated, such as Dhaka, Narayangang, Savor, Tongi, Rupganj,
and Narsindi. Eighty percent of the 500,000 handlooms sustained damage, of which
50 percent were seriously affected in terms of assets and raw materials. As a result,
manufacturing was expected to grow at only 3% during this fiscal year compared to
6.7 percent in the previous year. Fueled by higher food prices, the inflation rate shot
up and was expected to be around 8 percent for the year.
For Bangladesh, the readymade garment export industry has been the recognizable
industry that lays the golden eggs for over fifteen years now. The sector now
dominates the modern economy in export earnings, secondary impact and
employment generated. The events in 1998 serve to highlight the vulnerability of this
industry to both internal and external shocks on the demand and supply side. Given
the dominance of the sector in the overall modern economy of Bangladesh, this
vulnerability should be a matter of some concern to the policymakers in Bangladesh.
Although in gross terms the sectors contributions to the countrys export earnings is
around 74 percent, in net terms the share would be much less partially because the
backward linkages in textile have been slow to develop. The dependence on a single
sector, no matter how elastic or strong that sector is, is a matter of policy concern.
I believe the policymakers in Bangladesh should work to reduce this dependence by
moving quickly to develop the other export industries using the lessons learned from
the success of apparel exports. Support for the apparel sector should not be reduced.
In fact, another way to reduce the vulnerability is to diversify the product and the
market mix. It is heartening to observe that the knit products are rapidly gaining
share in overall garment exports as these products are sold in quota-free markets and
reflect the strength of Bangladeshi producers in the fully competitive global apparel
markets.
Preliminary data and informal evidence indicate that this sector seems to have tough
the devastating floods relatively well. The floods did create a crisis for the tightly
scheduled export industry, but to its credit the firms responded swiftly and creatively
to the unexpected dislocation and transportation disruptions. The industry is one
hundred percent export-oriented and therefore insulated from domestic demand
shocks; however, it remains weak to domestic supply shocks and the smooth
functioning of the banking, transportation and other forward and backward linkage
sectors of the economy.
The Dhaka-Chittagong road remains the main
transportation link connecting the production units, mostly situated in and around
Dhaka and the port in Chittagong, where the raw material and the finished products
are shipped in and out. Despite increased dependence on air transportation, trucks
remain the main vehicles for transporting raw materials and finished products for
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Bangladesh garment exports. The floods disrupted the normal flow of traffic on this
road. Eventually, this road link was completely severed for several days when large
sections of the road went under water for a few weeks during the latter phase of the
floods. This de-linking of the road connection between Dhaka and the port in
Chittagong was as serious a threat as one can imagine for the garment exporters. The
industry responded by calling upon the Bangladesh navy to help with trawlers and
renting a plane from Thai Air that was used to directly fly garment consignments
from the Dhaka airport to the Chittagong airport several times a day.
According to industry sources, the list of flood-related damage to the garment
industry is extensive.
According to the September 1998 BGMEA newsletter,
garments worth taka 1,000 crore ($208 million) could not be exported on time due
to the disruption of the Dhaka-Chittagong road. Finished products worth $231
million were stockpiled and twenty percent of these may end up in a stock-lot
situation. The estimated production loss was put at $120 million. As many as 250
apparel factories were partly or completely submerged during the floods. Attendance
and worker productivity in factories was down as much as 35 percent during the
worst period of the floods. As many as 300,000 workers were unable to work as
their homes and families were stricken by the flood conditions. Many more workers
fell sick from waterborne diseases.
Besides natural disasters, there were several other crises that impacted the garment
industry in 1998. The disruption of the Chittagong port due to labor disputes was
certainly one of them. BGMEA, the industry association, has repeatedly requested
the government to ban labor strikes in the Chittagong port for national security
reasons. Another source of disruption for the industry was the perennial problem of
hartals or general strikes called for and enforced by the political opposition.
Although the leader of the main opposition party has declared, in a major concession
to this industry, that the garment industry would be exempt from such hartals, in
practice the situation is more difficult. Lastly, the psychological impact of these
events on the existing and potential buyers cannot be overstated. Buyers in the
global garment markets remain highly sensitive to the risks of unfulfilled orders. As
a result of the floods, the image of Bangladesh as a somewhat unpredictable supply
source may have been strengthened since the floods received considerable world
media attention.
Historically, apparel exports have grown at an average rate of 24 percent annually,
roughly doubling every three years since 1984. In 1996-1997 the exports in gross
terms equaled three billion dollars. These should reach the six-billion-dollar range
by the year 2,000 and in the ten-billion-dollar range by the year 2004 when the
Multi-Fiber Arrangement (MFA) quotas are expected to end, ushering in a truly
global and competitive market. Among the many factors, the one most responsible
for the success of this industry is the entrepreneurial spirit it has displayed. The
garment entrepreneurs should receive a national "innovators" award for taking
creative initiatives to overcome the crises in 1998. The list of the hurdles the
industry had to overcome this year includes not only the floods related dislocations
but other internal constraints as well. Among the steps taken by the entrepreneurs to
improve the competitiveness of the industry were initiation of monthly meetings with
the union leadership, implementation of child labor agreement, and attempts to gain
market share as a result of the East Asian crisis by asking the U.S. to increase its
quotas for Bangladeshi apparels.
Md. Joynal Abdin
mdjoynal@gmail.com

Growth in overall exports from Bangladesh peaked in 1994-1995 at 40 percent a year,

but growth has remained strong. In the July 1997-February 1998 period, total export
earnings equaled $3.3 billion or 16.4% above the exports over the same period in the
previous year. The garment and knitwear exports accounted for the bulk of these
exports. The knitwear sector especially has been highly dynamic in recent years.
Given the fact that this market is outside the purview of MFA and not protected by
quotas, this bodes well for the post MFA future of the industry. Bangladesh apparel
exports can now point to a proven track record of successfully competing in a nonprotected global competitive environment.
Unfortunately, other potentially
promising exports from Bangladesh such as leather, jute goods, and frozen foods
have not fared as well over this period. This has accentuated the already narrow
export base of the country and is certainly a matter of concern. The excess
dependence on foreign exchange earnings and export growth on garments and
knitwear calls for policy attempts to diversify the export base of Bangladesh.
What can be said about the future performance of the apparel export industry in
Bangladesh? What are the downside risks for apparel exports from Bangladesh?
Focusing on the most recent disaster, the debilitating floods of 1998 that shaved off
several percentage points from the expected GDP growth this year, we have ignored
another major crisis the industry seems to have weathered very well. We refer to the
East Asian economic debacle of 1997-1998. The financial panic and the following
economic meltdown that afflicted scores of dynamic economies neighboring
Bangladesh - Malaysia, Indonesia, Thailand, Philippine and South Korea- certainly
have been a restraining element in the economic performance of this sector.
What are the links between the East Asian economies and garment exports from
Bangladesh? There are several avenues by which negative economic shocks from
these emerging economies have impacted Bangladesh. First, several of these nations
are also big apparel exporters to the same markets where Bangladesh sells its
apparels. The steep depreciation in their currency has made them more competitive,
especially in the quota-free apparel markets. Even in the markets protected by
quotas, this would be a deflationary force pulling down the unit prices and the profit
margins for Bangladesh exporters. Second, using the time-tested formula, most of
these economies are trying to export themselves out of their severe recessions. This
has greatly increased competition for Bangladesh exports. Third, to assist them in
their time of need, the U.S. and other developed nations have already relaxed quota
restrictions on exports from the worst affected economies, making the playing field
less level for Bangladeshi exporters. Fourth, prior to this crisis some of these nations
were potentially big investors in Bangladesh in the textile and infrastructure projects.
Their economic troubles have meant a dramatic scaling back in their direct
investments in Bangladesh.
On the plus side, the return of expatriate workers from this region has swelled the
urban labor force from which garment factories recruit their workers. Next, if some
of these economies weaken, causing an economic or political collapse, their ability to
compete in the global markets would be impaired. This could mean new
opportunities for their competitors in the short run. Finally, Bangladesh has tried to
leverage the crises by demanding from the U.S. equal quota concessions, pointing out
that it has been very successful in reducing the child worker problem in the apparel
manufacturing sector. The lobbying for a thirty percent (same as given to others for
relief) increase in quotas has yet to bear fruit, but the prospects look good.
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In our view, the biggest threat to apparel exports in Bangladesh comes from the
financial sector. Although we do not anticipate a financial panic similar to the Asian
crises as the foreign investment (hot money) and short-term borrowing has been
rather limited in Bangladesh, the common element is that of a weak banking sector
with very little transparency and accountability. Elements of crony capitalism and
moral hazard are certainly present in Bangladesh, especially in the nationalized
banking sector and in credit markets.
According to the World Bank-Asian
Development Bank report, the financial sector in Bangladesh remains fragile with 33
percent of the portfolios of the Nationalized Commercial Banks (NCBs) and domestic
private banks in the non-performing category. Notwithstanding the fifty billion taka
of taxpayers money, that was used to re-capitalize the NCBs in the early 1990s, the
system-wide capital inadequacy today is estimated to be taka 133 billion. This
situation could cause the entire banking system to collapse as a result of an external
shock or even a domestic event such as a run on a major bank. One important lesson
from the East Asian crisis is that moral hazard and the resulting financial panic can
be deadly for any economy, even one whose fundamentals are otherwise sound.
Without fundamental reforms in the banking sector and the financial sector, the
economy of Bangladesh remains susceptible to a financial panic where a speculative
price bubble crashing in the real estate sector or elsewhere could start a systemic
self-fulfilling type of panic. Such a collapse would seriously impact apparel exports,
which are critically dependent on the workings of a healthy banking system for the
institutional set up for exports and for short-term financing.
Other potential hazards include an overvaluation of the taka compared to the
currency of its competitors. Despite the repeated devaluation in the recent past,
according to the World Bank the taka remains overvalued in real terms. This could
undermine the long term competitiveness of the industry. Finally, in 2004, under
the Uruguay Round Agreement on Textiles and Clothing, the MFA quotas would be
phased out. Bangladesh would lose its preferential access to its most important
markets and would have to compete with India, China and other apparel exporters in
a truly global competitive environment. Many apparel entrepreneurs in Bangladesh
are not ready for this change although the industry as a whole probably would hold
its own in the post MFA world.
Finally, we would like to emphasize that the biggest source of potential problems for
apparel exports are likely to be home grown, not external. First, the politicians could
seriously damage this sector by creating instability and attempting to achieve their
goals by violent means in the streets instead of the parliament. Second, the bankers
and the bureaucrats and the politicians in power remain a source of threat. In their
attempt to further extract rent from this sector, they could undermine the dynamic
entrepreneurship that has characterized this industry. Third, the law enforcement
agencies, by allowing the mastans and toll collectors to create a climate of terror, may
debilitate commerce and production in the economy. Labor disturbances and
frequent disruptions in the Chittagong port remain a source of concern to the apparel
exporters. The practice of monthly meetings with union leaders and factory owners
initiated by BGMEA is a step in the right direction. Garment workers remain one of
the hardest working segments of the labor force in Bangladesh, and their working
conditions and benefits must improve as the industry matures. In the long-run, this
would be the best defense against union aggitation. Investing in worker training and
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in improved working conditions would certainly enhance productivity. The apparel

factory owners must be proactive instead of being reactive on this important issue.
According to a recent World Bank publication, exports and job-oriented
manufacturing must hold the key to national development over the next quarter
century. To make this possible, the limited but important industrial success achieved
so far, mainly in an export enclave environment, needs to be replicated throughout
the economy.
The document goes on to suggest that the maximum gains in
industrial production are not expected from the traditional sectors like jute, but from
the labor-intensive export-oriented production that brings the benefits of global
integration to the nation. Another virtue of this sector is that it is largely driven by
private entrepreneurs who have in many ways become the models for entrepreneurs
in other industries of the economy.

A Statistics of Bangladeshi RMG Industry:

GARMENT EXPORT DATA:
QUANTITY & VALUE OF TOTAL APPAREL EXPORT

TOTAL APPAREL EXPORT IN MN.US$

TOTAL APPAREL EXPORT IN MN.DZ

WOVEN

KNIT

TOTAL

WOVEN

KNIT

TOTAL

1992-93

1240.48

204.54

1445.02

36.05

10.66

46.71

1993-94

1291.65

264.14

1555.79

34.35

10.81

45.16

1994-95

1835.09

393.26

2228.35

47.21

15.30

62.51

1995-96

1948.81

598.32

2547.13

48.82

23.18

72.00

1996-97

2237.95

763.30

3001.25

53.45

27.54

80.99

1997-98

2844.43

937.51

3781.94

65.59

32.60

98.19

1998-99

2984.96

1035.02

4019.98

64.79

36.66

101.45

1999-2000

3081.19

1268.22

4349.41

66.63

45.27

111.90

2000-2001

3364.32

1495.51

4859.83

71.48

52.54

124.02

2001-2002

3124.82

1458.93

4583.75

77.05

63.39

140.44

2002-2003

3258.27

1653.82

4912.09

82.83

69.18

152.01

2003-2004

3538.07

2148.02

5686.09

90.48

91.60

182.08

2004-2005
2005-2006 (JulyAugust)

3598.20

2819.47

6417.67

92.26

120.13

212.39

701.53

662.63

1364.16

18.46

28.81

47.27

YEAR

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MAIN APPAREL ITEMS EXPORTED FROM BANGLADESH

YEAR

SHIRTS

TROUSERS

JACKETS

T-SHIRT

SWEATER

1993-94

805.34

80.56

126.85

225.90

1994-95

791.20

101.23

146.83

232.24

1995-96

807.66

112.02

171.73

366.36

70.41

1996-97

759.57

230.98

309.21

391.21

196.60

1997-98

961.13

333.28

467.19

388.50

296.29

1998-99

1043.11

394.85

393.44

471.88

271.70

1999-2000

1021.17

484.06

439.77

563.58

325.07

2000-2001

1073.59

656.33

573.74

597.42

476.87

2001-2002

871.21

636.61

412.34

546.28

517.83

2002-2003

1019.87

643.66

464.51

642.62

578.37

2003-2004

1116.57

1334.85

364.77

1062.10

616.31

2004-2005

1053.34

1667.72

430.28

1349.71

893.12

2005-2006
(July-August)

199.96

304.22

117.14

199.90

299.94

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COMPARISON OF APPAREL EXPORTS TO MAJOR MARKETS

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WOVEN

KNIT

TOTAL

July - June
2003-04

July - June
2004-05

Export
%
incr./decr.

July - June
2003-04

July June
2004-05

Export
%
incr./decr.

July - June
2003-04

July June
2004-05

Export %
incr./decr.

Austria

4.909

3.267

-33.449

6.559

6.871

4.757

11.468

10.138

-11.597

Belgium

82.759

67.532

-18.399

106.456

132.839

24.783

189.215

200.371

5.896

Denmark

21.604

17.090

-20.894

48.951

60.621

23.840

70.555

77.711

10.142

Finland

8.088

9.062

12.043

13.299

12.798

-3.767

21.387

21.860

2.212

France

218.997

211.985

-3.202

292.711

373.285

27.527

511.708

585.270

14.376

Germany

686.028

620.548

-9.545

544.433

668.818

22.847

1230.461

1289.366

4.787

Greece

1.876

4.230

125.480

3.431

5.438

58.496

5.307

9.668

82.174

Italy

114.542

113.838

-0.615

136.222

184.929

35.756

250.764

298.767

19.143

Ireland

31.737

26.679

-15.937

22.262

31.292

40.562

53.999

57.971

7.356

Netherlands

146.179

117.494

-19.623

121.516

142.664

17.403

267.695

260.158

-2.816

Portugal

2.720

2.878

5.809

2.974

6.482

117.956

5.694

9.360

64.384

Spain

106.282

99.579

-6.307

136.125

208.220

52.962

242.407

307.799

26.976

Sweden

63.126

49.964

-20.850

55.917

62.408

11.608

119.043

112.372

-5.604

U.K.
Other EU
countries

382.370

357.881

-6.405

289.717

330.081

13.932

672.087

687.962

2.362

6.327

5.531

-12.581

6.310

11.349

79.857

12.637

16.880

33.576

Total EU

1877.544

1707.558

-9.054

1786.883

2238.095

25.251

3664.427

3945.653

7.674

% of EU

53.067

47.456

83.187

79.380

64.445

61.481

Canada
% of
Canada

185.737

189.195

70.663

118.746

256.400

307.941

5.250

5.258

3.290

4.212

4.509

4.798

USA

1391.795

1623.407

236.793

402.684

1628.588

2026.091

% of USA

39.338

45.117

11.024

14.282

28.642

31.570

Japan

15.997

12.567

3.789

3.735

19.786

16.302

% of Japan

0.452

0.349

0.176

0.132

0.348

0.254

Australia
% of
Australia

2.467

3.272

1.272

4.027

3.739

7.299

0.070

0.091

0.059

0.143

0.066

0.114

64.526

62.206

48.622

52.185

113.148

114.391

1.824

1.729

2.264

1.851

1.990

1.782

3538.066

3598.205

2148.022

2819.472

5686.088

6417.677

EU
Countries

Other
Countries
% of Other
Countries
GRAND
TOTAL

1.862

16.641

-21.442

32.631

-3.595

1.700

68.046

70.057

-1.425

216.588

7.328

31.259

20.102

24.408

-17.608

95.213

1.099

12.866

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% OF RMG'S TO TOTAL EXPORT

GROWTH OF MEMBERS OF BGMEA

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Ready-made garments industry - Challenge of access and competition:

Bangladesh is the fifth largest garment exporter to the European Union and among
the top ten apparel suppliers to the US.
In the past two decades Bangladesh has emerged as a very successful manufacturer
and exporter of quality ready made garments (RMG). Thanks to its competitive
prices and access to US market with quota facilities, the volume of garment exports
has been growing spectacularly, from one million US dollar in 1970, $31.57m in 1983
to $4,35bn in 2000 and $4.91bn in 2002-03.
RMG accounts for more than 75% of Bangladeshi export earnings. Among some 24
major apparel exporting countries, none has grown faster than Bangladesh since
1980s; and since 1990, no other major Asian exporter of clothing has achieved higher
growth rates.
Bangladesh is the fifth largest garment exporter to the European Union and among
the top ten apparel suppliers to the US. European Union (EU) countries were the
major importers of ready made garments in 2002-03 worth $2.76bn, followed by the
US $1.87bn, Canada $1.45bn, Japan $15.28m and Australia $2.76m.
Some 90 countries import apparels from Bangladesh: the US is the single largest
importer followed by EU countries. Bangladesh is trying to expand its market in
countries like Australia, Canada, Japan, Norway, New Zealand etc., which allow duty
free imports.
However, a total phasing out of the Multi-Fibre Arrangement (MFA) from 1 January,
2005, which is designed to facilitate fire trade in textiles and clothing, will throw a
formidable challenge to the least developed countries (LDCs). Preferential market
access to the US market is vital for the access to the US market is vital for the survival
of the industry. According to many international studies Bangladesh's RMG exports
would decline.
The sensitivity of RMG exports to external factors became obvious after 11
September, 2001. Export to the US suffered a major setback following the terrorist
attacks on the world trade centre, leading to global recession and phasing out of
quota facilities there. It declined by 2.34% in 2003 and by 13.04% in the first five
months of 2004.
Responding to the fears and concerns of Bangladesh Garments Manufacturers and
Exporters Association (BGMEA), and Exporters Association (BGMEA), the
government is preparing a guideline for a fund to protect the country's textile and
garments industries after the phase-out MEA next year. BGMEA represents over
3,600 apparel manufacturing companies. Its primary function is to protect the
interest of the sector and promote trade negotiations in the international market,
global trade bodies like the World Trade Organization (WTO), concerned UN
agencies like International Labor Organization (ILO), and the United Nations
Conference on Trade and Development (UNCTAD) etc. The importance of the RMG
sector cannot be overemphasized as it is 'the engine of growth' for Bangladesh in so
many ways, including development of society as a hile. A huge local consumer market
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has emerged as a result of increase in the buying capacity of the RMG work force.
Others to benefit from the ever expanding garment sector are banking, insurance,
packaging, transport and allied industries.
For long the BGMEA had been pressing the government to set up a central bonded
warehouse so that the exporters could meet the demands of the international buyers
who had reduced the shipment of goods from 120 to 30-35 days. This issue and
related matters have become even more urgent as the end of preferential market
access poses a threat to the garments industry. BGMEA leaders are concerned about
the nearly two million women workers who would be worse affected by the garments
industry in ruins.
To protect the industry, BGMEA wants the government to take a number of
important measures in this regard. These include: setting up a central bonded
warehouse; establishing linkage industries with priority on dyeing, printing and
finishing factories; providing loans with low interest rate to set up backward linkage
industries; and doing everything to achieve global cumulating to boost export. There
is also the suggestion to extend tax holiday for RMG exports to the year 2008 and
withdraw some restrictions on the tax waiver.
Though exporters fear that Bangladesh would lose the market because of sharper
global competition, 'the full effect of the MFA phase-out can't be predicted with
certainty', as an official of the commerce ministry pointed out. Since 'the RMG sector
needs to develop strategies to deal with the changing market place after 2004', the
ministry has undertaken a one-year study project to assess the global market
Bangladeshi garments products in the post MFA period. Most of the least developed
countries have duty and quota free access to the US market; Vietnam, Laos and
Cambodia are negotiating with the US government to get the status. Recently, US
Congress tabled a bill offering duty and quota free access to 18 Muslim countries
including Bangladesh. Therefore, the BGMEA has called upon the government to
make necessary diplomatic efforts to earn duty and quota free status to the US and
the non-EU countries in Europe.
Once quota is phased out from 2005 competition will be stiff; only the most efficient
companies and countries will be able to continue supply to the EU and US markets
after 2004. As it is, international buyers want quick and efficient delivery.
It Bangladesh fails to develop backward linkage industries to face the challenge,
thousands of garment workers, mostly women (they constitute 80% of the work force
in the sector), will face the pinch of post-MFA regime. The government and the
industry need to join forces to pursue the preferential market access issue with the
US government. Some countries are striving to get access, and Bangladesh
government has strong reasons to pursue the case 'quickly and aggressively'.
Growth of RMG Industry and MFA Implications:
In spite of its recent origin, the garment industry has made an unparalleled impact
on the socio-economic conditions in Bangladesh. The history of the garment industry
dates back to 1977 when the first consignment was exported to then West Germany
by Jewel Garments. The number of units, however, remained a meager 46 until the
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end of 1983. From a humble beginning the sector has thus made phenomenal growth
over the last two decades, the number of units growing to around 3500. The RMG
industry achievement is noteworthy, particularly for a country plagued with poor
resource endowments and adverse conditions for industrialization. Exports increased
from approximately 32 million US dollars in 1983/84 to 1.4 billion dollars in
1992/93. In 1987/88, the RMG export share surpassed that of raw jute and allied
products. The figure further rose to 5.7 billion dollars in 2003/04, representing a
contribution of about 75 percent of the countrys total export earnings in that year4.
The employment generated by the sector is estimated to be around 1.5 million
workers.
Several factors account for the outstanding success of the RMG industry in
Bangladesh.
The countrys industrialization after independence in 1971 followed the same path,
from state-led to privatization, as that of the majority of the developing countries.
The state sector, which controlled 92 percent of the modern industrial fixed assets in
1972 as a result of the nationalization policy, had suffered from a chronic loss due to
various internal and external constraints (Sobhan and Ahmad 1980). The main
causes of the poor performance were mismanagement, obsolescent machinery, lack
of material and foreign exchange, political instability, manipulations of labor unions
by political parties and worsening terms of trade for the countrys primary export
product, jute.
Successive governments from the mid-1970s gradually shifted their policy stance
with more emphasis on private initiatives. The policies thereafter implemented
included things such as opening up sectors which were previously reserved for the
state sector, including banking and insurance sectors, divestiture of state enterprises,
beginning with smaller ones, and establishment of export processing zones, ensuring
access for private enterprises to credit and foreign exchange facilities. In addition,
the industrial policy of 1982 stipulated the return of the nationalized jute and textile
mills to their former Bangladeshi owners. The revised industrial policy of 1986
further provided for equity shares of public corporations and enterprises to be
floated for public subscription up to a limit of 49 percent.
Export promotion was one of the top priorities of these policy initiatives. Alongside
liberal policies offered for foreign direct investment, including allowing 100 percent
equity share ownership, export oriented units have been offered with lucrative
incentives such as tax holidays, bonded warehouse facilities and a duty drawback
system. Thus by the early 1980's the policy environment became quite favorable for
export industries, whether of domestic or foreign origin.
Nevertheless, the congenial policy environment would have remained unexploited
without external actors ready to make use of it. As in many other countries and
industries, foreign multinational companies played a catalyst role in promoting this
particular industry in Bangladesh. They brought initial technology and other knowhow with respect to the modern production of garments meeting international
requirements. Simultaneously, through controlling product development and
marketing operations, they have successfully linked Bangladesh as a competitive
production base to the international market. They further contributed to diffusing
technology and know-how to local firms by generating spin-offs.
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Behind the advent of foreign capital lies the economic restructuring that occurred in
the foreign companies respective countries. The relocation of production bases
necessitated by rising production costs in their home countries as well as in the
countries to which they had already shifted was not limited to the developed
countries alone. Newly industrializing countries, like the NIEs and ASEAN countries,
which used to be the recipients of foreign investment, became part of globalization as
sources of direct investment.
The case of Desh Garments, one of the pioneer garment companies in Bangladesh,
clearly illustrates the role played by foreign capital in the establishment and the
operation of mills. Desh Garments was established by an ex-civil servant with
technical collaboration with Daewoo, a leading Korean business group. Daewoo
mainly took responsibility for procurement of raw materials and marketing of the
companys products in the international market and for training of managers and
workers. When Deshs operations proved successful, a large number of local
entrepreneurs entered the sector with foreign buyers retaining major control in the
marketing operations of the local mills. In other words, Bangladesh was incorporated
into the lowest tier of the international subcontracting system.
Prior to its collaboration with Desh Garments, Daewoos involvement in Bangladesh
was limited to trading. Besides the rising cost of labor and a labor shortage in Korea,
the main reason for Daewoo to invest in the RMG sector in Bangladesh was the
import restrictions against some of its garment products in the US and other OECD
markets under the MFA regime (Rhee 1990: 336).
Since its inception in 1974, MFA was extended several times with widening coverage.
The history of trade control in the textile sector can be traced back to the 1950s. The
US, which had been an exporter of textile articles, had become a net importer by that
time. The increased penetration of imported products, particularly Japanese textiles,
into the US market prompted the US government, under pressure from the textile
lobby, to take a protectionist attitude against free trade in textiles. The US raised the
issue at the General Agreement on Tariffs and Trade (GATT) in 1959 and
consequently a Short-Term Arrangement on cotton articles was signed in 1961. The
arrangement became the Long-Term Arrangement in 1962. In 1973 this was then
extended into the MFA, which was enlarged to cover all kinds of textile and clothing
articles. Restrictions on exports in general took the form of bilateral quotas
negotiated within the MFA framework.
There have been two contrasting views regarding the effect of MFA on the developing
countries. One has criticized increasing protectionism in major OECD markets as
neo-protectionism, whereas the other has taken note of the positive impacts of MFA
in promoting the textile and garment industry in developing countries. In reality, the
actual effects of MFA differed from country to country because of the varying
economic conditions and experiences in global trade. The implications of MFA
differed particularly between long-standing exporting countries and new exporters of
textile and clothing5. For new entrants such as Bangladesh, MFA proved a blessing
since it induced industrial re-location from more advanced economies to Bangladesh.
It can be said that Bangladesh as a garment exporter was created by the MFA
regime6.

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The sudden surge of Bangladesh garments in the OECD markets led in 1985 to a
fresh imposition of quotas by some countries like the UK, France, the US and
Canada. Later the UK and France lifted restrictions and subsequently only the US
and Canada were implementing quotas for Bangladesh RMG exports. The US
restrictions affected Bangladeshs RMG sector significantly because the export
growth at that time was mainly owing to the US market. Implementation of quotas
caused a decline in absolute terms for most items in the first months of 1986.
However after a transition period, in 1987 the level of growth increased again, mainly
due to diversification into non-quota items (Wiig 1990: 154-159).
One of the successful areas of product diversification was knit-RMG, which was
outside the purview of MFA. Figure 1 shows that there have been two clearly
discernible phases in the growth dynamics of the RMG sector: in the initial period it
was the woven-RMG sector that dominated the structure of RMG exports, while in
recent yeas it has been the knit-RMG sector which has demonstrated the more robust
growth. The growth of knit-RMG was spurred by a growing demand in the EU
market and was also stimulated by domestic incentives in the form of cash
compensation and duty drawbacks (Battacharya and Rahman 2001:4). In addition,
industry-related technical and economic factors promoted the development of the
knit-RMG industry7.
Despite the high growth rate of RMG exports, 27 percent per year over the period
between 1983/84 and 2003/04, the elimination of MFA was considered to have
adverse impacts on Bangladesh RMG industry in the coming years. The post-MFA
trade environment would pose a dual challenge to Bangladesh: accessing raw
materials at competitive prices and competing with hitherto restricted countries in a
quota-free context (Battacharya and Rahman 2001:12). The major cause of concern
lies in Bangladeshs competitive strength with respect to the limited backward
linkages, particularly still heavy dependence on imported fabrics, lower labour
productivity, infrastructural constraints such as undeveloped port facilities,
corruption and administrative red-tape. All these negative elements were considered
to have imposed tremendous constraints on Bangladesh.
Figure 1.Trend of garment exports

Dollar Source: Bangladesh Economic Review, Ministory of Finance, various issues..

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Statement of Objectives
Ready Made Garment Industry is 100% export oriented as well as the single largest
foreign currency earning sector of Bangladeshi economy. Its tremendous growth in
the last twenty five years has break down all previous records as well as a milestone
for many developing economy also.
But it is a matter of great sorrow that, this sector has been captured by tri
dimensional problems. Global free market economy, global competition, withdrawals
of MFA & quota facilities, political instability, lack of policy support, inadequate
financial & infrastructural support, recent labor unrest in RMG sector and many
more are the problems for the garment owner in Bangladesh. Mismanagement,
inadequate wages, long working hours, lack of many basic needs, exploiting
mentality of the owners are the problems for the garment worker in Bangladesh.
Bureaucratic jam, political instability, lack of proper & quick government decision,
and lack of many types of government support are the main problems for foreign
buyers and investors.
It need not discuss again that, after passing twenty five years of tremendous success
& outstanding growth, this sector have emerged as a too much prospective sector in
our economy. We have economy as well as skilled manpower, experience expertise
and a large market among more than 50 countries including the USA, Canada,
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Netherlands, Portugal, Spain, Sweden, & UK.
To lead the world of Ready Made Garments we shall have to be most competitive,
more conscious and uncompromising about the quality of the product. To enjoy
continuous access in the new markets like Middle East countries, Japan such others
we shall have to remove the barriers from this sector. At the same time we will have
to ensure proper utilization of the prospects.
To do this tremendous work accurately, we will have to study this sector several
times from different perspective. Only owners dominating or trade unions
bargaining or buyers low cost work should not be the expectations. So, scholarly
research has no alternative to identify the problems & ways of solutions of RMG
industries in Bangladesh. At the same time research can help a lot to acquire as well
as utilization of opportunities that we have.
In fine I would like to state that, objective of this study is to identify various problems
of RMG sector from owners, workers, & buyers perspective and way of solution. At
the same time this research will allocate opportunities of Bangladeshi RMG
industries for better utilization. This paper will also describe future prospects of this
industry.

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Methodology
A. Research Design:
In this study I have tried at my best to find out the overall problems & way of
solutions of these problem at the same time future prospects of Bangladeshi RMG
sector & ways of utilizing the advantages from every aspects.
I would like to say it is a conclusive research by following both the methods of doing
research i.e. through conducting a survey by questionnaire (Open-ended & closeended questionnaire) as well as small-sample based narrative studies such as the
World Bank, the World Health Organization (WHO) do.
I interviewed 25 women, 15 male workers 5 owners & 5 buyers in the RMG industry.
The small number is also significant considering the facts that the interviews are indepth narrative of the 50 related persons.
Cannon E.T.A (1988) state that the qualitative research frequently involves: i. Face to face contact between researcher & subject.
ii.
Open-ended rather than close ended questions.
iii.
Unstructured rather than structured interview schedule.
iv. Small samples. It is much more useful if the small samples
under study are relatively homogenous, since extreme diversity
make the task identifying common patterns almost impossible.
There are other studies (Asia specific press: Australian National University 2001)
Problems surrounding wages: the ready made garment sector in Bangladesh, they
used only 35 women workers as sample.
Other studies (Kabeer 1991, Kibria 1995; World Bank 2000; and Markovic &
Manderson 2000) based on narratives of women only and these studies consist of 34
52 interviewees.
I justify my methodology as in-depth interviews were conducted to explore their
settlement experiences, as I believed this to be the methods which would best capture
the integrity and complexity of their lives and hence I can reach into my destination.
The workers samples were taken from three different locations, Dhaka, Savar and
Chittagong (Table 9). These three places are where most RMG factories are
concentrated. Another area, Narayanganj, where knitwear factories are clustered,
was initially marked for collection of samples but was later dropped because
knitwear factories were found to be better-off than woven-garment factories. Thus
the majority of samples are of workers at woven-garment factories (Table 10). Since
there are differences in terms of size and management between factories located in,
and outside of, Export Processing Zones (EPZ), workers who work or worked in both
types of factory were covered (Table 11).

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Table 9. Female sample by residence

Table 10.Type of factory

Moreover, although it would have been desirable to make a balanced gender analysis
of the impacts by taking both male and female samples, given time and financial
limitations, only female samples were taken. Also, preliminary information provided
by the fieldworkers indicated that most retrenched workers were women.
Table 11. Location of workplace

Data collection was conducted between November and December 2005 by four NUK
field workers, one male and three female, on the basis of separate structured
questionnaires. Table 12 shows that a large number of interviews were conducted in
workers residences. For retrenched workers, the next most frequent place of
interview was at factory gates, where they had gathered looking for work, but for
current workers it was the womens hostels run by NUK.
Table 12. Place of Interview

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Table 13 shows the distribution of the sample by employment size of factory. Since
the information on the number of workers employed in the factories where they now
work and where they last worked was taken from the workers, it may not be precisely
accurate. Nevertheless it indicates generally that the currently employed workers
tend to work in larger factories than the retrenched workers. The smallest factory in
the case of the retrenched workers sample employs 100 workers whereas the figure is
470 for the current workers. The largest concentration is in the range between 1000
to 2000 workers in both samples.

Table 13. Distribution of sample by employment size of factory

B. Profile of workers
(1) Age
The largest number of both current and retrenched workers is in the age cohort 20 to
24 years old (Table 14), but the age distribution of retrenched workers is skewed
towards the lower ages. The average age of current and retrenched workers is 24.1
and 21.6 years old, respectively. It should be noted that there are 9 child workers who
are less than 15 years old among the retrenched workers. This indicates that although
hiring child labor has been strongly discouraged under international pressure as well
as by the joint initiatives of Bangladesh Garment Exporters and Manufacturers
Association (BGMEA), the apex organization of the garment (mostly woven)
industry, UNICEF, ILO and some NGOs, there are still a sizable number of child
workers. These workers may have concealed their real ages at the time of hiring.
However it indicates the insecurity of their job status.
Table 14. Age distribution

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(2) Education
The educational level of the retrenched workers sample is on the whole lower than
that of the current workers sample. The largest number of retrenched workers (42
persons) studied only at the primary level while the largest number of current
workers studied at the lower secondary level (class 6 to 9) (Table 15). However the
difference is not very significant. It is notable that there are substantial numbers of
retrenched workers with secondary level education.
Table 15. Educational status

(3) Marital status

In terms of marital status, both samples show similar characteristics (Table 16).
Around half of the workers are married with a slightly higher share of married
women among the retrenched workers. The average age of marriage of current and
retrenched workers is 18.9 years and 18.1 yeas old, respectively.
Although the sample size is too small to make any judgment, it should be noted that
there are a greater number of current workers who are separated from their
husbands. Separation, or abandonment by one of the spouses, is more often observed
than legal divorce in the Bangladesh context. As has been mentioned, the RMG
industry offers an important means of earning a living for women with no financial
support from a man. Our data may indicate that separated women cannot afford to
be unemployed. Since the period of being unemployed was not very long at the time
of our survey, further research is needed to analyze the longer-term effect of
retrenchment on the marital status of workers.
Table 16. Marital status

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(4) Migratory status

Almost all the sample workers are of rural origin except two of the current workers
and four of the retrenched workers. They come from various districts, but it is
noteworthy that the Barishal district provided the highest number of workers in both
samples (16 of the current workers and 26 of the retrenched workers). Other major
districts of origin are Pirojpur, Mymensingh, Narsingdi, Commilla, Faridpur and
Jamalpur. This is in conformity with the general migration trend in Bangladesh
(Afsar 2000).
Table 17. Time of migration

Table 17 shows when the migrant workers moved to Dhaka. Those who have resided
more than ten years in cities constitute only one tenth of the total sample. As for the
retrenched workers, the highest number migrated between one and three years ago.
The reason for migration is predominantly to seek work (78 percent of current
workers and 87 percent of retrenched workers); family-induced migration is limited
to 10 and 3 percent, respectively.
C. Work experience
(1) Designation of workers
Table 18. Position of workers

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Table 18 shows the distribution of workers by position. For the retrenched workers,
the last position held is presented. Nearly 70 percent in both samples are sewing
operators. The helper share is much higher among the retrenched workers.
In terms of employment status, 92 percent of the current workers are regular
workers and the remaining 8 percent are on probation. On the other hand, 78
percent of the retrenched workers were regular workers and 22 percent were on
probation in the last factory where they worked. There are no contract workers in the
sample16.
(2) Work history
Only four current workers and six retrenched workers had wage work experience
other than that in the RMG industry, all of them as domestic servants. The rest had
previously either been students or had been helping with household chores at home.
Of the ten ex-domestic servants, nine gave better income prospects as the reason for
changing to the RMG industry and one cited better physical environment as the
reason.
Table 19. Year of first factory employment

Table 19 shows that the majority of both current and retrenched workers entered
their first RMG factory after 2000. The share is higher among the retrenched
workers. It can be said that there are more inexperienced workers in the retrenched
workers sample than in the other.
The relatively high turnover of garment workers is generally attributed to various
reasons. Some of the economic reasons are poor promotion prospects (especially
from helper to operator) and the attraction of higher wages and better facilities in
other factories, Family related reasons include such things as marriage, childbirth,
and sickness of family members. On average, the current and retrenched workers
had worked at 2.3 and 2.4 factories, respectively. Thirty-five percent of current
workers had experienced promotion, in 30 cases promotion being from helper to
either operator or quality controller. Some 73 percent of current workers believe that
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their work experience and desire to become a supervisor will lead to promotion in the
future. Although openings for promotion to supervisory positions are in fact limited,
it can be said that becoming a supervisor is perceived by many workers to be an
attainable goal.
(3) Work conditions
Regular working hours for 80 percent of current workers and 95 percent of
retrenched workers are, or were, from 8 in the morning to 5 in the evening. Overtime
work was said to be normal, except for 15 current workers and one retrenched
worker. Average overtime per day is 2.7 hours for the current worker group and was
3.9 hours for retrenched workers at the last factory where they worked. Of the
retrenched workers, the largest number, 36 persons, did 5 hours overtime regularly.
Of the current workers, 31 said they regularly worked 2 hours overtime. The long
overtime could be the reason why many retrenched workers left their job.
The harder working conditions the retrenched workers experienced are reflected also
in the lack of paid weekly holidays. Whereas 81 percent of the current workers enjoy
paid weekly holidays, only 43 percent of the retrenched workers had that benefit.
Although most of the workers have Eid holiday with pay, other paid holidays are
extremely limited, except for sick leave, general leave and maternity leave. And these
were mentioned only by current workers, none of the retrenched workers citing the
availability of such leaves.
(4) Wage structure
Payment system is summarized in Table 20. Although fixed salary plus overtime is
the dominant payment type for both samples, it is clear that more retrenched
workers than current workers received fixed salary without overtime. Given the fact
that the retrenched workers did longer overtime, the exploitative nature of this mode
of payment is obvious. However, if we look at average monthly wages including
overtime for both samples, we see that the wages of retrenched workers (the amount
they received at the last factory where they worked) are higher than those of current
workers, i.e., Tk.2483 in the case of the former and Tk.2073 in the case of the latter.
For both categories, operator and helper, the average wages are higher for the
retrenched workers. This should be investigated with a more through survey. The
average monthly wages are presented in Table 21.
Table 20. System of payment

Table 21. Average monthly wages including overtime (Taka)

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Gender Differences in Conditions of Employment and the Work Environment

Conditions of Employment
This section looks at the validity of the assumption that the terms and conditions of
employment in the export-oriented garment industry are gender differentiated.
Earnings
Based on data from surveys of 1990 and 1993, a female garment worker earns only
58 percent of a male workers earnings; in non-export industries, females earn 60
percent of male earnings. The survey data show that female workers employed in
DEPZ and non-DEPZ factories earn, respectively, 65 and 55 percent of male
earnings.
The surveys reveal gender differences in earnings in every job category in the
garment industry. The male-female earnings gap is highest for quality controllers
and lowest for folders. The gender gap in earnings widened over time. A female
worker could earn about 66 percent of an average male workers earnings in 1990,
and about 59 percent in 1997. The gender gap widened even in the female-dominated
job of operator. A female operator could earn more than 86 percent of a male
operators earnings in 1990, but only 68 percent in 1997. The gender gap in earnings
occurs mainly because males are increasingly employed in the skilled jobs. When a
garment job becomes technologically skilled and more remunerative, female workers
are ousted from that job and concentrated more and more in low-skilled jobs.
Because they are employed in technologically skilled jobs, mens earnings rise at
much faster rates than womens do.
Over the period 1990-97 the nominal rate of increase in female workers pay was
estimated at only 5 percent. Over the same period an average male workers pay
increased by about eight percent. The rate of increase for males and females was
almost at par at the lower-level jobs, but mens pay increased at a much higher rate
for higher-level jobs like supervisor and quality controller. Employers often justify
gender difference in earnings by saying that female workers get lower income than
male workers because they are less efficient than male workers.
Female workers are younger, less educated and less experienced than male workers,
but the gender gap in the wage rate persists even after controlling for all these
factors. For example, the most distinguishing factor affecting the wage rate turns out
to be workers education. The wage rate rises steadily with level of education.
However, the survey of 1997 indicates that female workers with comparable
education receive lower wages than their male counterparts, although the malefemale wage gap narrows as level of education rises.
Employers justify the male-female difference in wage rates by saying that male and
female workers hold different jobs. Documented evidence on occupational structure
in the garment industry shows that women are employed mostly in unskilled and
temporary occupations, where wages are low. Moreover, these jobs offer slim
prospects for occupational mobility. The sewing and finishing sections are overMd. Joynal Abdin
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represented by women, whereas the cutting section, which has the highest monthly
pay, is highly under-represented by women. Moreover, there is further sex
segregation within the sewing and finishing sections. The surveys of 1990 and 1997
show that within the sewing section, the job of supervisor is highly remunerative and
in the finishing section, the job of quality controller is highly remunerative. Women
are highly under-represented in these managerial jobs, although they are overrepresented in these sections.
Women earn less than men do even when they hold the same job. Even in the
operator and helper category jobs, which are dominated by female workers, they earn
less than their male counterparts. The gender gap in earnings persists even after
controlling for skill. The survey of 1997 shows that a female operator in the woven
wears factories earns 74 percent of a male operators earnings; in the knitwear
factories, where operators use improved technology, a female operator earns only 69
percent of her male counterparts earnings.
Bivariate analysis indicates that no single factor explains the difference between
mens and womens monthly earnings. However, bivariate analysis often fails to
capture the total influence. Hence, a rigorous analysis is necessary to measure the
gender differential in the wage rate. The regression analysis in Paul-Majumder and
Zohir (1993) shows that female workers earn significantly less than their male
counterparts having the same education and experience. Controlling for the latter
variables, a worker employed in the garment industry receives 41 percent higher pay
for being male (Paul-Majumder and Zohir 1993). The study shows that workers in
nonexport industries, such as textiles, receive 24 percent higher pay for being male.
In addition, the survey of 1990 shows that wages are below the legal minimum wage
for 42 percent of the female workers compared with about 17 percent of the male
workers. By 1997, 32 percent female workers and only 6 percent of male workers
received wages below the legal minimum for the helper category of workers. Among
the female workers, the helper category is the most deprived as far as the minimum
wage. Findings show that 73 percent of female helper category workers do not receive
the minimum wage compared with 15 percent of their male counterparts. Among the
operator category workers, 33 percent of females and only about seven percent of
males do not receive the minimum wage.
Other Conditions
In addition to earnings, several other factors affect the conditions of employment,
including the mode of recruitment, work hours, leave facilities, prospects for
promotion, and training facilities. Although the garment industry belongs to the
formal sector, the recruitment procedure is largely informal because seasonal
demand requires a labor market with high flexibility so that labor can be easily found
when needed and easily disposed off when not required. Thus, employers ho do not
want to be subject to labor laws requiring that they pay retrenchment benefits to
workers, like to recruit workers through informal mechanisms. The survey of 1990
shows that more than 75 percent of female workers and 57 percent of male workers
were recruited through neighbors, friends, or relatives working in the garment
industry. Garment jobs are never advertised in the newspaper. According to the
survey of 1993, about 19 percent of male and about 24 percent of female workers in
non-export industries are recruited through advertisements in the newspaper.
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In the export industries, work hour is long in order to meet foreign demand on time.
Female and male garment workers work about 12 hours a day. The survey of 1997
shows that in the garment factories located in the DEPZ, where labor laws are strictly
followed due to constant monitoring, an average worker works about 10 hours daily.
In non-export industries the average worker works a little more than eight hours a
day.
The absence of leave facilities is another important factor that makes the terms and
conditions of garment employment very stringent. Both male and female garment
workers have to work on weekly holidays. Although they were paid for overtime work
on weekly holidays, no alternate holidays are given. By contrast, workers in other
export and non-export industries, enjoy almost all weekly holidays.
There is a big gender difference regarding the granting of paid leave. Only about 35
percent of female workers who asked for leave were granted paid leave, compared
with about 60 percent for the male workers (Paul-Majumder and Begum 1999 longer version of this paper). There is no provision of medical leave, although the
Factory Act of 1965 provides for it. Of the 32 factories surveyed in 1990, 13 claimed
that maternity leave was given to the workers during the last year. Of these, only
three factories, gave leave with pay and none of the factories gave 12 weeks as
provided by the Maternity Benefit Act of 1950.
Prospects for promotion in the garment industry are slim. In most cases garment
workers remain in the same job throughout their working life. Among female
workers generally, helper category workers get promoted to the post of operator, but
few female operators are promoted to the higher category jobs of supervisor or
production manager. However, the findings show that prospects for promotion are
better in the garment industry than in either non-export industries or other export
industries. In addition, gender difference in promotion granting is lower in the
garment industry than that in non-export and other export industries. As far as
income increments, most of the workers working for more than one year in the same
garment factory receive at least one increment in their income.
The export-oriented garment industry is characterized by high inter-factory mobility.
About 48 percent of female workers and 42 percent of male workers have changed
their jobs at least once (Zohir and Paul-Majumder 1996). In non-export industries
only 17 percent of female workers and 26 percent of male workers have changed their
jobs at least once (survey of 1993). By changing jobs, female workers can increase
their income by about 15 percent. On-the-job training is the only training facility in
the export-oriented garment industry. In 1995, the Bangladesh Garment
Manufacturers and Exporters Association undertook a training program sponsored
by UNDP/ILO. Only 20 percent of the trainees were females, although women make
up the majority of workers in the garment industry (Paul-Majumder and Begum
1997).
Work Environment
Export-oriented industry is supposed to maintain working conditions that are
comparable to international standard because the industry produces for the
international market. Therefore, export-oriented industrialization is supposed to
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have a positive impact on working conditions. However, in most cases, exportoriented industry is based on sub-standard working conditions.
Sub-standard working conditions in the garment industry affect men and women
differently because they hold different jobs. Women suffer the worst from adverse
working conditions because they hold low-skilled jobs where occupational hazards
are greater.
Most of the garment factory buildings are overcrowded, congested and poorly
ventilated. As a result garment workers are exposed to toxic substance and dust. Raw
materials contain dust and fiber particles that hang in the air. Dye, a toxic substance
emitted from colored cloth, spreads in the workroom. The workers, particularly the
operators and sewing helpers, who are mostly women, continuously inhale these
substances. Most factories do not have adequate ventilation and exhaust fans and few
workers use masks.
Another problem is that most garment factories do not have adequate fire prevention
measures. The survey of 1997 shows that in addition to other fire code violations,
most of the garment factories do not have fire exits or fire alarms. According to the
Bangladesh Fire Brigade, up to November 1997, 58 fire accidents took place in the
garment industry; 118 workers were killed, of which 90 percent were female workers.
The export-oriented garment industry has grossly violated the Factory Act of 1965
and the Factory Rules of 1979, which specify that every factory must have adequate
staff amenities. In all garment factories surveyed, except the ones in the DEPZ, staff
amenities are grossly insufficient. On average, there is only one latrine per 61 female
workers, compared with one for every 31 male workers. Male workers are not
required to seek permission for break because most of them are employed in the
cutting and finishing sections, where works are not assembly oriented. But female
workers, who are mostly employed in assembly oriented works, have to seek
permission for breaks, which the supervisors often deny.
Garment workers suffer from the absence of a lunchroom, lack of pure drinking
water, and lack of canteen facilities. However, in terms of cleanliness, working
conditions in the garment factories situated in the DEPZ and suburban areas are far
better than those in the factories situated in Dhaka and Narayangonj (PaulMajumder and Begum 1999 longer version of this paper).
Impact on Economic, Social and Health Status
Economic Status
In spite of discrimination and irregularity in wages and earning below the minimum
wage, female workers employed in the export-oriented garment industry contribute
about 46 percent of their family income. Survey of 1997 shows that about 23 percent
of the unmarried garment workers are the main earners of their family. Without
female workers earning, 80 percent of their families would slide below the poverty
level (Paul-Majumder and Zohir 1995).
The nutritional food intake of garment workers is much higher than that of the poor
people of Bangladesh. Paul-Majumder et al. (1996) find that only 29 percent of slum
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families have fish, meat or egg in their daily diet. The survey of 1997 shows that, 72
percent of female workers eat these quality foods in their lunch. However, although
the quality of female workers food intake has improved, it is not enough to meet
their requirements. Female workers suffer from chronic energy deficiency and
occupational hazards that adversely affect their health. Female garment workers can
spend some of their income on medical care, whereas 80 percent of poor women
cannot afford any treatment for illness (Paul-Majumder et al.1996).
Female garment workers spend about 13 percent of their income on clothing and
cosmetics. They save about six percent of their monthly income, whereas an average
male worker saves only four percent of their income. About nine percent of female
workers invest their savings in business, land, or housing.
Social Status
Womens employment in the export-oriented garment industry has affected selfesteem and self-confidence, conjugal life, matrimonial relationship, fertility, age at
marriage, sharing of domestic chores, and decision making (Paul-Majumder and
Zohir 1995). By contrast, garment work has very little influence on the social status of
male workers. However, garment workers suffer from social insecurity associated
with their employment. Female garment workers face an uncongenial work
environment, unsafe transportation, and housing. These factors do not affect male
workers.
Positive Social Changes
More than 90 percent of female garment workers have expressed that they have a
high opinion about themselves, compared with about 57 percent of female workers in
non-export industries (survey of 1993). About 37 percent of female workers in the
garment industry have undertaken employment against the wishes of their family
members (Paul-Majumder and Zohir 1996). Zohir and Paul-Majumder (1996), BUP
(1990), Naved et al. (1997), and Afsar (1995) document that working women delay
marriage. The survey of 1997 indicates that female workers, who got married before
joining garment work marry at about age 16, compared with female workers, who got
married after joining the garment work, who marry at age 20. Womens age at first
childbirth is also significantly affected by employment in the garment industry. It is
21 for garment workers who gave birth to their first child after joining garment work,
compared with age 17 for workers who gave birth to their first child before joining
garment work. Amin (1997) claims that garment sector create a period of transition
from childhood to adulthood, as contrasted with the abrupt assumption of roles at
very young ages that marriage and child bearing mandate. Women employed in nonexport industries do not experience this period of transition.
For centuries, socially and culturally, domestic chores were the sole responsibility of
women. The survey of 1997 indicates that about 52 percent married female workers
in the garment industry have husbands, who help them in domestic work. On
average husbands spend 1.9 hours daily in household work. Female workers in nonexport industries could not shift their household responsibilities to their husbands to
such a large extent. Female garment workers work about four hours more daily than
their counterparts in non-export industries, and husbands participation in
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household work increased with the increasing participation of women in the garment
industry2.
Negative Social Changes
The most adverse social impact of womens employment in the export-oriented
garment industry of Bangladesh is violence against women. Not a single incidence of
violence against female workers in non-export industries was reported in the
newspaper during the last five years. However, female garment workers constitute a
high risk group because they tend to be young, unmarried, rural migrants, and work
late hours3.
In 1998, 161 rape cases were registered with the Department of Metropolitan Police,
Dhaka. Among these in 17 cases (about 11 percent of total rape cases), the victims
were garment workers and only in five cases (three percent of total rape cases), the
victims were non-garment workers. Female garment workers account for only two to
three percent of the total population of women in the metropolitan area of Dhaka,
whereas they account for 11 percent of rape cases.
The surveys of 1990 and 1997 collected information from the workers regarding
sexual harassment ranging from insults directed at a person's gender, suggestive
comments, and demeaning remarks, to unwelcome touching and grabbing and other
physical assaults, including raping. But these types of sexual harassment are highly
under reported because female workers are reluctant to disclose information on this
subject. Therefore, the workers were asked about the types of sexual harassment and
mishaps faced by their colleagues. The survey of 1997 shows that at the workplace
only five percent of female workers encountered sexual harassment. But more than
nine percent reported that their colleagues faced these kinds of harassment in the
workplace.
The survey of 1997 shows that 20 percent of the surveyed female workers lived in
slums and squatter settlements. For female garment workers, the possibility of being
raped by the local rent collector is high because in slums and squatter settlements
there is no law imposing authority. More than seven percent of the female workers
report that they live in relatives' houses. Most workers living in relatives' houses
report that they are afraid of their male relatives who try to have affairs with them.
Violence against women is not limited to the workplace or residence the streets are
even more risky. Paul-Majumder and Khatun, (1997) find that about 70 percent of
female garment workers, who commute by bus experienced bad behavior from the
conductor and driver.
Health Status
Many female workers suffer from various illnesses after starting work in the garment
industry. This is mainly due to overwork, uncongenial working conditions, and wideranging labor law violations. Findings show that womens employment in non-export
industries does not affect womens health so badly. From the survey of 1993, about 31
percent of all female workers employed in non-export industries, as opposed to only
10 percent of their counterparts in the garment industry, have good health even after
undertaking jobs (Paul-Majumder and Begum 1999 longer version of this paper).
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Many diseases and illnesses are more prevalent among the female workers than
among their male counterparts (Paul-Majumder and Begum 1999 Longer version
of this paper). Within the garment factories women work in the low-skilled jobs of
operator and helper, where health hazards are high. In these jobs they have to
continuously inhale toxic substances emitted from dye used in colored fabric as well
as dust and small particles of fiber. Sewing helpers, who are mostly women, have to
either keep standing or moving from one operator to another for 10-12 hours.
About 70 percent of total female workers, as opposed to only 25 percent of total male
workers, hold these two types of arduous jobs. Long working hour also affects
womens health more adversely than that of male workers. Due to long working
hours, female workers are obliged to shorten their time for leisure and sleep because
traditionally they are required to take care of all domestic chores.
Besides, occupational hazards, the absence of adequate treatment facilities adversely
affect the health of female garment workers. Few garment factories have a regular
doctor. As a result garment workers, particularly female garment workers, whose
physical mobility is restricted, have minimal access to treatment. About 40 percent of
womens illnesses and diseases as opposed to 33 percent for male workers do not
receive any treatment (Paul-Majumder 1998) Workers' job aspiration reflects their
psychological well being (Stein, 1997). High ambition reflects good mental health.
The survey of 1997 shows that only 20 percent of the female garment workers as
opposed to about 33 percent of males have high aspirations about their jobs. More
than 34 percent of garment workers have very low aspirations about their jobs.
Export-Oriented Manufacturing and Womens Migration:
The ready-made garment sector has created a niche for absorbing the relatively
unskilled, semi-literate, youthful female labor from rural Bangladesh. Historically,
distance has been projected as an important determinant of the number of migrants
to a city (Bogue and Thompson 1949; Claeson 1968; Olsson 1965; Stewart 1960; Zipf
1946; Premi and Tom 1985). Now information and contact factors act as a surrogate
for communication and tend to counter the effects of distance (Begum 1995). Thus,
within the garment industry, geographic distance is of minor significance compared
with information and contacts, income, living standards in area of origin, and asset
ownership.
Poverty in the Areas of Origin of Migrant Workers
The magnitude of migration to jobs in the export-oriented garment industry is
directly related to impoverishment of workers families in rural areas. Four main
aspects make up the poverty nexus in the workers areas of origin: income, ownership
of land or other assets, living environment, and access to institutional support.
Kibria (1996) finds that women commonly enter the export garment sector for
reasons of survival. Womens entry into wage employment is closely related to male
unemployment, male desertion, and family separation and the syndrome of extreme
poverty that inevitably occurs. By contrast, Zohir and Paul-Majumder (1996) find
that garment sector requires women from relatively more solvent and enlightened
families, that is, women who have above-average education. According to Johir and
Paul-Majumder, since 1980, employment in the sector has been less related to
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impoverishment among the garment job seekers. As the industry has gained
prominence, a more skilled, enterprising, and youthful section of rural society has
been willing to participate. Increasingly, age, gender, and education affect the
propensity to migrate to garment factories (Table A-13 and Zohir and PaulMajumder 1996).
Three of the five respondents in the case studies, hail from households that are
functionally landless. Afsar (1998) finds that four out of every five female workers in
the garment industry and two out of every three female workers from other
manufacturing industries are functionally landless in the rural areas. Comparatively
fewer male workers, that is, about half, irrespective of type of industry, are
functionally landless.
Unfortunately, lack of data restricts analysis of living standard in rural areas. Indepth case studies indicate that garment workers have a nutritious diet, superior to
the average of the urban poor (Paul-Majumder and Zohir 1995, and Paul-Majumder
and Begum 1999 Longer version of his paper).). Most have enough to eat after
coming to the city, with only eight percent revealing a scarcity of food.
Besides the nongovernmental organizations (NGOs), formal banking systems have
yet to be established in the rural areas on a comprehensive scale. After undertaking
employment in the garment industry, rural women tend to become more conscious
and diligent about saving.
According to Paul-Majumder (1998), the tendency to save increased over the years
and, although female workers in general are less educated than male workers, the
women open bank accounts in disproportionate numbers (Paul-Majumder and Johir
1995). Garment work and wages have ensured a secure present and hopeful future
for the majority of women workers. About 19 percent have used their discretion to
open bank accounts without the knowledge of their husbands and families.
The Impact of Migration on Womens Social Status
Migration to work in the export-oriented industries is a physical severance of the
individual from the familiar support of family, on one hand, and emancipation from
the traditional shackles of society, on the other. In many cases, women who migrate
to work in the garment sector are affected by societal condemnation of exportoriented wage work for women. The effects of migration are inextricably linked to the
constant pressure, on the individual, of balancing the economic gains against the
modified social environment and altered civic ranking in the rural and urban areas.
Almost all the workers in the export-oriented industries have had delayed marriages
if they have joined the jobs while still single. According to the Bangladesh
Demographic and Health Surveys (1993-94), more than 70 percent of the girls in the
15-19 age group were married, while among the migrant garment workers only a
quarter were married in this age group (survey of 1997).
Many studies have documented that women get spoiled in the export-oriented
industries as they have to work late at night (Paul-Majumder and Mahmud 1994;
Paul-Majumder and Zohir 1994; Zohir and Paul-Majumder, (1996). In the case
studies in Paul-Majumder and Begum 1999 Longer version of this paper, only one
women says that her status in the village has increased because of her garment job.
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The respondents unanimously concede that they have benefited immensely from
employment in the export-oriented garment industry.
Workers Remittances
The majorities of unmarried migrant female workers in the export-oriented garment
industry remit their earnings and sacrifice for their families in the rural areas.
According to at least two studies parents often depend on their daughters income
and are reluctant to permit marriage until the family has become more secure (PaulMajumder and Zohir 1994 and Naved et al., 1997).
Structure of, and Changes in, the Female Labor Market:
These far-reaching impacts on the garment industry are not confined to the
economic sphere. The RMG industry is a female dominant industry. According to the
latest Census of Manufacturing Industries (CMI), females accounted for 66.5 percent
of industry employment in 1999/2000 (Table 1). The female concentration in the
RMG industry is much higher than the 35 percent average for manufacturing as a
whole.
Although the RMG industry is generally considered to be a female-intensive industry,
in the historical and cultural context of Bangladesh, the massive entry of female
workers into the formal industrial sector was a totally new phenomenon and bore
important social, cultural and political implications.
Historically, the labour market in Bangladesh, as in most other countries, has had
two characteristics: segregation based on gender and segregation based on class.
Table 1. Gender-wise employment status in RMG industry (1999/2000, persons)

Source: Compiled from Bangladesh Census of Manufacturing Industries 1999-2000,

Table 16.
The gender-based difference implies that womens participation in production is
more limited than mens. Table 2 shows the wide gap that exists between the male
and female labor participation rates. Bangladesh womens labor participation is
lower than most of the other countries listed here, except for Pakistan and Turkey.
Needless to say the low participation rates do not imply that women do not work.
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Revising the definition of work increased more than double the rate of female labor
participation, in 2000, for instance, from 23.9% based on the usual definition to
55.9% based on a broadened definition. In contrast, male participation rates
remained more or less the same at 84.0% and 87.3%, respectively. Womens work
has been underestimated because it has been mainly unpaid. The broadened
definition of work includes household economic activities such as the care of poultry
and livestock, threshing, cleaning, boiling, drying, processing and preservation of
food etc. with or without pay or profit. In 2000, some 56 percent of total female labor
was engaged in these household economic activities (Labor Force Survey 2000).
Table 2. Labor participation rates of selected countries (above 15 years, %)

Source: Compiled from LABORSTA Internet.

From the above figures, therefore, it can be stated that while a majority of women are
at work, the number of women who have entered the labor market as wage labor is
still limited. The main impediment to womens participation in wage labor is
considered to be a social norm called purdah (seclusion of women. The term literally
means curtain). Although the actual compliance and interpretations vary from
person to person, particularly in relation to the individuals religion, class, age,
position in the family and living environment, purdah is an integral part of society as
a system and as a symbol and is deeply related to evaluation of status, ownership and
inheritance of property, arrangement of marriages, division of labor, and female
sexuality (Papanek 1973:290). As an integral part of the value system, purdah and
associated notions of female space, role and behavior serve as powerful weapons to
control womens choice of work. Thus women have been excluded, whether forcibly
or voluntarily, from public spheres, including the labor market.
Another element which characterizes the female labor market in Bangladesh is class.
There are some occupations like teacher and doctor that priorities women because
they serve the maintenance of purdah of woman in general as well as that of the
actual women working in those occupations. Women who work in these womens
occupations are from middle or upper-middle class backgrounds. As a whole,
however, employment opportunities for women have been severely limited both in
numbers and types of employment. In particular, for those who come from the lowermiddle and lower class with little or no academic qualifications, few jobs are
available except in occupations of an informal nature, such as domestic service, petty
trade, daily labor on construction sites and as sex-workers.
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While economic imperatives have indeed made many women transcend traditional
roles, the social norms and ideologies governing the gender-based division of labor
and space and the subordinate position of women as a gender have generally
remained intact. Consequently, despite the fact that new patterns of sexual division
of labor have been created, it is questionable whether womens subordinate position
has improved, and if it has, in what way. The shift in the norms and values that
accrue to the gender roles was not in conformity with the shift that occurred in the
actual role performances. The norm of purdah as a system of social control over
women is still a relevant and significant basis for gender identity and gender
relations. It not only functions as a norm controlling behavior and attitudes of
women, but also sets the value standard with respect to social status9. This implies
that a woman who takes up employment outside the home risks losing social prestige
for herself as well as her family.
However class plays a role in the impact of employment on status. Recently an
increasing number of educated women from the upper and the upper-middle classes
have begun to participate in non- traditional employment, for instance, as officials
and professionals both in the government and private sector, in competition with
male counterparts. Their social status has in fact improved, since those occupations
are perceived as socially prestigious. The social status of poor women, on the other
hand, is degraded by the very fact of taking employment outside the home, despite
their contributions to the home in terms of labor and income (Khan 1992: 178-199).
This is mainly due to the fact that jobs available for poorer woman are accorded low
social prestige. Therefore, for woman of the lower strata of the society, a choice
between pay or purdah still has to be made. The fact that of all classes middle class
women have the lowest economic participation rate indicates that they are placed in
the dilemma of choosing between economic gain and loss in social status10. In short,
in the female labor market, there is a strong co-relation between types of
employment and class, social prestige, and social acceptance of working women.
Now let us examine the structure of the labor market on the basis of statistical data.
It has been reported that the shift in the conventional division of labor has been
accelerating since the early 1970s (Feldman and McCarthy 1983: 955; Hossain,
Jahan and Sobhan 1990: 26). The economic crisis that followed the independence
war of 1971, a war which caused huge losses in human and physical assets, was
further aggravated by a severe famine in 1974. The consequences of the worsening
economic conditions marked by increasing landlessness and impoverishment were
more severely felt by women then by men. Many women lost their male custodians
through death or migration to urban areas by males in search of work, and for poor
households the decline in family income meant that women had to contribute
economically to meet the familys subsistence needs. An increasing number of
women from the lower echelon of society began to participate in economic work
outside the home, such as the rural construction work organized under the state
sponsored Food for Works Program (FFW).
Figure 2 shows the changes in the size of the labor force over the past 40 years. The
size of the female labor force, which stagnated between 1961 and 1974, began to make
a substantial increase after independence. Between 1974 and 1999/2000, the female
labor force increased at an annual average of 10 percent in contrast to the 3 percent
and 2 percent registered by the total and the male labor force, respectively.
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Figure 2. Growth of labor force (10 yeas and above) between 1961 and 1999/2000

Note: Based on the usual definition. MPS=Manpower survey, LFS=Labor force

Survey Source: Report on Labor Force Survey in Bangladesh 1984/85, 1995/96,
1999/2000
The majority of the female labor force lives in rural areas (Table 3). The issue of wage
earning opportunities for women was first addressed in the rural context. Besides the
FFW program, various NGOs incorporated income-generating activities targeting
poor women in their development programs. There were two approaches, production
enhancement based on womens traditional skills and employment expansion (Chen
1986). The production enhancement scheme was mainly conducted within the sphere
of rural womens everyday life and was based on skills already existing among
women in the fields of horticulture, animal husbandry, poultry rearing, fish culture,
paddy husking, and so forth. The employment expansion scheme, on the other hand,
tried to expand womens skills and work traditionally bound by gendered norms. It
sought new markets beyond the womens communities and external expertise was
hired for things like product design, skill upgrading and merchandising. While the
second type of scheme generates steady income, returns to the producers are said to
remain relatively low, and independent production by women is highly unlikely to
succeed, without an institutionalized program network (Feldman and McCarthy
1983: 217). Also, the number of beneficiaries could never reach the actual number of
needy women because this type of program requires close monitoring at each stage of
production up to marketing, necessitating large operational costs. The first type of
scheme is less costly because it utilizes the existing skills and markets in and around
the potential beneficiaries. It is this type of self-employment work that has been
promoted by Grameen Bank and other micro-credit providers that followed, and this
has become the major approach to addressing the issues of poverty and
empowerment of women.
Table 3. Distribution of labor force by residence.

Note: Labour force 15 years and above based on usual definition

Source: LFS 2002/03
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The positive impacts on women of micro-credit have been extensively researched.

Here let us investigate the implications for womens work and the rural labor
market. The implied mechanism of micro credit as a tool for reducing poverty is the
generating of self-employment among the poor. Most studies emphasize a positive
impact of micro credit programs on womens self-employment and labor
participation. There are numerous anecdotes describing how the programs have
enabled women to take up various income-generating works (Yunus ed. 1982, Counts
1987, Bornstein 1997, to mention a few).
Rahman and Khandker (1994) have examined the impact of micro credit program
placement on the employment situation of the poor. Studying three such programs
by Bangladesh Rural Development Board (BRDB, a semiautonomous government
agency), BRAC (the largest NGO in Bangladesh) and Grameen Bank, the paper states
that micro credit programs have increased employment in terms of labor
participation rates and employment per worker12. Both indices are higher among
program participants than among the target group population in the control area.
Also, self-employment per worker is much higher and, conversely, wage employment
is lower among program participants than among non-participants. Thus selfemployment has taken the place of wage employment among participants. This study
also found that the impact of programs extends to non-participants in the area as
well. Reduction in the supply of labor hours to wage employment by program
participants creates an upward pressure on wages. A higher wage rate has influenced
the level of wage employment in two ways: it has attracted labor from nonparticipating households and it has induced replacement of hired labor by ones own
labor. Thus, program placement induces an increase in labor use among all groups of
households. Rahman and Khandker found that the micro credit program has
contributed to a net increase in the level of overall employment.
The increase in self-employment in the rural labor force at the national level is
reflected in labor force survey data (Table 4). Between 1983/84 and 1999/2000, the
self-employment share increased both for males and females, but the increase was
larger in the case of male labor. On the other hand, the employee share declined
substantially in the case of female labor while remaining almost the same for male
labor. A noteworthy gender-based difference is observed with respect to unpaid
worker employment. Whereas the share of unpaid workers among male laborers
declined during the decade of the 1990s after an increase in the preceding period,
that of female labor has continuously expanded. In 1999/2000 the largest numbers
of rural women were working as unpaid workers. Therefore while it can be said that
the rural female employment situation has seen a positive shift from employee to
self-employment status, there is a larger increase of employment as unpaid workers.
In addition, there are discernible differences in the shift of employment status
between male and female labor. As stated above, the number of self-employed males
has increased on a larger scale than that of females, and the information in the table
suggests that the incremental change in male self-employment results from shifts
from the employer and unpaid laborer groups. Although these tendencies need
further in-depth investigation to elucidate the implications, the limitations of microcredit in employment creation should be noted.

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Table 4. Employment status in rural areas (10 years and above)

Note: Figures may not add up to 100 due to rounding.

Source: LFS 1983/84; 1990/91; 1999/2000
Another noteworthy limitation of micro-credit is the exclusion of the poorest
households from the programs. The failure of micro-credit programs to reach the
poorest has become an issue of concern in recent years (Wood and Sharif 1997; R. I.
Rahman 2000; Rahman and Razzaque 2000). Inclusion of non-target or non-poor
households, generally defined in terms of land-holding size, is said to be on the rise.
Between 27and 71 percent of new members of various credit programs in Bangladesh
are found to come from non-target groups (R. I. Rahman 2000: 50-51). The largescale inclusion of non-target households in recent years is in stark contrast to the
situation reflected in a 1985 survey which found that only 4.2 percent of Grameen
Bank members belonged to non-target groups (Hossain 1988: 44). And exclusion of
the poorest has become a rather general phenomenon of micro-credit schemes in
other countries as well (Hulme and Mosley 1997).
The constraints of micro credit schemes in extending services to the poorest have
been grouped by R.I. Rahman (2000: 54-67) into two sets of factors, those on the
client side and those on the lender side.
On the client side, lack of labor, land (a homestead, at least), and capital discourage
the poorest to borrow money. A micro credit program is basically a banking service,
although the scale of each transaction is small and the mode of transaction is quite
different from the ordinary banking system. Thus the money borrowed has to be
invested in a way that will produce some profit and ensure repayment. In order to
invest the borrowed money in a viable venture, one must have labor as input. In a
household with a good number of income-earning members there is a good balance
of dependents and laborers, while destitute households usually have more
dependents than laborers. Land (homesteads or houses) is necessary to undertake
self-employed work like livestock rearing, paddy husking or providing storage space
for a rickshaw. Possession of ones own capital to use in addition to loans broadens
the scope of investment. Moreover, the weekly/fortnightly/monthly repayment
installments, which start shortly after the loan disbursement, are difficult to meet
unless there is extra capital and flow of income because loan-financed activities may
take some time to get off the ground or may not have a high return.
The constraints on the lender side are concerned with the overriding objectives and
terms of services offered by the micro-credit programs, the group-based credit
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system and the management procedures. First, the very mission of micro-credit
programs, i.e., poverty alleviation and extension of credit services to the poor,
prompts the lender to accept as clients those just below the poverty line, not the
hardcore poor, because economic improvement is more easily attained with the
former than with the latter. Furthermore, financial sustainability of the program,
about which donors are becoming increasingly vociferous, can be more easily
maintained with the better-off poor, since they are good borrowers and reduce the
operation costs for the micro-credit organizations. Interest rates and repayment
schedules are also often criticized for creating entry barriers for the poorest. The
second constraint is that the system of group responsibility, although effective in
many ways to overcome the problems of transaction costs that arise when dealing
with large numbers of poor clients, works against the inclusion of the poorest. The
group screens out the poorest from the time of group formation because of their high
financial risks. The third constraint is concerned with the personnel management of
the micro credit institutions. Instead of emphasis on conscientisation or social
awareness of the members, quantitative results such as loan recovery rates have
increasingly become the central concern, especially at the field level. As a result, field
workers in the micro credit programs tend to shun the poorest and admit non-poor
members instead.
The tendency of exclusion of the poorest has an important bearing on women, for a
woman without male family members of active working age is likely to be left out of
these programs. The proportion of female-headed households varies in the different
population studies. An official estimate suggests that around a tenth of households
are headed by women (BBS 1999). The extensive poverty survey conducted by the
Bangladesh Institute of Development Studies in 1990/91 estimated that 9 percent of
rural households were managed or headed by women (Hamid 1995) 13. Others take
the view that the actual proportion could be around 20 to 30 percent (Asian
Development Bank 2001: 19). These studies corroborate the view that poverty is
more severe among female-headed households than male-headed households.
Female-headed households have a lower number of income-earning males than
male-headed households. The income level of female-headed households was only 55
percent of that of theaverage household (Hamid 1995: 180). The degree of access to
micro-credit for female-headed households with few active males has not been
substantiated through surveys, but our general understanding of the situation of the
female-headed household would suggest their under-representation among microcredit clients. It is an undeniable fact that many poor women have to seek some
means other than micro-credit to alleviate their poverty.
D. Impact of MFA withdrawal:
Before going into an analysis of findings from the survey, let us take a look at the
RMG export performance after the MFA withdrawal.
As was expected, China and India recorded robust growth in both the US and EU
markets. In this highly competitive context, the performance of Bangladesh was
mixed. Table 22 shows the changes in export value of Bangladesh garments in the US
and EU markets over the corresponding periods in 2004. The data up to October or
November 2005 displays several distinct tendencies in export performance: better
performance in the US market, and better performance by knitwear than by woven
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garments in the EU market. The negative growth of exports in the EU market does
not bode well for the future prospects of the Bangladesh RMG industry. Although
knitwear is Bangladeshs major export item in the EU market, it too entered a decline
after April.
Table 22. Export performance of Bangladesh garments in EU and US markets in
2005

Note: Each figure gives the growth percentage of the period between January and a
particular month over the corresponding period in 2004.
Source: Compiled from World Trade Atlas
It is beyond the scope of this paper to investigate the decline in exports to the EU
market. Here I would like to identify from our sample data changes being
experienced by workers.
(1) Changes in workloads and wages
All the workers, whether current or retrenched, reported a decrease in the workload
after January 2005 in terms of working hours, overtime and production targets. A
large decrease in workload was reported by 90 percent of retrenched workers and 55
percent of current workers. On the other hand, 11 of the current workers reported a
slight increase and 30 said there was no change in the workload.
Asked if they had experienced a wage change after January 2005, 87 of the current
workers said there was no change and the remaining 13 (2 quality controllers and 11
operators) stated that their wages had increased. The range of increase was less than
Tk 200, with most (7 workers) reporting an increase of Tk.100. Except for one
worker who works in a factory with 400 workers, these workers are employed in
relatively large factories with more than 1000 employees.
(2) The timing and reasons for quitting the RMG factory
Almost all the retrenched workers left their factories within less than one year. The
majority of them had been unemployed for two to three months at the time of the
survey (Table 23).
Contrary to what I had expected, a majority of them said that the decision to quit was
their own (Table 24). Twenty-seven had been dismissed by the factory. Further
investigation would be needed to determine whether this figure is significant.
Although the above replies must be interpreted cautiously, my general observations
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lead me to believe that the workers basically want to continue their work in garment
factories as long as possible because their earnings are the most important source of
their power at home and in society. However, due to the lack of formal structures for
leaves and for pursuing career advancement, including wage increase, many workers
have little choice but to quit.
Table 23. Time since leaving factory

Table 24. Reason for leaving factory

The distinction between leaving on ones own volition and being dismissed is not
always clear-cut. A look at reasons for dismissal (Table 25) shows that there was only
one case of dismissal due to factory closure. Most respondents said they were
dismissed after being absent due to sickness. From their answers alone, it is difficult
to determine whether or not declining production influenced the management
decisions to fire them. Their responses do, however, indicate the insecure
employment status of RMG workers. But workers own behavior may contribute to
some extent to the informal or illegal style of management. My field observations
lead me to believe that workers often take leave without giving prior notice to
management. While this may be due to the lack of a formal system for leaves, it is the
workers, not management, that suffer negative consequences.
Besides the one case of factory closure, in which 500 workers were fired, three
respondents cited relocation of the factory as reason for dismissal. Recently many
larger factories have begun to move from congested Dhaka to suburbs such as Savar
where larger plots are available and buildings with better physical facilities can be
constructed. This enables expansion of production lines and also satisfies social
requirements increasingly emphasized by foreign buyers by providing a better
working environment. Two of the three respondents had worked in the same factory.
Both the factories were located in Rampura, Dhaka, an area where RMG factories are
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concentrated. Factory relocation is a survival strategy for management in the postMFA competition, but it has significant impacts on the livelihoods of individual
workers.

Table 25. Reason for dismissal by factory

(3) Livelihoods impacts

The immediate impact that losing a factory job has had on former workers
livelihoods is a decrease in earnings. Sixty-six workers still have wages due them. In
many factories basic salary and overtime are paid separately, and overtime payment
is often delayed to keep workers from leaving for other factories and to retain
working capital. In all 66 cases overtime is yet to be paid, and in 20 cases both basic
salary and overtime are outstanding. On average, Tk.1191 is due per person, with the
highest outstanding amount being Tk 5000.
Of the 100 retrenched workers, 81 are currently unemployed. The other 19 are
engaged in work such as embroidery at home (15 cases), embroidery in a shop (3), as
domestic servants (2) and other (1) (Two are engaged in more than one job.). Their
current jobs entail less working time and less income than their former RMG factory
jobs, so their income level has significantly declined, ranging now between Tk.200
and Tk.700 per month. Due to the loss of income, only 11 said they could contribute
to family income, while in the past 87 of them had been able to contribute. Moreover,
their contributions now are substantially reduced, whereas before the income of 49
of the workers (56 percent of those who made financial contributions to their
families) accounted for more than half of total family earnings.
How has the reduced income level affected their livelihoods? Except for one woman
who said she experienced no problem, 99 cited negative effects. Ninety-six of these
stated that reduced food intake was the most serious. As second most serious
consequence, housing condition (68) lead, followed by education of family members
(10), savings (10), medical expenditures (5), remittances (4) and relations with
family members other than husband (2). As the third-ranking negative consequence,
taking loans from others was mentioned by 40 samples. This was followed by impact
on savings (27), remittances (7), relationship with husband (5), housing condition (4)
and relationship with family members other than husband (3). These replies show
that the loss of their factory job has affected the workers in multiple ways.
The most severely felt problems are related to basic needs such as food intake and
housing conditions, and their worsened financial situations have forced many
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retrenched workers to borrow from others. It will take a long time for the workers as
well as their households to improve their financial conditions, for the job loss also
interrupted the dynamic of the poverty reduction mechanism mentioned in section 3
by making investment in education of family members and savings difficult, if not
impossible.
In the past at least 28 of the ex-workers had savings ranging between Tk.3000 and
Tk.30000 which were used for various purposes, including lending to others,
purchase of furniture, their own or their childrens marriage and investment in a
family business. However now only three said that they had savings, in contrast to
the current workers, 67 of whom can save on a regular basis.
(4) Social effects of job loss
Family members of 58 of the 100 retrenched workers were interviewed to seek their
opinions regarding the job loss of the RMG worker in their family. Fifty-three of
them are husbands of ex-workers and the others are brothers (3), father (1) and
mother (1).
As was the case for the families of the currently employed, these family members
were asked to give negative effects in order of significance. For these respondents
too, food intake was overwhelmingly mentioned as the area most seriously affected
(50 answers), followed by education of family members (6). Housing condition
topped the list (32 answers) of second-order significance, followed by savings (8),
education (7) and medical expenditures (7). In the third order, having to take a loan
was mentioned by 21 family members, followed by impact on savings (15) and
remittances (8). These answers by family members coincide with those given by the
workers themselves. The only notable difference is the reference to relationships with
family members, including spouse. Although five ex-workers had said that their
relationship with their husbands had turned bad and another five referred to
worsened relationships with family members other than husbands, only one family
member, and that a workers brother, mentioned a worsened relationship with the
ex-worker.
General discussions with the ex-workers indicate that many workers, whether young
or old, agree that money makes family relationships peaceful. When asked if they
knew of any case of a husband leaving after a woman lost her job at an RMG factory,
they answered in the affirmative. Information about marital relationships is hard to
obtain in the context of a formal interview. The ten ex-workers who cited worsened
family relationships may represent what is in fact a more general problem of
deterioration of gender-relationships in retrenched garment workers households.
In recent years many foresaw a gloomy future for Bangladesh in the post-MFA era,
experts frequently predicting a loss of 1 to 1.5 million jobs in the Bangladesh RMG
industry (International Confederation of Free Trade Unions 2004; Steps Towards
Development 2004; Fritsch 2003; Siddiqi 2003).
In August 2005, when I visited Bangladesh in order to prepare for this survey,
Professor Mustafizur Rahman, a reputed expert on the RMG industry, stated that
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information about closure of factories and retrenchment of workers remained

anecdotal. In his opinion, smart factories, which account for 10 to 15 percent of all
the RMG factories, are expanding their production. They have already completed
repositioning of production in the form of factory restructuring, increase in
production machinery and expansion of their design sections, targeting high-end
markets. According to him, it will be the sub-contracting factories which will first
face closure, and this will have gender implications because the share of female
workers is particularly high in those factories. He also mentioned that the growing
importance of knitwear exports would likewise work negatively against women. This
is because knit RMG is more male-intensive, and a capital-intensive restructuring is
in progress in which machinery with multi-skills is being introduced. Male workers
are generally employed to operate such machinery.
In another interview conducted in August 2005, an owner of woven RMG factories
and an executive of BGMEA pointed out the sharp reduction of Cutting and Making
(C & M) charges after the MFA withdrawal. Under the MFA regime, quotas gave
Bangladesh factories a bargaining edge in negotiations on C & M with buyers. After
the elimination of quotas, the scope for maneuverings was severely limited, buyers
often threatening to shift their orders to China. Asked whether the reduction of C &
M would lead to reduction of wages, the owner stated that so far they had not cut
wages but that if the situation did not improve, at least the simultaneous payment of
basic salary and overtime might be suspended.
At the end of the first year in the non-MFA world, the Bangladesh RMG industry is
generally considered to have performed much better than expected. Our findings
from the survey also show that retrenchment due to factory closure was minimal. The
majority of the ex-workers left their jobs on their own. Nevertheless, as already
stated, the workers responses have to be interpreted with caution. In many cases
working conditions forced workers to decide to leave their jobs. It is not possible to
definitively state at this point to what extent the MFA withdrawal directly or
indirectly affected the business environment in the individual factories at which
individual decisions of workers were made. The decrease in workload after January
2005 mentioned by 90 percent of the ex-workers and 55 percent of current workers
may be interpreted as a direct consequence of MFA elimination.
A comparison of current and retrenched workers suggests a widening gap between
those who are able to keep their job and those who are forced to leave. Among the
current workers at least, none mentioned a decrease in wages after January 2005. On
the other hand, the adverse consequences of job loss are affecting the basic needs of
ex-workers and their households. The deterioration of the economic conditions of
their households is likely to cause deterioration in family relationships and
particularly in terms of a weakening of the position of the women workers.
From the pre-dominance of the RMG industry in the manufacturing sector as a
source of female employment, we can see that a job in an RMG factory is still a better
option than others and, especially for less educated women, may be the only option.
The vulnerable position of women workers makes possible the informal and arbitrary
practices found in what are formal sector factories. Nevertheless, we should not
overlook the fact that the workers own arbitrary behavior, while it can be interpreted
as a coping strategy under harsh working conditions, reinforces the persistence of
informal and arbitrary management practices.
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It remains to be seen how the Bangladesh RMG industry will carve out a share in
todays highly competitive market. The relocation of factories being carried out by
forward-looking factory owners may lead to creation of new jobs but it also implies
retrenchment of old workers who cannot cope with the change. Future actions by
firms and policy makers should therefore be carefully observed in terms of their
impacts, not only on the firms and the industrys survival, but also on the workers as
well.
Bangladeshi RMG sector in Post-MFA Era:
The expiry of the Multi-Fibre Arrangement (MFA) regime has brought a great deal of
uncertainty about Bangladesh's future export earnings and sustainability of macro
balances with potential adverse consequences on economic growth. Taking
advantage of the MFA quota system, Bangladesh demonstrated a spectacular export
performance, with exports of readymade garments (RMG) rocketing from just $10
million in FY 1985 to about $6,400 million in FY 2004-05. In the mid-1980s, only
about 0.1 million people were employed in the RMG industry, but over the next 20
years it grew rapidly to reach 1.9 million (or, 35 percent of all manufacturing
employment in the country) 80 percent of whom being women.
There is some suggestion that if jobs created in the complementary enterprises as a
result of the growth in this sector are considered, the number of people either
directly or indirectly depending for their employment on the existence and expansion
of the RMG sector will rise to three millions. The growth of RMG exports has had
favorable effects on macroeconomic balances. The trade deficit has declined from
around 10 percent of GDP in the early-1980s to around 5.5 percent in 2004. The
rising share of export trade in the economy brightly contrasts with the declining
significance of foreign aid, which now constitutes only about 3 percent of GDP down
from 7 percent of the mid-1980s. It is in this context that the RMG-led export growth
is thought to have transformed the country from a predominantly aid-dependent
country to a largely trade-dependent nation. Being a labor intensive sector coupled
with provider of employment mostly to women, the RMG sector has had a strong
influence on poverty alleviation and human development in Bangladesh.
The abolition of MFA quotas has exposed Bangladesh to fierce competition from a
large number of countries whose exports have so far been severely constrained by
quantitative restrictions imposed by developed countries. During the first six months
into the post-MFA period, for which data and information are available, Bangladesh
has somewhat managed to maintain a modest growth of its RMG exports, largely due
to a robust performance of knitwear exports. Notwithstanding this, it may still be too
early to predict anything about the country's future export prospect. China, the main
threat in the global quota-free apparel market, continues to face export restrictions in
the EU and the US. A particular clause embodied in the Protocol of China's accession
to the WTO enables the US to restrict imports of textile and clothing products from
the former until 2008 and fearing that many other countries (like the EU) could take
advantage of this precedent, importers in important markets might not want to rely
wholly on China for procurement immediately after the MFA-phase out. However,
from 2008, when keeping restrictions on China will be difficult as per the WTO rules,
only then the real competitive pressure in the market will be realized. It needs to be
mentioned here that most academic empirical studies predicted adverse
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consequences of MFA phase-out on Bangladesh and convincing arguments to defy

those predictions have not yet been found.
The post-MFA period has coincided with Bangladesh's reinvigorated policy efforts in
reducing poverty, as reflected in the preparation of its Poverty Reduction Strategy
Paper (PRSP). Although critics regard the poverty reduction strategy as a donor
driven initiative without any apparently significant policy shift that would make a
difference in the PRSP regime, the attainment of Millennium Development Goals
(MDGs) is expected through the implementation of the PRSP. The first target under
the MDGs is to have the number of people living in poverty (from the level of 1990)
by 2015. In recent times, Bangladesh has made some progress in reducing poverty.
Along with an annual average GDP growth of 5 percent over the decade of the 1990s,
the proportion of people living below the poverty line declined from 59 percent in
1991-92 to 50 percent in 2000. That is, on average poverty fell by one percentage
point per annum. This apparently impressive performance is overshadowed by a
frustrating fact that despite the fall in the proportion of people living below the
poverty line, the absolute number of poor people actually remained virtually
unchanged, at about 63 million.
For any low-income developing country, the best way (and most often the only
feasible way) to reduce poverty is to achieve and sustain higher economic growth
rates. Analysts suggest that if Bangladesh has to make any significant impact on the
existing poverty incidence, GDP growth at 6-8 percent will be needed. Under an
optimistic scenario, a sustained growth rate of 6 percent will barely let the country
achieve the target of halving the number of poor people by 2015.
The objective of accelerating economic growth will critically depend on channeling
increased resources into productive investment. Considering the experience of the
past 20 years or so, it can be inferred that a growth rate of 7 percent would require an
investment-GDP ratio of 31 percent as against of the current level of 23 percent. If
investment is to be made out of domestic savings, it would imply that the current
consumption is being sacrificed for future growth. When the overall income of a
country is low, curtailing current consumption is a very difficult option. However,
investment from foreign sources (such as FDI) can greatly help a country achieve
higher growth without constraining the current consumption too much. For
Bangladesh, raising the level of investment appears to be a critical necessary first
step for improving the poverty situation. The post-MFA regime could make the task
even more challenging. A fall in RMG exports would lead to loss of employment and
output thereby adversely affecting the poverty situation.
One important factor in determining the prospect of higher investment is the socioeconomic environment that influences returns from investment by private
enterprises. When profitability of investment is hampered by such factors as
macroeconomic instability, poor infrastructural facilities, deteriorating law and order
situation, etc., potential investors will be discouraged from putting their resources
into productive investment. Under such circumstances, only limited benefits can be
materialized at the national level by the accumulation of resources by individuals.
Given this backdrop, a lot of emphasis has been given to the importance of creating a
sound investment climate in Bangladesh.

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Investment climate is an idea, which is easy to perceive but difficult to define

precisely. According to the World Development Report 2005, investment climate is
the set of location-specific factors shaping the opportunities and incentives for firms
to invest productively, create jobs, and expand. Clearly, this definition is very broad,
which encompasses government policies, institutions and behavioral environment
that have significant influence on costs, risks, and barriers to business. It has been
emphasized that a good investment climate is the one that serves the society as a
whole on the one hand (through its impact on job creation, lower prices, and
broadening the tax base) and serves all firms, including both large and small, on the
other. A sound investment climate not only encourages more investment but also
promotes higher productivity because of increased competition. Consequently, the
amount of investment required to achieve a desired level of growth may be less than
what the previous experience suggests.
Many think that the investment climate is related to FDI only, which is not correct at
all. For countries to achieve and maintain high levels of income and employment
what is important is the total amount of investment irrespective of its foreign and
domestic sources. According to the World Investment Report 2004, during the
period 1990-2003, world FDI flows accounted for 8 percent of world domestic
investment, suggesting that such flows only complement domestic investment. Even
for China, which received an FDI flow of $53 billion in 2004, FDI comprised only
about 12.4 per cent of gross fixed capital formation. This is not to undermine the
importance of FDI, particularly when it reduces the pressure for curtailing the
domestic consumption, but to emphasize the point that investment climate is equally
important for mobilizing resources from domestic sources.
Macroeconomic factors, infrastructures (both physical and financial), and
governance related issues, are considered to be the three main features of the
investment climate. Over the past decade or so, Bangladesh performed well on
macroeconomic indicators and achieved a steady economic growth with the record of
an impressive macroeconomic management. It is now generally recognized that
governance and infrastructure related issues act as more serious impediments to
doing business in Bangladesh than macroeconomic environment.
The role of financial infrastructure is critical in the development of private sector
enterprises. Finance is required to enable firms undertake productive investment in
order to initiate and/or expand a business, to introduce new products and to market
them. Availability of investment funds also facilitates acquiring better technology to
promote competitiveness. However, one of the most important problems facing the
firms in Bangladesh is the access to finance. In a recent private enterprise survey, as
many as 58 percent of the surveyed firms reported the problem of lack of investment
funds, while in the World
Bank investment climate survey it was revealed only 30 percent of working and
investment capital was sourced from banks and financial institutions. The
significance of the constraint related to finance was also reflected in a survey of some
selected export-oriented firms, undertaken under the Bangladesh Export
Diversification Project (BDXDP), in which as high as 90 percent exporters reported
the problem of accessing export finance.

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The state of physical infrastructure in Bangladesh is considered to be one of the

biggest causes for concern. Given the poor infrastructure, business enterprises spend
more resources, both in terms of time and money, on such tasks as gathering
information, acquiring inputs, and marketing their products. All this can undermine
the competitiveness and returns to investment. There are two dimensions of poor
infrastructure problem one is the unavailability of certain services or utilities (such
as telephone, water, electricity, roads and highways, etc.) and the other is the
unreliability of the services provided. A firm-level investment climate survey carried
out by the World Bank in different countries confirms that the quality of
infrastructure services is a more acute problem in Bangladesh, with electricity being
the worst problem.
Ports and transportation are serious infrastructure problems. Bangladesh's main
seaport, Chittagong, has long been considered as one of the most expensive routes to
international trade due to labor problems, poor management, and lack of equipment.
According to the World Bank investment climate survey, the Chittagong port
container terminal handles about 100-05 lifts per berth a day, which is far below the
productivity standard of 230 lifts a day suggested by UNCTAD; Ship turn around
time is five to six days as against of just one day in more efficient ports; and the port
faces serious congestion. Inland transportation also suffers from such problems as
illegal toll collection, bad road communication, congestion at ferry-ghats, and
frequent disruption in transportation due to political programs. All this contributes
to costs of doing business in Bangladesh.
Port and transport related infrastructural problems may have far-reaching
implications. Recent research works on economic geography and international trade
suggest that, as the geographical distance (hence transportation costs) between two
partner countries increases, traded volumes tend to decline. A 10-percentage point
increase in transport costs is found to reduce trade volumes by about 20 per cent.
Consequently, increased transport costs due to unfavorable geographical location
alone can make a country's exports uncompetitive. The implication is that only
because of their geographical location, some countries will experience much higher
gains from trade and foreign firms might be reluctant to move or relocate their
production to those countries that are far from their main export markets even when
the wages in those countries are low. For the two major markets of the EU and the
US, there are competitors, which are geographically better located compared to
Bangladesh. Therefore, while geographical location puts Bangladesh at a
disadvantaged position, inefficient ports and inland transportation further imposes
penalties on firms' accessing foreign markets and acquiring imported inputs. Exportoriented firms, critically dependent on imported inputs, are the worst victim of these
double disadvantages.
Governance is a big problem for firms in Bangladesh. Firms are often subject to
excessive regulatory burdens while in other times there is a complete lack of
regulation and monitoring both inappropriate for ensuring equity, establishing the
rules of the game and protecting the consumers. Corruption is pervasive and
according to the cross-country comparative index prepared by the Transparency
International, Bangladesh ranks worst on measure of corruption amongst a set of
global economies. More than half of the private enterprises covered in World Bank
Investment Climate Survey in Bangladesh recognize corruption as a major or very
severe obstacle to business and production. When cross country data are compared,
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proportionately more business firms in Bangladesh compared to those in Cambodia,

China, consider corruption and crime, theft, and disorder as severe constraints.
Enforcement of contracts and property rights are two important issues in private
investment, but investors in Bangladesh have little confidence that the legal system
can support them in case disputes concerning these two aspects arise. According to
the cross-country survey data from the World Bank, while only 17 percent firms in
Bangladesh reported of having some confidence in the judiciary system, the
corresponding figures for India and China were respectively 70 and 82 percent.
Destructive political activities, which are manifest in frequent disruption in
production by political protests and strikes are also a big problem adversely affecting
the investment climate. Apart from the issues mentioned above, other important
factors influencing the investment climate in Bangladesh are: weak human resource
base, use of obsolete technology, poor technological innovation, lack of free flow of
information, and lack of entrepreneurship and management skills.
In the context of Bangladesh, there is some evidence of small and medium scale
enterprises (SMEs) facing greater investment climate difficulties than their large
counterparts. According to the World Bank survey, while about 34 percent
investment funds of large firms come from the banking sector, the comparable figure
for SMEs is only about 20 percent. The same survey also revealed that smallest firms
tend to make unofficial payments (or bribes) at nearly five times the level of
payments by large firms (as percentage of total costs). While a vibrant SME sector is
often considered as one of the principal driving forces in the development of a
market economy, higher investment climate costs could constrain their growth and
development.

It follows from the above discussions that, Bangladesh will have to go a long way to
improve its investment climate not only to attract FDI but also to mobilize more
resources for investment from domestic sources. Improvement in infrastructural
facilities and governance should be given utmost priority in bringing about a real
change. In recent times some notable improvements in the customs and ports
procedures in Chittagong have been accomplished as a result of which each export
consignment now requires only 5 signatures by different officials as compared to 17
signatures required previously. Freight-forwarding charges have drastically been
reduced. And, most importantly, waiting time for ports and customs clearance has
declined significantly. Presently, the average typical wait for export is about 4.5 days
compared to 9 days recorded during the World Bank invests climate survey in 200102. Similarly, the average typical wait for imports is now about 6 days as compared
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to 12 days in 2001-02. All this should have greatly contributed to reducing costs of
business and is a pointer to the fact that it is possible to make things change in
positive directions.
A number of attractive fiscal and financial incentives are currently available for
investors, particularly for investing in 100 percent export-oriented units. However,
there are formidable difficulties in actually accessing them. Therefore, along with the
development of infrastructural facilities, there is a need for streamlining the
management of the incentive systems.
One pragmatic way to improve the investment climate in Bangladesh may be to
consider a well-devised integrated approach. Under this approach, actions required
at different levels are brought together to make intervention measures or support
systems comprehensive. Considering the problems faced by the business firms,
various appropriate measures can be devised at three levels: (i) strategic or policymaking level; (ii) institutional level; and (iii) enterprise level. At the highest level, the
policy makers with inputs from stakeholders may design appropriate short-,
medium-, and long-term strategies to overcome the difficulties with the investment
climate and to provide firm policy directions without any sense of uncertainty.
Resource constraints would imply that some kind of prioritization will have to be
determined at this stage in implementing the actions. The policy decisions will have
to be implemented by the institutions. Operation of an effective and supportive legal
and regulatory framework, effective management of public services, improvement of
the managerial and entrepreneurial skills, development of human resources, etc. are
the areas where the role of institutions is indispensable. Finally, there is no denying
that the ultimate success in business depends on the efficiency of individual firms.
Therefore, enterprises will have to be dynamic, innovative, and amenable to new
ideas and ways of managing things.

Md. Joynal Abdin

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Limitations of this study:

Nothing & nobody is 100% perfect. So this paper is also not supposed to be completely
perfect. As an undergraduate student I may have several limitations in this study.
These limitations are may be from various points.
At first, RMG is the single largest foreign currency earning sector of Bangladesh. To
have a perfect judgment about this sector a large comprehensive long-time as well as
close study is required. At the same time opinion collecting from BGMEA members
as well as garments owners is a completely tuff task. Because of without a small
portion of them, none have helped to collect data for any purpose.
Secondly, research is an expensive matter today. Because to conducting a massive
survey it is necessary to reach every resort relating to the topic. Here I collect data
mainly from Dhaka & Narayan Gong area of course some workers interviews are
taken those are working in several garments in Chittagong. As a single student I try
at my best to conduct a generalized survey & took help from several previous surveys
have done by World Bank, UNDP, Australian National University, Dhaka University
Research community and others.
Maximum garments worker are not familiar with questionnaire or survey, they are
afraid of giving any interviews to any unknown person. So, any single form of
conducting survey is not applicable in this case. Sometime I collect data through
making gossiping with them, through maintaining any relatives reference or by
consulting them about my objective of the study.
Thirdly, this paper has been taken three month only to complete it. It is a very
limited time to do any research in a large sector like RMG. Because of there are
around 4,500 garments factories in the country. To have a complete scenario about
the sector anybody will have to work with the sector at least six eight months with
proper authority and financial support.
Fourthly, any massive study needs human resource I mean a team to conducting
survey, making judgment, sorting data any interpretation, any the rest. But I only
alone have conducting the survey, and as an undergraduate student I tried at best to
have the real scenario of the sector.
With so many limitations I think this is the single largest paper on the topic ever
before on Bangladeshi RMG sector. This paper includes almost every aspects of the
sector. I am hopeful that this paper will help a lot to know Bangladeshi RMG
industry its past, present and future in a single arrangement.
Almost every data, table or quotations includes in this paper with references as well
as period. Me self have conducting the survey for its present state and present it with
the others. So with so many limitations it holds authentic and realistic information
about the present state of nature of Bangladeshi RMG sector.

Md. Joynal Abdin

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Findings of the research on my topic:

A. Problems, way of solutions & government initiative to solve these
problems of Bangladeshi RMG industries
This vital and vibrant export oriented industry has been facing some problems from
local forces, which may be termed weaknesses (or the Nation's weakness), and some
problems caused by forces beyond our geographical/political boundary, which may
be termed as threats to our industry. The Readymade Garment Industry is already 20
years old but during the last two decades no planned, fruitful policy to build up a
backward linkage textile industry to feed the RMG industry has been taken by the
authorities. Even the existing textile industries are not capable of producing high
standard fabrics to offset the foreign ones from the market. Shortage of capital
necessary to develop local sources for quality fabrics/yam is a major weakness. The
reason behind the shortage of capital, however, can be attributed to the socioeconomic condition of the country; enabling foreign direct investment could
however, compensate for this. Furthermore although the Government has responded
to the RMG industry's requests for devaluation of the local currency the Taka
from time to time, it has failed to decrease the current rate of interest. At the same
time, our financial policy measures are not sufficient to attract entrepreneurs to
invest in the textile industry. Anomalies in the banking sector, problems at the port,
vindictive political environment, bureaucratic shackles, electricity crisis, currency
adjustment policy pursued by the country, and the lack of some policy support from
the government to sustain the country's falling competitiveness against its
competitors in the international market are other serious weaknesses.
Without miscellaneous expenditures no file moves, no UC is cashed, no imported
raw material released. There are many eager hands in the public service agencies that
the industries have to fill with ready cash. Without this practice no job can be done
timely. The public service agencies work very slowly and speed money becomes the
only solution to hasten the procedure. This is however done increasing by
miscellaneous expenditures. The raw materials the industry imports, say, within 7
days, take an additional 15 days to reach warehouses from the Chittagong port. About
54 formalities (with miscellaneous expenditure) have to be observed to release a
shipment of raw materials. These formalities increased the industry's lead-time
against overseas competitors.
The weaknesses, which have been mentioned above, could be classified in following
categories:
01. Unstable political environment and unfavorable law and order
02. Insufficient development of political measures for the RMG sector
03. Inadequate financial measures
04. Infrastructural bottlenecks
05. Inefficient service support
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06. Inappropriate development management and institutional initiatives

Political Instability
Due to the last non-cooperation movement in 1995-96 the industry suffered a loss of
about Tk. 4,500 crore (Tk. 45 billion) and about 300 factories were forced to take
loans of over Tk. 200 crore (Tk. 2 billion). Due to hartal (general strike) and other
such political programs, problems such as order cancellations and stock-lot gluts
arose in the ready-made garment industry. Banks started showing its reluctance to
open L/Cs. Ultimately many affected factories were on the verge of winding-up and
declaring bankruptcy. The export oriented garment industry bore production losses
equivalent to Tk 6-9 crore (Tk. 60-90 million) per hour.
During the last three years, the country went through about 200 working days of
hartal. In the interest of 1.5 million workers and owners of over 3000 garment
factories, the political differences should be solved politically in the parliament.
Unfavorable Law and Order Situation
The disrupting law and order situation is another heavy constraint which hinders not
only the development of the national economy but also the development of the
export- oriented RMG sector. Due to the depreciating law and order situation, the
interest of both the employers and the employees are being affected.
In this relation it should be mentioned that the Factories' Act and labor laws of the
country are old and do not support the development of the export-oriented RMG
sector. The changed environment must be reviewed and in this process all interested
and involved parties should be integrated.
Inefficient Development of Political Measures for RMG
Unsuccessful Initiatives for Foreign Direct Investment in the Export Oriented RMG
Sector
The proper authorities have duly resolved that the Board of Investment (BOI) would
not approve any Foreign Direct Investment (FDI) proposal in the RMG sector
without seeking recommendation from the BGMEA. However, it is being observed
that the BOI continues to decisions without seeking any BGMEA recommendations.
Any further foreign investment in the garments industry must be considered in light
of the technological modernization in this sector, i.e. whether the foreign investment
is promoting technology transfer. The export-oriented RMG sector would welcome
foreign direct investment and encourage foreign financial and technical assistance in
the backward linkage textile sector as there is a dearth of fabric, both in quantity and
quality, in the country.
Inefficient Efforts to Increase Quota in USA and Other Important Countries
This is a topic that is not only an integral part of US Senator Harkin's personal
political agenda but is also an issue of vital importance to the fate of Bangladesh's
readymade garment industry.
BGMEA has been trying to enter the US market with an additional 30% quota over
the present level. Although, on the face of it, a 30 percent raise might seem too large
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in actuality it would comprise an increase of less than one percent of the total
amount of imports entering the United States. The increase would, however, be very
vital and beneficial for Bangladesh.
The increase is being pursued so as to compensate the apparel export losses
Bangladesh suffered due to the anti-child labor propaganda that followed the
introduction of the Child Labor Deterrence Act, popularly known as the Harkin's Bill.
After suffering export losses since 1992 with the signing of the historic MOU on
elimination of child labor from the garment industry of Bangladesh, the country's
RMG industry started recovering in late 1996. Due to the Bill, it has been roughly
estimated that the industry lost its market in the USA and other parts of the world by
about 15-20% annually.
While the BGMEA is trying for such a compensatory quota increase, the US House of
Representatives has passed a Bill liberalizing trade with Sub-Saharan Africa (SSA) by
a vote of 233 to 186, a smaller majority than the 350 votes projected by the Bill's
backers. The measure now goes to the Senate, while there are doubts whether the
body would even act on the Bill this year.
The measure is aimed at 48 SSA countries that have committed to market-based
economic reforms and trade liberalization, and grants them free-access to the US
market for a range of products. The US would also lift the textile quotas currently
imposed on Mauritius and Kenya.
As a direct result of the SSA (Sub-Saharan Africa) Bill, Congressman Philip Crane, a
backer of the Bill, estimates that Sub-Saharan African countries will immediately be
able to double their present volume of export to the USA. SSA countries presently
share about 1% of the USA's apparel imports. Within a decade, they will be able to
triple their present export to the USA.
If the SSA Bill is passed, the benefits to the SSA countries will be at the cost of
developing countries like Bangladesh. Experts say the Bill would encourage textile
and apparel producers in China and other Asian countries to flood the US market
with garments partially assembled in Africa from Asian fabrics, as well as to Transship apparel made in the Far East to the US market via SSA. Experts see in the
legislation a rule of origin requirement that is far weaker than the rule of origin in
effect between NAFTA partner countries. That is, by means of transshipments and
other unfair means other textiles exporting countries will try to enter the US market
through SSA countries. LDC like Bangladesh that lack in sound backward linkage
industries will suffer terribly.
Considering all these points, the BGMEA has been pursuing for a 30% quota increase
for the US market. It will provide the garments industry in Bangladesh with an
opportunity to export apparel worth about US$ 400 million and to employ another
one million workers. Although BGMEA representatives have initiated a strong drive
towards achieving this target, visited the USA and met key Congressmen, Senators
and other government representatives, it is still not considered sufficient effort to
achieve such a large national interest issue; concerted efforts from the proper levels
of Government are needed. Accordingly during the March 2000 visit to Bangladesh
by President Bill Clinton of the United States, both the Government of Bangladesh
and the BGMEA had requested for an increase in the textile quota and for the merger
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of certain categories, inline with the formal proposal submitted to U.S Government
in November 1998. It is certainly a step in right direction.
Insufficient International Marketing Support
In order to expand the market share and survive in the up coming free global
competition in the international market, product diversification appears to be an
indispensable strategy. The more varied the product line and range, the better the
competitive strength. As for our access to other markets, efforts are being made to
enter Japan and other far east markets, however, presently we are mainly dependent
on EU markets and the U.S. We know that if we put all our eggs in one basket, our
risk is higher. We can reduce the risk by putting our eggs in several baskets. When
the GSP crisis arose we knew that our whole EU market was going to be disturbed,
when quota matters created a problem we had to give extra efforts to keep our export
earnings from falling. The EU market share accounts for 50% and the U.S. market
shares for over 40% of our RMG exports. The above statistics justifies further market
diversification. The government should ensure assistance from international
organizations like WB, IMF, UNDP, WTO and international Chambers to support the
export-oriented RMG sector.
Inefficient Financial Support For Backward Linkage Industries
Since 1974 international trade in textiles and clothing has been guided by various
restrictions on a global or regional basis under MFA. The entire business in apparel
and garment industry has been subjected to bilateral quota negotiated under MFA.
The arrangement of bilateral quotas and restrictions on import under MFA has
begun phasing out from January 1995 and the process will be complete by 2005.
Therefore there will be no more quotas and the only barrier to import penetration
will be the normal rules of competitiveness such as price, quality, service, fashion and
tariff.
Again, the GSP scheme is keen on the basic rules of origin and to meet this rule we
need to mobilize the textile sector to feed the RMG sector. Investment in a textile
industry will not be viable unless the government reforms its policies for financial
support. The cost of financing the linkage projects must be brought down, as was
done by India and other competitors of Bangladesh during the initial period of
developing their textile sector. Cash incentives should continue. In addition, long
term loans must be available at reasonable interest rates. Although the current
nominal rates are around 12%, the actual cost of fund to the entrepreneurs amounts
to between 20% and 24% after various adjustments. This is quite high a rate and
discourages investment in this sector. The Commercial Banks need not maximize its
profits at the cost of the RMG industry. The government may direct the Banks to
make reasonable profit and lessen the rate of interest for the RMG sector
substantially, say, to 6% to 7%. This of course does not mean that the Bank should
not take necessary precautions against possible defaulters.
Investment in backward linkage industries for greater supply of raw materials to the
RMG sector, particularly in composite textile mills, is quite large. The entrepreneurs
will need equity capital from financial institutions. Currently a 50:50 debt-equity
ratio is enforced. To encourage investment in this sector, the Government should
moderate the ratio to a reasonable 80:20 level.
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If all the backward linkage industries in spinning, weaving, dyeing, printing and
processing are to be developed by 2004, a total of Tk. 210 billion will be needed for
investment. The Government should create a special fund of at least Tk. 150 billion to
provide equity capital to sound entrepreneurs who can come up with the balance
20% equity. It is worth mentioning here that similar support is available in many
countries including India.
Given the investment needs and future uncertainty, it is questionable if Bangladesh
will be able to invest Tk.210 billion in order to develop the total capacity in the
backward linkage industries required to meet the RMG demand in 2005. To be selfsufficient in the production of export quality yam and fabrics is neither necessary nor
feasible nor wanted. The traditional supply of cotton yarn and fabrics from foreign
countries may decline due to the phasing out of MFA. Some of Bangladeshs fabric
supplying countries, facing the competition of total globalization after 2004, may not
have the surplus to export while others may find it more profitable to expand their
own garment industry.
Subsequently Bangladesh must create opportunities to generate a certain new
capacity to spin yarn, weave cloth and process Grey fabric. Like Hong Kong and
Singapore, which trade quite normally, RMG will have to remain partly dependent on
imported yarn and fabric. This, however, should not create a serious problem for
Bangladesh to remain competitive in the world market after 2004. Therefore the
RMG industry needs to be restructured only partially; a limited number of composite
mills, a large number of independent spinning mills and processing units need to be
established. One of the easier avenues of gaining success in this respect may lie in
modernization of dying or decadent mills.
Unfavorable Taxes and VAT for RMG Exports
The tax burden on the export oriented garment sector is reducing the
competitiveness of Bangladesh-made garments in the international market against
products from competing countries. In Addition to incentives for aggressive
marketing, several countries, including our neighboring ones, are totally exempting
their export sectors, including RMG, from all export taxes to help supplement
competitiveness and boost exports in the international market. Although included in
the 1996-97 Export Policy, the export oriented RMG industry has not yet been
brought within the purview of taxation.
While the world is in transition from MFA to GATT to WTO, the country is still being
constrained further, partly through old ideas. The industry has got to take its best
lead before the international players in the industry are at full pace, otherwise there
will be little scope for recovery.
Unfavorable Tax for New Investment in RMG Export Sector
International experiences show that facilities like a tax holiday could promote
national and foreign investment. For the sake of a healthy economic development of
the country, it is expected that with proper taxation policies in place investment in
the export-oriented RMG sector in the country can be canalized.
Inadequate Adjustment of the National Currency with the Currency of
International Competitors
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With Bangladesh's competitor countries adjusting their currencies downward,

ranging from 25 percent to even as high as 550 percent, the downward adjustment of
our local currency the Taka has become imperative.
Considering currency devaluation by competitor countries like Indonesia, Thailand,
Korea, Philippines, India, Pakistan, Sri Lanka etc., to successfully pursue the exportled growth, our government should have a similar strategy to increase the countrys
external competitiveness. Against aggressive currency devaluation by our competitor
countries, our real trade-weighted effective exchange rate is still insufficient to
maintain competitiveness vis--vis our neighbors and potential competitors in the
world export market. It must be properly adjusted. We cannot back step from
steadily adjusting our currency by observing the strategy our competitors are taking.
If devaluation is not conducive to the general national economic development of the
country, an alternative must be worked out which best make more of our exporters
competitive in the international market.
Unfavorable Value Addition for High Valued RMG Exports
Just because of the rigidity in the Value Addition criteria, high value items
manufactured in the country are failing to enter the international market. For
example, the margin that we can retain by producing one gown may not be secured
by producing even 10 basic shirts. We had potential but because of our rigid value
addition policy we are losing a huge amount of foreign currency. Besides earning
foreign currency for the nation, relaxing this criterion could further develop the skill
of the workforce, which in turn would not only support the economic development of
the country but would make it one of the nations most valuable resources.
Anomalies in the Functions of the Banks
The RMG sector has been one of the main catalysts contributing to the tremendous
development of the banking and insurance sector of the country. While foreign
banks, under different heads, charge only 0.25% for first the US$50,000 + 0.125%
for whatever rest amount, our banks charge rates from 10-16% straight. Presently our
commercial banks are earning over Tk 2,000 crore (Tk. 20 billion) per year from the
export-oriented sector. Over the years some bank charges have increased to even
three times the charges from 1985. Even now there are some regulations and services
which hinder performance of the export-oriented RMG enterprises. These are:
1.
Regulating approval from the Bangladesh Bank for creating Forced/Demand
Loan by lien banks.
2.
Considering of Back-to-Back PAD/Forced Loans as default loans.
3.
Considering overdue FBP against the liability of any UC as default loans.
4.
Enforcing mandatory compulsions in the ECG policy.
5.
Regulating the obtaining of prior permission from the Bangladesh Bank for
exporting goods against stock-lot.
6.
Regulating prior approval for discount from the Bangladesh Bank and EPB.
7.
Allowing 45 days from the date of document negotiation for fund remittance
in the event of remittance being delayed.
8.
Allowing private commercial banks to charge "UC Acceptance Charges" fees
which the Nationalized Banks do not.
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9.
Applying the Banking Companies Act, passed by Parliament on 13 March
1997, also for the export-oriented Readymade Garment Sector of the country.
10.
Holding the readymade garment exporters responsible if the proceeds against
their exports are not realized owing to the reasons beyond the exporters control.
11.
Banning of the Realization Clause when opening L/Cs.
Inadequate Cash Support and Export Performance Benefit
The disbursement of alternative cash assistance has increased recently. This should
not be a cause for alarm, however, stringent measures to ensure that genuine users of
local yarn are being benefited should be put in place. Till date, less than 15 percent of
the yarn and fabric demand in the RMG industry is being met from local sources.
Hence the Alternative Cash Assistance scheme deserves to be continued until the
industry achieves a sustainable development in the backward-linkage industry.
In the past, the Alternative Cash Assistance was used to give garment manufacturers
and exporters help to increase garment exports. But since early the 1990s it has been
given to the local fabric producers to encourage direct export or use of local yarn
fabrics in the RMG industry. Appreciating the Government's gesture toward the local
yarn and fabric manufacturers, our observation are that since the garment
manufacturers and exporters are the ultimate exporters of local yarn and fabrics, if
they were encouraged to use local yarn and fabrics under the same scheme, as in the
past, the ultimate objective of this scheme would be achieved through further usage
of local yarn and fabrics.
While transaction and overhead costs have increased considerably, the garment
manufacturers and exporters are still buying local fabrics and yam at higher prices in
comparison to the prices of imported fabrics/yarns. In the international market, we
are losing our market share to our competitors, who besides enjoying several exportbenefits also enjoy tax-free status for all their export income.
Moreover, in the past, the Export Performance Benefit (XPB) used to be provided to
the RMG manufacturers and exporters to encourage export earnings. Presently in the
international market, competition has been intensified due to the entry of new
competitors. Without such a benefit scheme, garment manufacturers and exporters
of Bangladesh are losing their competitiveness in the international market.
Inadequate Exchange of Views between BGMEA and the Board of Directors of the
Nationalized Commercial Banks
BGMEA, the single largest trade organization, has been leading the RMG industry to
become the biggest export-earning sector in Bangladesh. This sector has propelled
the financial sector of the country to new heights. The sector also involves a huge
amount of capital investment from the Nationalized Commercial Banks (NCB). The
Bank's recovery of loans from this sector has been positive and the sector's
contribution to the Bank's earning has been quite considerable. But the financial
activities of the NCBs are not sufficient to fasten the export-import procedure for this
industry. Moreover, the government's policy to reform the public sector banking
institutions has not been working to simplify the complex system.

Md. Joynal Abdin

mdjoynal@gmail.com

If representatives from the BGMEA could be included in the Board of Directors of

Nationalized Banks and the Bangladesh Bank, this would help solve the different
banking problems faced by the garment industry and thus help the economy in a
positive way.
Unequal Opportunity for RMG Export Oriented Industry
The government's policy to attract foreign investment in Bangladesh is quite
impressive. This policy, however, show some inequalities. Under the bonded
warehouse system every export oriented garment factory is an EPZ, but factories in
the EPZ enjoy more benefits than those outside the EPZ. Even in Japan, all exportoriented factories enjoy such benefits. If these inequalities were eliminated and
export oriented garment units outside the EPZ were provided with similar benefits to
those industries in the EPZ, it would certainly support to increase export and earn
more foreign currency for the country.
Port Congestion and Crisis
Due to unchecked interest by a section of politicized dock laborers, the Chittagong
Port has remained closed for about 30 days during the last three years. Go-slow and
congestion are chronic problems. Chittagong port being the largest seaport in the
country contributes to 80% of import and 75% of export of the total international
trade. As the normal activities in export and import are hampered due to the
complexity created by various reasons like dock labor unionism, go slow principle,
strike etc. usage of the seaport by traders has been disturbed and declining. This is
definitely influencing the national economy negatively. The Garment Exporters and
Garment input importers have been facing problems in export and import for years.
It is worth mentioning that due to delay in unloading of raw materials for the
Garment Industry, it is not possible for the entrepreneurs to produce the garments
within the Letter of Credit (L/C) period. Thus the L/C becomes invalid and the
exporters face great financial loss. Consequently, buyers are losing interest in trade
with Bangladesh. Moreover the entrepreneurs have to take the responsibilities of the
loss on their own shoulders. A large number of garment factories are classified as
sick as they have been unable to recover from the stock-lot problem, which is also
one of the causes for bottlenecks in the port area.
Heavy congestion in the Chittagong port has been prevailing for the last four years.
This congestion affects the normal activities of the port. Loading and unloading of
goods are always delayed and ships remain in the outer anchorage for long periods of
time. As a result, port utility has been lessened which is also damaging the reputation
and image of the port internationally. The handling equipment at the port is
insufficient to cope with the rising volume of the export-import business from the
garment industry and other export oriented industries. The country should start
setting up new jetties immediately to increase the loading and unloading capacity of
the Chittagong Port because an average size jetty takes about 4 years to be set up.
The port is taken hostage by a handful of people for their egotistic interest, posing a
serious threat to the export-trade of the country. The government should play a
stronger role in addressing the port crises. Handing over port activities to private
sector enterprises perhaps can ensure a sustainable solution.

Md. Joynal Abdin

mdjoynal@gmail.com

Frequent Interruption in Energy Supply

For nearly the last two years the electricity crisis has been unparalleled. To better
describe the situation it would be safe to say that the power grid has been at its peak
capacity for the last decade or two. A survey in the RMG sector in May 1997,
indicated that in Jan-May 1997, the RMG sector had already suffered losses in excess
of Tk.1700 crore (Tk.17 billion). Presently on an average, we are losing production
worth about US$ 1.6 million per day (or, US$ 46.4 million per month and US$ 561.6
million per year) just owing to the electricity crisis alone. For obvious reasons the
chain-effect is more serious. RMG production could be increased by 10-15 % if
reliable power supply was available.
Congestion in Road and Railway Communication and Traffic Jam
A good transport system is a prerequisite for economic development. A lack of it
creates road congestion, as a result it may take a longer time to get imported raw
materials from the port and transport the finished product to the port from the
factory. It also causes additional transport costs. A congestion-free road and rail
communication, especially between Dhaka and Chittagong, linking the garment
industry is vital for further development of the export-oriented RMG sector.
Inadequate Service Support
Unfavorable Service Charges for Air Cargo
It is a common practice that garment factories import goods by air, paying very high
freight rates, only when the speedy delivery of finished goods is the prime
requirement of the buyer. Thus, damage, misplacement, dislocation of raw materials
and delay in clearance thereof grossly affect the delivery schedule of the finished
goods. The replacement of damaged or missing raw materials is not only expensive,
but also time consuming and involves onerous Customs/Bank formalities. The irony
of the whole system is that the importer is not spared from the onus of paying
duties/taxes for non-export of finished goods due to damage in fabric.
In the seaport at Chittagong, the Port Authority acts as Bailee on behalf of all carriers
and thus goods land under the port's tally along with remarks as to the condition in
which goods have out-turned, stored consignment-wise/shipping mark-wise etc., no
such system prevails at ZIA. Neither the Civil Aviation nor Bangladesh Biman act as
"Bailee" and as such there remains a vacuum of accountability for misplacement
and/or damage to goods. Unlike the seaport at Chittagong or Mongla, at ZIA the
importer or their C&F agents are unable to see the condition or storage position of
the goods and have to depend on Biman Loaders for "produce of goods". In the
examination section a highly irregular practice is being followed by Biman when
certain a percentage of goods are required to be produced for inspection purpose, the
C&F agents are made to sign that all goods have been duly produced before the actual
inspection. Only then does Biman produce the goods.
Therefore at the time of delivery if the loaders fail to detect any goods, in that case
only tally marks are made on the reverse side of the photocopy of Air Way Bill which
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is retained by Security and only an entry for short received is made in their Delivery
Register. The C&F agents are not given any official documents for the short receipt.
Even inside the canopy area there are storage tracks where goods are required to be
stored according to the last digit of Air Way Bill Number, but the loaders for obvious
reasons scatter single consignments in different tracks while stacking.
Incompetent, Slow and Corrupt Custom Services
It is obvious that with the rapidly expanding export business of the country the
pressure on customs office has increased immensely. The globalized export business
demands not only prompt but qualified services, because missing documentation
could cause loss of international customers. Therefore it is not enough to employ
sufficient personnel in the custom office but they must also be trained. The custom
office must be provided with modern technical support and its services must be
computerized. The government has already taken some steps in this direction, but it
has to be strengthened.
Bangladesh's readymade garment loses 30 pct output due to power shortage:
Bangladesh's readymade garment (RMG) sector is facing severe crisis due to
inadequate and irregular power supply that pushed the potential export-oriented
sector to cut off its production by at least 30 percent on a regular basis since
February.
"We are forced to stop our production due to frequent power interruptions resulting
production loss by about 30 percent of our total production," Tipu Munshi, President
of Bangladesh Garments Manufacturer and Exporter's Association (BGMEA) was
quoted as saying by local daily The Independent on Wednesday.
According to the daily, during a meeting with State Minister for Power Iqbal Hasan
Mahmood on Tuesday, the BGMEA president, along with his colleagues, also
submitted an 8-point demand and urged the minister to start planned load shedding
program for the RMG sector to minimize the production and export losses.
Their suggestions include introducing a relatively lower and flat power tariff dealing
with the existing peak and off-peak hour rates, issuing notice prior to the start of
load-shedding and installing PFI (power factor improvement) devices at the garment
factories by the government and allowing factories to consume up to 75 kilowatt
electricity without any installing and sub-stations.
The state minister assured the BGMEA team that the utility department will
henceforth follow a schedule load shedding chart for the RMG sector. Though there
is a power staggering program chart but the utility departments failed to follow it due
to huge and often unpredictable power shortage.
To reduce extra burden from their shoulder, the BGMEA representatives demanded
withdrawal of the off-peak hour and peak- hour rates for the RMG sector.
At present, the rate of per kilowatt hours electricity in peak hours is 5.36 taka (7.66
U.S. cents) against the off-peak rate of 3.05 taka (4.36 U.S. cents).
Source: Xinhua
Other problems of the RMG sector in Bangladesh:
Today our RMG sector is going through a crucial period; it has many long term
problems as well as it is facing some short term and new arrival problems also. If we
try to make a list of these problems it can be as follows:
Md. Joynal Abdin
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(i)

The entrepreneurs are discouraged to invest to very high debt - equity

ratio.
(ii)
The long-term interest rates on loan for new industries in Bangladesh are
very high (Bangladesh 9-12%, Pakistan 5%, India 6%) compared to
competing countries.
(iii) Present worker unrest is making the sector limbs at the same time our
glorious image is downward in the international market. Which caused
some buyers is really worried to place new order.
(iv) Exploiting mentality of some garment owners is also a major problem to
have a sustainable RMG industry & continuing of its current growth.
(v)
Political instability is another major problem for this sector. Day long
strike or so call uncompromised strike may be cause of undue shipment of
product. It hampers the transportation of product from factory to sea port.
(vi) Long bureaucratic jam is another major problem for every industry in
Bangladesh. As a result we are loosing FDI in our country which may help
to establish backward linkage of RMG industry in Bangladesh.
(vii) Leakage from Bonded warehouses and smuggled fabrics deter the growth
and development of RMG.
(viii) Due to provision of subsidy and other incentive at different stages of
production process by the competing countries, their products are more
competitive than ours in the international market.
(ix) Dearth of trained manpower of international standard.
(x)
Scarcity of use of modern technology is resulting a long period of shipment
as a result our products are uncompetitive in international market even
though the labor costs are low.
(xi) Due to operation of obsolete production techniques and acute shortage of
technically sound manpower, weaving and weaving-dyeing-finishing subsector could not make significant headway.
(xii) Production capacity of some factory is extremely low due to use of obsolete
technology. This was compounded by poor quality of manufacture.
Worker Unrest in May 2006
In late May and through June this year, there has been a
wave of fierce class struggle in the Bangladesh garment
industry. To illustrate the scale of events: around 4000
factories in Dhaka went on wildcat strike, 16 factories were
burnt down by strikers and hundreds more ransacked and
looted, pitched battles were fought with cops and private
security forces in workplaces and workers' neighborhoods,
main roads were blocked. Casualties include 3 workers shot
dead, thousands injured, several thousand jailed. The
Government eventually felt compelled to bring in the Army
to restore 'order'. It was a working class revolt that spread
beyond the workplace and generalized to involve the wider
working class community. At present (early July) the
struggle continues in the garment zones on a lesser scale.
(Note; figures quoted from different sources vary - I have generally taken the most
commonly
quoted.)
Md. Joynal Abdin
mdjoynal@gmail.com

The Dhaka explosion

The revolt began on Saturday 20th May in Sripur in the Gazipour district of Dhaka.
1,000 garment workers gathered at FS Sweater Factory, refusing to work until 3
arrested fellow workers were released from custody. The factory bosses locked the
striking workers in the factory, cutting the power and water supplies. Eventually, the
sweltering heat proved too much and by 11 am the workers fought their way out, then
gathered on the Dhaka-Mymensingh highway. Now joined by locals, they barricaded
the highway for 6 hours and fought pitched battles with the cops.[1] One person was
killed and 70 others, including cops and journalists, were injured.
On the morning of Monday, 22 May at Savar Export Processing Zone (EPZ), a suburb
of Dhaka, workers at Universal Garments Limited gathered in front of the factory to
demand payment of 3 months owed back wages. They were attacked by factory
security staff. In response the workers went to neighboring factories and called out
other garment workers for support. The growing group of workers then went from
factory to factory calling on other workers to join them; 20,000 workers are reported
to have joined this angry procession. By the
afternoon hundreds of other factories in Savar
EPZ and New EPZ had joined the strikes . Two
factories were torched and 100s more ransacked,
over 300 hundred company and management
vehicles wrecked. The main roads going through
Dhaka were blocked. Eventually the clashes with
police escalated and the cops responded with
bullets. The news of the escalation spread among
the workplaces and drew out most other workers
into participating.
"The day the 'riot' broke out I had been on my
way to office. Its not new these agitations here in
my locality (lot of RMG [Ready Made
Garment]factories are situated here)... I have
been witnessing this from a year or more.What struck me most was how this sort of
happening readily unified street vendors, rickshawwallas in one single angry 'mob',
which was throwing stones, crashing cars, setting fire on big VOLVO buses. If its sort
of an anarchy, I am for it with some fears inside.." - eyewitness, 26/May/06
By Tuesday (23rd) the revolt spread to more factories as more workers were picketed
out and the industrial areas of Dhaka were shut down by a generalised strike.
Workers took the revolt from the industrial suburbs, where factories were now being
looted, into the capital city itself, destroying cars and attacking commercial
buildings. Mass demonstrations demanded an end to repression, release of arrested
workers, higher minimum wages, weekly time off, overtime pay for extra work,
public holidays, payment of wages due etc. (All these demands have since been
agreed to.) Press photographers were attacked, roads were blocked and clashes with
security forces continued. Thousands of strikers descended on factories, torching 4
and ransacking hundreds more. The Bangladesh Rifles were recalled from their
normal duties as Border Control and deployed across the areas of unrest. By the
evening
3,000
soldiers
and
armed
cops
were
in
occupation.
Md. Joynal Abdin
mdjoynal@gmail.com

The garment industry bosses were now urging the government to protect all factories
with troops. The garment owners also staged their own quite pathetic little
demonstration, lying down in the road in protest at the attacks on their business. For
news footage of the revolt and meetings of panicked bosses, see;
http://www.shuchinta.com/2006/05/25/some-clips-from-the-atn-news-on-theattack-on-garments-industries/
On Wednesday (24th) things calmed down in face of the massive police/army
presence. The bosses were showing signs of being willing to make some concessions,
though still refusing to allow the right to organise trade unions. It is at present
difficult to know if this is a demand voiced by the unions or if it has much support
among workers themselves. Union leaders were brought in to negotiate a deal with
the bosses. This was a breach of the garment bosses' longstanding opposition to
union recognition; also a recognition of unions' useful potential role in containing
struggle.
Throughout June, clashes in the garment producing areas have continued, the main
issues being victimisation of militants, back pay, non-implementation of previously
agreed concessions. Strikes continually break out at individual factories, workers
nearby stop work to join in the spontaneous demonstrations. Clashes with police,
army and factory security continue, as do attacks on company property. Bosses have
also sometimes locked out workers from factories when the breakdown in workplace
discipline has become too explosive. At times whole EPZ areas are closed off by
troops. This is made easier, once the workers have been driven out, as these
industrial zones are fenced off and have their own checkpoints - complete with
customs posts - due to their exceptional economic and tax status. The garment
owners are dragging their feet in implementing the concessions, so workers remain
continually
in
conflict
with
the
bosses.
The garment bosses have estimated their losses from the revolt so far at $70 million
(and rising!) in a compensation claim submitted to the government. They have
critcised the government's indecisiveness in dealing with the revolt.The BGMEA have
demanded that a permanent industrial police force be set up to protect factory
property in the event of future unrest. At present the Rapid Action Battalion, an
armed police/paramilitary grouping is fulfilling this role. As the strikes at individual
factories continue and often spread to neighbouring workplaces, the RAB are rushed
in to attempt to disperse the angry crowds. But this does not encourage a return to
work and invites sympathy and similar action from neighbouring workers.
A recent report states:
"The owners declared suspension of work at the apparel manufacturing units at
Jamgorah, Zirabo and Ashulia in Savar on Tuesday amid an escalating labour unrest
that left at least 100 people injured and 20 vehicles damaged.
The crisis came to a head as workers of Irish Fashion started a furious demonstration
in front of the garment factory over a rumoured murder of a co-worker on Monday
night and closure of the factory for indefinite period since Tuesday morning.
The angry workers went on the rampage, clashed with police and damaged about 20
vehicles, including two staff buses of a factory, during the mayhem.... Witnesses said
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following the Monday night's violence at Irish Fashion, hundreds of workers of the
factory came to work at around 7:00am. But, they found a notice hung on the main
gate saying the factory was closed for indefinite period.
Enraged, the nearly 6,000 workers of the seven-storey factory immediately tore the
notice into pieces, went on the warpath and started demonstrating.
Fearing attack, police stationed inside the factory remained silent and did not come
out to disperse the agitating workers.
The mob pelted brickbats at and forced some other factories to close, and chanted
slogans, urging workers of those plants to join forces with it.
Most of the factories in the areas declared closure of work. Within a few minutes, the
majority of workers of those factories joined hands with their agitating fellows and
brought out a procession....
Fearing further vandalism, the authorities announced closure of over 50 factories
located in the areas adjoining to the Dhaka Export Processing Zone for indefinite
period..... A tense situation is prevailing in the areas, with many contingents of
police, the paramilitary Bangladesh Rifles and the Rapid Action Battalion deployed
in front of the DEPZ and at others key points." - New Age, 5 July 2006
"The government agreed to release arrested workers and union officials, and to drop
the cases against them. It also promised to set up a "minimum wage board for the
garment sector and take steps to meet the demands of garment workers," and -- in a
bow to the manufacturers -- to investigate the causes of the riots."
"Following the unrest in the garment sector, the factory owners at a tripartite
meeting late last month accepted almost all demands of the garment workers,
including the right to form trade unions, weekly holiday, maternity leave and
issuance of appointment letter and identity card (these letters and cards are proof of
employment and are often withheld to prevent workers later claiming back pay when
they are dismissed). The meeting formed a minimum wage board comprising
representatives from the government, the garment factory owners and
SKOP[workers' representatives] as the workers demanded increase of minimum
salary from Tk 940 [7. 59/Eur10. 97/$14. 03] to Tk 3,000 [22. 24/Eur 35. 03/$44.
79] because of the unprecedented price hikes of essentials." New Age, 29 June 2006)
So far, as unrest in the factories continues, the bosses are resisting agreeing to a
minimum wage of Tk 3,000 - an average 30% wage rise.
The
globalize
sweatshop
below we will briefly describe general working conditions and some background to
the revolt:
"Bangladesh is endowed with abundant and cheap labor force that is easily trainable
and convertible into semi-skilled and skilled work force. Price, heavily weighted by
the labor cost, is one of the main determinants of comparative advantage in the
labor-intensive garment industry. The price of labor in our country is lower
compared to some of our neighboring countries as well as some other garment
producing countries in South-East Asia and East Europe. Obviously, existence of
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such cheap but easily trainable labor is one of the advantages that Bangladesh enjoys
and will be enjoying over a considerable period in the context of international trade
on clothing."(Bangladesh Garment Manufacturers and Exporters Association
[GMEA] website.)
"The garment workers of Bangladesh may be the most deprived labor force in the
world. Most are paid between US$14 to US$16 per month, the lowest salary in the
world". - Amirul Haq Amin, Coordinator of the Bangladesh Garment Workers Unity
Council (BGWUC), 2005.
"I get Tk 900 [7. 27/Eur10. 50/$13. 43] For a month of hard labor which is not
enough to even cover my food bills,' said a worker at Tejgaon. 'Can you show me one
worker who runs his family without a hitch with the money he gets?" - Sagar, who
works in SS Sweater factory.
"Bangladesh's apparel sector now employs 2.5 million in more than 5,000 factories
and the largest industrial sector contributes more than 75 per cent to the country's
export earnings." (New Age, 30/June/06) [2.5 million Is the highest and most
recently quoted figure for workers - most sources saying 1.5 -1.8million.]
In February 2005, the International Textile, Garment and Leather Workers'
Federation found that the [official] monthly minimum wage for Bangladesh's
garment workers was some $33 ten years ago, but that came down to $16 in real
value due to devaluation of Bangladesh Taka against dollar.
The Brussels-based organization shows that in India and Pakistan, an apparel worker
gets at least 20 cents per hour, in China 23 cents, in Sri Lanka 40 cents while in
Thailand the worker is paid 78 cents. (Bangladesh Trotskyism Democratic Workers
Party.)
This is the modern face of 'Globalization'. Capital goes where there is surplus labor to
be had cheapest, installs its plant machinery and begins to extract profits. Equally,
local capital sees an opportunity to utilize cheap local labor for the global market. In
1978 the Bangladesh government set up Export Processing Zones (EPZs) to attract
foreign capital and earn export dollars. (100% foreign ownership, 65%; joint venture,
13%; 100% local venture, 22%.) In 1993 the Bangladesh Export Processing Zone
Authority (BEPZA) was set up and a blanket ban on trade union activity imposed. An
attractive investment location for investors, also including tax breaks and other
incentives. The EPZs now employ 70,000 workers, mostly in the garment and shoemaking industries (though most of the garment industry exists outside the EPZs).
National labor laws do not apply in the EPZs, leaving BEPZA in full control over work
conditions, wages and benefits. The garment industry is the life blood of the
Bangladesh economy. Garment factories in Bangladesh provide employment to 40
percent of industrial workers. More than three-quarters of the $7.8 billion of
Bangladesh's export earnings comes from exporting garments. Despite falling prices,
export volume has grown, and business is booming at present as the Bangladesh
garment industry takes advantage of comparatively cheaper labor costs and World
Trade Organization restrictions put on China, the world's largest Ready Made
Garment (RMG) exporter. Bangladesh RMG imports to the US have increased 25%
this year so far.[2]

Md. Joynal Abdin

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In its negotiation of trade agreements with the US, the Bangladeshi garment industry
is attempting to box clever in the arena of geo-politics;
"Dhaka raised the issue that most of these countries rely heavily on the export
earnings of textiles and apparel which are subjected to some of the highest US tariffs,
averaging 17 percent.
"Any debacle in the apparel industry would lead to massive unemployment of
women, creating economic and social instability, and have other possible
ramifications," the Ambassador said, conveying his country's apprehension to his
American audience.
Elaborating on Bangladesh's achievement in this sector, Chowdhury pointed out that
in a society where women empowerment is so deeply entrenched there is no scope
for religious radicalism. "This must be sustained," he emphasized."
(Bangladeshinfo.com, July 06)
The implication being that lucrative duty-free access to the American market will
encourage social conditions that lessen the possibility of a rise in Islamic
fundamentalism. It is true that the so far limited emergence of fundamentalism in
Dhaka has led to attacks on unions for their attempts to organize the predominantly
female RMG workforce.
In the generally stagnant economy of Bangladesh, the ready made garment sector is
the only significant economic force. This sector is entirely export oriented and is
composed of over 5000 units - most working for international buyers, some owned
by international companies. Most of the garment units are clustered in industrial
areas and EPZs in and around Dhaka - Ghazipor, Savar, Ashulia, Mirpur, Tejgaon,
Mohakhali, Uttara, Wari and Tongi etc. The textile and garments export constitute
over 75% of a total of $7.8 billion exports from Bangladesh.
Most of the garment workers have migrated from the poorest rural areas into the city
slums. The slum population of Dhaka has doubled in the last 10 years. "More than 90
per cent of the slum dwellers have income below poverty line, which is Tk 5,000 a
month a household. The dwellers are mostly transport workers, day laborers,
garment workers, small vendors, hawkers and domestic helps..." (New Age.) It is this
wider community that joined in the clashes and rioted with the garment workers.
The 2 million or so workers in the Bangladesh garment industry work for little more
than starvation wages, under conditions closer to those endured by European
workers 150-200 years ago. 90% are young girls and women from 12 years upwards:
physical and sexual abuse in the workplace is common. Average rates of pay in the
EPZs are $20 a month, less than half the supposed official minimum wage, overtime
is often compulsory and wages are sometimes withheld for months. Outside the
EPZs, where over 80% of garment workers labor, conditions are worse. "Some of
these garment workers earn as little as eight cents an hour, while the top wage for an
experienced sewer is just 18 cents. ...
Helpers earn: 8 cents an hour; $3.64 a week/ $15.77 a month/ $189.28 a year.
Senior Sewing Operators earn: 18 cents an hour/ $8.40 a week/ $36.40 a month/
$436.80 a year." (National Labor Committee, www.nlcnet.org, 2004)
Md. Joynal Abdin
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"The bourgeois media reports that the industry currently owes $US300, 000 in back
pay, a staggering amount considering the miserly wages." There are no guaranteed
weekly days off, no holidays, no guaranteed maternity leave, and no annual leave.
Employment is also often insecure; workers change jobs frequently due to wage
arrears, lay-offs, ill health or harassment from the bosses and their security guards.
The workplace is a highly dangerous place in this industry: in February and March
this year 2 fires killed over 100 workers and injured hundreds more, provoking
strikes. As is common, most exit doors were locked, increasing casualties greatly.
Also in February, a multi-storey factory collapsed: originally built as a 2 storey
building then over-extended, 19 workers were killed and around 50 injured.
Thousands of workers have died from employers' neglect of safety procedures.
Unions
and
workers
though there are 16 unions representing garment workers, according to the
Democratic Workers Party "...the level of unionization among workers is very low.
Where unions are involved, they act more like extortionists, taking money from
management to keep the employees in line while at the same time collecting dues
from their members, with whom they have virtually no contact. Most of the unions
have direct or indirect links with local and foreign NGOs, and receiving lucrative
grants seems to be their main goal."
Most of the trade unions appear to be tools of one or other of the political parties,
strikes being used more as vehicles for pursuing political goals against rival parties
than improving workers' conditions. The Nation Garment Workers Federation [3]
apparently is an exception to this, being a more grass-roots organization, closer to an
expression of workers' self-organization emerging from their own struggles. It would
be too easy and simplistic to apply critiques of modern western business unions to
such an organization. 11 years ago the NGWF was an organization with 3 workers
paid a basic garment workers wage operating out of a shed in a workers slum.
Working in conditions more similar for workers in Europe a century or two ago, basic
organization for defense and improvement of working conditions is a matter,
sometimes, of whether one starves or not. With rapid large-scale pro-letarianisation
of rural workers in many parts of Asia (China, India etc) struggles for unionization
are likely to follow. How institutionalized and bureaucratized organs like the NGWF
might have become is unclear at present, and will be partly determined by their
success as negotiators. One can predict that official recognition, with a greater budget
and status to manage and protect, would accelerate that process. NGWF was at one
time (though apparently no longer) in an alliance with the BGWUC , which has
recently shown an eagerness to promise an obedient workforce to the bosses. [4]
Though organizing trade unions was banned by employers in the EPZs, this is
changing, as one of the concessions won by the revolt. This is anyway a convenient
concession for the bosses; a Bill is being introduced into the US Senate which, if
passed, would ban all imports produced in sweatshops. This is a form of US trade
protectionism and corporate image management expressed as concern for workers'
conditions. The Bill would penalize Bangladesh, Jordan etc and America's big rival
China in, for example, the garment industry, by attempting to undercut their present
advantage of cheaper labor costs.
"... The Greater Los Angeles area ... has surpassed the New York area as the center of
the North American garment industry. Home to more than 1,000 manufacturers who
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employ an estimated 90,000 workers, most of them immigrant, the garment and
related industries account for as much as 10 percent of Los Angeles' economy,
according to "Sweatshop Slaves." Nearly one in five local employees today work in
the garment industry, making it Los Angeles' leading manufacturing sector." (Review
of "Sweatshop Slaves: Asian Americans in the Garment Industry", Various, 2006.)
As well as the dire conditions of employment, the low level of unionism is one likely
reason for the ferocity of the workers response. When it erupts, unmediated class war
is generally conducted more brutally on both sides. The Bangladesh state finally
realized this when it brought in union officials to mediate and negotiate an end to the
rebellion. In the long term, union representation is usually granted by the bosses as a
necessary safety valve mechanism and tool of management for the stability of the
production
process.
Riot
as
struggle
some commentators, from the bourgeois media to the ultra-left; have considered the
working class's use of riot as a sign of organizational weakness. On the contrary, we
see their use of riot [5] and fire as brave and intelligent in a situation where they
faced brutal repression by a determined body of employers and the armed forces of
the state. Property damage combined with withdrawal of labor is a time-honored
tactic of proletarians. Rioting also opens up an opportunity for the wider working
class community to become involved in the struggle and immediately spread the
perspective beyond isolated sectional activity. When the cops and army invade
workers' living areas it is anyway inevitable that the neighborhood is drawn into the
struggle. The extensive use of this tactic is also an inspiring example of effective
collective self-organization that, for the garment workers, has been far more
successful than all previous struggles.
These events are part of a wider situation where, with so many workers in
Bangladesh working at or below the level of a minimal wage necessary for survival,
the class struggle more readily takes extra-ordinary forms. Thousands of primary
school teachers have last week called off a hunger strike to the death in a struggle for
higher wages. 15 said they would 'self-immolate' (set themselves on fire) if their
demands were not met quickly. Negotiations are ongoing. (New Age, Dhaka.)[6]
The
economics
of
exploitation
The workers' revolt led to a sharp drop in share prices as international investors
panicked at reports of a 'workers' insurrection' in the garment industry. At a meeting
between the garment owners and the major international buyers (Gap, Walmart,
Asda, Carrefour etc) on June 29th, they were criticized for their handling of labour
relations. The bosses responded by saying that the agreed concessions such as wage
rises would be passed on to the buyers and retailers abroad. One buyer's
representative, claiming fake indignation at low wages in the industry, (which never
captured their interest till now when it jeopardized smooth supply and cheap price)
replied by asking; why had wages not risen in 12 years when prices had? (In the same
period the cost of living for workers had doubled.) First Secretary and Chief
Economic and Commercial Officer of the US Embassy in Bangladesh David W Renz
said it was not enough to just increase the workers wages.Improving the
competitiveness is vital to compete in the global market." "Meaning: claw back the
wage increases by pushing for higher productivity.

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The ruling class in Bangladesh should be worried by this expression of workers'

power - a major revolt forcing major concessions in the only significant export
industry. Some Western analysts are already classifying the country as 'a failing state'
and it is rated as the most corrupt in the world (in whatever way the ruling class
calculates such things). This is causing international concern at the potential
destabilizing influence on the region. "The geopolitical significance of the riots lies in
the fact that they reveal the weakness of the Bangladeshi state. The failure of the
government to contain the violence quickly and opting instead for half measures that
satisfied neither side and did nothing to bring them to an agreement points to an
implosion of govern ability and indicates that Bangladesh is drifting toward the
status of a failed state. This has implications for the stability of the South Asian
region." (pinr.com) The political system in Bangladesh is a vicious mess of instability
and regular political assassinations. There is no cohesion within the ruling class, only
warring factions perpetuating an economically and politically vulnerable state.
For capital, the competition in the global RMG sector grows fiercer. Upward wage
pressure, such as the Dhaka revolt expressed, will lead to demands for greater
productivity to compete with those countries that have managed to keep the lid on
wage demands. Competition for a bigger share of the market will cause market
saturation and price drops. The possibility of new regulations outlawing or regulating
sweatshop conditions by western buyer countries, as a form of protectionism and to
ease concerns about corporate image, is another factor, as is import quota restriction
by both the EU and US. The neo-liberal globalizing project has exported new forms
of trade and production and, consequently, new forms of class struggle.
The readymade Garments Industry is the key export earning sector for Bangladesh,
which brings to this developing country $6 billion yearly revenue. The industry has
over 4,000 export oriented factories and thousands more small scale sub-contractors
which employ nearly three million workers most of whom are women (80%).
All hell broke loose last weekend as a riot broke out in and around the capital Dhaka
city when a garments worker was shot in Savar, an industrial zone 30km away from
Dhaka as police was trying to control the angry protesters. The death sparked more
violence as thousands of garments workers took to the streets in Savar, creating
chaos and huge traffic deadlocks around the capital. A section of 800-1000 violent
protesters with sticks lead by motorcycle processions resorted to widespread damage
of vehicles, attacked about 300 garments factories, and torched many of them.
Widespread lootings were also reported and finally extra security forces were
deployed to prevent this from going further.
From the Washington post: One thing I can say that we love our machines because
they feed us and protect us from starvation. How can one with a sane heart destroy
them? - female worker Masuda Begum.
The Bangladeshi bloggers had different opinions on this issue. Change Bangladesh
Blog wonders are Bangladeshis stupid enough to kill the duck laying golden egg?
In Suchinta blog there is one video clip from the ATN News on the attack on
Garments Industries, which provides visuals of the rioting and the views of the
owners and the government. Bangladesh Garment Manufacturers and Exporters
Association (BGMEA), the owners association claimed This is part of a conspiracy
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to ruin the nations economy. They and the government are pointing to political
manipulation citing that almost all protesters were men while the majority of the
workers in the industry are women.
Shafiur shades a light that there is no one union, one industry scenario here. The
workers unions fall in line behind party politics and no doubt they can easily be
exploited by the confrontational political parties. Like some parties were dumb
enough to blame neighboring India behind this. All these beating around the bush
neglect the prime issue, the exploitation of the workers. He also blames the Garments
owners for demanding the use of force to deal with the issue.
Rumi of Drishtipat supports the workers cause but is troubled with the anarchy the
protests produced.
Journalist Tasneem Khalil points to the fact that the workers are deprived from fair
wage, fair working hour arrangements, weekly holiday, maternity leave etc. The
monthly minimum wage for Bangladeshs garment workers was some $33 ten years
ago, but that came down to $16 in real value due to devaluation of Bangladesh Taka
against dollar. The labor organizations are pressing for increasing the workers
minimum monthly wages to Tk 3,000 (18 cents an hour). Owners of RMG factories
have subverted a government plan to fix a minimum national wage for workers in the
private sector and continue to pay one of the lowest remuneration packages in the
world.
In my opinion, it is true that currently the wages are low but this small wages are also
blessings for most of the workers as they would have no option to fall victim to more
abuse as housemaids if there were no garments factory jobs. Using this leverage, the
owners have been able to continue the slavery and exploitation. Its a pity that the
government failed to uphold the rights of the workers by ignoring the minimum
wages demand. The other political parties are also guilty to the same extent as they
also do not fight for these causes. In reality, Bangladeshi politics are held ransom by
leaders, who do not stem from the workers community but are wealthy
entrepreneurs.
The exploitation issue actually starts with the globalization and the growing
competition.
Dateline NBC investigates: In Bangladesh, a female worker, Masuma gets more like
17 cents for sewing as much as 80 stripes on pants in an hour, a perfectly legal wage,
and more than many Bangladeshis like her earn. But she can barely live with that
wages. If she was paid 25 cents an hour instead of 17, a 50 percent raise, she could
lead what she considers a decent life. When a Walmart customer in US was asked in
front of Masuma, whether she would by the pant (selling price $12.84) if it was 8
cents more, she declined. One Bangladeshi garments executive claims: A few years
back, I told Wal-Mart, Give me one cents more a piece, one cent. I will use that
money for these poor people. Wal-Marts reply was, No, give us two cents less.
However consumers in the global economy seem to have no objection to Wal-Mart
CEOs $27,207,799 pa salary for encouraging such exploitation.

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Actually the Bangladeshi entrepreneurs have also little option and are forced to keep
the wages low in order to survive. It is like the master-slavery chain. Whether we
accept it or not, we all are chained humans, there is a master above us and we are a
master of someone. And the exploitation continues. The truth is no hero or
revolution is going to break the chain saving us anytime soon.
Bangladesh: Industrial Chaos Worsens Political Instability
Bangladesh has already been grappling with political instability due to the prevailing
confrontational politics in the country. The situation was made worse when the
countrys major industry and its main foreign exchange earner Ready Made
Garments (RMG) industry got embroiled in labour unrest. The industry owners and
political leaders initially tried to sweep the grievances of labour under the carpet by
floating various conspiracy theories. But the problem has refused to die down as its
roots lie within the industry and in the exploitation of labour.
Garment Industry of Bangladesh
Bangladesh earns nearly $7 billion a year by exporting textile products, mainly to
Europe and the United States. This is about 70 percent of total export earnings of the
country. The RMG industry has around 4,000 units across the country. It employs
around 2.5 million workers, 90 percent of whom are poor women. Whenever the
country is criticized for its high level of corruption and confrontational politics, its
garment industry is held up as a success story.
Dark Side of the Garment Industry
This most flourishing industry of Bangladesh has its dark side. A large number of the
units are located in dilapidated buildings. In April 2005, an entire building, housing
hundreds of mainly female workers in the outskirts of Dhaka, collapsed. Sixty-four
laborers, at work on their machines, were crushed to death, and 84 injured. What is
worse, most of these buildings do not have adequate fire escapes. On February 24
this year, more than 50 people were killed and about 100 injured in a fire at a textile
mill in Bangladesh.
The industry leaders unite together to get support and benefits from the government,
but they are not equally willing to look after the welfare of workers. In the RMG
industry in several places in Bangladesh workers are paid their salaries two moths
late. Overtime is imposed and in some cases not rewarded. The rising inflation has
reduced the value of wages. But the industrialists say that its the job of the
government to control inflation.
Exploitation of Workers
Unions say garment workers are angry over low pay and long hours. Wages in
Bangladesh's garment factories can be as little as $20 a month. Thanks to poor
working conditions, employer-worker clashes have been recurring in the textile
industry. Workers often take to the streets with complaints of poor pay and working
conditions.

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Uncertain Future of the Industry

After the end of the Multi-Fiber Agreement at the beginning of 2005 and the
changeover to the new World Trade Organization regime, it was feared that the
Bangladesh's booming textile industry would suffer as it would loose business to
countries like China and India. But fortunately for Bangladesh, so far this prediction
has been proved wrong. In fact, the industry has continued to grow at a healthy rate
of 20 percent. However, this does not indicate that the Bangladesh garment industry
has become more competitive. The reality is that this increase has been largely due to
restrictions imposed on China by the Western nations than to the ingenuity in Dhaka
or Chittagong. The Chinese cannot be held back after 2008, which means a
completely different picture might emerge after that.
Industry also faces various infrastructural problems. Due to shortage of power and
diesel industries are not able to work to their full capacity. Bangladesh Garment
Manufacturers and Exporters Association (BGMEA) fears that production in RMG
industry might fall by 50 percent and production cost might go up by about 25
percent due to the crises. Due to power shortage shipments are sent through air,
thereby increasing its cost. Unfortunately the government has not taken any step to
improve the situation. On the other hand, people have been shot dead for demanding
regular supply of electricity.
Worst Industrial Rioting in the RMG Industry
The spiraling labour unrest in the Bangladesh RMG industry started on May 23 after
a knitwear factory owner rejected an 11-point charter of demands. The factory was
completely gutted in the blaze. Protesting workers forced their way into an exclusive
industrial zone for foreign investors and damaged machinery. These workers
demanding unpaid wages and a weekly holiday smashed scores of vehicles and burn
down factories in Savar, an industrial town near Dhaka.
Among the 250 damaged units, at least 30 were owned by foreign investors in the
Savar Export Processing Zone. According to Bangladesh Garment Manufacturers and
Exporters' Association (BGMEA) vice-president (finance) Shahadat Hossain
Chowdhury Arun nearly 300 factories, including 21 factories in the Savar Export
Processing Zone (EPZ), were damaged during the three-day crisis. The total loss of
the garment industry is around four billion taka (nearly $70 million). Many vehicles
were also set on fire during the unrest, which left three workers dead and hundreds
others wounded.
This is reportedly the worst industrial rioting in Bangladesh in the ready-made
garment industry which is the country's biggest export earner. The violence also dealt
a serious blow to the industry's image apart from causing huge losses.
A Rights activist and trade union leader Shrin Akhter blamed the outbreak on
accumulated anger of workers, who even do not have any weekend. She alleged that
some garment owners even do not pay the worker their salaries and overtime
regularly. And in some cases, the employees loyal to owners cut 2 percent from the
salaries and overtime allowances.
Conspiracy Theories
The violent outburst of the workers crippled the industry for many days. Several
quarters saw sabotage behind this development. But interestingly all of them found
the involvement of different actors according to their own convenience. Government
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ministers and leaders of the Bangladesh Garment Manufacturers and Exporters

Association (BGMEA) alluded to an Indian role, alleging that the violence was the
result of "conspiracy from across the border." Finance Minister M Saifur Rahman
said the attack on the readymade garment sector was influenced from outside to
hamper growth of the industry. He said, "What happened in the past few days is very
frustrating, but I don't believe that it can be carried out by workers." Commerce
Minister M Hafiz Uddin Ahmed, in a meeting with the Bangladesh Knitwear
Manufacturers Association (BKMEA), also called the happenings "sabotage".
State Minister for Home Lutfozzaman Babar termed the outburst in the garments
sector as a subversive act. He also thought that it was a part of a conspiracy against
the country. But the same minister had seen a "conspiracy from across the border"
last year as well, when about 500 explosions occurred across the country on August
18.
Very soon the issue also acquired political overtones. Main opposition leader Sheikh
Hasina demanded the government's resignation. The opposition also alleged that the
government has created the trouble in order to shift the peoples attention from its
various failures. On the other hand, the ruling Bangladesh Nationalist Party (BNP)
said it would mobilise the public against "attempts at spreading anarchy". Former
president and Jatiya Party chief Gen (rtd) HM Ershad blamed "vested quarter"
behind the violence and mayhem, but did not specify. Leading economists of
Bangladesh have criticised both the employers and the government for their sheer
negligence to overcome the present anarchic situation in the country's readymade
garments (RMG) industry. According to Bangladesh Economic Association (BEA)
president Quazi Kholiquzzaman Ahmed the current situation in the RMG sector is an
explosion of anger that remains unresolved for long.
Agreements with Garment Workers not honoured
A study by Bangladesh Institute of Labour Studies (BILS) has indicated that garment
manufacturers and exporters in Bangladesh have yet to implement four agreements
signed between 1997 and 2005 to defuse problems following labour unrests. A
number of labour leaders believe that owners reached accords with workers just to
defuse troubles whenever there was unrest. Instead of implementing deals, the
owners even filed a writ petition against the government notification about minimum
wages for labourers circulated in 2001.
The factory owners also did not implement the 24-point suggestion offered by the
Department of Inspection for Factories and Establishment in November 2000. The
department pointed out 24 kinds of irregularities in the garment industry that went
against labour laws. Inspection by the department also found that nonimplementation of labour laws resulted in discontent and anger among the workers.
Garment Workers' Unrest Flares Up Again
Protests over low wages and other exploitative conditions continued in the month of
June too. The garment workers continued to hold rallies and clashed with law
enforcers, leaving many people injured and few dead. Defying a 'red alert' imposed
by law enforcers at the Dhaka Export Processing Zone (DEPZ) and its adjoining
industrial areas, workers were involved in clashes in the Savar, Ashulia and Gazipur
areas.
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The deepening unrest in the garment industry forced the foreign investors to
announce on June 4 that they have shut their units as fresh violence flared up in the
Export Processing Zone (EPZ). Investors of 92 units in the EPZ said that they will not
reopen the units until the government gives guarantee of law and order in the area.
They also requested the EPZ authority to declare the EPZ closed indefinitely to cool
off the situation.
Leaders of the garment factory owners' also urged the government to form an
industrial police force to ensure a secure working environment for the apparel
industry. They felt that the overall security situations in different industrial hubs
were not risk free despite the governments deployment of huge security forces.
Speaking to media on May 25 acting president of Bangladesh Garment
Manufacturers and Exporters Association (BGMEA) said, "We need permanent
solution to overcome this situation."
The Bangladesh government on June 5 dismissed Mohammd Zakir Hossain,
chairman of Bangladesh Export Processing Zones Authority (BEPZA), for failing to
adequately respond to violent protests at clothing factories. The government also
promised disciplinary action against several other executives.
Labor Unrest amidst Political Instability
Unfortunately for Bangladesh, this labour unrest has taken place at a time when the
main opposition party is also leading a movement for political reforms in the
country. The 14-party opposition alliance led by former Prime Minister Sheikh
Hasina Wajed called a 36-hour shutdown on June 13 and 14 to press home its
demands for electoral reforms, resignation of the chief election commissioner (CEC)
and two 'politically appointed' election commissioners, and to protest 'police
atrocities' on opposition leaders and workers during the Dhaka siege on June 11. The
countrywide shutdown disrupted normal life, affecting communications and
economic and other activities. Hundreds of people have been injured in clashes
between protestors and the law enforcers.
Increased political activity in the form of political agitation was expected in the runup to the upcoming elections in Bangladesh given its history of confrontational
politics. But the political instability has been made worse by the simultaneous labour
unrest in the economic lifeline of Bangladesh that is its garment industry. Initially
the government and the industry leaders underestimated the magnitude of the
problem and tried to brush it aside by floating various conspiracy theories. But these
theories were bound to fail as the problem lied in the exploitation of workers. It is
preposterous to blame India for a labour unrest in Bangladesh. If the leading
industry of Bangladesh collapses it would directly affect India as the economic chaos
in its neighbourhood will lead to large-scale exodus. This would create a bigger
problem for India. Bangladeshi industrialists have been exploiting workers,
sometimes to increase their profit margins and sometime to keep their industries
competitive in the face of increasing international competition. Thankfully, they have
now realized the root cause of the unrest and are trying to deal with it. However, only
time will tell whether the deals struck even this time would be implemented.

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Tripartite meetings for competitiveness in the garment industry:

Labour unions, employers and government
In order to respond to this need for an open dialogue among the actors of the
industry, The Asia Foundation (TAF) launched, toward the end of last year, a
regional project on Building Competitiveness through Economic Reforms in the
Garment-Exporting Countries, with financial support from the United States Agency
for International Development (USAID), in Bangladesh, Cambodia and Sri Lanka.
Through this project, The Asia Foundation, with the assistance of a local consultant,
facilitated tripartite meetings among representatives of employers and employees of
the ready-made garment (RMG) industry, and public authorities to discuss countryspecific agendas for domestic reforms that will enhance the ability of Bangladesh to
compete with other nations in maintaining a share of the global garment trade. The
eight-month program implemented simultaneously in the three countries builds
upon active engagement by the international community involved in this sector.
Consulting with other stakeholders
Prior to organizing the tripartite meetings, The Asia Foundation carried out
consultations with a number of stakeholders knowledgeable about and involved in
the RMG sector. Discussions were held with representatives of factory owners'
associations, labour federations, government departments, non-governmental
organizations (NGOs), research organizations, and donor agencies for eliciting
information on the state of the garment industry in Bangladesh and identifying the
key actors in the RMG sector of the country.
The stakeholder consultations and preparatory meetings helped in building rapport
with the three parties -- employers, employees and public authorities -- and set the
stage for holding the tripartite dialogues. Discussions with them highlighted the key
issues and concerns of these groups and provided a basis for shaping the agenda for
the tripartite meetings.
This consultation with the other stakeholders also led to the development by The
Asia Foundation of a matrix on Who Is Doing What in the RMG Sector. Developing
and updating this matrix is an on-going process aimed at keeping track of the main
activities that donor agencies, NGOs, civil society, and government departments have
undertaken in the recent past or are currently conducting in order to support the
garment industry of Bangladesh.
Engaging the actors
In Bangladesh, the program was launched at a pressing time of high tension and
deteriorating industrial relation between employers and employees. However, the
first tripartite meeting was held on April 3, 2006, with members of labour unions,
representatives of business associations and of the main relevant ministries. During
the meeting, all sides of the sector agreed upon the importance of creating a venue
for an open and constructive dialogue among the main actors.
All parties agreed that since other venues, facilitated by international organizations
or organized by the government, are specifically aimed at tackling issues such as
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labour compliance or labour dispute, these tripartite meetings should avoid such
controversial issues to concentrate on building understanding among the three
parties and on discussing areas of reform where a consensus may easily be reached.
This first meeting was thus designed to enable the three parties to freely exchange
views on the status of the industry in general and how to make it competitive under
conditions resulting from the expiry of MFA in particular.
In this meeting, the participants identified and discussed key issues that affect the
RMG sector. These issues cover a wide range of areas where improvements and
reforms have to be made in order to make the garment industry more competitive.
These include inadequate infrastructure (e.g. poor quality of roads, railways and
ports, and erratic supply of electricity and gas), inefficient and corrupt facilities (e.g.
port and customs procedures), insufficient business support (e.g. high bank interest
and charges), low level of labour standards and compliance (e.g. low wages and
inadequate compensation, unsafe working conditions, low level of productivity and
skills, non-implementation of labour laws), and ineffective policy support (e.g. lack of
government initiative to promote setting up of backward linkage industries and
"garment villages"). On most of these issues, there was consensus amongst the
participants and a willingness to work together for the betterment of the industry.
In the second tripartite meeting held on May 22, 2006, prior to discussing potential
activities to be carried out to better address the issues identified earlier by the three
parties, and in order to avoid potential duplication, The Asia Foundation presented
the matrix on Who Is Doing What in the RMG Sector. The participants then
suggested a number of activities that The Asia Foundation and other stakeholders
could undertake to improve the competitiveness of the RMG sector of Bangladesh.
The suggested activities cover a wide range of areas relating to awareness raising,
social compliance, training of managers and workers, campaigning for fair prices,
institutionalizing tripartite meetings, facilitating discussions with development
partners on their projects, etc.
The participants agreed on two activities that The Asia Foundation could conduct or
commission as part of its present program in Bangladesh. Acknowledging the fact
that creating an informal venue where the three parties could meet on a regular basis
to exchange information and discuss issues facing the industry was helping the
process of creating a better environment for the industry in Bangladesh, the
participants agreed that the first activity should focus on how to continue these
tripartite meetings after the end of the current USAID-sponsored program, in July
2006. The second activity consists in "publicizing" the outcome of the tripartite
meetings through a series of articles in order to raise awareness about the reality of
the situation of the post-MFA RMG sector in Bangladesh.
The third tripartite meeting, held on July 13, 2006, focused on the implementation of
these two selected activities. Participants confirmed their will to continue this
informal dialogue among the three parties and agreed on general guidelines for
continuing the tripartite meetings after the end of the program and discussed the
content of the articles to be published. This meeting was also the occasion to invite
other stakeholders such as international organizations and NGOs, to present them
with the outcome of the tripartite meetings and share views about possible activities.
The series of tripartite meetings facilitated by The Asia Foundation between January
and July 2006 have provided an opportunity for the participants to frankly exchange
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views and discuss difficult and sometimes controversial issues in a professional

manner. The participants have been sincere in their efforts to understand the
problems confronting the industry in general and each party in particular.
Despite the recent workers unrest and agitation, which often became violent and led
to widespread disruptions in many factories, or because of this conflict situation, the
participants to the tripartite meetings acknowledge the importance of continuing this
informal and constructive dialogue. The participants all clearly stated that these
tripartite meetings do not aim to create a venue for negotiation or dispute settlement
but rather to establish a regular forum for exchanges and discussion on issues that all
parties agree need to be reformed to improve the competitiveness of the Bangladeshi
RMG sector in the post-MFA era.
How should set the minimum wages in RMG sector?
Need is not only the materials essential to live but also it contains the standard of
living of the particular country even it is same to the poor and lower income group.
Need allows that rights also which are common to live in a minimum standard.
Bangladeshi RMG industries have a great contribution in our GDP it is about 9%
(according to the Center for Policy Dialogue) & it earns about 75% of export
currencies. Twenty laces of labor are working in this sector with 70% women
workers. This sector had to fight with various problem time to time. Such as
infrastructural insufficiency, international quota facilities withdraw in 2005 but its
growth was upward woven 13.5% & knit 35.4% in 2005 2006 fiscal year.
Recently labor unrest raise a major problem for this sector, any harm of this sector
may influence our national economy also. This problem includes
01. Working environment in the factories,
02. Working hours,
03. Weekly holyday and
04. Minimum wages of the worker.
Rests of the issues were discussing promptly but the main problem is the settlement
of minimum wages for the labor. I would like to recommend some ways this problem
can be solved but I can not recommend what should be the minimum wages of the
labor.
Steps to solve the problem & current situation:
To stop the labor unrest in RMG sector raises from May 2006, a contract has been
signed among the worker leaders, owners & government in 12 June 2006 with ten
articles. The contract includes the following matters:
01. To be sorrow in the damage of wealth & taking necessary actions to stop labor
unrest immediately.
02. The labor being faced cases in Gazipur, Asulia & Saver these cases have to
withdraw.
03. Relief of the arrested labors & no labor can be fire from his job.
04. Opening the factories being stopped.
05. Issuing of appointment letter & identity card of each worker.
06. Owners have to allow Trade Union & their bargaining.
07. One weekly holyday & other holidays according to the rules of the country.
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08. Overtime have to pay according to the labor law.

09. Maternity leave have to permit with salary.
10. A board has to arrange to set minimum wages of the labors.
To set the minimum wages government declared a board with the owners, labor
leaders & neutral representative at 31 May 2006 with six members. This committee
declared a minimum wages & request to implement it within three months. The
owners & labor did not agree to implement these recommendations.
Wants of the labors:
To declared minimum wages the labors have raised some issues like
a. Minimum main salary should be 3000 BDT and different scale should be
mentioned with different salaries for each grade.
b. 35% of the main wages have to pay as house rent.
c. 300 BDT as medical allowance.
d. 400BDT as transportation cost.
e. 200 BDT as attendance bonuses & 100BDT as washing cost.
f. According to this statement minimum wages can be 5050 BDT.
Offerings from the owners:
The owners try to set five grades in state of present seven grades, they offer only 1230
BDT for the grade 5, according to this statement a labor with get 1900BDT at the
end of a month. According to the different news published in different national
dailies the owners can be provide up to 1300BDT as minimum wage. Another neutral
representative offers to both the parties 1800BDT main salary & 2650BDT as
minimum salary.
When did minimum salary setup in Bangladesh?
There are no national minimum wages in Bangladesh. There was a board to declare
minimum wages for any sector was established at 1961 by the 34 Ordinance namely
(minimum wages ordinance). This board can setup minimum wages for any sector
when requested. In the November, 1990 government requests them to setup a
minimum wages for the labors working in the RMG sector. This board recommended
a minimum salary to the government in 1993 for implementing from January 1994.
Previous 12 years followed that minimum wages notice & no change were there.
Bangladesh did not agree with the minimum wages related ILO convention 138.
RMG workers wages in different countries:
We can compare minimum wages of some countries equal socio-economic country
like Bangladesh. It can be based on their economic condition, social standing and
others but minimum wages can be compared with the countries as follows: Country
Area
Minimum wages
Sri-lanka
EPZ
$ 50 US
Bangladesh
EPZ
$ 30 US
Pakistan
$ 43.25 US
Cambodia
$ 45 US
China
Ziang Zee
$ 22 US
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Bangladesh

$ 10 US

Methods of setup minimum wages:

Different ways of setup minimum wages can be describe here, followings should be
considered to set a minimum wages:
I. Basic Needs of the workers: Minimum wages should be set up by
considering the basic needs of a worker. The daily needs & required
services should be meeting up with this salary. It can be calculated by
considering house rent, food needs, medical allowance, transportation
& recreation etc. his family size, income of such families & sources of
income should be known to select minimum wages for the labors.
II. Capacity to bear the wages expenses for the employers: It should be
considered how much minimum salary can be paid up by the RMG
owners. In this can the rate of profit & its ratio is important. Rate of
income depends on, size of the factory, product, productivity,
marketing expenditure & international demand etc.
III. Comparing minimum wages of the other sectors of Country: It should
be considered that, what are the minimum salaries of the other sectors
of this country. Minimum salaries should be increased in RMG sector
comparing to the international value chain like lather product.
IV. Balanced Economic Development: Minimum wages should be set up by
considering the matter of balanced economic development. It should
not be so high that our RMG sector will not be competitive in the
international perspective. At the same time it should not be as lowest as
present.
Re setup present minimum wages:
The main issue of current labor unrest in Bangladeshi RMG sector is minimum
wages issue. Minimum wages should be revised based on current cost of living &
other factors. It was estimated in 1994 but costs of living have increased a lot today.
So it also should be revised. To do this followings should be considered:
a. Inflation in the Economy: Currently a great inflation has occurred in our
economy. Price of each material has increased up to 100%. So minimum
wages should be setup based on rate of inflation & its effect in the consumer
price index. Minimum wages should be calculated up to 100% of the inflation.
Not more than that or less than that. Because more wages increase may be
cause of another inflation, on the other hand less increase of wages may be
cause of poor living as well as another labor unrest in the RMG.
b. Growth of National Income: Minimum wages should be set up based on
national income otherwise it will be value less. It should be considered that,
with the growth of national income labors income should be increased.

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c. Exchange Rate: There will have to be equilibrium among the exchange rate as
well as minimum wages of labor. In this case in can be calculated based on
U.S. Dollar price with BDT. It should be considered that, benefit of BDTs
devaluation should be enjoyed by the labors as it is enjoying by the exporters.
d. It should be upper than poverty line: Minimum wages should be upper than
national poverty line, otherwise revision of minimum wages will be value less.
In fine it should be considered that, a labor provide his / her service against wages.
To fulfill his / her & there family lives what should be faire & decent wages it is mater
of dialogue. According to Carl Marx Minimum wages should be capable to fulfill
labor & his family lives & cultural needs to make him fit for the next time labor. We
should remember that, minimum wages is the least amount of wages according to
law. To set up a faire & decent minimum wages owners & government can play a
pivotal rule. It should be increase yearly so that twelve years load can not be jam at a
time.
How much BDT should be the minimum wages in RMG sector?
Minimum wages is not a competitive salary. It is fixed up for the labor those are not
skilled at all; it can save his from the exploitation of the owners. In the recent face I
discuss various methods of set up minimum wages for RMG workers in Bangladesh.
Now I would like to explain how much money should be the minimum wages in RMG
sector:
01. According to the poverty line method: According to the eating cost study of
2000 the poverty line was 708 BDT or $14 US. Its exchange value with US
Dollar at June 2006 it is equal to 975 BDT. It is quite impossible to select a
minimum wages less than this poverty line. But RMG is a modern export
oriented global business. In this sector minimum wages should not be
selected based on poverty line.
02. Equilibrium method with the current minimum wages & rate of inflation: If
we make it equilibrium with the minimum wages of 1994, i.e. 930 BDT it is
equal to 1778 BDT according to the inflationary changes. It is not an
international standard scale because according to economic law it should be
selected based upon exchange rate & economic growth of the country also. So
it will higher than that of the equilibrium method.
03. According to the method of exchange rate: In 1994 it was $1 US = 40 BDT, at
that period minimum wages was 930 BDT. With the devaluation of BDT now
in June 2006, $1US = 69.7 BDT. So, minimum wages should be about
1500BDT if we remain unchanged the minimum wages of 1994. But should it
be remain unchanged in 2006 after a great deal of inflation in each price list?
04. According to the economic growth method: If we think about the growth of
economic indicator / index it will be 2818 BDT instead of 1770 BDT. On the
other hand labors consumer index increase into 2156BDT from 1433BDT so
according to this method minimum main wages should be upper than 2156
BDT.

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05. According to the productivity method: In this case it have to remember that,
in our country a unskilled worker became a skilled labor in a factory and a
owner train up him for his own interest. After being train up a labor can shift
from this factory to the others. So this mater also should be considered when
a non-skilled labors minimum wages set up. If the wages level of this workers
do not differ from their seniors then a half skilled labor will be dissatisfy to his
/ her work.
On the other hand productivity of the private labor is more than that of the
public labors (Government factory labors). In a government factory minimum
wages of a labor is 2450BDT. So wages of RMG sector should be more than
that of them, because it is proven true that RMG workers are more productive
than that of a government factory.
06. Minimum Standard of Living Method: Minimum wages of the labor can be
set up based on any of the above methods. But it is essential that this wages
will satisfy workers basic needs & daily demands. To fulfill daily demand a
worker needs how much money it can be shown according to different
researches:
a. According to the study of Seba Nari o Sisu Kalyan Kendra 2006
single labor needs 1950BDT for his own lives in Dhaka city. It is done
to calculate only his expenditure. His family members or others are not
included here.
b. According to Trade Union Kendraw it is 9300BDT for a five
members family. But if we calculate it only for four members in a
family than it should be less than that of above mentioned.
Probable pressure on RMG sector if increased wages being implemented:
It is true that Bangladeshi product loss its price after quota facility being withdraw in
America & Europe. According to the data of BGMEA one pants or shirts C.M was
$20 - $30 US in 2004, but it is only $8.5 $12.00 today. This decrease is less in the
European market than that of the America. As a result owners are facing less profit.
According to BGMEA statement if this decrease continue then owners can not
implement increased wages of the labor thus many factory can not continue their
operation in so competitive market.
It is true that CM has decrease but it should not be considered only but it also be
considered that yearly number of work order has increased than that of the previous
time. In the 2005 2006 fiscal year growth of oven sector was 13.5% and knit sector
35.4%. so it is easy to understand from that growth rate that profit can be declined
per pieces of product but yearly profit is not declined. It is also considerable that
large factories gets lots of orders at the same time they earns hues profit but it is less
in both the cases for the small factories.
It has to be considered that, workers are getting more salaries in a large factory
comparing that in a small factory. But national minimum wages should be
representing all the maters. At the same time it is also be considered that, labors
should be issued appointment, identity cards, weekly leave, maternity leave with
wages, and right to trade union. As a result productivity will increase when a labor is
satisfied.
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B. Prospects of Bangladeshi RMG Industries

Forces behind the Development:
The success story of the Readymade Garments sector of Bangladesh is based on
employment generation and increasingly high value addition, thus smoothening the
path for growth and development of the country. The apparel and garment industry
propels sectors such as banking, finance and insurance, cargo, shipping and
transport, entertainment and hospitality, research and education and a lot more. The
mentioned performance of the industry has been possible due to:
01. The Government of Bangladesh has always been concerned about the sector's
growth and has played an active role as a catalyst to solve various
complexities, whenever intervention was necessary.
02. The cheap but disciplined and regimented workforce has been key for the
success of this industry.
03. The entrepreneur class has been dedicated and motivated to the country's
economic prosperity.
04. The quality of the manufactured apparel, which has been increasingly
recognized by our international buyers and end users all over the world.
05. Buyers' response has been encouraging through repeat orders. The industry
has been producing all sort of apparels for all seasons and has managed to get
repeat orders for every season.
06. The import policy of Bangladesh has been flexible and friendly for import of
accessories.
07. Although there are accountable anomalies, the financial institutions, both
nationalized and private, have been serving to assist this sector.
08. Readymade garment industries have managed to maintain the confidence of
the buying class and others in the business.
09. Although the backward linkage textile industry is not adequate for the needs
of the RMG industry, it has been supporting regular manufacturing and
supply systems to some extent.
Global Ready Made Garment Industry
Global Ready Made Garments exports have experienced extraordinarily high rates of
growth, along with the continual entry of new suppliers. Global export of textiles and
ready-made garment (RMG) exceeds US $ 300 billion per year, well over one-third of
which is accounted for by developing countries. Growth was particularly dramatic in
China with exports increasing several times over previous years, for Mexico and
Turkey, for Mauritius and Jamaica, as well as the better known cases of East and
South-East Asia.
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The value of world garments exports is estimated to have been $166 billion in 1996
(WTO 1998, vol. 2, p. 132).4Until the end of the 1980s the top four garment
exporters were Hong Kong, Italy, Republic of Korea, and Taiwan. China emerged as a
leading exporter in the second half of the 1980s and today occupies the number one
position in the world. In 1995 China and Hong Kong together had a share of 21.2 per
cent of the world markets, and they pose a formidable challenge to other developing
countries.
The United States and the EU together imported more than 70 per cent of world's
clothing imports in 1996. In that year the United States and the EU imported
clothing worth $43.3 billion and $80.9 billion respectively (WTO 1998, vol. 2, p.
133).5
China emerging as a major supplier of clothing is a big worry. It is the largest
garment exporter in the world and its share in the world garment exports amount to
20 per cent. Several developing countries such as India, Thailand, Bangladesh,
Indonesia, Sri Lanka, Pakistan, East European countries and Turkey are all
becoming sizeable producers of ready made garments.
Experts believe that the 2004 phase out of apparel export quotas currently in place
under the multi-fiber agreement (MFA), garment manufacturing will shift to China
at such a scale that it will become the producer of half the world's garments by the
end of 2005.
RMG Industry as a Source of Alternative Income for Women
Men who can not find a viable source of income frequently resort to migration to
urban centers. This is not such an easy option for women, however. Migration is a
highly gender-differentiated population movement. There are differentiated
responses based on gender towards individual factors concerned with migration,
entailing different consequences. There are diversities in migration patterns in
different countries and regions, reflecting diverse macro as well as micro structural
forces along with individual agencies.14 although a preponderance of males in the
migration stream prevails in most of the world, some countries such as the
Philippines and those of Latin America have demonstrated female dominance,
especially in migration to urban areas. Conversely, in South Asia it has been reported
that independent female migration to towns is still rare. According to Chant and
Radcliffe (1992: 4-7), the differences in female migration are caused by the lack of
employment opportunities in low-wage industry and service sectors in towns and
cultural barriers such as female seclusion which prohibit any independent movement
of women.
Bangladesh was considered to be a typical example of low incidence of female
migration. This is corroborated by the high sex ratio (number of males per 100
females) in urban areas compared with rural areas (Table 5). Nevertheless the gap
has been closing over the years, as shown in the same table. The sex-ratio of Dhaka
also decreased from 150 in 1961 to 123.4 in 2001, indicating a relatively greater
increase in the female population in Dhaka in recent years. Table 6 also indicates the
large decrease in the sex-ratio for the age groups between 20 to 40 over the period
between 1981 and 2001, with the largest decline for the 25 to 29 age group. This is
considered to be a clear indication of increasing migration of women of working age.
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This is corroborated by labor force survey data. The urban female labor force
demonstrated the highest rate of increase throughout the period between 1974 and
1999/2000 (Table 7).
Table 5. Sex-ratio of rural and urban population

Source: Analytical Report of Population Census 1991 and Population Census 2001:
National Report (Provisional).
Table 6. Changes in urban sex-ratio by age group

Source: Computed from figures obtained from Analytical Report of Population

Census 1991 and Population Census 2001: National Report (Provisional).
Employment in the garment industry has played an instrumental role in the increase
of independent migration of women (Afsar 2000: 123). Table 8 presents a list of the
major female occupations in urban areas. Doctor, teacher and other professional
jobs, which are socially recognized as suitable for women, constitute only a small
segment of the urban female labor market. The tailor, dressmaker category, which
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covers jobs in garment factories, constitutes the dominant occupation, accounting for
30 percent of the total female urban labor force.
Table 7. Annual average growth rate of labor force, 10 years and above (%)

Source: Calculated from LFS 1995-96; 1999-2000

This is followed by housemaid, and the two occupations together make up half of
urban female employment. These are also the few occupations in which female
workers outnumber male workers. Male employment in the tailor, dressmaker
category is 2,68,000, compared with 7,18,000 for females. In the case of
housemaids, the difference is much larger, 62,000 male and 4,54,000 female
workers.
The predominant position that the RMG industry occupies in urban female
employment is indicated by the fact that 78.3 percent of female employment in the
manufacturing sector is provided by the RMG industry alone (Census of
Manufacturing Industries 1999/2000)15. This figure is significantly higher than that
for male workers, which is 21.2 percent. (For males, the next highest occupation is in
the manufacture of bricks, tiles and non-clay products (13.5%).) For both male and
female workers in the manufacturing sector, RMG is the largest source of
employment. But while male employment is distributed across various sub-sectors,
female employment is highly concentrated in the RMG industry. Thus the
performance of this sector has an extremely important bearing on the employment
prospects and welfare levels of women.

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Table 8. Major female occupations in urban areas (10 years and above)

Source: Compiled from LFS 1999/2000

Needless to say, the RMG industry has brought significant economic benefits to poor
women who were previously deprived of any means of income generation or had only
limited choices with low economic and social remuneration, for instance, as domestic
servants, construction workers and sex-workers (Zohir and Paul-Majumder1996;
Kabeer 2000). In addition to immediate improvement in income levels, resulting in
the improvement of diet, housing conditions, and purchasing power, the steady
income provided by RMG employment has contributed to a longer term
improvement in their living conditions. The dynamics of the poverty reduction
mechanism for RMG workers functions through savings, accumulation of assets such
as land and housing, investment in business and education of children and siblings.

The role of the RMG sector in our national economy

The role of the RMG sector in our national economy can hardly be over-emphasized.
There has been a steady development in our RMG export field during at least the last
decade and a half but in the last few years it has been unique. The export of RMG
recorded an average growth of 21.53% since 1994-95. The growth of export in the
RMG sector from 1993 to 1999 shows that in 1993 it amounted to 61.4% of the
countrys total export income, and by 1999 the it was 76.05%. This indicates how
rapidly the export of the RMG has grown (see Table 1) Table-1: Development of the
Export of RMG Sector
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YEAR
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999

Export of RMG (in Mln. Total Export (in Mln. Share of RMG's to Total
US$)
US$)
Export
1555.79
2533.90
61.40
2228.35
3472.56
64.17
2547.13
3882.42
65.61
3001.25
4418.28
67.93
3781.94
5161.20
73.28
4019.98
5312.86
75.67
2810.38
3695.46
76.05

Source: Bangladesh Export Statistics, Export Promotion Bureau (EPB) (Compiled).

The share of annual national export income from other sectors such as frozen food
and jute goods together is not more than 12% of the annual national export income
(see Table 2). Table-2: Development of the Export (in Million Taka) of different
Sectors from 1993 to 1999
Commoditi 1993-94
es
Amoun %
t
Woven
51 47.21 50.97

1994-95

1995-96

1996-97

1997-98

Amoun %
Amoun %
Amoun %
Amoun %
t
t
t
t
7360.53 52.85 7970.65 50.20 9529.18 50.65 12900.1 55.09
8
Knit
1052.58 10.42 1577.37 11.32 2447.12 15.41 3250.11 17.28 4266.17 18.22
Total RMG 6199.79 61.40 8937.9 64.17 10417.7 65.61 12779.2 67.93 17166.3 73.31
7
9
5
Frozen
638.91 8.31 1225.93 8.80 1283.01 8.08 365.65 7.26 1333.13 5.69
Food
Tea
152.14 1.51 131.54 0.94 135.51 0.85 162.39 0.86 21 5.36 0.92
Raw Jute 227.23 2.25 318.74 2.29 371.12 2.34 495.29 2.63 488.94 2.09
Chemical 21 6.73 2.15 431.65 3.10 402.68 2.54 461.89 2.46 363.21 1.44
Product
Leather
670.16 6.64 810.52 5.82 865.86 5.45 832.35 4.42 863.21 3.69
Jute
1130.89 11.20 1278.62 9.18 1345.29 8.47 1353.45 7.19 1276.82 5.45
Grand
10097.5 100.0 13928.4 100.0 15879.0 100.0 18813.0 100.0 23416.3 100.0
Total
9
0
6
0
9
0
4
0
7
0

1998-99
Amount %
14320.8 56.18
0
4967.67 19.49
19288.4 75.67
7
1316.17 5.16
184.99 0.73
344.14 1.35
380.19 1.49
807.20
1457.78
25491.1
0

3.17
5.72
100.0
0

Source : Bangladesh Export Statistics, Export Promotion

Bureau (EPB) (Compiled).
Back in the 80s, a large number of private sector initiatives were taken in
manufacturing sectors like the RMG industry. The RMG industry has enjoyed a
meteoric rise from less than 50 factories in 1983 to over 3000 in 1999. In between
this period, the level of employment has increased from some 10,000 to
approximately 1.5 million today (see Table: 3); with its share of employment in the
manufacturing industry increasing from a mere 2% to over 15%.
Table-3
Year
No.

1983
of 50

1987
629

1991
934

1995
2268

1999
3000
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Factories
Source: Bangladesh Statistics, EPB
Women are the most disadvantaged section of our population, whereas in the apparel
and garment industry they are the prime movers of this labor-intensive industry.
About 90 per cent of the workers are women, comprising of almost 70% of all female
employment in the nation's manufacturing sector. This industry has also created a
vast scope for employment at all levels of production including management,
supervision, etc. This sector has uplifted the neglected section of the population, thus
radically transforming the socio-economic condition of the country.
Bangladeshi entrepreneurs took advantage of the Multi-Fiber Arrangement (MFA)
and the Generalized System of Preferences (GSP) to successfully capture a significant
market share for Bangladeshi garments in Europe and the US. A substantial number
of entrepreneurs, managers, supervisors, technicians, and workers, etc. are
reasonably proficient in all relevant aspects of the industry. Almost all major
retailers, brands and importers of Europe and the US buy garments from
Bangladesh, and many have set up offices here. They have invested time and money
in transferring critical know-how, and establishing strong and long-term
relationships. Even in trading, Bangladeshi entrepreneurs have made their slow but
sure entry. Under these circumstances Bangladesh must look at the future of RMG
exports after 2004 with strong optimism. The human capital and customer
preference must be leveraged to its full potential, rather than lost due to illogical and
unnecessary pessimism about the future.

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Recommendations
Recommendations to ensure optimum realization of the potential of the exportoriented RMG sector to increase the export income of the country: To ensure the
expected development of the export-oriented RMG sector and use its full potential to
increase the foreign exchange income of the country, the following measures must be
introduced:
National political Measures
a. Introducing measures to ensure national political consensus so that the exportoriented sector would remain unconditionally unaffected under any political
circumstances.
b. Introducing measures to ensure a sound law and order situation so that all
operations of the export-oriented factories can take place without any kind of
interruption and hindrance.
Developmental Political Measures
01. Introducing attractive financial as well as other kinds of incentives to promote
investment in the export-oriented RMG sector.
02. Introducing non-bureaucratic and easy operating practical policies to encourage
foreign direct investment in the export-oriented RMG sector.
Marketing Support Measures
a. Ensuring trade diplomatic measures to convince the USA and other
such developed politically important trade countries to increase its
RMG export quota for RMG export from Bangladesh.
b. Providing international-marketing support for export-oriented RMG
manufacturers, i.e. helping exporters from the RMG sector to visit
international Trade-Fairs and buyers abroad.
c. Supporting quality management, proper export documentation, and, in
cases of difficulties, ensuring payment from abroad.
Fiscal Measures
01. Providing financial, legal, institutional and all other kinds of support for
backward linkage industries in the export-oriented RMG sector, so that this
sector can grow relatively independent from imports and improve its
competitiveness in the international market.
02. Exempting taxes and VAT for RMG exports, so that exports could become
more competitive in the international market.
03. Providing long term Tax Holiday in export-oriented RMG sector to
encourage new national and foreign investment.
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04. Carefully adjusting the exchange rate of the national currency to the
currencies of the international competitors so that national economic
development is not affected but the export-oriented RMG sector gets the
necessary financial incentives and the support.
05. Making value addition for high value items flexible, so that high valued RMG
exports can become competitive in the international market.
06. Removing all anomalies from the functions of the Banks and introducing the
following steps to support export-oriented RMG enterprises:
Requirement of obtaining approval from Bangladesh Bank for the
issuance of Forced/Demand Loan by the lien banks should be
withdrawn.
Back-to-Back PAD/Forced Loans should not be considered as default
loans. Loans of this nature should be converted into interest-free Block
Accounts and amortized against future export proceeds.
Overdue FBP created against the liability of any VC should also not be
considered as default loans.
Mandatory compulsions set forth in the ECG policy should be waived.
Procedure of obtaining prior permission from Bangladesh Bank for
exporting goods against stock-lot should be withdrawn.
Negotiating Banks should be authorized to consider discounts up to
20%.
Condition for obtaining approval for discount from the Bangladesh
Bank should be relaxed and discount approved by the EPB should be
treated valid.
Forty-five days, from the date of document negotiation, should be
allowed for fund remittance. Overdue interest should not be charged in
the event that the remittance is delayed.
Private commercial banks should immediately cease charging "VC
Acceptance Charges" as done by the Nationalized Banks of the country.
Laws should be enacted announcing that the Banking Companies Act
passed by the Jatiya Sangshad (the Parliament) on 13 March 1997 is not
applicable to the export-oriented Readymade Garment Sector of the
country.
Readymade garment exporters should not be held responsible if
proceeds against their exports are not realized owing to the reasons
beyond their control.
Opening of UC based on Realization Clause should be re-introduced.
Working out policies, in cooperation with BGMEA, to provide cash
incentives to encourage better export performances.
Infrastructural Supporting Measures
Measures To Remove Transport Congestion
I. Removing port congestion so that export-import operation can take place
without any kind of delay, a holding export schedule is not only a precondition
to satisfy the buyer but also to improve the business image of the country
abroad.
II. Ensuring a rush-free and well-developed Road and Railway communication,
so that urgent transport between the export-oriented RMG enterprises can
take place without delay.
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III. Ensuring prompt transportation of export goods to the port and transport of
import goods from the port to the corresponding enterprises.
IV. Regulating air cargo charges so that it does not affect the competitiveness of
the export-oriented RMG sector.
V. Ensuring the delivery of air import shipment so that delivery without any
delay is assured.
Measures To Ensure Uninterrupted Power Supply
v Introducing measures to ensure uninterrupted power supply to all exportoriented RMG enterprises, so that they can operate normally and at its full
potential and capacity.
Measures To Ensure Appreciating Customs Service
A. Computerizing custom services and equipping it with a modern
communications system, to ensure prompt services.
B. Freeing the custom procedure and services from all anomalies and corruption.
Development of Managerial and Institutional Measures
i.

ii.
iii.

iv.
v.
vi.

Integrating BGMEA representatives in the Board of the nationalized Banks to

ensure prompt financial operation in the export-import business of the
export-oriented RMG enterprises and to speed up and promote investment in
the export-oriented RMG sector.
Providing the export-oriented RMG sector similar facilities given to the
enterprises in the EPZ; essentially there is no difference between these two
groups of enterprises.
Establishing RMG villages so that unhindered operations of the exportoriented RMG enterprises can be ascertained and the productivity increased
by providing healthy accommodation to the employees of these enterprises.
This will help keep the capital city free from environmental pollution, which is
partly done by these enterprises. This will also relieve city from the unbearable
traffic jam.
Establishing an Apparel Board composed of persons from the policy making
and implementing body of the government to ensure support and assistance
for the export-oriented RMG sector.
Forming a Cabinet committee headed by the Hon'ble Prime Minister, which
should meet quarterly to solve especially unforeseen problems of the exportoriented RMG sector instantly.
Privatizing EPB or permitting a parallel private institution for the services that
are provided by EPB so that prompt and qualified services are ensured.

Measures To Ensure Development of Human Resource

1. Creating educational facilities for the labor force from export-oriented RMG
enterprises.
2. Providing training opportunities for labor and management from exportoriented RMG enterprises.
3. Organizing workshops, seminars and symposiums to explain the necessity and
importance of discipline, qualified workers, and improved productivity for
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export, national economy development & the welfare of the workers

themselves.

From Labors Perspective: It should be like the followings:1. Labor Laws :

The Government of Bangladesh should devote resources to enforce existing labor
laws, particularly regarding occupational safety. It should increase the number of
labor inspectors and random inspections and develop incentives for inspectors
and employers. In addition, it should enforce punishment for noncompliance
with labor laws. Resources should also be devoted to modifying existing laws and
formulating new laws where necessary. Many female garment workers are
excluded from the application of existing labor laws, because their jobs are
temporary or seasonal. Moreover, many existing labor laws do not comply with
the dynamic needs of export-oriented industrialization. For example, because the
laws limit women to working in a factory from 7 a.m. to 8 p.m., many garment
employers are reluctant to employ women. Such laws need to be reformulated to
accommodate equal participation of men and women.
2. Labor Rights:
Less-educated and new workers do not know much about labor laws. For
example, the survey of 1990 shows that most employers do not give maternity
leave because workers do not ask for it. The Bangladesh Garment Manufacturers
and Exporters Association, together with trade unions and NGOs, should conduct
educational programs for workers so that laws can be enforced through popular
demand.
3. Export Processing Zones: The study has shown that both terms and
conditions of employment and working conditions in the factories established
in the Dhaka Export Processing Zone (DEPZ) are better than those established
outside the DEPZ. Gender relations in DEPZ factories are better than those in
non-DEPZ factories. Hence, expansion of export-processing zones should help
to balance the gender impact of export-oriented industrialization. In setting
up its export processing zones, Bangladesh should impose precautionary labor
and environmental provisions to combat the adverse effects of growth of
EPZs.
4. Training and Education
To successfully compete in the global apparel market, Bangladesh has to translate
its comparative advantage of womens cheap labor into sustainable competitive
advantage. This will require technological development in the garment industry.
However, the findings show that female workers are ousted from the garment
industry when there is technological improvement. This problem can be
effectively solved by training female workers. Education plays a dominant role in
balancing the gender impact of export-oriented garment manufacturing.
However, more-educated women are reluctant to undertake jobs in the garment
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industry because they have to join as helpers, the lowest-paying jobs. Highercategory jobs require skills that, at present, must be acquired through on-the-job
training as a helper. Establishing training facilities outside the firm would
effectively raise female garment workers educational base.
5. Support Services
The provision of safe, secure, and inexpensive services would alleviate the gender
imbalance against women. First, provision of separate bus services would relieve
much of the female workers' stress. Paul-Majumder and Khatun (1997) show that,
female garment workers are willing to pay more for safe and secure transport.
Second, supplying cheap, secure, and hygienic housing facilities for female
garment workers would help eliminate the gender imbalance arising from the
growth of export-oriented garment manufacturing. Third, the government should
establish health centers at the locations where the garment factories are
clustered. Health centers in these locations would help the garment workers to
gain access to medical facilities without spending much time. Additional services
that would greatly help eliminate the detrimental effects of export oriented
industrialization on women include health insurance services, financial services
for savings and credit, day-care services, and legal services that meet the specific
needs of women as workers. Empirical evidence suggests that investment in
support services brings profits to employers by raising the productivity of female
workers (Paul-Majumder 1998).
6. The Two-shift Working System
The survey findings showed that one of the most dominant factors affecting the
health status of the garment workers is long working hours that drastically curtail
the female garment workers' time for leisure and sleep. Hence, a policy
recommendation follows that steps should be taken to eliminate overtime work
from the garment industry by establishing a two-shift working system.
7. Issues for further Research Researches should be undertaken on the following
issues in order to enhance our understanding of the relationships among
gender, export-oriented industrialization and change in Bangladesh.
1. Long-run employment prospects for women in the export-oriented
industries.
2. Long-term impact of garment workers poor health.
3. Export-oriented industrialization and violence against female
workers.
4. The role of support service in eliminating gender imbalances.
5. The impact of return migration on poverty.
8. Indecisive regional Re-location Policies for Export-Oriented RMG
Enterprises: To help reduce the environment pollution in the city and provide
garment workers with adequate residencial facilities, garment factories need
to be shifted to the outskirts of the city. Government's "khas" (own) lands
beside the Dhaka-Chittagong highway could be allocated for setting up of
garment villages and to accommodate the workers of the export oriented
garment industry. This could relieve not only the pressure on the environment
of the city but also traffic jam and population and other related pressures.
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9. Acknowledgement for the Needs of a Cabinet Committee for export-Oriented

RMG: A cabinet committee headed by the Hon'ble Prime Minister of the
country should be formed to solve specific and unforeseen problems in the
export-oriented RMG sector. The committee may meet quarterly to review the
overall situation of the export-oriented RMG and take necessary measures to
promote RMG exports.
10. Recognition of the Necessities of Delegation of Responsibility of the
Government: Export-led development has become imperative for survival in
the changed environment of the world economy. To respond to the demands
of the export business, the establishment of a Private Export Promotion
Bureau has also become imperative. In view of the recent quota bungling by
the corrupt EPB officials and quota brokers, it must be considered whether
EPB activities relating to quota matters should be handed over to BGMEA.
Recent international development in this respect supports this view.
Pakistan's new textile quota management policy for 1998 to 2004, for
example, has been deregulated. Conceding to the call for quota and duty free
trade in textile and clothing by the year 2005, the country's quota
management has been dramatically shifted, almost in tote, from the official
agency Export Promotion Bureau Pakistan to the 15 private sector associations
dealing with knitwear, woven garments, made-ups and yarns & fabrics.
11. Recognition of the Necessity for an "Apparel Board": Solving specific and
unforeseen problems of the exporters of the RMG sector from policy making
to implementation in every phase needs prompt service from the Government.
Following the example of the Tea and Jute Board, the setting up of an
"Apparel Board" has become very essential to free the industry from time
wasting bureaucratic shackles and make it more dynamic.
12. Recognition of the Role of Education and Training to Improve Labor
Productivity: The experiences of the industrialized countries of the world
show that improvement in working conditions and work organization can
result in increased productivity and competitiveness. This has been also been
demonstrated in Bangladesh by entrepreneurs of small and medium sized
enterprises who have taken voluntary action to improve working conditions
and labor productivity. Improving the productivity in this industry could thus
result in making these enterprises more competitive. In Bangladesh, the
garment industry is the major employer of the disadvantaged section of the
population the women. Increased competitiveness in the industry will also
bring economic advantage for the women and make them socially safer.
The work force contributing to this sector comes mostly from the
disadvantaged areas and thus workers lack the proper education and training.
These workers are not highly skilled and their contribution sometimes results
in more rejected products. It is the skilled laborer and technicians who play
the vital role in the development of the industry. The employment of a
disproportionate number of unskilled labor by the garment factories in
Bangladesh results in low productivity and comparatively more expensive
apparels. Measures to enhance worker contribution should take place
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immediately. Vocational training for increased labor productivity should

include graduation/diploma programs at the plant level to ensure sustained
improvement of the industry's productivity. As a means, conventional
vocational training institutes all over Bangladesh should be developed to teach
the base level human resource for advanced technology. Moreover, necessary
steps should be taken both by the government and the private sector to
establish more fashion and technology institutes according to the spirit of the
age. The work force in this sector should be well aware of the modern
technologies as well as the fashion of the buying countries.
13. The debt-equity ratio is fixed at 70:30 or at least to a favorable range.
14. To reduce the demand-supply gap of fabrics and yarn an investment of
Tk.160000.00 million shall have to be made in the backward linkage
industries in the textile PTS in the next 5 years. Half of this may be provided
by the entrepreneurs as equity or agents for foreign direct investment. Rest
half may be provided by banking channel on the basis of bank-client
relationship.
15. Workers unrest should be stopped for ever by arranging a logical feedback to
their claims.
16. Worker rights fixed by the International Labor Organization (ILO) should be
strictly maintained in this global sector so that these types of labor unrest
never come back.
17. Government should form a special tribunal those who will inspect the working
environment as well as labor owner relationship. This is doing by the
BGMEA from owners side.
18. National political leaders should be aware about their harmful activities like
strike. They should be compromised to keep national & economic interest
first.
19. Necessary instruction is issued by the Bangladesh Bank to finance the
following backward linkage sectors on priority basis.
a. Dyeing and finishing of woven fabric Weaving
b. Composite knit
c. Specialized spinning (manmade fabric-based)
d. Spinning (Ring and Open-end)
Priority may be given to those units which will be employing the
retrenched/terminated workers of RMG units closed down due to
adverse impact of MFA phase-out.
20. A special fund of Tk.80, 000.00 million shall be made available at an interest
rate of 7%, 2% less than the present bank interest rate. The 2% difference is
subsidized by Bangladesh Bank (Central Bank) under a refinancing scheme.
21. Import of textile spares, dyes and chemicals and sizing materials is made duty
free.
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22. Rebate may be allowed to utility bills like electricity and gas etc. subject to
regular and timely payments.
23. Cash assistance at 15% is given for using local yarn/fabrics for export of
apparels to make them competitive in the post MFA regime.
24. Training program be introduced to produce efficient and experts workforce
and personnel in the field of textile production, so as to keep pace with growth
of the sector as a whole. In this regard new training institutes are set up and
program to upgrade the existing institutes undertaken.
25. The National Institute for Textile Training Research and Design (NITTRAD),
a training institute under public sector having necessary infrastructures be
upgraded and run under public-private joint partnership with BGMEA &
BTMA. This will then be effective and result-oriented. At the moment its
performance is below the satisfactory level. If possible this may be affiliated
with foreign training institute to impart training to meet the demand of the
present day.
26. Go for capacity building of the textile related trade bodies.

Md. Joynal Abdin

mdjoynal@gmail.com