RMG industry: Realities versus emotions

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Offline sayma

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RMG industry: Realities versus emotions
« on: June 04, 2013, 03:43:51 PM »
Readymade garment (RMG) industry in Bangladesh has come a long way today since its inception in the late 1970s. The industry enjoys the status of being the biggest and number one industry in the country and does rightfully so. Employing directly more than three and a half million workers and many more indirectly, the 20-billion dollar export industry, unfortunately, is yet to be seen as a firmly footed and solid one.

Shortly after the very first initiative of RMG manufacturing and exporting from the country, the business flourished and has been growing henceforth at a phenomenal rate. Reasons for this rapid growth of this industry can be attributed to following various factors:

a) The rise of RMG in Bangladesh coincided with the volatile internal conflict situation in Sri Lanka. A strong RMG industry in Sri Lanka was faltering. International buyers then found an alternative emerging industry almost in the neighbourhood exactly at the same time,

b) Availability of government policy support in terms of duty- free import facility of capital machinery, back-to-back Letter of Credit (LC) facility for import of raw materials, Customs bond facility etc,

c) Abundance of cheap labour,

d) A situation of relaxed or almost no control/restrictions over matters related to labour law, compliance etc. for the garment makers,

e) Entrepreneurship from the relatively young investors,

f) Both technical and buying support from the foreign buying agents and buyers, etc.

The growth of the industry was comparatively easier for us than it was in other countries because of these reasons. As a result, the industry could reach the level where it stands today. One can ask a question though whether the existing state of the industry is a very satisfactory one or it could have been better. The issue is debatable.

It is possible that if all the favourable conditions did not exist then the growth of the industry could have been slower and the size of the industry could have been much smaller.

But if the conditions at the beginning were different, that is, strict control was in force; all legal requirements in the factories were made mandatory including observance of code of conduct; labour and factory compliances were compulsory; buyers were firm on their requirements including their demands for sourcing factories to be compliant, today we might have ended up with maybe a mere 25 per cent of the number of factories than that we actually have today. But with this scenario there could have been some better pictures available in the industry as well. Factories growing up under those conditions could have been far more efficient and resilient in running production; managements could have been better positioned in price negotiations; workers far better off in terms of getting better compensation packages and other benefits; far less or no industrial unrest; better image of the country in the eyes of the rest of the world; etc.

Though the total export turnover in that case would have been less than what it is today, yet with the industry would have been suitably placed at a solid base for a reasonable and healthy growth thereafter, avoiding unhealthy competitions among the co-makers and exporters. Buyers of our RMG would have learnt from the beginning to buy at right prices (not as cheap as they are today but still cheaper than anywhere else).

This writer's own reasoning says that the second scenario for the industry would have been more profitable for us in the long run. But then this is not what has happened. The growth instead has been too fast and it has happened before the fortification of the industry could take place, resulting in a situation where large-quantity buyers find big opportunities for them to buy their merchandise at low prices, which often are beyond reason and logic. Factories with big stomachs are trapped in a situation where they feel compelled to take orders at below or cost prices.

Now, what has happened has happened. We must be happy with the positive gains of the real scenario. But we must not be contented or complacent. If we believe in the fact that still the industry can turn around and work hard on making amends to the past mistakes/lack of proper practices and prepare for a brighter future, then we should start today.

What are there to be done? How and by whom?

But this is not an easy task anymore and also there is no magic wand for doing it overnight. It is neither a task that can be performed singularly by the garment makers only. There are also other important multiple players who must do it together keeping a common goal in view to achieving.

Manufacturers themselves, business associations, buyers' community, labor organizations, government and opposition political parties, media, civil society have all important and vital roles to play.

Manufacturers of RMG, being the ultimate beneficiaries of the outcome good or bad, are the most important players of all. This writer does not advocate here for all the garment owners to be united on taking measures or actions together in doing businesses. It would have been very good that way but it is a near impossible task in our country. If we cannot unite together to achieve our common goals then at least we should work individually in a manner where your way of doing business will not harm others in the industry but at the same time ensure your own rightful interests.

The workers' recruitment often is to target good factories to hunt the heads from. This is not a wise move, as it doesn't help the industry train or make more skilled work forces. Factories which do this make others suffer. In a way, it is unethical too. Training workers in-house, deploying work-study team for improving productivity etc. can be a good practice for the factories.

Doing business ethically for the factory owners also is something that can have many complex interpretations. We shall not go for that in this script. Pulling workers from the next-door neighbour or extracting orders by under-quoting prices intentionally below standard levels can be just two of the examples of unethical practices on the part of the factory managements. There could be many more other examples.

Generally RMG owners/entrepreneurs are well educated and they enjoy lofty positions in the society. So it would be befitting for them to care for being ethical at least to a decent extent. Business should not mean money-making only. Doing business with prestige should matter at some stage.

If not for the industry or for the country then at least for themselves, the factory owners need to be on their guard whether they are doing the right things in terms of achieving different performance indices in their operations. Improving productivity and efficiency by adopting modern production machinery, tools and techniques, workers and staff satisfaction, reducing workers' turnover and absenteeism; ensuring quality and delivery commitments, minimising wastages, caring for environment, contributing to the corporate social responsibility (CSR) and thus making a factory commendable and desirable for its production by eminent buyers are the issues the garment makers and exporters cannot afford to miss addressing seriously.

We do not need to think about the industry: just think about our own operation(s) and improve them. That will do the trick. The whole industry will be transformed one day. Suddenly we will find that we no more need to entice workers from our neighbouring factories: we don't need to quote prices below the rational lines, we don't need to overbook capacity beyond practical limits, we don't need to hide facts from buyers or third party auditors, or maintain manipulated records to pass code of conduct or ethical audits. For compliant and efficient manufacturers the market is quite big and it can always get bigger for us as we successfully come out of the spectre of fire incidents or building collapses or poor health and safety records and lack of ethical practices in the industry.

We may think that orders are coming to us anyway. But we can also consider the fact that some of the buyers buy from us because they do not have a choice yet but secretly they are searching for a better supplier than one of us in all those CoC and ethical terms. They are buying under compulsion but if we can change our status for better then they would come to us happily with a smile on their faces and will not mind paying us some extra bucks because that would make sense for them too.

In order to get to that state there is no other alternative but to have a very strong HR (human resource) department in our factories and also a very strong team of people who would work in synergy with production and quality teams. Those days are gone when we could feel safe only because our production department is doing well and quality is acceptable. There are much more on the demand list from the buyers these days. Every time there is a serious violation in the industry and media has it, big and top buyers immediately sit on devising stricter conditions for us. We cannot blame them, can we? Even without CoC or ethical or health and safety issues, buyers can always work on making our tasks difficult by asking for more and more tests on raw-materials and the products. But when there was fire in Tazreen garments or a building collapse in Savar and hundreds of workers' lives were lost, they can make the sky fall on us. This is exactly what is happening now.

Less or no violation of overall compliance requirements and no major accidents can make our life a lot easier and business can prosper unhindered.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) are apparel business associations for almost all the apparel makers and exporters in the country, doing a very useful job for the industry. We have all seen how fantastically these two associations always reacted fast with full force to attend the distressed whenever a disaster struck the member factories. They always managed to keep the interest of the industry beyond anything else including petty party interests, which can be a very good example for political parties of the country to take inspiration from.

But they can do a lot more and doing it is an absolute necessity in the context of the current situation that prevails in the industry now. Tougher actions are required from these apex bodies to see that the individual RMG companies are doing right things which are fundamental. Health and safety standards, general compliance, ethical practices and workers' rights in the work places are serious issues that need to be tackled with prudent and bold leadership. It is not easy and possible for these associations to put pressure on the factories and compel them to do anything and everything that is essential to do. If this is the case, then the associations must make a list of conditions they must impose on the member-factories for greater good of the entire industry in general.

The BGMEA and the BKMEA should look into third party audits as often persons coming for audit tend to interpret customers' requirements inappropriately. It happens quite regularly that they interpret buyers'/customers' recommendations as mandatory and press the factories to act accordingly. Recommendations are advice and suggestions, not compulsory. They even rate factories on the basis of indiscrete assumptions. Associations can work closely with the factories to learn more specifically about these matters and help sort them out by working with buyers/audit firms. Factories spend a good amount of money to comply with and keep good practices up all the time. It is important to see that factories are not forced to do unnecessary things when necessa ry things lie aside.