Emergence of the global market has heightened the role of trade in world economy and

made industrialization as an integral system of global trade and production.

Executive summaryEmergence of the global market has heightened the role of trade in world economy and made

industrialization as an integral system of global trade and production. Bangladesh economy at

present is more globally integrated than at any time in the past. The MFA phase-out will lead

to more efficient global realignments of the textile and clothing industry. After the

introduction of Agreement on Textile and Clothing (ATC), the RMG industry of Bangladesh

is facing new and unique challenges. The phase out was expected to have a negative impact

on the economy of Bangladesh. But recent data reveals that Bangladesh absorbed the shock

successfully and indeed RMG exports grew significantly. Due to a number of steps taken by

the industry (e.g., successful in diversifying products and markets, increased backward

integration, high level of investment, and supportive policy regime), Bangladesh still remains

competitive in RMG exports even in this post phase-out period. But much more needs to be

done (e.g., removal of structural impediments, establishment of training and research

institute, sharing of knowledge and technology) in order to maintain the competitiveness in

the global RMG market.

Over View of Bangladesh Economy:

According to the IMF list of 2007, Bangladesh ranked as the 48th largest economy in the

world. The economy has grown 6-7% over the past few years despite inefficient state-owned

enterprises, delays in exploiting natural gas resources, insufficient power supplies, and slow

implementation of economic reforms. Bangladesh remains a poor, overpopulated, and

inefficiently-governed nation. Although more than half of GDP is generated through the

service sector, nearly two-thirds of Bangladeshis are employed in the agriculture sector, with

rice as the single-most-important product. Garment exports and remittances from

Bangladeshis working overseas, mainly in the Middle East and East Asia, fuel economic

growth. Although one of the world's poorest and most densely populated countries,

Bangladesh has made major strides to meet the food needs of its increasing population. The

land is devoted mainly to rice and jute cultivation, although wheat production has increased

in recent years; the country is largely self-sufficient in rice production.Nonetheless, an

estimated 10% to 15% of the population faces serious nutritional risk, and that food security

is at risk for 45% of the population. Bangladesh's predominantly agricultural economy

depends heavily on an erratic monsoonal cycle, with periodic flooding and drought. Although

improving at a very fast rate, infrastructure to support transportation, communications, and

power supply is poorly developed.

Economic history

East Bengal--the region that was to become East Pakistan and later Bangladesh - was a

prosperous region of South Asia until modern times.It had the advantages of a mild, almost

tropical climate, fertile soil, ample water, and an abundance of fish, wildlife, and fruit. The

standard of living compared favorably with other parts of South Asia. As early as the

thirteenth century, the region was developing as an agrarian economy It was not entirely

without commercial centers, and Dhaka in particular grew into an important entrepôt during

the Mughal Empire. The British, however, on their arrival in the late eighteenth (18th)

century, chose to develop Calcutta as their commercial and administrative center in South

Asia. The development of East Bengal was thereafter limited to agriculture. The

adminstrative infrastructure of the late eighteenth and nineteenth centuries reinforced East

Bengal's function as the primary producer--chiefly of rice and jute--for processors and traders

in Calcutta and beyond. Some of the same factors that had made East Bengal a prosperous

region became disadvantages during the nineteenth and twentieth centuries. As life

expectancy increased, the limitations of land and the annual floods increasingly became

constraints on economic growth. Traditional agricultural methods became obstacles to the

modernization of agriculture. Geography severely limited the development and maintenance

of a modern transportation and communications system.

The partition of British India and the emergence of India and Pakistan in 1947 severely

disrupted the former colonial economic system that had preserved East Bengal (now

Bangladesh) as a producer of jute and rice for the urban industrial economy around Calcutta.

East Pakistan had to build a new industrial base and modernize agriculture in the midst of a

population explosion. The united government of Pakistan expanded the cultivated area and

some irrigation facilities, but the rural population generally became poorer between 1947 and

1971 because improvements did not keep pace with rural population increase. Pakistan's five-

year plans opted for a development strategy based on industrialization, but the major share of

the development budget went to West Pakistan, that is, contemporary Pakistan. The lack of

natural resources meant that East Pakistan was heavily dependent on imports, creating a

balance of payments problem. Without a substantial industrialization program or adequate

agrarian expansion, the economy of East Pakistan steadily declined. Blame was placed by

various observers, but especially those in East Pakistan, on the West Pakistani leaders who

not only dominated the government but also most of the fledgling industries in East Pakistan.

Following the violent events of 1971 during the fight for independence, the highest rural

population density in the entire world, an annual population growth rate between 2.5 and 3

percent, chronic malnutrition for perhaps the majority of the people, and the dislocation of

between 8 and 10 million people who had fled to India and returned to independent

Bangladesh by 1972. The new nation had few experienced entrepreneurs, managers,

administrators, engineers, or technicians. There were critical shortages of essential food

grains and other staples because of wartime disruptions. External markets for jute had been

lost because of the instability of supply and the increasing popularity of synthetic substitutes.

Foreign exchange resources were minuscule, and the banking and monetary system was

unreliable. Although Bangladesh had a large work force, the vast reserves of undertrained

and underpaid workers were largely illiterate, unskilled, and underemployed. Commercially

exploitable industrial resources, except for natural gas, were lacking. Inflation, especially for

essential consumer goods, ran between 300 and 400 percent. The war of independence had

crippled the transportation system. Hundreds of road and railroad bridges had been destroyed

or damaged, and rolling stock was inadequate and in poor repair. The new country was still

recovering from a severe cyclone that hit the area in 1970 and cause 250,000 deaths. India, by

no means a wealthy country and without a tradition of giving aid to other nations, came

forward immediately with massive economic assistance in the first months after the fighting

ended. Between December 1971 and January 1972, India committed US$232 million in aid to

Bangladesh, almost all of it for immediate disbursement.

Bangladeshi leaders slowly began to turn their attention to developing new industrial capacity

and rehabilitating its economy. The static economic model adopted by these early leaders,

however--including the nationalization of much of the industrial sector--resulted in

inefficiency and economic stagnation. Beginning in late 1975, the government gradually gave

greater scope to private sector participation in the economy, a pattern that has continued. A

few state-owned enterprises have been privatized, but many, including major portions of the

banking and jute sectors, remain under government control. Population growth, inefficiency

in the public sector, resistance to developing the country's richest natural resources, and

limited capital have all continued to restrict economic growth.

Economic outlook

Efforts to achieve Bangladesh's macroeconomic goals have been problematic mostly due to

corruption within the government. The privatization of public sector industries has proceeded

at a slow pace--due in part to worker unrest in affected industries--although on June 30, 2002,

the government took a bold step as it closed down the Adamjee Jute Mill, the country's

largest and most costly state-owned enterprise. The government also has proven unable to

resist demands for wage hikes in government-owned industries. Access to capital is impeded.

State-owned banks, which control about three-fourths of deposits and loans, carry classified

loan burdens of about 50%.

The IMF and World Bank predict GDP growth over the next 5 years will be about 6.5%, well

short of the 9-10% needed to lift Bangladesh out of its severe poverty. The initial impact of

the end of quotas under the Multi-Fiber Arrangement has been positive for Bangladesh, with

continuing investment in the ready-made garment sector, which has experienced annual

export growth in excess of around 20%. Downward price pressure means Bangladesh must

continue to cut final delivered costs if it is to remain competitive in the world market.

Foreign investors in a broad range of sectors are increasingly frustrated with the politics of

confrontation, the level of corruption, the slow pace of reform and privatisation and

deregulation of the public sector and the lack of basic infrastructure e.g. roads. While

investors view favorably recent steps by the interim government to address corruption,

governance, and infrastructure issues, most believe it is too early to asepses the long-term

impact of these developments.

Agriculture

Map showing the growing areas of major agricultural products.

Most Bangladeshis earn their living from agriculture. Although rice and jute are the primary

crops, maize and vegetables are assuming greater importance. Due to the expansion of

irrigation networks, some wheat producers have switched to cultivation of maize which is

used mostly as poultry feed. Tea is grown in the northeast. Because of Bangladesh's fertile

soil and normally ample water supply, rice can be grown and harvested three times a year in

many areas. Due to a number of factors, Bangladesh's labor-intensive agriculture has

achieved steady increases in food grain production despite the often unfavorable weather

conditions. These include better flood control and irrigation, a generally more efficient use of

fertilizers, and the establishment of better distribution and rural credit networks. With 28.8

million metric tons produced in 2005-2006 (July-June), rice is Bangladesh's principal crop.

By comparison, wheat output in 2005-2006 was 9 million metric tons. Population pressure

continues to place a severe burden on productive capacity, creating a food deficit, especially

of wheat. Foreign assistance and commercial imports fill the gap. Underemployment remains

a serious problem, and a growing concern for Bangladesh's agricultural sector will be its

ability to absorb additional manpower. Finding alternative sources of employment will

continue to be a daunting problem for future governments, particularly with the increasing

numbers of landless peasants who already account for about half the rural labor force.

Manufacturing & Industry

Many new jobs - mostly for women - have been created by the country's dynamic private

ready-made garment industry, which grew at double-digit rates through most of the 1990s.

By the late 1990s, about 1.5 million people, mostly women, were employed in the garments

sector. During 2001-2002, export earnings from ready-made garments reached $3,125

million, representing 52% of Bangladesh's total exports.

Eastern Bengal was known for its fine muslin and silk fabric before the British period. The

dyes, yarn, and cloth were the envy of much of the premodern world. Bengali muslin, silk,

and brocade were worn by the aristocracy of Asia and Europe. The introduction of machine-

made textiles from England in the late eighteenth century spelled doom for the costly and

time-consuming handloom process. Cotton growing died out in East Bengal, and the textile

industry became dependent on imported yarn. Those who had earned their living in the textile

industry were forced to rely more completely on farming. Only the smallest vestiges of a

once-thriving cottage industry survived. Other industries which have shown very strong

growth include the chemical industry, steel industry, mining industry and the paper and pulp

industry.

Investment

The stock market capitalisation of the Dhaka Stock Exchange in Bangladesh crossed $ 10

billion in November 2007 and the $15 billion dollar mark. Major investment from foreign

investors have led to a massive building boom in Dhaka and Chittagong.

Textile sector

Bangladesh's textile industry, which includes knitwear and ready-made garments along with

specialised textile products, is the nation's number one export earner. The sector, which

employs 2.2 million workers, accounted for 75 per cent of Bangladesh's total exports of

US$10.53 billion in FY2005-06, in the process logging a record growth rate of 24.44 per

cent. However, since May 2006 the industry has been plagued by on-going industrial unrest,

as textile workers, who are among some of the most lowly paid in the world, have staged

regular violent demonstrations in a bid to achieve a higher minimum wage, regular rest days

and safer working conditions. Following the worst of the unrest in late May, which saw at

least one worker killed as police shot live rounds at protesters, the government formed a

Wage Commission, ordering it to report on a suitable new minimum wage in three months.

The Commission, which included business and worker representatives finally released its

conclusions on October 9, recommending the wage be set at Tk1,662.50, up from the current

level of Tk950, but far below initial worker demands for Tk3,000. After initially condemning

the unrest as the work of outsiders attempting to capture the nation's share of global markets,

Bangladesh Garment

Manufacturers and

Exporters Association

(BGMEA) leaders appear to

have finally accepted the

need to raise wages.

Economy of Bangladesh

Major Export Item And

Receipt:

Over View of Garments

Industry:

Industry Large-scale

production of readymade

garments (RMG) in

organized factories is a

relatively new phenomenon

in Bangladesh. Until early

sixties, individual tailors

made garments as per

specifications provided by

individual customers who

supplied the fabrics. The

Economy of Bangladesh

Currency Bangladesh Taka (BDT)

Fiscal year 1 July – 30 June

Trade

organizations

WTO, SAFTA, D8

Statistics

GDP (PPP) $208.6 billion (2007 est.)

GDP growth 6.5% (2007 est.)

GDP per capita $1,400 (2007 est.)

GDP by sector Agriculture (19%), industry (28.7%),

services (53.7%) (2007 est.)

Inflation (CPI) 10.11% (2008 est.)

Population

below poverty

line

41.3% (2007 est.)

Labour force 69 million (2006 est.)

Labour force

by occupation

Agriculture (65%), industry (25%),

services (10%) (2005 est.)

Unemployment 2.4% (2008)

Main industries jute manufacturing, cotton textiles,

garments, tea processing, paper newsprint,

sugar, light engineering, chemical, cement,

fertilizer, food processing, iron and steel

External

Exports $14.11 billion (2007 est.)

Export goods garments, jute and jute goods, leather,

frozen fish and seafood

Main export

partners

US 31.8%, Germany 10.9%, UK 7.9%,

France 5.2%, Netherlands 5.2%, Italy

4.42% (2000)

Imports $21.6 billion (2007)

Import goods machinery and equipment, chemicals, iron

and steel, raw cotton, food, crude oil and

petroleum products,

Main import

partners

India 10.5%, EU 9.5%, Japan 9.5%,

Singapore 8.5%, China 7.4%(2004)

Gross External

Debt

$21.23 billion (31 December 2007 est.)

Public finances

Public debt $1.2 billion (June 2005 est.)

Revenues $8 billion (2007 est.)

domestic market for readymade garment, excepting children wears and men's knit underwear

(genji) was virtually non-existent in Bangladesh until the sixties. Since the late 1970s, the

RMG industry started developing in Bangladesh primarily as an export-oriented industry

although; the domestic market for RMG has been increasing fast due to increase in personal

disposable income and change in life style. The sector rapidly attained high importance in

terms of employment, foreign exchange earnings and its contribution to GDP. In 1999, the

industry employed directly more than 1.4 million workers, about 80% of whom were female.

With the growth of RMG industry, linkage industries supplying fabrics, yarns, accessories,

packaging materials, etc. have also expanded. In addition, demand for services like

transportation, banking, shipping and insurance has increased. All these have created

additional employment. The total indirect employment created by the RMG industry in

Bangladesh is estimated to be some 200,000 workers. In additions to its economic

contribution; the expansion of the RMG industry has caused noticeable social changes by

bringing more than 1.12 million women into labour force. The economic empowerment of

these working girls/women has changed their status in the family. The attractive opportunity

of employment has changed the traditional patriarchal hegemony of the fathers, brothers and

husbands. Most working women/girls can now chose when to get married or become

mothers. The number of early MARRIAGEs is decreasing; so is the birth rate; and the working

girls tend to send their little bothers and sisters to school, as a result, the literacy rate is

increasing. They can participate in family decision-making. Most importantly, the growth of

RMG sector produced a group of entrepreneurs who have created a strong private sector. Of

these entrepreneurs, a sizeable number is female. A woman entrepreneur established one of

the oldest export-oriented garment factories, the Baishakhi Garment in 1977. Many women

hold top executive positions in RMG industry. The RMG industry is highly dependent on

imported raw materials and accessories because Bangladesh does not have enough capacity to

produce export quality fabrics and accessories. About 90% of woven fabrics and 60% of knit

fabrics are imported to make garments for export.

The industry is based primarily on sub-contracting, under which Bangladeshi entrepreneurs

work as sub-contractors of foreign buyers. It has grown by responding to orders placed by

foreign buyers on C-M (Cut and Make) basis. During its early years, the buyers supplied all

the fabrics and accessories or recommended the sources of supply from which Bangladeshi

sub-contractors were required to import the fabrics. However, situation has improved. At

present, there are many large firms, which do their own sourcing. The hundred percent

export-oriented RMG industry experienced phenomenal growth during the last 15 or so years.

In 1978, there were only 9 export-oriented garment manufacturing units, which generated

export earnings of hardly one million dollar. Some of these units were very small and

produced garments for both domestic and export markets. Four such small and old units were

Reaz Garments, Paris Garments, Jewel Garments and Baishakhi Garments. Reaz Garments,

the pioneer, was established in 1960 as a small tailoring outfit, named Reaz Store in DHAKA.

It served only domestic markets for about 15 years. In 1973 it changed its name to M/s Reaz

Garments Ltd. and expanded its operations into export market by selling 10,000 pieces of

men's shirts worth French Franc 13 million to a Paris-based firm in 1978. It was the first

direct exporter of garments from Bangladesh. Desh Garments Ltd, the first non-equity joint-

venture in the garment industry was established in 1979. Desh had technical and marketing

collaboration with Daewoo Corporation of South Korea. It was also the first hundred percent

export-oriented company. It had about 120 operators including 3 women trained in South

Korea, and with these trained workers it started its production in early 1980. Another South

Korean Firm, Youngones Corporation formed the first equity joint-venture garment factory

with a Bangladeshi firm, Trexim Ltd. in 1980. Bangladeshi partners contributed 51% of the

equity of thee new firm, named Youngones Bangladesh. It exported its first consignment of

padded and non-padded jackets to Sweden in December 1980.Within a short period,

Bangladeshi entrepreneurs got familiar with the world apparel markets and marketing. They

acquired the expertise of mobilizing resources to export-oriented RMG industries. Foreign

buyers found Bangladesh an increasingly attractive sourcing place. To take advantage of this

cheap source, foreign buyers extended, in many cases, suppliers' credit under special

arrangements. In some cases, local banks provided part of the equity capital.

The problem of working capital was greatly solved with the introduction of back-to-back

letter of credit, which also facilitated import of quality fabric, the basic raw material of the

industry. The government assigned high priority to the development of RMG industry.

Till the end of 1982, there were only 47 garment manufacturing units. The breakthrough

occurred in 1984-85, when the number of garment factories increased to 587. The number of

RMG factories shot up to around 2,900 in 1999. Bangladesh is now one of the 12 largest

apparel exporters of the world, the sixth largest supplier in the US market and the fifth largest

supplier of T-shirts in the EU market. The industry has grown during the 1990s roughly at the

rate of 22%. In the past, until 1980, jute and jute goods topped the list of merchandises

exported from Bangladesh and contributed more than 50% of the total export earnings. By

late 1980s, RMG exports replaced jute and jute goods and became the number one in terms of

exports. In 1983-84, RMG exports earned only $0.9 billion, which was 3.89% of the total

export earnings of Bangladesh. In 1998-99, the export earnings of the RMG sector were

$5.51 billion, which was 75.67% of the total export earnings of the country. The net foreign

exchange earnings were, however, only about 30% of the figures quoted above because

approximately 70% of foreign exchanges earned were spent in importing the raw materials

and accessories to produce the garments exported. Both external and internal factors

contributed to the phenomenal growth of RMG sector. One external factor was the

application of the GATT-approved Multifibre Arrangement (MFA) which accelerated

international relocation of garment production. Under MFA, large importers of RMG like

USA and Canada imposed quota restrictions, which limited export of apparels from countries

like Hong Kong, South Korea, Singapore, Taiwan, Thailand, Malaysia, Indonesia, Sri Lanka

and India to USA and Canada. On the other hand, application of MFA worked as a blessing

for Bangladesh. As a least developed country, Bangladesh received preferential treatment

from the USA and European Union (EU). Initially Bangladesh was granted quota-free status.

To maintain competitive edge in the world markets, the traditionally large

suppliers/producers of apparels followed a strategy of relocating RMG factories in countries,

which were free from quota restrictions and at the same time had enough trainable cheap

labour.

They found Bangladesh as a promising country. So RMG industry grew in Bangladesh. By

1985, Bangladesh emerged as a strong apparel supplier and became a powerful competitor for

traditional suppliers in the US, Canadian and European markets. Since 1986, Bangladesh has

been increasingly subjected to quota restrictions by USA and Canada. RMG industry suffered

setback in a number of countries in the 1980s. Some countries had internal problems, for

example, Sri Lanka; and some other countries of Southeast Asia experienced rapid increase in

labour cost. Buyers looked for alternative sources. Bangladesh was an ideal one as it had both

cheap labour and large export quotas. The EU continued to grant Bangladesh quota-free

status and GSP privileges. In addition, USA and Canada allocated substantially large quotas

to Bangladesh. These privileges guaranteed Bangladesh assured markets for its garments in

USA, Canada and EU. The domestic factor that contributed to the growth of RMG industry

was the comparative advantage Bangladesh enjoyed in garment production because of low

labour cost and availability of almost unlimited number of trainable cheap labour. The

domestic policies of the government contributed to the rapid growth of this sector. The

government provided various kinds of incentives such as duty-free import of fabrics under

back-to-back L/C, bonded warehouse facilities, concessionary rates of interest, cash export

incentive, export processing zone facilities, etc. The government also took a number of

pragmatic steps to streamline export-import formalities. There are several weaknesses of the

RMG industry of Bangladesh. Labour productivity in the RMG sector of Bangladesh is lower

than many of its competitors. Bangladeshi workers are not as efficient as those of Hong

Kong, South Korea and some other countries and in most factories, technologies used are not

the latest. In addition to the fact that the industry is vulnerable because it is highly dependent

on the imported raw materials, the infrastructure in the country is deplorably underdeveloped.

Problems in power supply, transportation and communication create serious bottlenecks.

Inadequate port facilities result in frequent port congestion, which delays shipment. All these

increase the lead-time to process an order, i.e. the time from the date of receiving an order to

the date of shipment. The application of MFA had negative impact on many garments

exporting countries. The countries, which were adversely affected by quotas under MFA,

created pressure to discontinue MFA by integrating textile and clothing industries into GATT

system.

As a result, the Uruguay Round negotiations envisaged the phasing out of MFA by the end

of 2004. With the phasing out of MFA, the position of Bangladesh in the world market will

change as all countries including those under quota restrictions, will enjoy quota free status.

Bangladesh will have to compete with a larger number of established and powerful suppliers

of readymade garments. Bangladesh has taken some steps to face the new challenges. Such

steps include removing infrastructural bottlenecks, building additional supply capacity, use of

cost reduction strategy, and increase in value-addition through backward integration. For

RMG sector, the backward linkages are weaving the fabric, spinning the yarn, and dyeing,

printing and finishing operations.

Prospects of the RMG Industry:

Despite many difficulties faced by the RMG industry over the past years, it continued to

show its robust performance and competitive strength. The resilience and bold trend in this

MFA phase-out period partly reflects the imposition of ‘safeguard quotas’ by US and similar

restrictions by EU administration on China up to 2008, which has been the largest supplier of

textiles and apparel to USA. Other factors like price competitiveness, enhanced GSP facility,

market and product diversification, cheap labour, increased backward integration, high level

of investment, and government support are among the key factors that helped the country to

continue the momentum in export earnings in the apparel sector. Some of these elements are

reviewed below.

Market Diversification

Bangladeshi RMG products are mainly destined to the US and EU. Back in 1996-97,

Bangladesh was the 7th and 5th largest apparel exporter to the USA and European Union

respectively. The industry was successful in exploring the opportunities in markets away

from EU and US. In FY06, a successful turnaround was observed in exports to third

countries, which having a negative growth in FY05 rose three-fold in FY06, which helped to

record 23.1 percent overall export growth in the RMG sector. It is anticipated that the trend of

market diversification will continue and this will help to maintain the growth momentum of

export earnings. At the same time a recent WTO review points out that Bangladesh has not

been able to exploit fully the duty free access to EU that it enjoys. While this is pointed out to

be due to stringent rules of origin (ROO) criteria, the relative stagnation in exports to EU

requires further analysis.

Region-wise Share of RMG Export

Year Export Share to

USA

Export Share to

European

Countries

Combined

Share of USA &

EU (%)

Export Share

of Other

Countries (%)

2001-2002 42.67 55.43 98.10 1.90

2002-2003 38.02 57.12 95.14 4.86

2003-2004 28.64 65.42 94.06 5.94

2004-2005 30.64 64.24 94.88 5.12

2005-2006 33.67 49.77 83.43 16.57

Product Diversification

The growth pattern of RMG exports can be categorized into two distinct phases. During the

initial phase it was the woven category, which contributed the most. Second phase is the

emergence of knitwear products that powered the recent double digit (year-on-year) growth

starting in FY04.

Growth Pattern of Woven and Knitwear Categories

Year Woven Knitwear Total RMG

Export

2002-03 4.28 13.34 7.16

2003-04 8.59 29.88 15.76

2004-05 1.70 31.26 12.87

2005-06 13.50 35.38 23.11

Source: Export Promotion Bureau (EPB)

In the globalize economy and ever-changing fashion world, product diversification is the key

to continuous business success. Starting with a few items, the entrepreneurs of the RMG

sector have also been able to diversify the product base ranging from ordinary shirts, T-shirts,

trousers, shorts, pajamas, ladies and children’s wear to sophisticated high value items like

quality suits, branded jeans, jackets, sweaters, embroidered wear etc. It is clear that value

addition accrues mostly in the designer items, and the sooner local entrepreneurs can catch on

to this trend the brighter be the RMG future.

Year Shirt Jackets T-Shirt Trousers Sweater

2000-01 1067.22 570.33 593.87 652.44 474.04

2001-02 871.22 412.34 546.28 636.61 517.83

2002-03 1019.88 464.51 642.62 643.66 578.38

2003-04 1116.57 364.78 1062.11 1334.85 616.31

2004-05 1053.34 430.28 1349.71 1667.72 893.12

2005-06 1056.87 408.97 1781.51 2165.25 1042.61

Backward Integration

RMG industry in Bangladesh has already proved itself to be a resilient industry and can be a

catalyst for further industrialization in the country. However, this vital industry still depends

heavily on imported fabrics. After the liberalization of the quota regime some of the major

textile suppliers Thailand, India, China, Hong Kong, Indonesia and Taiwan increased their

own RMG exports.

If Bangladesh wants to enjoy increased market access created by the global open market

economy it has no alternative but to produce textile items competitively at home through the

establishment of backward linkage with the RMG industry. To some extent the industry has

foreseen the need and has embarked on its own capacity building. The trend of back-to-back

import has been declining over the years implying a rising contribution of domestic value

addition (Figure 2). This is an optimistic indication that a well equipped and modern

backward linkage industry may well prove cost effective and thus helping Bangladesh to

meet the challenges in the post-MFA era.

Flow of Investment

It is plausible that domestic entrepreneurs alone may not be able to develop the textile

industry by establishing modern mills with adequate capacity to meet the growing RMG

demand. It is important to have significant flow of investment both in terms of finance and

technology. Figure 3 indicates that the investment outlook in this sector is encouraging,

although the uncertainties before the MFA phase-out period caused a sluggish investment

scenario. In part the momentum in the post-MFA phase-out period is indicative of the efforts

underway towards capacity building through backward integration. This is evident in the pace

of lending to the RMG sector and in the rising import share of RMG related machinery.

However further progress would be necessary to improve and sustain competitiveness on a

global scale.

A Supportive Policy Regime

Government of Bangladesh has played an active role in designing policy support to the RMG

sector that includes back-to-back L/C, bonded warehouse, cash incentives, export credit

guarantee scheme, tax holiday and related facilities. At present government operates a cash

compensation scheme through which domestic suppliers to export-oriented RMG units

receive a cash payment equivalent to 5 percent of the net FOB value of exported garments.

The FY04 budget also lowered the corporate income tax rate for the RMG industry from 30

to 10 percent for the period up to June 30, 2006. From FY05 the tax regime has been further

changed, and a 0.25 percent tax at source will be deducted from the value of the export

proceeds of Woven and Knitwear category. At the same time, income tax rate for textile

manufacturers were reduced to 15 percent from its earlier level for the period up to June 30,

2008. The reduced tax rates and other facilities are likely to have a positive impact on the

RMG sector.

Lead Time

‘Lead time’ is a crucial factor maintaining export competitiveness. Bangladesh happens to

feature the longest lead time in the RMG world. The lead time for Bangladesh is 120 days on

an average, while the corresponding period for Sri Lanka is about 19-45 days and for India it

is only about 12 days. Various factors like the distance from major markets, importation of

raw materials, port congestion, strikes, poor roads, etc. are some of the factors responsible for

this. At present the fashion seasons are becoming short with a changing trend, it would not be

possible to compete if the lead time extends beyond 30-40 days. Therefore, bringing down

the ‘lead time’ to about 30-40 days is a major challenge for the country’s RMG sector.

Clearly more business can be captured only if the lead time could be improved.

Infrastructural Impediments

The existence of sound infrastructural facilities is a prerequisite for economic development.

In Bangladesh, continuing growth of the RMG sector is dependent on the development of a

strong backward linkage in order to reduce the lead time. However, other factors constraining

competitiveness of Bangladesh’s RMG exports included the absence of adequate physical

infrastructure and utilities (e.g., transportation, telecommunication, stable power supply,

efficient seaport, political tolerance, quality control and a smoothly functioning bureaucracy).

According to a recent World Bank-IFC publication (2006) records that a businessman in

Bangladesh needs 35 days to export and incurs USD 902 per container, whereas his

counterpart in India requires 27 days and spends USD 864 per container. The comparable

figures for Pakistan, Sri Lanka and Vietnam are 24 days and USD 996, 25 days and USD

797, and 35 days and USD 701, respectively.

Labor Productivity

The productive efficiency of labor is more important determinant for gaining comparative

advantage than the physical abundance of labor. In Bangladesh, the garment workers are

mostly women with little education and training. The employment of an uneven number of

unskilled labors by the garment factories results in low productivity and comparatively more

expensive apparels. Bangladesh labor productivity is known to be lower when compared with

that of Sri Lanka, South Korea and Hong Kong SAR. Bangladesh must look for ways to

improve the productivity of its labor force if it wants to compete regionally if not globally.

Cheap Labor Force

The strength of a firm depends on its specific comparative advantages, which its competitors

do not possess. To date the local industry has flourished in spite of the challenges cited above

(e.g., lead time, infrastructure, and bureaucratic red tape) on the back of cheap female labor.

The wages paid to RMG workers in Bangladesh are the lowest even by the South Asian

regional standard. Figure 4 illustrates the comparative average hourly wages in apparel

industry of selected developed and developing countries.

Research and Training

The country has no dedicated research institute related to the apparel sector. RMG is highly

fashion oriented and constant market research is necessary to become successful in the

business. Here India has had a head start and Mumbai and Delhi are on line to become

fashion centers on a global scale. At present whatever design work is done in the country,

these are mostly carried out with foreign workers and experts. BGMEA has already

established an institute which offers bachelor’s degree in fashion designing and BKMEA is

planning on setting up a research and training institute. These and related initiatives need

encouragement possibly intermediated by donor-assisted technology and knowledge transfer.

A facilitating public sector role can be very relevant here.

Introducing HR Department:

Most of the garments in Bangladesh have no Human Resource Department. But it is a matter

of regret that garments sector of Bangladesh mainly handle with people but here HR division

is absence. HR professional can improve the garments sector by solving Human related

problem.

Regarding future challenges, majority of entrepreneurs have mentioned about competition

with China after 2008 when the safeguard measures against China will be lifted. Besides,

implementation of the new wage structure could be a challenge for the sector, since cost of

production will increase (Tk.9, 40,000 on average) through implementing the new wage

structure. The highest level of burden would be on small knit enterprises, about 6.6 per cent,

while the lowest would be on medium sweater enterprises (0.96 per cent) and large

enterprises located in EPZ (0.24). Estimates show that with the new wage structure, about 5.3

percent enterprises would earn a negative profit (ranging between -14 per cent and -1 per

cent). 7 percent would earn about a 3 per cent profit. During January-August, 2007

Government took a number of initiatives to improve management and worker related issues

of the Chittagong port.

U.S. Retailers - US buyers are considering Bangladesh one of the major sources as JC

Penny, Wall Mart, GAP, K -Mart and other big buyers are coming to Bangladesh and setting

up offices. (New Age, 2004).Recently one of the garments of Bangladesh got order of Tk 100

cr from the Wal-Mart. In past these order goes to India, Thailand. In the quota free regime

exports in US market may increase. This is because during the post-MFA period, a restriction

was put on the volume of exports to US market.

Lifting of those restrictions would enable knitwear firms in Bangladesh to export as much

their capacity allows them to. Bangladeshi knitwear firms, though has always focused on the

European markets due to GSP facilities, should explore the US market, which provides a

substantial customer base.

Price of Product:

Currently Bangladesh serves the lowest end needs of the foreign market by offering the

lowest price as evidenced in the following table.

Average Price of RMG Imported in USA by Major Importers, 2007

COUNTRY MEN’S

KNITTED

SHIRTS

WOMEN’S

SWEATERS

MEN’S

WOVEN

SHIRTS

MEN’S TROUSERS

AND COTTON

BREECHES

World $ 6.14 $ 7.84 $ 6.77 $ 8.94

China 9.35 9.36 8.20 9.49

El Salvador 4.23

Guatemala 4.79 7.55 8.79

Honduras 4.67 5.44 8.99

Hong Kong 10.99 9.65 8.52 10.24

Indonesia 8.18 6.60 8 9.20

Bangladesh 4.12 4.48 5.07 6.55

Italy 33.92 28.37 28.15

Malaysia 9.03 9.74

Mexico 4.80 6.44 8.79

Pakistan 5.30

Philippines 8.10 6.94 8.24 9.12

South Korea 6.14 6.76

Sri Lanka 8.10 5.57

Taiwan 8.77 8.68

Thailand 8.28 6.06

Turkey 5.83

India 6.52

In this chart we see that Bangladesh provides lowest price compare with other competitive

countries like China, Thailand, India, Hong Kong, Sri Lanka, Indonesia, Hong Kong,

Pakistan, Malaysia and Philippines. These prices of the product now become the most

considerable for Bangladesh. If Bangladesh can maintain this competitive price it will be able

to compete any type of barrier. So, we find here huge opportunities in export in low price.

FDI IN BANGLADESH:

A happier news for the nation is that Bangladesh places 65th position among 155

countries in terms of Ease of Doing Business in the world bank report. This ranking is based

on 39 indicators grouped into 10 categories. It recognizes Bangladesh as one of the easiest

location for doing business in south Asia, better than Sri Lanka and India. Besides, persistent

growth in FDI is the best testimony of a favorable business climate prevailing in Bangladesh.

(Doing Business in 2006: Creating Jobs, World Bank 2006)

In 2005, total FDI inflow in Bangladesh was increased by 84% amounting US$ 845

Million–highest ever in any year since her independence. The growth is second highest in

entire South Asia (Bangladesh Investment Handbook 2007-BOI). Bangladesh now ahead of

India in terms of FDI Performance Index being ranked 116th among 200 economies while

India is ranked 119th (World Investment Report 2006). A component-wise analysis of FDI

inflow in 2005 shows that about 50% of FDI came as equity, 29% as reinvestment, and the

rest as intra-company borrowing. The higher reinvestment rate indicates unwavering

confidence of foreign investors on overall investment climate of the country and

competitiveness.

Table

FDI inflows from1995-2006 (US$ in million)

The table shows a fluctuating trend of the FDI inflows over the last 12 years. Data

reveals that in 1999 there was a sudden fall in the FDI, and again in 2001, 2002 and 2003 the

falling trend continued for many reasons. Among others serious political unrest during the

period was a major factor that discouraged foreign investment in these years and it took quite

some time to regain the confidence of foreign investors. It stabilized afterwards but remained

below the average achieved during 1997-2000. Later on during next two years period it

becomes alive again. The following graphical presentation gives us clearer picture of the FDI

inflows over the years.

Continued Interests of Foreign Investors

The recent year’s tremendous interests of foreign investors are shown to invest in

Bangladesh. In FY 2005-06, major foreign investors include Dhabi Group of United Arab

Emirates, Singtel of Singapore, Orascom of Egypt, YKK of Japan and Microsoft of USA.

Besides, a number of large investment proposals worth about US$ 10.5 billion are at

negotiation and or approval stages. These include investment proposals from Tata Group of

India, Toray of Japan, Indorama Group of Thailand, Luxon Global of South Korea, Delta

Pacific Mining of United Kingdom, Dawood Group of Pakistan, Kingdom Group of Saudi

Arabia and other proposals from China, Malaysia, India, Taiwan, UK, USA, Australia,

Singapore, Thailand, Saudi Arabia, UAE and Kuwait.

Incentives for Foreign Investors

The foreign investors will choose Bangladesh for their next for investment destination

as Bangladesh conducted Bilateral Investment Agreement, Double Taxation, Treaties

etc. to protect the interest of foreign investors. The investors will also enjoy the following

incentives investing Bangladesh.

1. Tax Exemptions: Generally 5 to 7 years. However, for power generation exemption is

allowed for 15years

2. Duty: No import duty for export oriented industry. For other industry it is @5% ad

valorem.

3. Tax law: Double taxation can be avoided in case of foreign investors on the basis of

bilateral agreements. Exemption of income tax up to 3 years for the expatriate employees in

industries specified in the relevant schedule of Income Tax ordinance.

4. Remittance: Facilities for full repatriation of invested capital, profit and dividend.

5. Exit: An investor can wind up on investment either through a decision of the AGM or

EGM. Once a foreign investor completes the formalities to exit the country, he or she can

repatriate the sales proceeds after securing proper authorization from the Central Bank.

6. Ownership: Foreign investor can set up ventures either wholly owned on in joint

collaboration with local partner.

Problems Regarding Trade Union:

A trade union or labour union is an organisation of workers who have bonded together to

achieve common goals in key areas such as wages, hours, and working conditions, forming a

cartel of labor. The trade union, through its leadership, bargains with the employer on behalf

of union members (rank and file members) and negotiates labor contracts with employers.

This may include the negotiation of wages, work rules, complaint procedures, rules

governing hiring, firing and promotion of workers, benefits, workplace safety and policies.

Present Trade Union Condition:

There are 16 unions representing garment workers, according to the Democratic Workers

Party "...the level of unionisation 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 apparently is an exception to this, being a more grass-

roots organisation, closer to an expression of workers' self-organisation emerging from their

own struggles. It would be too easy and simplistic to apply critiques of modern western

business unions to such an organisation. 11 years ago the NGWF was an organisation 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 defence and improvement of working conditions is a matter, sometimes, of

whether one starves or not. With rapid large-scale proletarianisation of rural workers in many

parts of Asia (China, India etc) struggles for unionisation are likely to follow. How

institutionalised and bureaucratised 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.

Though organising 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 penalise

Bangladesh, Jordan etc and America's big rival China in, for example, the garment industry,

by attempting to undercut their present advantage of cheaper labour costs.

Political linkage: In most of the cases we see that types of scenario that, Trade unions are

influenced by political parties and politicians. Most of the time, politicians use the trade

unions for political and self- seeking purpose. In this view, trade unions are not work

independently and can not server the interest of their workers in RMG sector.

Poor organizational Strength: The strength of the trade unions in the RMG sectors in

Bangladesh is very weak due to the unemployment problem. The employer can fire any

worker at any time if they protest for their demands because in our country manpower supply

is very high. In this point of view, commitment is less on the perspective of employers

regarding any cases.

Little economic strength:

Bangladesh is a developing country for that reason economic condition of this country is not

so good. Most of the people of this country living under poverty line. Economic status of

People is not so good. That is why they can not continue the strike for a long period of time

as a result happen of the striking result will not seriously affect to the employers. If we see

the actual scenario of real condition of the RMG sector workers in Bangladesh, the fact of

economic condition creating that’s kinds of surrounding environment which will create a fear

able position in their mind of the prospect, at this time ultimately they are not interested to

create a striking environment that will enforce the employers to provide their rights in an

effective and efficient manner.

Educational level: Most of the workers are not educated enough, that is why they are not

conscious enough to exercise their roles, rights and responsibilities. They entirely depend on

the central leaders. But most of the cases in the RMG sector in Bangladesh, we see that our

Trade union leaders always interested to their self interest.

Self-seeking leadership: Majority of the union leaders at all levels; plant levels, Industrial

levels and National levels are concerned with their self-interest. They are not aware for the

economic and other interests of the workers. If we see the actual scenario of the RMG sector

in Bangladesh, we realize that their ethical standard is very low on the perspective of their

commitment regarding their duties and responsibilities.

Lack of ideological commitments: Most of the trade unions are loyal to their leaders than to

the ideologies that hamper the activities of the trade unions. This actual scenario we observe

RMG sector in Bangladesh.

Legal orientation: Trade unions are developed in our country because of the political

pressures and politicians. So it was never free from the pressure of the political parties.

Sometimes they use trade unions for their self interest like to bring change in the

Government.

Multiplicity of unions: In our country, there are many numbers of trade unions available

which indicates one of the weak points of them as when their bargaining with their employers

for the demands it can not use its full power for the acceptance of their demands.

In the RMG sector in Bangladesh, there are many numbers of trade unions. They are not

united. As result it can not influence the employers to accept their demands. Most of the trade

unions are not well organized to maintain the necessary records which can be used for the

future references. Most of the time, union leaders are concerned for themselves; as a result,

employers are getting chance for unfair labor practice. Most of the trade unions are less

concerned to their members; it tries to take its own decision that hampers the rights of the

workers as well as the expectations. Most of the trade unions in our country are not able to

protect the economic interest of the workers. Most of the time workers are not getting the

minimum wages, working environment is not safe.

Problems Regarding Collective Bargaining:

Collective bargaining means the negotiation between and employer or group of employers

and a group of work people to reach an agreement on working conditions. It is opposite to the

individual bargaining.

According to the Bangladesh Labor Code, 2006, - it includes Trade union or trade union

federation Works as the agent of the workers in the matter of collective bargaining.

Characteristics of collective bargaining This concept was first identified by Sydney and

Webb in UK and also by groups in USA.

1. Where there is only one trade union in an establishment that trade union shall be

considered to be the collective bargaining agent for that establishment.

2. Where there are more than one trade union in an establishment the director of labor shall

after getting an application made in this regard made by any trade one of that establishment

or by employers holds a secret ballot within 120 days to determine as to which one of such

trade unions shall be the collective bargaining agent for the establishment.

Although at the beginning of the Pakistan Period there was no initiative, a structural

framework was given to the collective bargaining in the industrial relations ordinances in

1969. Collective Bargaining was prohibited in large government sectors in 1972 although the

same government withdrew this decision later. Outsider’s memberships in basic unions and

election of CBA were prohibited through industrial relations ordinance in 1975. CBA created

a ridiculous situation in the period of General Ziaur rahman due to misuse of labor leaders by

the government. General Ershad in 1982 restricted the election of collective bargaining agent

and imposed restrictions on the functions of trade unions. These factors made the collective

bargaining program inactive and developed unrest among labors. At this stage National

federations were united and formed SKOP to keep the interest of the workers and started

movement. This situation compelled the government to sign an agreement with SKOP and

collective bargaining started its work again.

Reason for the Failure of Collective Bargaining in garments Sector:

Collective bargaining may take place at the national, industry or enterprise level. In no

country does it take place exclusively at one level only. However in many industrialized

countries, especially in Europe, the existence of strong employers, organizations and trade

unions have resulted in many important agreement beings concluded at the national or

industry level, supplemented by some enterprises level bargaining.

A favorable political climate: If collective bargaining is to be fully effective, a favorable

political climate must be existing. In particular, the Government and public opinion must be

convinced that collective agreement is the best method of regulating certain conditions of

employments. When we see the real conditions of the RMG sector in Bangladesh, political

climate is not good. We see that, politicians create a pressure to the trade unions.

Freedom of association: Freedom of association is essential for collective bargaining, where

it is restricted, collective bargaining is also restricted. In the RMG Sector in Bangladesh,

employers are more powerful because in our country there is an unemployment problem. So,

employers frequently create a pressure. In this case ultimately freedom of association is not

there.

Stability of workers organizations: Workers may have freedom of association but unless

they make use of this right and form and maintain stable unions, collective bargaining will be

ineffective. In the RMG sector in Bangladesh, we see that most of the time trade unions are

not stable; it is reforming that is why it can not create a huge influence to the employers.

Recognition of Trade Unions: Even assuming that freedom of association is exists and that

the workers have established stable organizations, collective bargaining can not begin until

employers recognize the organizations for that purpose. In most of the cases RMG sector

employers not interested to hear any causes that are raised by the trade unions.

Willingness to give and take: The fact of entering into negotiations implies that the

differences between two parties can be adjusted by compromise and concession in the

expectation that agreement can be reached. In RMG sector in Bangladesh, Willingness to

give and take conditions is very poor. Maximum garments employers not pay minimum

amount of wages to their employees, as a result workers are unhappy; ultimately workers

productivity is also low.

Constructive Consultations: Constructive Consultations between trade union and

management is possible only when the bargaining power of two parties is relatively equal. In

the RMG sector in Bangladesh, Employers tendency will always forcing power to the

workers. Workers are always feeling fear able conditions because in this country there are lot

of people wait to do the work, that is unemployment problem and educational background is

not good also. As a result, we see that, ultimately bargaining power of two parties is not

equal.

Mutual confidence: Both the parties must have mutual confidence, good faiths and a desire

to make collective bargaining machinery success. In the RMG sector in Bangladesh, the

workers do not trust their employers as continuously employers are not fulfilling the demands

which were accepted by them.

Free from unfair labor practice: The process of bargaining should be free from unfair labor

practices. In our RMG sector in Bangladesh, we see that frequently strike is happen because

of unfair labor practice.

Positive attitudes: The attitudes of the parties should be positive. In the RMG sector

conditions, we see that some of the employers and worker member’s attitude is positive but

most of employers and workers attitude is not positive.

Proper representations of rights and responsibilities: Both the parties should represent

their rights and responsibilities properly. In RMG sector in Bangladesh, proper

representations of rights and responsibilities are not maintained. The workers are not and

union leaders are not educated enough to exercise their rights and responsibilities

Employee Grievance as a problem:

A grievance occurs when an individual thinks that he is being wrongly treated by his

colleagues or supervisor; perhaps he or she is being picked on, unfairly appraised in his

annual report, unfairly blocked for promotion or discriminated against on grounds of race or

sex. An employee grievance is an indication of his discontent or dissatisfaction. It may be

expressed by him or he may not communicate it. It can be real or imaginary, legitimate or

ridiculous, stated or unvoiced, written or oral. It must, however, find expression in some form

or the other. Dissatisfaction or discontent per se is not a grievance. They initially find

expression in the form of a complaint. When a complaint remains unattended and the

employee concerned feels a sense of lace of justice and fair play, the dissatisfaction grows

and assumes the status of a grievance.

It is simply a complaint which has been formally presented in writing, to a management

representative or a union official. But for the most people, the word “grievance” suggests a

complaint that has been ignored, overridden or dismissed without due consideration. “ILO”

defines a grievance as a complaint of one or more workers related to wages and allowance,

Conditions of work, Interpretation of service conditions covering such as Leave, Transfer,

Promotion, Seniority, Job, and Termination of Service”. The National Commission on Labor

Observed that “Complaints affecting one or more individual workers in respect of their

workers in respect of their Wage payments, OT, Leave, Transfer Promotion, Seniority, and

Work Assignment & Discharges Constitute Grievances”.

Causes of Employee Grievances:

There are several reason for employee grievances such as; Amenities, Promotions, Continuity

of Service, Fine, Nature of Job, Compensation, Payments, Continuity of work, Safety

Environment, Disciplinary action, Super Annuation, Transfers, Victimization.

Effects of Grievance:

The results of these grievances are- Frustration, Alienation, De-motivation, Slackness, Low

Productivity, Increase in Wastage & Costs, Absenteeism, In discipline, Labour unrest,

Increase in employee.

If we see the actual senario of the RMG sector in Bangladesh, there are lot of grivance occur

regarding the causes of wages, physical conditions, working environment, sexual harrasment,

safety environment, supervisors behavior, Disciplinary action etc. The fact is that, if the

workers raise their voice regarding grievance, they go to employers but we see most of cases

our RMG sector employers not willingly try to solve grivance. They always create a pressure

to the workers, that’s way workers are unhappy most of the time. If we see different

newspapers, sometimes workers are treated unequally because most of the garments factory

promotion will be based on the perspective of relatives to the employers. So, basically

performance based is ignoring. We see that, most of the garments factory, they terminate

their workers without serving a notice. At the time if the employer pursue to negotiate, what

are the causes they will terminate, in this condition employers create pressure to the workers.

In the grievance procedure, we see that workers are right to go the labour court; but if we see

our economic conditions, education level regarding workers, sometimes they are not able to

go the labour court. Government of Bangladesh are not impement their laws effectively

because political pressure is there. So, ultimately we see all of the casses employers hold a

powerful position in all of the grievance handling procedure..

Problems in quality of work life

Quality of Life indicates the favorableness or unfavorable ness of a job environment for

people. A QWL aim is to create more satisfied and more productive employees to create

more profitable organizations.

Adequate and fair compensation:

Gender Division of Labor

In the garment industry in Bangladesh, tasks are allocated largely on the basis of gender. This

determines many of the working conditions of women workers. All the workers in the sewing

section are women, while almost all those in the cutting, ironing, and finishing sections are

men (Paul-Majumder and Begum 1997). Women workers are absorbed in a variety of

occupations from cutting, sewing, inserting buttons, making button holes, checking, cleaning

the threads, ironing, folding, packing and training to supervising. Duties and responsibilities

vary according to the type of work. Women work mainly as helpers, machinists and, less

frequently, as line supervisors and quality controllers. There are no female cutting masters.

Unit labor cost

Bangladesh has the cheapest unit labor cost in South Asia . It costs only 11 cents to produce a

shirt in Bangladesh, whereas it costs 79 cents in Sri Lanka and 26 cents in India. Clearly,

Bangladesh’s comparative advantage lies in having the cheapest unit labor cost.

Working hours

Though the wages are low, the working hours are very long. The RMG factories Claim to

operate one eight-hour shift six days week. The 1965 Factory Act allows women to work

overtime up until 8 o’clock at night. To meet delivery deadlines, however, women are

virtually compelled to work after 8 o’clock. Sometimes they work until 3 o’clock in the

morning and report back to start work again five hours later at 8 o’clock (Jamaly and

Wickramanayake 1996). They are asked to work whole months at a time without a single day

off, in contrevention of the Factory Act, which stipulates that no employee should work more

than ten days consecutively without a break (Jamaly and Wickramanayake 1996; Ahmad

1996; and Hossain et al. 1990).

Occupational mobility

Level of education, age, length of service, job position and gender all affect the occupational

mobility of workers in the RMG sector. Men have more years of Schooling, are absent less

often and their average age is higher than that of women workers. Thus men hold upper level

jobs and women are mostly helpers.

Pay Scale Ratio:

In garments sector there is a huge difference between the highest pay and lowest pay. So pay

ratio is much higher .But we know that the lower the pay ratios the higher the satisfaction

exist among employees. So, there should be balance pay ratio to establish the equity.

This includes two facts on is the sufficient amount of wages and another is that this wages

has to be comparable that means it has to be equitable. In the RMG sector in Bangladesh, the

workers are not getting sufficient amount of wages for the job they are performing in most

organizations even they are not getting the minimum wages. So on the job and off the job

both are hampered. Job dissatisfaction is increasing day by day. As a result workers are

frequently going for the strikes and public properties are destroyed which are disadvantage

for the employers, the economy of the countries and for the workers themselves. The wages

workers are getting that is not also comparable with others both in the inside of the

organization and outside of the organization. As a result productivity is also decreased

because of the increased job dissatisfaction.

Safe and healthy working conditions: Safe and healthy working conditions are not

satisfactory in the most of the organization in the RMG sector in Bangladesh. Employers are

supposed to comply with The Bangladesh Labor Code, 2006 that gives some guidelines how

QWL can be developed in the organizations, it states a " policy of increasing the participation

of the labor force, the chief socio-economic force of the country, in the management of

enterprises by gradually securing employment opportunities to it, ensuring the right to work,

and thus protecting its rights and interests. In compliance of the QWL the Labor Code, 2006

aims to protect rights, interests, facilities and safety of workers and employees working in

different enterprises in various sectors. Some of the major provisions are summarized below:

Job Classification: Every establishment shall have to classify the job of the workers and

employees of the enterprise according to the nature of production process, service or business

of the enterprise and shall furnish the information thereof to the concerned Labor Office.

This refers that pay and other incentives of a worker should be explicitly based on the nature

of work done.

Change in the ownership: Any change in the ownership of the enterprise shall not be

deemed to have any effect on the terms and conditions of service of the workers or employees

of the enterprise adversely thus QWL will be increase.

Intermission for Refreshment and Rest: Employees are not supposed to work continuously

for more than five hours without providing an interval of half an hour for Tiffin & rest, six

hours without providing an interval of one hour break and it is very important for the workers

to enhance their productivity with efficiency and will create a good working life.

Minimum Remuneration Fixation Committee: Government shall fix the minimum

remuneration, dearness allowance and facilities of workers or employees of enterprises and

have to make sure about the implementation. Good salary is an essential element to develop a

quality work life.

Annual increments: Any worker or employee employed permanently shall be entitled to one

increment each year.

Health and Safety: Have to keep the workplace free from dust, fumes and hazardous

chemicals, adequate supply of light and water and other health and sanitation facilities at

work places. The Labor Office can give order for maintaining safety standard at the work

place.

Compensation: In case of any worker or employee of the enterprise sustains physical injury

or seriously hurt or gets impairment due to loss of any part of body or dies in course of his

work, the compensation shall be paid to him or to his family, as prescribed.

Power to determine the standards: Government time-to-time may prescribe the standards

of safety to develop quality working life for the workers.

Punishment: Very important term to ensure QWL in the work place. Punishment will create

proper justice in the workplace, the workers should know if they violate the working life of

other workers he/ she have to take punishment.

Appointment of Factory Inspector: One of the duties of the Factory Inspector is to examine

building, land, plant, machine, health and security aspects of the factory, to collect and test

the samples of finished or semi-finished materials used in the factory or to cause them to be

tested, to inspect working environment which has a great impact on QWL.

Welfare Officer: The welfare officer will work for different welfare services for the workers.

For example whether the first aid appliances, washing facilities, canteen, restroom, rooms for

the children are maintained by the organization according to the code or not, if not taking

immediate action.

Investigation undertaken by a group of experts comprising academicians, managers, and plant

engineers in 40 manufacturing industries employing 10 to 1000 workers in 1997 revealed the

following QWL features in the manufacturing industries (CEMIR, 1993):

Physical working conditions: A large number of small scale industries were established in

existing building facilities, layouts are not systematically arranged.

Physical and mental efforts required: In these industries jobs are very short-cycled, simple

and repetitive and involve conventional low-level technology, dexterity and initiative.

Performance of most of the jobs does not require high physical and mental efforts.

Social security: Workers are not insured against health hazards and the given medical

facility is not enough to cover health and sanitation needs.

Skill required in the jobs: About 44 percent of the jobs do not require even reading and

writing skills of the workers. 43 percent workers require detail instructions to perform their

jobs. Less than 4 percent jobs require close attention, diligence, initiative and a high degree of

dexterity and accuracy. 90 percent supervisors working on production floors have no ideas

about the principles and practices of modern management, marketing, finance, engineering,

auditing and other relevant disciplines.

Accommodation: Only 27 percent workers were having apartment provided by the factories.

The quality of accommodation was very poor from hygiene and sanitation point of view.

They normally stayed in a small room and in most cases; the kitchen would be attached to the

bedroom in the corner.

Job responsibility: Only 2 percent workers have some economic and supervisory

responsibility on the job.

In a study it is concluded that very few enterprises are following the labour laws and other

government policies about the working life and conditions of the workers, from those some

very important aspects are pointed bellow,

Recruitment: 61 percent organizations had no system of providing appointment letter, 77

percent organizations had not reappointed as permanent even after completing 240 days, 86

percent organizations had no system of advertisement for recruitment and 40 percent

organization had no employees contact in permanent basis.

Working hours: Regarding working hours and facilities the survey finds very unsatisfactory

results. Only 42 percent of enterprises had implemented minimum wage system, and 36

percent of enterprises had no provision of fixed working hours.

Leaves and holidays: Regarding provision for leaves and holidays, 65 percent had provided

sick leaves, 54 percent had provided public holidays, 55 percent had provided compassionate

leave, 50 percent had provided sick leave and 33 percent had provided maternity leave.

Collective bargaining: Regarding trade union rights and collective bargaining agreements

(CBA), 54 percent of enterprises had CBA atmosphere, 55 percent enterprises had not created

obstacle or harassment for CBA, only 64 percent organizations had implemented CBA, 60

percent organizations created problem in the formation of unions and 35 percent

organizations were found to be punishing or harassing union activists.

Occupational health and safety: Only 13 percent organizations had provision for life

insurance and 22 percent organizations had provision for accidental insurance. The survey

reveals that only 37 percent enterprises had provisions for pay during accident and injury, 62

percent had provided medical treatment in the accidental injury, 49 percent organizations had

provision for first aid. Furthermore, only 15 percent enterprises had provided pay during sick

time, 23 percent had provision for medical treatment and 15 percent had medical check up

facilities.

Formation of Labor Relations Committee (LRC): Only 7 percent of organizations having

LRC to facilitate labor management relations and 24 percent of organizations had their own

regulations of enterprises. The situation of garment industry is worst in terms of labor

relations where almost 98 percent of enterprises had no LRC.

In a recent study undertaken in the garment industries the following features of QWL are

noticed:

Pay system mechanism: The amount of salary, wage and allowance is based on personal

whims of the entrepreneurs. No standard pay system is developed across the industry. There

is no link between workers' productivity and wages.

Training and development: A large number of the employees were trained on-the-job.

However, employers began to think that such training only increases operational costs. It was

due to the experience in the past with female workers who failed to develop their skills

despite the training given to them.

Performance evaluation: No industries have formal system of performance evaluation and

therefore no promotion is done on the basis of work performed.

Job security: Almost 70 percent of employees are employed on daily wage contract or piece-

rate basis. Only 14 percent are employed under the permanent contract basis. Appointment

letters are issued only for permanent employees. Temporary employees are not provided

appointment letters because employers fear that after 240 days of employment they are

entitled to claim for permanent jobs. Almost 25 percent of garment factories are paying

wages below the wage fixed by the government which is against the provision of the Labor

Code.

Retirement and other benefits: Although few industries have claimed that they have

provisions for provident fund, gratuity and accident insurance, many of them have failed to

comply with Labor Code in this matter.

Safety and comfort at work place:

Garments and fire are closely related to each other in Bangladesh. Outbreaks of fire in

garments factories have become acceptable. We learn some lessons after a disaster, and most

often forget about them. People had been dying but authorities were not that much concerned

until overseas buyers took exception to the large number of deaths and injuries. It is a matter

of great shame that we had to be warned by the importers about the safety concern for our

workers. Despite improvements in the area over the past decade, even today many a garments

factory owners are found paying minimum attention to the issue of fire safety. Even if fire

fighting equipments are installed in a factory, albeit arbitrarily, none can ensure that they will

not malfunction at the time of emergency.

Although the factories are not hazardous by their nature they need to take few more safety

measures to improve the quality of work. The study explores that factories need to exist some

safety measures such as provision for fire-exists, fire-alarms, safe drinking water and regulate

temperature.

Problems Regarding Foreign Direct Investment (FDI):

Infrastructure

Better infrastructure of the host country attracts foreign investors. Inflows of the FDI depend

mostly on quality and quantity of physical infrastructure like roads and highways, transport,

power, telecommunications and so on. Banking and other financial services also affect the

FDI inflows significantly. Good transport facilities-road, rail and air, including developed

port systems, energy and water and low cost utilities like telecommunications are important

infrastructural factors in attracting FDI. Business has to incur excess cost to collect

information in a country with poor infrastructure. But it can be done easily and with

minimum cost in a country having good infrastructure that makes FDI financed projects cost

efficient and competitive in the global market.

Macro Economic Environment

Macroeconomic factors such as fiscal policy, monetary policy and exchange rate

policies, political stability and business climate have a serious influence for FDI. Foreign

investors choose a location where there is evidence of success and availability of favorable

macroeconomic conditions. Investment is generally driven by profit, and foreign investors

always prefer a country with a rich business sector measured in terms of GDP growth rate,

rate of inflation, level of industrialization etc. than one, where the macro economic

environment is sluggish.

Governance

Governance of a country comprises economic and business policy and regulations

Such as taxation system and tax rate, interest and Bank rate, drive against corruption etc. All

this factors are related with the cost business and profit. Foreign investors very consciously

consider the governance of a country to invest. An important aspect of governance is the ease

with which investors can enter and exit a market. It is and important determinant of

productivity, investment and entrepreneurship.

The Journal of Nepalese Business Studies

International integration

International integration is another determinant that drives investment. Countries that

aggressively pursue integration with the global economy grow more quickly than those that

did not. The low level of incoming FDI in indicates poor integration with the global

economy.

Political stability

Political factors like change of government, attitude of opposition group, transparency

in bureaucracy, degree of nationalism, corruption, terrorism etc. are seriously considered by

the investors in pre-investment decision making. For example, in case of Bangladesh the

most sensitive issue for discouragement of the FDI is political unrest and corruption and red-

tapism.

Human resources

Skilled workforce leaves a country at an ease to attract investment. Development programs

financed by the FDI may be interrupted for the absence of skills and adequate knowledge

infrastructure. Low growth that takes place in trade and investment is the result of the use of

unskilled cheap labor. Bangladesh is a country where there is ample scope for development

of human resources. It is a shame for the planners that thousands of Indians and other foreign

nationals are employed in the top positions of most of the multinational and national

corporations.

Technology infrastructure

Economic growth of a country largely depends on technological progress, which stimulates

FDI. It includes more modest advances, implementation of better business processes, and

involves the adoption of new technologies. In this area, again, Bangladesh lags behind in

comparison to its competitors.

Complicated Bureaucracy

The country has a bureaucratic system that is not at all compatible with an investment

environment. The concrete implementation of investment related policies are prolonged to

obstruct both local and foreign investors. An inefficient and dishonest bureaucratic system is

extensively responsible for the absence of FDI in the country.

Political Unrest

The political situation in Bangladesh is extremely vulnerable because of the continuous

hostility among the political parties, which in turn pollutes the entire investment environment.

It is unfortunate that Bangladesh is an exception where most of the political violence centered

on industries. Even EPZs are not exempted by any means. However, the situation has been

apparently improved since the present interim government has taken over.

Foreign Direct Investment in Bangladesh: Problems and Prospects

Corruption

Culture and society have become corrupted through sick politics. The bureaucrats and

regulatory bodies are steeped in corruption. For business enterprise, corruption works as

taxation or lubrication cost. Many companies regard bribery as just one of the costs of doing

business (‘Lubrication Cost’) and show these payments as legitimate business expenses.

However the current situation in this regard is as gloomy as it was in the past.

High Inefficiency Cost

Government control and management has been extremely ineffective and inefficient.

The country is suffering from inefficiency of state-owned entities in telecommunication,

energy, ports, aviation, railways, banking and many other sectors. All these sectoral

inefficiencies push the total cost of local and foreign businesses extensively high.

Absence of Autonomous Regulatory Bodies

The politically influenced government agencies are functioning as regulatory bodies without

any operational autonomy. So an effective and rapid response towards providing the

necessary services to investors is apparently absent in Bangladesh.

Differential Treatment

Though are regulations to provide equal treatment of local and foreign investors, certain

inequitable conventions are practised with the foreign investors. Such inequalities are evident

in cases of authorization necessities for foreign investment, barriers against capacity

expansion, supplier’s credit, etc.

Insufficient Power Supply

Bangladesh faces a system loss often more than 40% of the gross power generation

probing with the lowest per capita power consumption and network coverage of

electrification among developing countries. This creates immense discouragement for

investment in the power intensive industries.

Inconsistent Policy Implementation

Bangladesh provides various favorable investment facilities and incentives under

Liberalized industrial policy. Bodies like the Export Processing Zones are there to promote

export orientation and privatization based growth strategy. However, in reality, none of these

favorable policies and strategies are implemented, thus foreign investors are being

discouraged.

Tax Authority’s Discretion

The government of Bangladesh has given its tax administrators discretionary authority

and they unduly apply it to bother businessmen and investors. This authority has made

many of the officials highly corrupt. At present Bangladesh is trying to get red of from this

scandal.

Lack of effective cooperation of Board of Investment (BOI)

The BOI of Bangladesh has a One Stop Service cell to serve and assist with various

investment facilities, mostly FDI. But, materializing the service in reality is still an illusion.

The least capable and least productive government personnel working for the cell naturally

fail to improve the situation.

The Journal of Nepalese Business Studies

Legal Absurdity

The system of legal suits and actions prolonged over the years puts business investors in a

dilemma about placing their precious capital in businesses in Bangladesh.

Disrupting Fiscal Policy

Each year the government declares Fiscal Policy that quite often goes adverse to the Investors

and disrupts their regular business and operations plans and strategies both in short and long

run.

Administrative coordination problem

Policies and the implementation processes are not materialized simultaneously because of

lack of administrative communication and coordination among the government agencies.

This situation results in high business costs and hassles for investors.

Time wasting customs processing

The inefficient and corrupt customs system quite often takes more than twenty signatories to

discharge a shipment along with physical inspection by the authorized personnel. There are

many other problems such as poor leadership quality, ignorant labor forces, and unorganized

financial or capital markets that damage the national image of the country to the foreign

investors.

Functional Requirements for Sound Industrial Relations in RMG Sector (Bangladesh):

History of Good Industrial Relations: A good Industrial Relations means harmonious

relationship between the management and workers. On the other hand, a bad history is

characterized by militant strikes and lockouts. Both have perpetuating tendency that does not

mean that they cannot change their attitude. The probability of conflict is greater when

conflict has been accepted as normal. The probability of peaceful relations is greater when

mutual understanding is expected to continue as a part of standard operation.

In our country, there is a bad history of Industrial relations, because we see that frequently

strike is there, and we also see that, workers not get a safety environment and not get

minimum wages. A significant number of readymade garment factories do not even pay the

minimum wage of Tk 1, 662.50, let alone overtime bills. In June 2007 the Bangladesh

Garment Manufacturers and Exporters Association released the report of a survey, amid

much fanfare, claiming almost 83 per cent of its member factories go by the minimum wage

stipulation. So, we see that strike is there and an employers-employees relation of the RMG

sector of Bangladesh is not good.

Economic Satisfaction of workers: The demands of the workers were rightful, rational and

indeed justified, as they had been on previous occasions. They demanded such basic

provisions as payment of wages within the first week of every month, regular payment of

overtime. A large number of companies enforce workdays much longer than the standard

eight hours, as stipulated by labor laws. A significant number of readymade garment factories

do not even pay the minimum wage of Tk 1, 662.50, let alone overtime bills. But minimum

wage is only part of the labor rights and just one of the ten points of the tripartite agreement

that was struck by the owners, workers and the government following the violent

demonstrations by garment workers in May 2006. To help the garment exporters and allow

them to remain competitive despite the ever deteriorating terms of trade, successive

governments, including the current military-controlled interim regime, have ensured that the

value of taka against dollar remains devalued at such levels so as to lure foreign buyers.

Social and Psychological satisfaction: Identifying the social and psychological needs of

workers is very important step to determine the good industrial relations. It has been reveled

by the Hawthorne Experiments that a man has several other needs besides his physical needs.

Employment relationships are not only an economic contract; supportive climate is more

required than economic rewards. The supportive climate of organizations is essentially built

around social and psychological rewards. Workers participation in management, job

enrichment, suggestion schemes, redressal of grievances, effective two ways communication

are some of social and psychological rewards. When we see the research paper of different

expertise, the present situation of RMG sector regarding social and psychological perspective

is not good, worker’s participation is not there, worker’s not get chance to raise up there

voice regarding wages, or any surrounding physical environment. When we see that, workers

are happy if she/he get proper environment to done their jobs, but we see that supervisor’s

behavior is not satisfactory level, when supervisors deal with the employees. So, ultimately

we see the workers are not psychologically satisfied; another things is that most of the RMG

sector in Bangladesh not maintain to give minimum wages to the workers, so workers not

maintain their minimum social status because due to the increasing rate inflation rate is high,

so worker are not capable to buy their necessary of this wages. So, ultimately social

satisfaction is not their in RMG sector in Bangladesh.

Off the Job Conditions: For good IRS it is not enough that the workers factory life alone

should be taken care of. His home life is not totally separable from his work life and his

emotional condition. Each affects the others. For these reason workers off the job conditions

should also be improved. Through the readings of different papers, we see that; minimum

wages is not provided most of the garments in Bangladesh. So, they are not capable to meet

up their family demands, so ultimately their family members are not satisfied. This impact is

create big influence on the performance of the workers, as its affect there attitude towards the

job (Motivation is declined). So, frequently strike is happen.

Enlightened Labor Unions: Strong and enlightened labor movement can help to promote

the status of labor without hampering the interest of management. Labor unions always talk

much of the employer’s obligations to the workers but say very little about the workers

responsibility to the employers. Trade union activities are not satisfactory level in the

perspective of RMG sector in Bangladesh because proper utilization of leadership capability

is not there. The leaders of the trade unions should have proper educational background, so

that they can understand what are their rights as well as responsibilities, while they negotiate

for their workers to the perspective of problems facing regarding RMG sectors in

Bangladesh.

Negotiating skills of management and workers: Good industrial relations depend on the

ability of employers, organizations and trade unions to deal with their mutual problems

freely, independently and with responsibility. From the perspective of different literature it is

clearly identified in the RMG sector in Bangladesh, there is a involvement of weakness of

different trade union activities and finally we see that workers do not get chance to give their

opinions independently regarding their wages, physical environment, psychological

conditions and their health and hygiene, so we easily understand negotiation skills of

management and workers is really poor in the RMG sector in Bangladesh. The educational

backgrounds of the trade union leaders are not satisfactory that reduces the chance for a better

solution.

Urge on the part of employers: Good industrial relations depend on the realizations and

urges on the part of employers for the promotion of their workers welfare. From the different

scenario of the RMG sector in Bangladesh, we find out that employers are not interested

regarding workers welfare because most of the cases they are not properly give the wages and

other facilities of workers. Think of this scenario we can easily understand willingness of

give and take perspective is absent most of the RMG sector in Bangladesh

Genuine sympathy of the public: Good IRS depends on the genuine sympathy of the

general public towards labor. Sometimes we see that very small portion of columnists, write

regarding the different problems of the workers such as wages, physical conditions, working

environment, psychological satisfaction, trade union activities, employers unethical decisions

and so on.

Public policy and Legislation: Government becomes a third major force in determining IRS.

It regulates the behaviors of both labor and management. In our country we see that

Government regulates the laws and policies to proper maintaining industrial relations of the

RMG sector in Bangladesh but many of the cases implementation is not there and

Government not enforce to maintain the rules and laws to the employers. That means there is

not monitoring mapping is there.

Better Education: Better education provides proper sense of responsibility and thus they will

be less influenced by outside forces. When we see that different conflicts in the RMG sector

in Bangladesh that most of the cases conflict is happen because of the lack of education of the

workers.

Collective Bargaining: Collective Bargaining is the cornerstone of good industrial relations

through the assistances of appropriate Government agencies might be necessary in public

interest. We know that collective bargaining is the negotiation of different parties but in the

actual scenario of the RMG sector in Bangladesh that there is a poor understanding of

relationship between the workers and the employers, so proper negotiations is absent.

Compliance Standard for Garments Sector:

Factory Level Compliance Standard: Ergonomic Balance:

Factory level ergonomics indicate appropriate balance between factory space, installed

machines and workers. This refers to size of floor space available for doing work, ratio

between floor space and number of workers, workers and machines used workers and

production lines, adequacy of air and light inside the factory, etc. Floor space available for

working in the surveyed factories was, on average, about 50,000 sq ft, while spaces for

setting up a production line was about 6128 sq ft. Available space for each worker on average

was 52 sq. ft. It appears that large and medium enterprises provided relatively more space for

setting up production lines and for workers working in the factory. Average worker-machine

ratio was 1.74, indicating that every operator of a machine took support of 0.74 additional

workers (usually these workers are called 'helpers'). Enterprises, directly dealt with buyers,

(which also tended to be large and medium enterprises) were operated by higher number of

workers in production lines and also provided higher space to the workers. In other words,

ergonomic standard was better in enterprises which worked directly with buyers. A majority

of large enterprises were purpose-built, while the proportion of such enterprises in the case of

medium and small units was relatively low. Factories established in earlier periods were

behind in terms of complying with factory level compliance standards, perhaps because of

government's “soft look” towards apparel sector in the earlier stage of its development when

these standards requirements were either mildly dealt or overlooked by concerned offices. In

general, factories established in more recent periods were relatively better compliant in terms

of factory standards.

 

Worker's Job-related Compliance Standard:

Factory management, in most of the cases, checked the minimum age of workers that they

were recruiting. It appeared from the survey that entrepreneurs are very strict on this issue, a

considerable change compared to the 1990s. With the introduction of Harkin's Bill in the US

Senate in the early 1990s, both the government and the entrepreneurs had taken steps to

eliminate child labour in the export-oriented RMG sector of the country. Buyers are at

present very strict in terms of ensuring that they do not place orders to factories that have any

child labor. Majority of sample enterprises did not provide appointment letters to the workers,

according to the data collected through survey in 2006. A high proportion of large enterprises

provided appointment letters to their workers; about 53 per cent of knit, 51 per cent of woven

and 40 per cent of sweater enterprises did so. The proportion of sample EPZ enterprises that

provided appointment letters to workers was about 69 per cent, while the proportion of non-

EPZ enterprises providing appointment letters to workers was 22 per cent. A formal

appointment letter, where all important aspects of employment, were mentioned, would give

confidence to the workers regarding job security which could lead to higher levels of

retention in the factory. According to entrepreneurs, most of the enterprises paid workers'

wages within first and second week of the month; more than 90 per cent of the enterprises did

so. The practice of payment of workers' wages in the third week of the month was evident not

only in small enterprises, but also in medium and large enterprises. Getting income in the first

week of the month was felt to be critically important by the workers since they had to pay

their monthly dues including room rent, utility charges, etc. in the first week of the month.

Irregular payment was a major inducement for switching jobs and a high turnover. In most of

the sample enterprises, normal working hour (excluding overtime working hours) was 8.28

hours, which was more than the stipulated working hours set by the law. In general, normal

working hour in 2005 was marginally lower (-0.2 per cent) compared to that in 2004. From

workers' point of view, reduction of normal working hour was less important compared to

effective working hour which included overtime working hour along with normal working

hour. Length of overtime working hour was considerable - it averaged about 13.9 hours per

week or more than two hours a day. In general, overtime working hour has increased by

about 3 per cent after the MFA phase out. It was argued by entrepreneurs that managing bulk

volume of production orders was often difficult within a predetermined schedule of work as

production was often hampered due to electricity outage, strikes, etc. Thus factories had to

operate for longer hours to compensate for these disruptions. However, in most instances

longer working hours in factories was dictated by the pattern of orders placed by buyers

which necessitated production of certain volume within a strictly stipulated time –line. As

maintained by workers, longer working hours and high load of work in the factory, especially

in sweater and knit factories, have reduced workers' leisure hours. Besides, pressure from the

production managers to fulfill high production targets also made their lives very stressful.

This often led to deterioration in relationship between workers and the management people

directly involved in production. Workers maintained that in many instances workers' unrest

was caused by deterioration of relation between workers and management. Most of the

enterprises, according to their owners, maintained a weekly holiday. Workers maintained that

in view of long working hours a weekly holiday was essential for them. Most of the sample

enterprises provided maternity leave to their female employees. More than 80 per cent

enterprises provided maternity leave; the ratio was higher in the case of sample sweater units.

Most of the factories did not have day-care and canteen facilities. Workers had to take their

meal sitting in the stairs or in the corridors or by going back home. Day-care or canteen

facility was available in 53 per cent woven factories; the share was very low in the case of

sweater and knit factories. In general, the trend is for all types of enterprises to provide such

facilities in increasingly greater numbers in recent years. Because of having no day care

facility in most of the factories, female workers had to leave their children at home or in

many cases in their villages. Monthly wage of a female worker was 28 per cent less than that

of a male worker with identical characteristics. However, the field survey indicated that

situation has improved in recent years and large enterprises tended to provide relatively better

facilities compared to medium and small enterprises. Analysis indicates that compliance

standard of large enterprises was about six points higher than medium enterprises; while the

standard of small enterprises was three points lower than medium enterprises and both are

significant at a high level. It was also found that initial investment was very important for the

level of compliance standard that was maintained by enterprises.

Workers' Health and Safety Related Compliance Standard:

There were, on average, more than two emergency exits in a sample factory. More than 600

workers could use one exit in large factories, while the number for medium and small

factories was 353 and 170 workers respectively. Number of emergency exits was relatively

higher in EPZ-factory compared to non-EPZ factory. However, availability of emergency

exits did not necessarily ensure worker's safety in full measure. The width of the exit, landing

space available etc. was also important factors from the perspective of safety. There were, on

average, 0.8 doctors available in every factory, which indicates a good number of factories

have no in-house doctors. In other words, one doctor was available for 1,088 workers.

According to sample workers, most common diseases from which they suffered were

headache, cold fever, etc. Most factories did not have adequate ventilation and exhaust fans

and few workers use masks. As a result, there was strong possibility to be affected by serious

diseases, such as tuberculosis. Incidence of accidents while working in the factory was not

found to be very high. Other than accidents, in-house doctors usually diagnosed the patients

and prescribed medicines free of cost, but workers had to bear all costs of medicine. Trade

union activities were almost non-existent in the garment sector. There were very few factories

where workers were allowed to have trade unions at the factory premise. As is known,

following long debates over the issue of allowing trade union activities in EPZ factories, the

government agreed to allow formation of Workers Welfare Committee (WWC) in the RMG

factories located in EPZs. The WWC is usually comprised of representatives of workers and

factory management, which regularly met and discussed worker related issues. About 52

factories were found where WWC activities prevailed. Fifty five per cent of EPZ factories

were found to have WWC, while only 20 per cent of non-EPZ factories had WWC.

Prevalence of WWC activity has marginally increased in 2005 compared to that in 2004.

Entrepreneurs were more or less divided as regards the issue; one group supported such a

negotiating body while the other group was against it. A regression analysis was carried out

to understand the impact of different factors on workers' health and safety related compliance

standards maintained by the sample enterprises. It is found that large enterprises were better

compliant as the value of index of these enterprises was 9.6 points higher compared to

medium enterprises, while small enterprises were less compliant compared to medium

enterprises: score of the former was 5.5 points lower than the latter. Highly compliant

enterprises were 57 per cent more productive compared to less compliant enterprises and 65

per cent more productive compared to moderately compliant enterprises. Thus, maintaining

compliance with the required standards was found to have a positive impact on productivity,

indicating the need to enforce compliance at the factory level for the good of the RMG sector

itself. Sample entrepreneurs were of the opinion that for enhancing labour productivity a

number of measures should be taken: organize training for workers, improve compliant

situation, diversify production, provide entertainment facility, increase workers' wage and

provide other incentives, and ensure good behavior with workers, etc.

Code of Conduct Followed by Major Buyers and Bangladesh's RMG Industry:

Codes of conduct have been an important part of efforts to improve labor standards in global

supply chains. Over the past ten years, these codes and systems put in place to ensure their

implementation have seen a large scale proliferation. Brands and retailers are faced with

multiple industry standards and suppliers are confused by the numerous codes and initiatives.

There is lack of harmony in the Code of Conducts of the different brands, particularly in the

cases of minimum age requirements, wages and benefits and overtime payment. However,

there are some common concerns and standards and Bangladesh will need to be very careful

in addressing the norms established by the brands. Both legislation of appropriate laws and

their enforcement are important. Lack of uniformity in the brands' requirements often gives

rise to confusion among suppliers. A large number of suppliers do business with several

brands. Moreover, although all buyers talk about following the code of conduct which refers

to maintaining and adherence to local legislation as a minimum requirement, when monitors

appointed by buyers or an independent monitor conducted audit of firms, they tended to

follow detailed checklists provided by respective brands which were usually local legislation

plus; suppliers were often not aware about the additional requirements. Better coordination

and cooperation is essential to address this confusion and agents of the brand, government

regulators and RMG industry should work towards a tripartite understanding. In this context,

a local clearing house of standards and compliance could be thought of to streamline the

situation. It is also important to develop a shared understanding about the important

contribution that voluntary codes of conduct could make towards better working conditions in

the factories and also towards higher productivity of labor.

Recommendations1. Good governance can bring about efficient and productive government, necessary

reformation in judicial system, fiscal policy, infrastructural reforms and eradication of

corruption, bureaucracy and dishonesty to lead a country to achieve handsome investment.

2. To make the business environment and activities smooth and efficient, coordinated

government agencies (ministries, departments, regulatory bodies, etc.) are a must.

3. More dynamic government agencies can facilitate investment in Bangladesh. So,

Bangladesh Bank, Investment Promotion Agencies, Bangladesh Board of Investment escape

essentially suggested enhancing FDI in Bangladesh.

4. More accountability and transparency are recommended for the development, efficiency

and competence Government and regulatory bodies in the work of investment.

5. Bangladesh should maintain a good relation with the developed countries as well as with

developing countries for significant share of FDI by developing countries.

6. In recent years foreign investments are going to RMG, telecommunication, power and

energy or other profitable areas. Bangladesh should provide appropriate attention to attract

more FDI in the industrial and infrastructural areas like construction of roads and highway

(especially in building large bridges, flyovers, underground ways etc.), assuring enough

inducing competitive advantages to investment in these sectors.

7. Nowadays Bangladesh is badly suffering for lacking of power supply and it is a great

obstacle in the smooth inflow of FDI. So the recipient country has to ensure required supply

of power and energy.

8. Wages need to be increased substantially, but at least to a level that permits workers to

address basic needs. “The women workers interviewed see housing, transportation, food,

health and security as basic needs which can be improved if wages are increased”.

9. Introduction of an area-based ration-provision system could lessen the frequent relocation

of workers and encourage residential and employment stability. Workers would like rationing

cards to buy everyday needs such as rice, flour, lentils, sugar, salt and edible oil at subsidized

prices from ration-stores. Approximately ten years ago a ration system was popular among

low-income people government employees because it provided them some reasonable food

security. Some garments are now practicing this ration-provision system. This system should

follow all the garments.

10. Our informants join those of many other studies to highlight the importance of a healthier

and safer working environment, including such specific things as wide emergency exits,

readily available emergency medical care and facilities, and some form of insurance in the

event of injury.

11. Friday (Islamic holy day) clinics should provide free but mandatory weekly health checks

and vaccinations. Such services should be made available to all garment workers in the

interest of improved living standards and control of the spread of disease. These clinics may

also serve as information distribution sites for health and birth control education.

12. There continues to be an urgent need for medical facilities to serve garment workers.

13. A most critical need cited by the workers in our study is for provision of safe night time

transportation from the factories to home. Safe travel is such a prominent need for women

garment workers that it obviates the urgency for a special subsidized morning and nighttime

bus service for women workers only.

14. Subsidized low-cost housing targeted to garment workers should be considered seriously,

and additionally should be accompanied by schools, day care centres, a women’s cooperative

and other nearby shops.

15. Primary schools for children and young dependents of workers (e.g., brothers or sisters)

are funded by the Government of Bangladesh, International Labour Organization (ILO),

United Nations International Childrens’ Emergency Fund (UNICEF) and BGMEA, and

operated by Bangladesh Rural Advancement Committee (BRAC), and Gana Shahajya

Sangstha (GSS).

16. Finally, an important contribution to the health and well being of workers would be the

supply of umbrellas and raincoats for the rainy season. As an obligation of employers, this

slight humanizing gesture would likely be returned many times over in better health among

workers.

17. Employment generation programs, including “backward linkages” related to a thriving

textile and garment industry, need to be launched in rural areas in order to encourage garment

workers to return to villages. Infrastructure barriers to such projects are disappearing, as rural

electrification and road communication in rural Bangladesh has become adequately

developed in recent years. These projects need the support of international donors, and both

national and international NGOs.

18. Stimulation of alternatives to garment industry employment needs attention from both the

public and private sector in Bangladesh. BRAC launched a vocational training and credit

program for workers who are either dismissed or lost job due to closure of factories. A

worker must first register as a member of BRAC. Second, BRAC assesses each worker’s

potential, capacity, skill and job preferences.

19. Need to establish deliberate links between garment workers and women’s groups, trade

unions and advocacy groups to promote rights issues both nationally and internationally, and

to build solidarity among and with women workers.

20. Bangladesh economy at present is more globally integrated than at any time in the past.

The MFA phase-out will lead to more efficient global realignments of the textile and clothing

industry. The phase out was expected to have negative impact on the economy of

Bangladesh. Recent data reveals that Bangladesh absorbed the shock successfully and indeed

RMG exports grew significantly both in FY05 and (especially) in FY06. Due to a number of

steps taken by the industry, Bangladesh still remains competitive in RMG exports even in this

post phase-out period.

21. Cheap labor is no longer seen to be a mainstay of comparative advantage. The need for

establishing strong backward linkage was appropriately realized and accordingly necessary

steps were taken by all quarters of the RMG industry, which has been reflected in the

decreased pattern of back-to-back import supported by increased domestic value addition.

However further progress is in order, and a strong public sector role is necessary to mediate

the establishment of textile mills with global standards. An appropriate policy regime is

needed to encourage the importation of technology, intermediate and raw materials, so that

the local industries get a chance to reduce its average cost to international level and narrow

the lead time.

22. Presently, Bangladesh’s apparel sector operates mainly at the lower-end segment of the

international market. Although knitwear products achieved tremendous growth but these are

low-value products with small profit margins. Bangladesh can enhance its value addition

capacity substantially through diversification of apparel products and by moving into more

value-added, high-priced, high-fashion products. Woven category can be more attractive via

large capital investment. If cost effective investment can increase in the spinning and

weaving sub-sectors, as it has been in the past few years, Bangladesh has the possibility of

building a competitive export-oriented RMG sector with strong backward linkages in the

textiles sector.

23. Training is always considered as an effective instrument for upgrading skills and raising

efficiency of human resource, which eventually ensures increased productivity. Some

initiatives have been taken by the entrepreneurs of the relevant sector but much more needs to

be done. Necessary steps should be taken both by the public and the private sectors, and

development partners to establish appropriate fashion and technology institutes. Improvement

in working conditions and organizational environment can also result in increased

productivity, which eventually renders these.

24. A Sector wide approach for protection and insurance arrangements complemented by a

robust institutional framework for design and implementation rather than an individual

enterprise based approach is required.

25. The existing institutional arrangement is that of supervision and control while the social

protection and social insurance schemes can be implemented through Public Private

Partnerships.

26. It is evident from the available level and type social protection that much ground is yet to

be covered.

27. There is a need for setting up a more sustainable and meaningful integrated system of

social protection for RMG workers in Bangladesh. Whereas, Social Assistance is a State

responsibility met from revenue. Social Protect System has to be participatory with

contribution from all the Stakeholders - Government, Employers and Workers.

30. Under informal employment conditions SP is unlikely to be successful without focusing

on the social capital aspect at the family level.

31. However, this approach cannot be taken up by the industry alone.

Key Elements of SP System:

• Sectoral Approach for Sustainable Long Term SP System• Tripartite Approach in Management• Empowerment of Women and their Families through Enhancement of Employability and Stabilization of Family Income

32. Long Term Social Protect System 1. Continuing education (part time) cum skill development

2. Design and implementation of insurance schemes for covering the risks that include accident cum life and medical care.

33. Continuing education classes for RMG female workers so as to enable them to acquire certification of thresh hold level of education - 5 / 7 years of schooling. This expected to help this semi illiterate worker to acquire better and diversified skills for future.

34. Organized skill development classes so as to acquire marketable skills in diversify occupations focusing on the workers as well as their family Members.

Bibliography:www.jstor.org

www.bgmea.com

www.dailystar.com

Banglapedia- Detail information for RMG sector.

www.cpd-bangladesh.org

www.epzbangladesh.org.bd

www.wikipedia.com