Pacts, plans and reality

 Published in: The Financial Express on July 26, 2013
Pacts, plans and reality

One just routinely wakes up to “90% structurally unsound factory buildings in Bangladesh” headliners. Out of the recent survey of 70 factories, six were found faulty, the rest 64 were found to have minor deviations, out of which again six were completely sound, and the rest 58 (82.85% over 70 factories) were not structurally 100% compliant. This made news. One media reported that only six factories were found safe; some reported only six were non compliant; some reported majority of factories in Bangladesh being structurally compromised. It all ultimately boils down to a question of phrasing in the media.

Labour Law 2013 has been passed with significant amendments that add flesh to the one passed in 2006. While 30% of workers are needed to form the unions with leaders from their own establishments, while Export Processing Zone (EPZ) still stays off trade unions, while the government is able to obstruct foreign funds from coming into trade unions, and while strikes become difficult to implement, we might as well accept the fact that in spite of all the hiccups, we have actually been able to move forward in acknowledging the collective bargaining voice of labour and that Labour Law 2013, is in no way, a step backward.

While all eyes have been on Bangladesh, many including the retailers, brands, international organisations have come up with multiple initiatives. International brands and retailers have stepped in. Accords and Alliances have been announced; international organisations have come forward to pen agreements to ensure safety of factories and workers in Bangladesh. Simultaneously, the number of surprise inspections and unannounced audits has increased and factories have been continuously submitting structural designs and soil test reports to Bangladesh Garments Manufacturers & Exporters Association (BGMEA). The whole manufacturing sector has been buzzing with corrective action plans.

Question is, are these initiatives merely a ‘feel good’ factor for most of us? How many of us need to be sincerely engaged in these multiple initiatives? And of course, how many of us know what we have in our hands and what our issues are…

No, another Rana Plaza is not being read in our palms. But we may run into fire safety issues again. The recent news of International Labour Organision (ILO) funding the noncompliant and risky factories is heartening. The news of the Alliance of the North American retailers for Safer Factories is also promising, considering they have huge plans to set up a database of the factories which will continue to report and update their statuses every time a violation happens. But, considering that the factory tiers have not yet been classified, it may actually not be feasible for any Alliance to assume that they would have transparency and free access to the factories in Bangladesh.

At the same time, let us make a note of the Alliance refering to Workers Participatory Committees and not Trade Unions, at a time when the Generalised System of Preferences (GSP) privilege of Bangladesh has been cancelled by the US because of Bangladesh not having met the minimum standard of fair labour practices. The European Union (EU) Accord, on the other hand, pledges to work on issues of fire and building safety. It aims to address the concerns raised in the factories that the European brands have chosen to engage with. Compact, another agreement which involves the EU, ILO and the Government of Bangladesh endorses the Accord and promises to stay engaged in areas of labour. It is the ILO alone, so far, which has given its initial comments on the reforms and will review the law later this year.

Out of all the exercises, the stress on mainly the safety and security issues comes from the retailers and brands while the focus on labour issues comes from the ILO. The reason is simple, the brands do not want their images to suffer and they want to continue sourcing more meaningful capacity from Bangladesh. I add the word “meaningful” to sourcing as a critical factor. Truth is, Bangladesh manages to remain meaningful because of our competitiveness and capacity. Minimum wage is set to increase by November 2013 and prices of our products will soar. While house rent and prices of essentials will possibly shoot through our workers’ ceilings, manufacturers may ink a deal with the policymakers on how to make the wage increase translate into actual good for labour. As for increasing costs, many factories have already introduced free lunch and increased attendance bonus. With the additional compliance factors being at work, factories are paying more for audit fees, which leads to additional costs.

There is clearly a need for a coordinated approach to security involving the government, BGMEA, the international organisations, the brands and the manufacturers. While the Alliance refers to the government and business body, the Accord lays lesser importance to local affiliation (understandably for good reasons). In many cases, manufacturers are in the dark as to what exactly is happening to the sector. After all, it is not the aliens amongst us who will dictate our production units rather it will only be left on us and our own prevailing good senses. Therefore, it is time for all of us to come clean and declare unauthorized units and not suffer the fear of exposure. The buyers must place trust on their sources to be transparent and not threaten them with elevated standards of compliance.

We also need to draw a quick line between safety, unionization and wage. These are challenging factors for Bangladesh to handle. While safety is a key concern of the buyers, unionization is a global requirement backed by local trade leaders and civil society, and wage remains only an issue with the trade unionists in Bangladesh. While a few brands have assured to pay extra prices in accordance with the wage hike, many have kept quiet on this area. Manufacturers like us who are attempting to raise prices are being told to remain competitive. That makes sense, though. The buyers are not here for charity and it makes no sense for them to pay extra for the same product that they have bought last season. It absolutely makes sense for them to shop around and find their next competitive spot in Cambodia and invest in capacities there. Why wouldn’t and shouldn’t they?

If we keep on being the “basic” suppliers forever and not attempt value addition, I sincerely do not see Bangladesh RMG sector moving forward in a sustainable manner. It is unfortunate that we lack adequate research on this sector and suffer from populist attacks more frequently than we ought to. A standard basic research would possibly indicate that garment factories in Bangladesh are no more feasible to sustain and that unless we move up the value chain, we cannot make money and may just end up being social businesses.

Many interest groups are at play. Rana, Tazreen and Spectrum have placed us as a dangerous spot in the world and manufacturers are increasingly finding themselves at critical spots, unable to find their way back home. There must be a national consensus on helping the sector and a unanimity in efforts in order to avert immediate damage, without which most of the stakeholders in the sector will only find excuses to shy away from efficient and timely housekeeping, leaving the labor sector exposed to risk at large.

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