Size, survival and sustainability

 Published in: The Daily Star on March 24, 2014
Size, survival and sustainability

A four-member delegation of the European Union Parliament is due in the city today to talk about politics and working conditions. While inspections of factories are going on, many factories are reporting empty sewing lines with no work. There are more factors at play here. With April 24 less than a month away, Rana Plaza anniversary will once again attract attention and many media columns will be dedicated to what could-have-been factors. That it took almost a year to formulate safety standards will be overlooked; that the manufacturers have not done enough at their end will be highlighted; that many factories are still struggling with complying with minimum wages requirement will be splashed all over our faces. Now, how are we to pay more, remedy our working conditions and still be the second best to China?
The US just reported a decline in apparel pricing for the sixth successive month in February. The Consumer Price Index for All Urban Consumers (CPI-U) recorded February’s apparel decline being sixth in a row, with apparel pricing falling 0.6% over the past year before seasonal adjustment. If prices are going to fall, who is going to be paying for the expected increases in products made in Bangladesh? And why would they be paying it as well?
A question like this warrants a global examination of all our competitors at this point along with the Trade Facilitation considerations that the World Bank has just reported, which also includes Logistics Performance Index where an overall score reflects perceptions of a country’s logistics based on efficiency of customs, trade-infrastructure, ease of shipment, services and also the frequency with which shipments reach the consignee. The report, on a scale of 1-5, rates China at 3.52, India at 3.08, Pakistan at 2.83, Sri Lanka at 2.75, Bangladesh at 2.74, Bhutan at 2.52, Maldives at 2.55 and Afghanistan at 2.3 for Logistics Performance Index. As for the burden on customs procedure, Sri Lanka is best in Asia with 4.3, followed by China with 4.2, followed by India at 3.8, Pakistan with 3.7, Nepal with 3.5 and then of course Bangladesh ranking lower than any other with a score of 3.2. With regard to ease of doing business, the best seems to be Sri Lanka with a score of an 85, Maldives with a 95, China with a 96 followed by Nepal at 105, and finally 110 for Pakistan. What surprises me most is that, in many cases, we are lagging behind Pakistan. And, excuse me, why is India looking better?
Though in India, ready-made garment export contributes to just about 4.7% of total exports, 12 million people are employed both directly and indirectly in garment production. While China has an ageing population with a median age of 35.6 years and has changing demographics, India, with an enormous population with 70% living in penury in rural areas, has an untapped pool of workers. And this is exactly why India has been deliberately focusing on their growth in RMG. A quick look at the pattern of exports (2000-2013) declining by almost 47%-60% by leading exporters like Tunisia, Morocco, Indonesia, Thailand makes us wonder how Indian exports to the EU have actually risen by 18%. And even when Mexico, Dominican Republic, Honduras, Korea, Taiwan, Philippines, and a few of the top ten exporters to the US have reported decline of exports from 55%-93%, how has India risen by 26.9%?
Simple. Firstly, they have the labour. Secondly, they source material with ease and assist the buyers with design, ranking right after China and Turkey. They have innovation to their advantage as well as backward linkage. Moreover, they are rapidly expanding their training institutes and equipping them to train industry-ready candidates to tackle the skilled labour shortage. India’s Apparel Training & Design Centre (ATDC) network has risen from 39 units in 2009 to 190 in 18 Indian states today. Way back in 2011, 45% of textile and apparel firms were running at half their production capacity due to shortage of labour.
What’s India’s handicap then? India ranks low with compliance, pollution and productivity for sure, and ranks high with workers’ attrition ranging from about 10.4%-12.4%. But with its superb product development capabilities, India is an ideal destination for better value-added fashion product.
A quick look at Myanmar, Cambodia, Sri Lanka, and even Ethiopia may be worthwhile as the ground realities in those countries are looking way better than ours now. EU’s GSP restoration in July 2013 has helped Myanmar earn more than $1.1billion from garment exports in 2013. Myanmar has just ended more than half century of military rule in 2011, and EU has rewarded the move. We can only hope that the orders from EU and the US won’t grow radically considering the current labour shortages. Male workers in Myanmar opt for construction sites, which give them around $ 5.18 a day, whereas the current demand of the workers is to increase minimum wages to almost $200 with overtime. But let’s pay heed to the interest of the Myanmarese government which is quick to attract foreign investment, and as a result of government initiatives, investors are setting up factories away from Yangon, which is proving to be far more profitable for them.
Sri Lanka is yet another success scenario. Dynamic firms are being showcased in a bid to boost growth with the US. ‘SriLanka 25’ is a recently launched scheme, co-founded by a professor of the Harvard Business School, which will recognise and reward the most exciting private companies with international credentialing process. Needless to add, the spotlight will follow Sri Lanka.
Even in Cambodia, in spite of its challenges with an initiative of ILO, Better Factories Cambodia (BFC) has introduced online transparency database that records 17 or more factories improving 21 basic requirements with just with the hope of being included in the initial report. Number of violations have also fallen from 59 to 34 between December 2013 and February 2014. Let us not forget that in Cambodia there is high interest from foreign investors as well, namely China, Hong Kong, Malaysia, Singapore, South Korea, Taiwan and the USA, countries that own and control 90% of the clothing factories there.
Let’s now look at Ethiopia, which is standing out as a land of growth and investment. The country has the finest cotton and a rich textile spinning and weaving history. The government is also providing incentives, and since it has duty free market access to both the US and the EU it is now beginning to attract international brands and investors. Why is Ethiopia getting better? Simple. Since 1995, there has been a stable political framework there and the country has also been experiencing a consistent GDP growth of 8%.
They are all looking better and that’s the truth. At this point of time, we must all remember that size gives us no guarantee for survival…and just reporting surge in export does not ensure sustainability. If there are loopholes that need to be fixed, let’s fix them. If we need to be showcased better, please do so. If we need to be counseled and taught better practices, then engage. But Bangladesh ready-made garment industry cannot just afford to quote soaring exports and feel it is back-to-business as usual. Without the active intervention and support of the government, the sector will continue to remain defensive and finally succumb to yet another fatal image plunge next month as the world will once again remember the 1129 lives lost…in tears and shame.

The writer is Managing Director, Mohammadi Group.

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