The battles of RMG

 Published in: The Financial Express on September 25, 2013
The battles of RMG

The police and Rapid Action Battalion (RAB) were on the road just the other day, clearing the protesting workers who had come out in the streets from the neighbourhood of Khilkhet and Bishwa Road. The scene was not a pretty one. It’s never a relief to see law enforcement teams dispelling the crowd. This is the last thing a garment factory owner desires to witness. In spite of how many times garment-wallahs are publicly shamed, the reality is that the sector exists. In spite of many wanting to wish the ‘blood sucking’ owners away, the readymade garment (RMG) entrepreneurs still happen to provide the highest employment in the country.

Whether RMG is viable as an industry or whether it will survive at the pace it is advancing, is a critical discussion altogether. Sweeping suggestions on the sector producing better products, enhancing the skill of workers, enforcing good practices in the area…have all been a part of the current popular discourse. One is yet to read a thought-provoking, in-depth study and suggestion on exactly how to take this industry forward and let’s reconcile with one fact: one can’t simply do with overnight wish lists.

Currently, the most important thing in the agenda is labour and wages. The minimum wage proposed from the owners’ side has been Taka 3600.00. The general expectation and unofficial consensus weighs on the side of something close to Taka 4500.00. Asking questions like whether it is enough for a worker to get by is a valid question. But the answer requires courage, empathy and entrepreneurial spirit. These three elements don’t usually fit into one single mould and hence a manufacturer often finds oneself facing conflicting roles that comply with one segment of the society or the other. It’s never an easy choice.

How well do we know the industry and its capabilities? Can Bangladesh raise minimum wages to Taka 8000.00 and retain competitiveness? Can Bangladesh really substantially bag some of China’s export and significantly raise exports by 2020? Can Bangladesh really become the producer of higher value added products in the next five years or so? And above all, when we predict the future of RMG in Bangladesh, do we take into consideration the small factories that exist in our neighborhood, where we witness 300-500 workers queuing up to join work every morning?

While assessing the potential of RMG it’s essential to realize that exporters have limited capability to sell their products. Selling products means being able to present a collection that suits the tastes of the buyers. The large black Samsonites of the garment exporters often have products folded with labels that list the content and the composition of the shell fabric of the product and most importantly, the price. It has taken the exporters of the sector over 30 years to be able to showcase their product lines.

Let me share a simple story with you: a competitor from a neighbouring country and I were offering the same products that we both wanted to offer to the customer. When I went in with the shirts range, the buyer looked at my face and asked: “So…is this beta wash?” I felt ashamed about my ignorance and answered: “No, it’s a shirt with a PP spray on effect.” He looked disappointed and said: “But the handfeel? Is this with beta wash?” I again fumbled while opening my mouth: “No, it’s a silicon enzyme finish.” He pulled out a few of my competitor’s shirts and said: “Look…this is alpha wash.” For the life of me, I couldn’t figure out what wash methods he was referring to. But I knew that my competitor friend had pulled a fast one on the buyer. There were no such washes!!

The trick in the trade is to sound smarter and make the ultimate product seem difficult and complicated. Now this is something the Bangladeshi manufacturers haven’t learnt. We haven’t learnt to sell ourselves well and we can’t brand ourselves well either. This is precisely where we fall short of negotiating with the brands and the retailers and hence the discussion on the affordability and competitiveness arises.

Will the buyers be able to afford a 50 US cents increase to accommodate a Taka 8000.00 minimum wage scale? That’s a straight ‘No.” Will the buyers pay 30-40 US cents? Very unlikely. Will they at least give 20 US cents extra for the wage hike? Probably. With a fairly simple calculation of 10 US cents increase per thousand, if the minimum wage is pushed to Taka 4400-4500,the customers would have to pay a 15 US cents up charge and with Taka 5000.00, the customers would have to pay 20 US cents. The guessing range is all within 10-20 US cents.

Now, how does the world market look? In reality, the European Union (EU) has been the saviour for Bangladeshi RMG with their everything but arms (EBA) scheme. Unfortunately the internal market of the EU is depressed. In the period of July 2012-May 2013, the EU exports to their own EU member-states have declined by 11.6% though garment export from the EU to non-EU countries have registered a 12.1% increase. Chinese exports has fallen 22.4% to Germany, 14% to France and most of all, Italy, Spain and the Netherlands are no more the top buyers for China, as they used to be.

Vietnam is predicted to grow 15% at an average, every year till 2020. Our neighbour, India saw a decline last year with exports falling up to 24.7% to Belgium, 23.5% to Italy, 22.2% to Germany, 21.8% to France and 15.9% to the Netherlands. But this year, the story is different. With the currency depreciation, India has come out as a winner, registering growth in export…big time.

Most of us have ignored Turkey’s growth. After almost a decade of stagnation, Turkey has once again surfaced as a winner in the sector. Inditex group (ZARA) has shifted much of their production from Bangladesh to Turkey. The reasons behind their shift is understandable: political weather and of course, the challenging lead times. The world needs to be fashion forward and Bangladesh is still not ready for quick turn around times.

And last but not the least, let’s not forget Myanmar, a country currently set off to look its best, with US$ 43 billion of foreign direct investment (FDI) in the country, as of Aug 2013. Many EU buyers have started their sourcing journey there and in about five years, I won’t be surprised to see the Bangladeshis setting up factory units in Myanmar.

As for our own export to traditional markets in Europe, Bangladesh has witnessed a huge surge in exports to Germany with US$ 3.3 billion, to UK with $2.23 billion, and to Spain with $ 1.06 billion between July 2012 -May 2013. To non-traditional markets like Australia, Japan and Turkey, the export figures in the same period stand at $ 392, $ 437 and $ 362 million respectively.

All these figures may end up declining sharply because of the picture that we paint of ourselves. I say ‘ourselves’, simply because if Panorama of BBC is airing our factories, it is because we ourselves are vulnerable to bad press stemming from our own non-transparent practices of duplication of records. If the civil society members are attaching “rogue” labels on the manufacturers, we need to realize that the media capturing a lathi-charge of a police on workers does not evoke sympathy in our favour and it’s natural to loathe the community.

But what the country cannot afford today is certainly a minister in power wanting to look like a hero winning his own political trophies by playing his “Hefazote” card. What the country cannot also afford is an enraged media and civil society, which refuse to come to the aid of the manufacturing community. It’s time to bridge communication gaps that the manufacturers have within their own vicinity and explain that stopping work in the factory, urging co-workers to join the protest, blocking roads, looting rifles, and burning cars won’t increase wage. It may help to create pressure, but that pressure will not certainly yield positive result for the sector as the very next moment, the owners shall run to the government and law enforcement agencies for help and the outcome is often not a pleasant one.

Labor leaders who lead the sector, media that covers truth, civil society members who seek transparency and justice must all side with the industry in this hour of need as one single protest of one single morning costs Bangladesh 60 million dollars.