What our RMG sector can learn from labour practices in other countries
The RMG sector has been a significant driver of economic growth since the early nineties in Bangladesh. The sector accounts for more than 80 percent of Bangladesh's export earnings and employs around four million workers relying on low-cost labour as a competitive advantage in the global market. However, the sector faces some structural issues which endanger its competitiveness in the long run. An in-depth examination of these issues is required in the context of competitor countries and the recent socio-political advancements for undertaking key takeaways.
According to various studies, the RMG sector's development has been facilitated by a "political settlement" between the government and business elites, aligning economic benefits for owners with political stability through employment generation. This settlement has supported keeping wages low to maintain Bangladesh's competitive advantage, but cemented a cycle of labour unrest, as workers' demands are persistently sidelined, and minimum wage adjustments rarely match inflation or living costs. International attention on Bangladesh's RMG sector peaks only during tragic incidents, such as the Rana Plaza collapse in 2013, but systemic issues persist in daily operations. Workers have protested against low wages, unsafe working conditions, and the suppression of their rights, leading to factory closures and disruptions in production. This unrest is exacerbated by a backdrop of political instability and the interim government is now tasked with the challenge of maintaining order and addressing the root causes of discontent among workers.
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Even after four decades, long working hours, low wages, lack of regular contracts, and systemically hazardous conditions persist in the sector. The absence of contracts allows owners to avoid providing proper compensation while laying off workers, or when work-related injuries or deaths occur. Furthermore, arbitrary cases in times of protests hamper the way forward to peaceful collaborative solutions. Trade unions face considerable repression, with union organisers often experiencing intimidation or violence. This suppression hinders workers from securing better wages or improved working conditions, leading to a fragile industrial relations climate. The inability of unions to advocate effectively leaves workers vulnerable and strengthens the employer's position, as reflected in the minimal improvements in wage structures over the years. Furthermore, taking advantage of the lack of strong unions, vested interest groups driven by political motives manipulate the conflicts.
Another major issue facing the industry is the low productivity of workers which the sector mitigates through longer working hours. This low productivity refers to the lower skill levels due to lower education levels among workers and lower levels of automation in the production process. Currently, less than 15 percent of operations in Bangladesh's RMG sector are mechanised, which is significantly lower than that of competitors like Vietnam. Bangladesh's investment in research and development (R&D) within the RMG sector is also low, with factories allocating only about two percent of their expenditures to research and development activities. Moreover, many mid-to-senior management personnel in this sector lack the necessary skills to uplift efficiency in critical production areas, such as sewing. Such skill gaps prevent the workforce from achieving optimal productivity levels. On the contrary, Vietnam's workforce is often considered more skilled due to better training and educational systems, which contributes to its ability to produce higher-value garments compared to Bangladesh's focus on basic apparel.
Another competitor, the garment sector of Cambodia, faces challenges similar to Bangladesh in terms of wages but has made strides with its structured, tripartite minimum wage adjustment system. Regular wage reviews involving the government, employers, and unions help in creating a more balanced environment. Although there are still challenges, the presence of structured negotiations has allowed for more stable industrial relations compared to Bangladesh. Vietnam offers relatively higher wages and has better productivity, in part due to a strong focus on efficiency over long working hours. This shift attracts a more stable workforce and minimises excessive unrest, positioning Vietnam as a key competitor.
Moving forward, first, the sector ought to establish stronger, more autonomous trade unions, which would be essential for creating balance in wage negotiations and peaceful collaborative solutions. This shift might include establishing wage-setting boards with true worker representation to foster more regular wage adjustments in line with living costs. Second, emulating Indonesia's model, where wage adjustments align with GDP and inflation, could make wage changes more transparent and prevent abrupt demands for wage hikes due to inflationary pressures. Third, developing a robust regulatory framework and investing in compliance mechanisms can protect workers and minimise the reputational risks tied to poor labour conditions. This could include strengthening Bangladesh's Department of Inspection for Factories and Establishments (DIFE) to enforce safety standards more effectively.
Addressing the underlying causes of unrest and mitigating the structural issues are essential for restoring confidence among international buyers and ensuring the sector's long-term viability. Without significant reforms and a commitment to stability, Bangladesh risks losing its competitive edge in the global apparel market.
Eshrat Sharmin is senior research associate at South Asian Network on Economic Modeling (SANEM). She can be reached at sharminishrat4@gmail.com.
Views expressed in this article are the author's own.
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