A 100% Opportunity at a 2% Cost

APRIL 24, 2013 changed our lives forever. We woke up to altered realities of manufacturing where new safety standards became our sole tool of survival. Platforms like Accord and Alliance stepped in. Almost 1800 factories out of 4422 got inspected and while the rest are yet to be addressed, most leading manufacturers have either already complied with the structural, fire and electrical safety, or are on their way to becoming so.  Many have finished their Detailed Engineering Assessment (DEA) and have received comments from structural engineers who have either passed the factories or have given suggestions to resort to retrofitting. Retrofitting is a fairly simple, but a time consuming procedure where the factory needs to strengthen the columns to justify and bear the weight of the structure. Retrofitting is expensive and can cost from anywhere in between Tk 200 to Tk 400 per square feet. Having a factory retrofitted would mean either closing down the factory for at least two to three months or attempt to retrofit phase-wise while shutting sections down gradually and remediating. In brief, it's time to move on. For many in rented factories, shifting to new premises makes more sense where at least the structural issues will be addressed; for the lucky ones, shifting to own premises would yield benefits as remediation is almost half a million dollars investment, depending on an average factory size of thirty to forty thousand square feet; for many more out there, shifting or remediating is a distant dream as they do not either have alternate plans, or the means to change. 

In a situation like this, the garment sector is going through a massive transition. For most of us who raised our voices and asked for a "level playing field" and demanded that Accord and Alliance to go to India, Pakistan or China, things are a little different now. Today, Bangladesh is the only country in the world where the industry has been addressed, audited, and assessed. In about three years or so, the readymade garment sector in Bangladesh will look better than anyone else out there in the globe. The change will be brought about by the manufacturers themselves through tackling all the structural and other safety challenges. True there will be financial issues and in a country of banks which offer double digit interest rates, changing things around will not be easy. Manufacturers may totally and ultimately fail to convince brands to be a part of the remediation costs and may just settle for a promise of business, but the road to remediation will be on as there is no alternative to keeping our workers safe. 

If the entire process to correct practices in the industry is for the workers and not for just being in business, then your columnist believes that it's time to go beyond the regular practices that help the workers the most.What is that worries workers? What adds most to their insecurities? Most of their fears evolve around housing. In a city that has 33% living in semi-permanent and 25% living in temporary shelters, where as many as 40% of the urban population live in slum and squatter settlements, many come to Dhaka for the pure reason of employment in RMG units. (Source: Shafi, S. Future of Dhaka: Our Responsibilities) Many of them ultimately end up paying much higher rent than what we ourselves pay. It maybe shocking, but many  workers usually end up paying almost Tk 32 to Tk 40 per square feet while we pay Tk 10 to 20, depending on areas we live in. What can we do to solve this? 

The government has offered a 2% interest rate for low cost housing for the workers. Your columnist most humbly proposes that most of us ought to seize this opportunity and invest in this mode of non-wage benefit immediately. What would it take for us to attempt this? It's fairly simple. Housing could be offered to the 25% of the best workers, based on their level of skill. This would then automatically incentivize good performance in workplace with ease. 

The project could include two types of accommodation: dormitories for accommodating four in a room of 100 sq ft and family accommodation could be arranged within 150 sq ft. If we were to build 450 apartments of 100 square feet and 150 apartments of family size, i.e. 150 sq ft, and if we were to cost based on a 1500/sq ft as construction cost then a project for 600 workers could be set up for Tk 110 million. 

In order to understand the costs of workers, I just ran a simple survey in one of our factories. Fifty workers were asked about their costs, namely house rent, food and other incidental expenses. Out of the fifty, the single men/women were found to be the ones who earned the most and spent most on house rent. The ones living in messes paid a substantial amount towards house rent and managed to save a little. The ones living with children bore the burden of expenses with earnings being averaged at humble numbers impacting savings. However the ones living with extended families had more family members earning and saving a bit more. And lastly, the ones who were living as couples had 70% of their partners working and hence could afford more space and more cost, though savings weren't much. The survey that your columnist conducted was based on a bare minimum sample size of fifty workers living in an area called Khilkhet, which falls under North Dhaka. I shall make an attempt to summarize the findings and present it graphically to the best of my ability. The data justifies that low cost housing projects would not only save the workers from a rental nightmare, it would also increase the level of their workplace securities.

A low cost housing on even a rent-to-own basis, would take a worker around 6 years to pay for. Let's do a quick math: The total cost of a 150 square feet family type home for a worker would cost a maximum of Tk 2,25,000.00 and if a worker paid just Tk 3000 per month, he or she would take 75 months to pay for his/her new home. In case if the manufacturers want to retain the spaces, renting them out would also be helpful for the workers. We could then go to the next level of building a community around those living areas and give the workers a full life to live. For community building, one could approach many other organizations, who I believe, would willingly join hands with the RMG manufacturing sector. In a city where the bubble of real estate has burst, even real estate developers could collaborate with garment exporters and build these housing projects and also reasonably profit from the deals. 

The 2% interest offer for low cost housing meant for the workers is a magical opportunity for many of us to graduate to the next level of compliance. Instead of saying that land is scarce and instead of calling the project utopian, maybe we need to look harder and find lands to build our dreams which will ultimately free us from the demons of a guilt ridden conscience that has been plaguing us for over a decade and which, with every industrial accident has suffered newer dents. 

The writer is Managing Director, Mohammadi Group.