THE repercussions of the Rana Plaza fiasco simply cannot be understated. With hundreds dead and thousands injured, the 9-storey building collapse at Savar has propelled the $20billion export-driven industry under an international microscope. Nearly 8million people’s livelihoods are directly or indirectly dependent on the sector’s continued existence. Yet, as a State we have failed to mete out punishment for such major crimes.
Things are seldom as simple as they look. Could the ground realities be bettered with an improvement of the business environment? Could we reduce the cost of production so that more money is made available for workers’ safety and welfare? The question less asked is why the average RMG owner (around 70% of who deal with buyers for whom compliance is nonissue) is being pushed to the limits to cut costs. The RMG sector is operating in niche or tight markets. The global market for apparels is about $400billion. China occupies 33%, whereas, Bangladesh represents only 6%. The bulk of RMG owners are operating in that 70% margin of the market where foreign buyers are pushing for “bargain-basement” pricing. With minimum wages at $38, it is not possible for the average factory owner to go below that. Cost minimisation will have to come from other variables, i.e. overhead which include infrastructure, power and freight.
Here too costs cannot, in reality, be minimised either in power or freight. Uncertainties like hartal take their toll. Shipment dates cannot be postponed. While factories are kept outside the purview of hartals, transportation to the port city is not. Produced goods require transportation and have switched to airfreight that carries a heavy escalation of cost, around eight times.
Consider the following scenario. Shipping cost for a 20-foot container packed with 28 cubic metres (1 cubic metre = 176kg) of goods for the United States (US) averages at $2,500. The same cargo when air shipped cost nearly $18,000. Then there is the issue of power. According to company representatives located in BSCIC industrial area, power outages on average cost factories 6 hours a day. Plants switch to power generated by diesel. REB costs Tk.5.5 per unit of electricity. Exact figures on diesel-generated power vary according to size of generator, plant efficiency and a host of other factors. Even if we were to take a very conservative doubling of cost of pricing per unit of electricity produced; that in itself represents a cost hike not a reduction.
So, in reality, the only way to cut costs is to switch to shoddy physical infrastructure. With little in way of inspection, that is one area where costs can seriously be minimised at the detriment of workers’ safety. It is the duty of the state to find ways to reduce the cost of business if we wish to see our garments sector continue to grow without compromising the safety and welfare of the workers.
Does the above scenario absolve proprietors like Rana Plaza of their gross negligence? Does it absolve the government of its failure to regulate? Answer to both is in the negative. At the end of the day, unscrupulous business entities will take advantage of poor regulatory frameworks and weak implementing agencies. Then why has nothing changed, either in terms of holding errant owners to account or bolstering regulatory weaknesses? An article titled ‘Bangladesh factory disasters highlight regulatory failures’ published by The Financial Express on April 27 states, “Garment manufacturers, who supply companies such as Marks and Spencer and H&M, wield tremendous clout in the corridors of power in Dhaka. Analysts say at least 10 per cent of Bangladesh’s parliament members are direct owners of the country’s garment factories, which number almost 5,000.” Were we to take that statement at face value, it would go a long way to explain why there have been no convictions on any of the major disasters that have killed hundreds and injured thousands in the last decade of industrial “accidents” in the RMG sector.
According to Wal-Mart, one of the largest retailers in the world issued a “zero tolerance” policy for any violation of its global sourcing standards. Unofficial comments coming from the fashion industry point that the company may be winding down its sourcing from Bangladesh by early 2014. Roughly translated, it means Bangladesh could be poised to lose more than $500million of inner-ware exported to the US in 2012 and part of the country’s $11.05billion inner-ware sector. Losing Wal-Mart or H&M or Disney would precipitate a sector-wide dampening effect. A negative move by global brand leaders from the US would certainly have ripple effects across the Atlantic and who knows how the Europeans would react.
The government has its work cut out. It must move from being reactive to being proactive. Proper fire standards, infrastructure constructed adhering to building codes, workers’ health and safety are all prerequisites to reputed brands which play in a market worth $400billion annually. That is the bottom line. The question is whether the government and industry are going to take steps to protect the $19billion a year industry because the news coming out of the US fashion industry is that 2014 is literally round the corner.
The write is Assistant Editor, The Daily Star.