• Friday, August 22, 2014

The ride to closure

Rubana Huq

Figures are varying. Four days back, the vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said that 19 factories -- twelve in Dhaka and seven in Chittagong -- have been closed down due to structural flaws and almost 18,000 workers lost their jobs. Twelve days back, a study announced that almost 50,000 workers have lost jobs and 50 factories have faced closure. Another newspaper reported that 16 factories have been shut down so far and 11,500 workers are currently jobless, as per the declaration by the inspector general of the Department of Inspection for Factories and Establishments. What is the exact figure?
In an official list revealed by BGMEA two days back, the figure of factory closure comes to 9, and the number of factories facing suspension of work and further review is 11; 11,110 workers have lost their jobs in Dhaka and 3,215 have lost jobs in Chittagong. Another updated list is yet to be received. Out of the list, only one factory, which seems to have employed the highest number of workers, is Softex Cotton Private Limited which, according to the official list from BGMEA, employed 2,550 workers. Another factory that has closed down is Fame Knitwear Limited with 800 workers. These figures also vary as a newspaper reported on April 13 that 6,000 workers have lost their jobs in both these units, as a result of closure.
At this point, it is extremely important to get the figures right. A $537 million shortfall in revenue earning from agriculture to ship building (including RMG) has just been reported. Therefore, what is most important is verifiable data in all sectors so that we can assess our progress, gains and damages.
Considering its size, it is regrettable that the RMG industry lacks research and data. The database that is now being demanded by Alliance and the one which is now being gradually filled up has almost no details. But luckily, the process has at least begun. Considering the size of the industry, the factories should have been classified long time ago. In terms of the word 'classification' we also need to be clear about what exactly we mean by it. When we refer to the 'tier' system, many of us generally refer to factories in terms of size and revenue.
Many groups have multiple factories and therefore it is natural for many manufacturers to have compliant buildings and also non-compliant ones. One thing is for sure: we need to acknowledge that we have unsafe factories and we need to do whatever it takes to make them safe or cease business in that particular unit. And no manufacturer is arguing about this. So it is evident that the entire industry needs to go through full audit and gain credibility on safety standards.
Now, who are doing the inspecting? Alliance has so far audited more than 450 factories, and is aiming to complete inspection of all 640 factories by July. Accord began inspection of around 1,600 factories in February and has audited more than 350 so far. The names of both the initiatives suggest that they are fully committed to continuing business in Bangladesh. Therefore, audits are necessary for them as otherwise they would not be able to cover their sourcing risks. A picture of protesters in front of any brand outlet in any city of the world may not spell immediate sales risks, but there are stock markets to be considered and, above all, market credibility is required to be in business.
The audits are covering basic issues that help assess the manufacturing units. The basic questions include onsite structural assessment that checks the as-built drawings, load plans, foundation performance concerns, water tank placements, undocumented rooftop construction, seismic bracing -- meaning earthquake protection for non-structural elements -- etc. In terms of fire assessment, stair capacity and number, chamber storage and generator room, exit doors, emergency lights, stair discharge, railings, floor surfaces and occupant load are checked. However, the new rule is to also check for automatic fire detection system and fire alarm along with requirement of a fire safety officer on site. As for electrical assessment, electrical layouts are checked along with equipment maintenance and placement of substation/transformers/generators/fuel tanks, and whether the factory has sufficient labeling/marking indicating the exits and equipments, etc.
Out of all these assessments, the only one that is causing instant closure is the structural performance concern. For example, if there are considerable stresses on slabs and if there are cracks in the building, then that shop may have to shut down…instantly. The issue of lives being in distress does not call for any compromise. Therefore, a few factories have had to close down.
Once again, in no way are the audits extremely stringent and in no way do they call for instant remediation of all concerns. But if the audit team decides to close a particular factory or submit the findings to the review panel, BGMEA and the labor directorate must jointly jump into the case and offer and arrange instant technical assistance, including arranging Buet team inspections, within 48 hours of audits by Alliance/Accord. The compensation of workers also must be taken into full consideration. Alliance has just declared that it has allocated $5 million compensation for workers of the factories that have been shut. The issue of compensation along with the amount must also be quickly negotiated with BGMEA's mediation.
It is important to remember that as soon as a factory owner declares closure he or she is bound to pay 120 days of salary as per labour law clause 26.1.KA. In case of layoff, 45 days salary needs to be paid, and this is extendable by 15 days during which period one-fourth of salary along with full house rent must be paid. These 15 days can also be further extendable but would require same compliance with regard to payment. If a four line factory has 500 workers and the salary comes to Tk.40 lac, then an owner would have to be ready with Tk.1.6 crore, along with a promise to remedy the concerns and comply with newer requirements within the next 3-6 months. The new requirements would cost him another crore at the minimum and remediation would depend on the extent of danger noticed by the auditors. For instance, the building of Softex and Fame would need structural remediation of about Tk.15 crore, as estimated by authorities. Not only are the workers out of work, the factory owners are also at a complete loss and have no idea about how to proceed.
The owner of Softex has sued the entire review panel (which reviewed his factory building and suggested closure) for $100 million as he feels that the absence of the lead brand during the audit, the time of audit, and the process had loopholes. He is also facing endless cases from workers' end. He is so far friendless as manufacturers are also being cautious about siding with him, for fear that they may lose their stand with their brands. Brands will rightly audit us. But the point remains that we need to turn to ourselves and strategise on how to design our next moves in order to save the industry. And this initiative must be a combined one undertaken by the government, BGMEA and the manufacturers in distress.


The writer is Managing Director, Mohammadi Group.

Published: 12:00 am Monday, May 05, 2014

Last modified: 12:50 am Monday, May 05, 2014

TAGS: Dhaka Chittagong Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Department of Inspection for Factories multiple factories

Comment Policy