• Friday, July 25, 2014

We have grown indeed…

Rubana Huq

THINGS change. Ever since the US signaled that Bangladesh has to do a lot more for labour in the RMG sector, your columnist has been losing her sleep. More? In less than one year, labour laws have changed, minimum wages have shot up, factories are being inspected, retailers are tightening their grip on compliance … and yet we need to do more? Look at Myanmar, which suffered sanctions from the US way back in 2003 and is a star now. Till the US sanctions in 2003, apparel export accounted for 40% in Myanmar. Half was to the US. After the trade embargo, export dropped from 800 million to 300 million.  But eventually the US revised its decision and was kind enough to ease sanctions in 2013 and, almost instantly, exports increased to around $1.2 billion in 2013, a 33% increase from the year before. It is expected that by 2016 it will go up to $2 billion. Of course, the Americans would have to be mad not to be there. As a result, Gap, the giant retailer, has just signed a sourcing deal with Korean owned factories in Yangon, which already produce outerwear for Old Navy and Banana Republic. Friends, Myanmar is just beginning.
US imports fell by 3.7% year-on-year in May, slipping from 1.89 billion square metre equivalents SME (Square Meter Equivalent, also referred to as "M2". SME is a notional, common unit of quantity, and time and product based conversion factors are used to convert units of quantity into SME.) to 1.96 billion SME a year earlier. In a five-month period in 2014, China edged up .5% to 3.6 billion SME, it was 12% up for Vietnam to 1.02 billion SME, with Bangladesh falling 3.8% to 705 million SME, and India climbing 8.2% to 444 million SME. Out of all of those considered, India has begun.
As for China, Xi Jinping has pledged to root out pollution and corruption in China. Competitiveness is still not affected. All seems to be on track. But importers have paid China 3% less compared to its competitors' prices in the first five months of 2014. And bad news … China imported less textile equipment in 2013 than in 2012. Official inflation stood at 2.5% in 2013 but Bureau of Statistics has just estimated inflation for migrant workers to be at 22%. In China, locations determine competitiveness of wage. With regard to the hunt for location for new factories, Xinjiang province has been the feasible location as unemployment is high there and there are abundant cotton fields nearby. The residents in the area are local Uighurs (mostly Muslims) who speak a language close to Turkish and resent Chinese speakers. To make it worse, on July 2, China banned Xinjiang Party members, students and teachers from Ramadan fasting. So, Xinjiang may not be the best place after all. In fact, China may just end up being a difficult place to be in sometime during the future. Let's pay attention to the recent Japanese import figures from China, which have fallen from 85% to 75% following the Chinese attack on Japanese property in China. Let's also not forget that the Vietnamese rioted in May against the Chinese owned factories. China is changing.
Cambodia announced a possible increase in the workers' minimum wage in January 2015. Minimum wage increased $15 to $80 in May, 2013. In December 2013 it went up to $95, as announced by Cambodia's Labor Advisory Committee, a tripartite group led by the government. It again shot up to $100 in February. But the trade unions want the increase to be at $160. The 31st Synthesis Report of ILO's Better Factories , based on the 362 factories and 9 footwear factories surveyed, revealed that 15% of casual workers and 8% of piece-rate workers are not paid minimum wage; child labour has increased by 1%, pushing the increase in the number of factories with confirmed child labour cases to 4%; strikes had gone up from 19%  in November 2011 to 24% in July 2013; number of factories engaged in discrimination has gone up from 16% to 20%; number of factories with wide enough and unobstructed access paths has declined over the last year; there has been an 8% increase in heat levels in factories; only 56% of factories conducted emergency drills every 6 months, and only 44% emergency exits are unlocked during working hours. Yet, Cambodian exports grew by 12% to $560 million in 2013 while 106 workers fainted at two garment factories from suspected exposure to toxic substances. Is Cambodia an enigma?
And while most of us are struggling with structural, electrical and fire issues in our factories, and running from customer to customer with a plea to hike prices and failing miserably, there has been a 14% growth in the apparel export figures, standing at $24.49 billion compared to $21.51 billion in 2013-14, exceeding the nation's export target of $24.15 billion. While, together, apparels and textiles made $25.62 billion and 85% of the entire export proceeds, readymade garments alone has a share of 77% of that amount with woven products increasing by 12.7% to 12.44 billion and knitwear by 15% to 12.05 billion. Friends … Bangladesh is surviving.
That the country is surviving shouldn't send us signals of triumph. We are surviving just because we are still the most competitive. Most of us have compromised on prices again and are having trouble making ends meet. On one hand, no one wants to lose a customer, on the other, the customer knows this and is pushing for “better” prices. With a yearly increment for the workers already due, and with the bonuses due before Eid calculated on the already increased minimum wage levels, how will the industry deal with the challenges this month? Getting past this month maybe possible, but what lies beyond? With the fund requirement for all the remediation to be done in factories and with the constant pressure of dropping prices, how will Bangladesh ever find its niche? Are export figures enough to assess an industry, or is it just a tool to tell the world that we are survivors because we are resilient? Will the government and the industry leaders take a deep breath and do an industry assessment and chart the map for the rest of us? Recording growth figures may act as a lullaby for many, but there are many more who are fighting raging fires in our backyard and losing sleep on the other side of the fence. Just survival isn't enough. Just a surge in export figures also does not paint a clear picture of the overall health of RMG in the country. Without a detailed research on the sector's potential and future, a post trauma survival (after Rana) for the industry may just mean weaning ourselves out of the life support system, but it certainly does not promise healthy levels of sustainable growth.
 

The writer is Managing Director, Mohammadi Group.

Published: 12:00 am Monday, July 14, 2014

Last modified: 10:29 pm Sunday, July 13, 2014

TAGS: US RMG sector GSP status minimum wage

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