RMG: A way forward | The Daily Star
12:00 AM, August 10, 2010 / LAST MODIFIED: 12:00 AM, August 10, 2010


RMG: A way forward

Popular economist speaks on the lifeline of the economy

Dr. Mustafizur Rahman

Dr Mustafizur Rahman, executive director of the independent think tank Centre for Policy Dialogue (CPD), recently gave The Daily Star an exclusive interview on the RMG sector. Rahman, who holds a PhD in economics and is a professor in the department of Accounting and Information Systems at Dhaka University, has become widely trusted as an impartial analyst of Bangladesh economy; and CPD reports are known for their in-depth comparisons of sector trends. Given the unrest following the recent announcement of the Tk 3,000 per month minimum wage for garment workers, we asked him about how to balance the needs of workers and the national need for a strong RMG export sector, as well about its long-term prospects. Excerpts:

Can a family live on the announced RMG wages, given the current prices in Bangladesh?

"Obviously, as the minimum standard salary for a family of three members, it [the new wage] is nowhere near." He puts the ideal wage at Tk 7,000.
On the other hand, it would be difficult to bridge the gap "at one go," he says. "We also have to take cognisance of the fact that it is an 80 percent increment at the seventh grade from the previous salary structure, and of the issue of productivity and of the time required to absorb the incremental cost is also involved," he says.
Getting from Tk 1,663 a month to Tk 7,000 is a process, he stresses -- one that will take many years. (The next revision should come in four years.) The key is that the RMG workers should have a fair share in the value they add to the nation's wealth. "We found that the national income went up about 70 percent since 2006," he says. "Workers should have the same share in the growth of the economy."

Do you believe that the unrest sprang from worker frustration or that political enemies of the government provoked it?

There may be some who would like to take advantage of [the issue], and if that is the case, the government should follow it up. But if [no evidence is presented], that means it was a legitimate grievance."
Rahman criticises both the owners and the unions, and says both must learn to build a working relationship.
The owners now resist and fire union organisers, he says, and many factories and subcontractors take advantage of the traditionally female workforce. Some do not pay salaries on time, underestimate overtime or do not pay bonuses. "Oftentimes the factory owners have discouraged trade unions, and that has not worked."
"In our country there are many subcontracting firms, which do not follow the labour rules and compliance requirements, so there are other reasons for this type of unrest," he says, apart from the minimum wage. The factory owners' associations are member-driven, and have failed to expel or penalise their entrepreneurs who cross the line.
While the woven-garment workforce in the sector is mostly female, the rise of the mostly male knitwear workers in RMG has added to the stridency of union demands, he says. "The issue of a better working relationship," he says, "will become more important" as this "masculinsation" trend continues.
"We don't have good trade unions," he says. "The current commotion shows that the leaders have no command over the common workers.

What are solutions? Should the government verify that union leaders are freely elected?

"The growth of a healthy trade unionism is good," he says. He notes that the country's jute and leather sectors have a large unionised workforce, but not one that vandalised or destroyed property in residential areas, and that other low-wage RMG countries have unions with labour peace.
He also says the government has not played its role in ensuring that union rights are enforced. The government should create an environment conducive to healthy trade unions, and to arbitrate, but not to oversee their elections, he thinks.
"The government should not organize the trade unions," he says, "but the government should supervise trade unionism. Ensuring a healthy environment is the prerequisite for healthy trade unions." Government factory inspectors are supposed to enforce the labour laws, but they are too few to do so.

What is the foreign buyers' role in this sector?

The buyers always call for compliance and wages, but are seldom willing to pay the higher prices that this entails, he says: "We do not see any willingness to absorb the cost of this. This is the hypocrisy between ethical buying and ethical outsourcing." He adds that entrepreneurs should start a campaign for truly ethical buying practices.

What is the future of RMG exports from Bangladesh?

"We have a tremendous opportunities," Rahman says. "There is a lot of opportunity for growth at only 4 percent (of the currently $500 billion global textile and clothing market).
China, the largest supplier of apparel items counts, has 30 percent market share, he says, but is under pressure from labour unrest and a shortages. "I am very optimistic about the future of Bangladeshi apparel items," he says.

What needs to happen here to grow that market share?

Rahman says the government must lessen the uncertainty faced by entrepreneurs -- in particular the problems of Chittagong Port, gas and power supplies. "If you can bring down the costs, the capacity of the entrepreneurs to accept higher wages also increases," he says. "It is only fair that the entrepreneur has predictability; even one making super-profits is making long-term investment decisions."
The government should continue rations of food for garment workers, and start offering the entrepreneurs loans at no interest to build decent shelter for workers, he says.
But the workers also need a dose of realism: "Workers have to realise that at the end of the day it is productivity that drives what their wages can be. We have to compete in the global market."

What about the longer-term prospects of the needle trade here?

Countries like Cambodia, India and Vietnam have free trade unions and these help protect workers from unreasonable conditions. But unions should not resist lay-offs. Rahman says Bangladesh should decide what type of industries should be pursued. Now it is a low-cost, labour-intensive industry; but wages raises will boost technology spending and thus productivity. That means many workers will lose their jobs.

What should be done differently in fixing the next minimum wage for garment workers? Should it be adjusted for inflation in between reviews?

"No -- It needs a periodic review," Rahman says. Inflation and bare necessities should be reviewed, but the income growth of the nation should be the key until "we have reached the bare minimum." He says one of the major reasons for unrest is the wage implementation in November, and "serious consideration" should be given to implementing the new wage before Ramadan.


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