Bangladesh RMG: Gains and pains in 2018
In the ready-made garment (RMG) sector, 2018 will in many ways be viewed as the end of an era. The Alliance for Bangladesh Worker Safety, the North American-led initiative which has done so much to improve worker safety in garment export factories, will shortly end operations in Bangladesh. Ninety-three percent of the remediation work is now complete in Alliance-affiliated factories, and there is no doubt that Bangladesh's RMG industry has a much safer working environment now than when the Alliance arrived.
A similar story is to be told about the Bangladesh Accord for Fire and Building Safety. We cannot at this stage speak with an air of finality about the Accord, as it is unclear whether the Supreme Court in Bangladesh will allow the safety body to extend its tenure. The Accord, like the Alliance, has undoubtedly been a force for good in the RMG industry, making it safer, more sustainable, and significantly more competitive in the international markets.
It is hoped that whatever the Supreme Court verdict is, the government of Bangladesh and the Accord steering committee can work together to devise a way forward which will be beneficial to our industry and its people.
The year 2018 has seen other strides taken by the RMG industry. Earlier this year, we saw the announcement of a new minimum wage of Tk 8,000 (USD 97) for the garment workers. This is a notable step forward for the RMG industry and, although some international NGOs and unions were calling for a larger increase, it has to be borne in mind that this was an over 50 percent increase on the previous minimum wage, which was set five years ago.
More general, recent amendments to national labour laws will also help to bring Bangladesh further into line with internationally accepted standards, including those of the International Labour Organization (ILO). In October, new Bangladesh Labour Laws were passed in parliament. Under the new laws, workers' participation required to form trade unions was reduced to 20 percent from the existing 30 percent. In addition, union quashing will be generally more difficult under the new regulations.
While in many ways this has been a good year for Bangladesh, the mood has not all been positive. The terrorist attack at the Holey Artisan Bakery in July 2016 placed the authorities in Bangladesh on high alert. This led to the issuing of travel alerts by many countries on foreign nationals visiting Bangladesh, and this undoubtedly impacts the ease of doing business. Thankfully, in the two and a half years since then, we have had plenty of evidence to suggest that the government has successfully secured full security. It foiled a number of planned attacks, making several arrests in 2018, and has taken a position of zero tolerance and committed to uprooting terrorism from the country.
Similarly, temporary direct bans on air cargo from Bangladesh were implemented by some countries in the wake of the terrorism concerns. However, many such bans have now been lifted since the government has taken a number of steps to comply with international security standards. The removal of bans will provide a relief to forwarders and exporters that have been compelled to pay extra surcharges to have their cargos screened in a third country before being transported to the target markets.
Against the backdrop, garment exports from Bangladesh were sluggish in the early months of the year but steadily picked up. The latest figures from the Export Promotion Bureau show that for the last fiscal year, the apparel sector contributed USD 30.61 billion, or 83.49 percent, to Bangladesh's total exports of USD 36.66 billion. And during July-November of the current fiscal year 2018-19, the growth stood at 20 percent.
The challenge for the garment export industry is to maintain and even exceed these excellent figures in 2019. This will be a tough task at a time when wage levels have risen sharply and with uncertainty around the sector due to deliberations regarding the Bangladesh Accord which have been ongoing since September.
Can garment exporters rise to the challenge? Of course—but the industry, despite many successes, is still not completely fulfilling its potential. The way to exploit the potential is investing in people, technology and innovation. Well-trained people using cutting-edge industry technology are vital ingredients which drive productivity. Higher productivity in turn leads to increased national income per head and increased wages.
Such a path is well trodden by the world's most successful economies—China is the most obvious in terms of textile and garment orientated exporters. There is no reason why Bangladesh should not follow this route. Indeed, there is already evidence among more successful and progressive exporters that a greater focus is now being placed on quality, service, and sustainability when dealing with international apparel brands. Sustainability, particularly, will become an increasingly important point of differentiation for exporters moving forwards.
Factory safety will also be an important source of competitive advantage. In this area, Bangladesh's garment export industry now leads the world. For this reason and many others, the world will be watching Bangladesh as we head into 2019. We expect that our apparel industry will be placed to a further elevated position in the coming days.
Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE).