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VOL 24 NO 48 REGD NO DA 1589 | Dhaka, Thursday, December 29 2016
Posted : 29 Dec, 2016 00:00:00 AA-A+
RMG: Lessons from Savar unrest
Asjadul Kibria

The latest incident of unrest at the garment factories in Savar and the adjoining areas due to demand for wage adjustment again reflects the mishandling of the labour issue, especially by the factory owners. While the garment factory owners and exporters, with the help of law-enforcement agencies, took tough stand and successfully suppressed the agitation of the workers, they actually ignored the long-term consequences.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) accused the workers of creating havoc and ruled out any scope for negotiation. The uncompromising stance, backed by the government, compelled the workers to discard their demand, for the time being, and they returned to the factories with the burden of penalties. Though owners shut down the factories by misinterpreting a provision of law, they are punishing the workers by not giving the wages of the days the factories remained closed. Wholesale arrest on the plea of instigating unrest also became effective to repress the workers.

If the repressive stance encourages the BGMEA to go ahead with similar moves while dealing with any unrest in future, this will curb the scope of rational negotiation which is a legitimate right of the workers.

The latest official adjustment of minimum wage for garment workers in Bangladesh was made in November, 2013. According to the adjusted scale, the minimum wage was fixed at Tk 5,300 (US$68 on average).  It took a long movement by the workers and right activists to get the adjustment which the owners were refusing to accept.

The Rana Plaza disaster that claimed 1130 lives of poor workers in April, 2013, sparked a huge outcry across the world. The global pressure compelled the owners to accept the adjusted scale of minimum wage. To safeguard the workers' rights, minimum annual increment of five per cent and annual festival bonus also become mandatory.  

While minimum wage is the minimum amount of remuneration that an employer has to pay a worker, the fundamental purpose of minimum wage is to protect wage-earners from undue low pay. Unfortunately, country's garment owners are yet to go with the spirit of the minimum wage. After the revision of minimum wage in 2013, many factories increased the workers' per hour or per day output targets and some adopted forced overtime. Such measures to offset the 'additional wage payments' also goes against the workers' fundamental right.  

A recent report (August, 2016) of the International Labour Organisation (ILO) mentioned that non-compliance rates with the minimum wage in the garment sector of Asia is widespread. The non-compliance rate is 50.7 per cent in India, 25.6 per cent in Cambodia and 6.6 per cent in Vietnam. Interestingly, the study found out that the survey sample size in Bangladesh and Lao PDR were 'insufficient to generate statistically reliable estimates of non-compliance rates in the garment sector of these two countries.

 Another report revealed that minimum wage in the RMG sector is the lowest in Bangladesh compared to other Asian countries (Table-1) like China, India and Vietnam.  It is only $68 in Bangladesh while $165 in China, $78 in India and $100 in Vietnam. Cambodian government has already announced $153 for 2017 which is now $140.

Thus, the county's apparel exporters are competing with other leading exporters in the global market mainly relying on low wage. But low wage obstructs better productivity in the long run.  

True, all factories are not in a similar condition as business varies. Being the largest export-oriented sector of the country employing over 4.0 million people, the sector is yet to mature significantly. Consolidation of the sector is in many cases weak mainly due to unplanned investment and expansion, internal conflicts of the factory owners and mismanagement in production. To help the sector, the government is continuously providing policy supports along with fiscal incentives one after another for the last 30 years. But the owners are little interested to even pay the regular taxes. One example may be mentioned here. The national budget for the current fiscal year (FY17) marginally increased the rate of source tax to 0.70 per cent from 0.60 per cent for export earnings from garment sector. At the same time, it reduced the corporate tax rate to 20 per cent from 35 per cent. Finance minister, however, had proposed the rate of source tax at 1.50 per cent. But trade bodies of the industry -- BGMEA and BKMEA strongly opposed this claiming that rise in source tax would jeopardise the sector.

Again, in 2014, the National Board of Revenue (NBR) announced reduction of the source tax on RMG industry to 0.30 per cent from 0.80 per cent for 15 months. The huge tax reduction was announced to compensate damages faced by the industry during the political turmoil in the second half of 2013. The reduction resulted in revenue loss worth Tk 20 billion in 15 months.

In fact, the incentives and support the RMG sector has been receiving for the last three decades need to be quantified properly to reveal the amount of revenue forgone so far and the amount of public money channelled to the sector. Being the largest export-oriented sector, the RMG sector should comply with greater socio-economic responsibilities. The BGMEA and BKMEA should also come out of the mindset that they are showing charity towards the workers. They are paying the workers for their hard work.

While many factory owners have set examples of better pay and better output, and some of them are pioneering green garment, it is time to address the issues of the workers with care. The garment industry should also seriously think of providing some non-cash compensation like free-medical service, low-cost housing and healthy diet for the workers. The industry needs to demonstrate some creative and positive move for the workers which will pay-off to the whole industry in the long-run.

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