December 6, 2022

Pay more to share compliance cost for healthier RMG industry (The Financial Express (Bangladesh))

Speakers at an all-stakeholder meet observed Wednesday Bangladesh readymade garment sector still struggling to meet compliance with its existing profit margins, lowest in the world, and urged the western buyers to pay more to see a healthier industry.

They pointed at a disparity in compliance conditions handed to Bangladesh and those allowed to its competitors on the global apparel market and called for a fairer value chain on an equitable basis.

Exchanging views on a presentation entitled ‘Bangladesh Apparel sector: does margin matter for ensuring compliance?’ at the BRAC Centre Inn in the city, experts in the trade issues recommended adding a component of ‘worker compliance’ during negotiation on price.

This, in their view, would help the country come out of the situation arising out of the compliance issue raised and strongly being pursued by western consumer side following recent tragedies in factories.

They, however, blamed the government for its “inability” to make the regulatory system accountable and acceptable to lessen growing international pressure.

Policy think-tank Centre for Policy Dialogue-Friedrich-Ebert-Stiftung organised the dialogue. With CPD Chairman Prof Rehman Sobhan in the chair, the meet was attended by labour and employment secretary Mikhail Shipar as chief guest.

Economists, entrepreneurs and labour rights activists, CPD executive director Mustafizur Rahman, Swedish Ambassador in Bangladesh Johan Frisell, FES resident representative Henrik Maihak, European Union Delegation trade adviser Zillul Hye Razi, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) director Arshad Jamal, among others, spoke at the dialogue.

Dr Khondaker G Moazzem, additional research fellow of the CDP, presented an illustration based on a study on 15 apparel industries of different categories. It shows Bangladesh’s gap in profit margin with its competitor countries.

Such gap in gains has compelled readymade garment sector to spend minor part from it on compliance. Such modicum spending, however, put the burden of spending additional eight cents to meet the demand.

Though he showed spending little from buyer side on compliance issue as their margin is also low, the CPD fellow recommended integration of both sides’ shares on worker- related issues to meet the compliance that has been getting highest priority after the incidents like Rana Plaza collapse and Tazreen fire.

Chairman of Opex Group and former president of BGMEA Anisur Rahman Sinha and Assistant Executive Director of Bangladesh Institute of Labour Studies and Managing Director of Mohammadi Group Rubana Huq were also present as discussants.

Professor Sobhan also raised the question of denying the GSP facility to Bangladesh and urged the US government to “transparently explain” actual status of the country on the issue.

The CPD chair noted that Bangladesh was maintaining competitiveness only in the cheap labour cost while the cost of capital, port charge and other costs are high in the country.

“Cheap labour practically means that the country is getting competitiveness at the cost of workers’ health and welfare,” he told the meet.

The CPD chief, however, stressed new standard of governance, good administration as well as regulatory framework for ensuring accountability in the sector.

CPD distinguished fellow Debapriya Bhattacharya also termed the decision of the USA not acceptable and suggested that the government continue its effort to retain the GSP facility for local exporters.

The government should not leave its efforts to retain the benefit out of frustration as GSP is a fair right of Bangladesh in the international trade system, he said.

The CPD distinguished fellow emphasised ensuring harmonisation in compliance standards globally and said compliance issue should be similar for both Bangladesh and other countries such as China, Vietnam and Cambodia.

Sultan Uddin Ahmed of BILS laid importance on creating solid ground to establish a decent working condition and productive employment through the country’s own regulations and legal obligations and urged entrepreneurs to provide the workers the proper share to ensure industrial competitiveness.

“We are not still in a way preparing ground to fix percentage of profit margin and labour compliance,” he said.

The Opex Group chairman laid importance on maintaining a margin in business from sustainable point of view but said practice of zero tolerance on the issue of getting business and customers should be maintained through fair competitive prices.

“Lower price for products indirectly direct lower wage to workers,” he said.

Rubana Huq highlighted the burden of compliance being put on suppliers from buyers’ side for lack of the country’s acceptable regulatory system and said meeting compliance issues cannot be possible without funds.

She finds the country in reputational risk and said price is often compromise price for the sake of survival. She urged all to address the problem properly.

The EU trade adviser said supplier side has no other choice than to comply in the case of preferential trade and urged the readymade garment sector to be prepared from now on for the GSP-plus regime.

Roy Ramesh Chandra, president of United Federation of Garment Workers, however, highlighted fact that marginal profit of the apparel sector was not as low as it is now and urged the authorities concerned to be alert on the ethical buying practice, as to whether it is being maintained or not.

BGMEA Director Arshad Ahmed laid importance on forming participatory committee to oversee developments in the sector on compliance issues.

The CPD suggested the market players to build an integrated value chain in which suppliers and buyers will jointly share the responsibility for improving compliance issues and said allocation for maintaining compliance by apparel firms needs to be increased.

And a part of this additional spending should come from buyers as increased cutting and making charges of products.

Gana Shasthya Kendra trustee Zafrullah Chowdhury stressed improving workers’ health, living wages for workers and sound law-and-order situation in the country for increasing productivity.

The labour secretary highlighted the government efforts to ensure labour rights and improve working environment and compliance in factory level. He said amended labour rules will be published by end of August or early September.

He said “ethical buying is most important issue at value chain” for the exporters target to reach $50 billion export earnings by 2021.”