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The Growth and Growth of the Readymade Garments (RMG) Industry

It is hard to overstate the significance of this sector. Export industry dominates economic growth, and Bangladesh stands out among less developed countries in the high share of manufacturing in its base (Kathuria and Malouche 2015). RMG dominates: of the USD 30 billion earned in exports in 2014-15, more than 80 per cent was from woven and knitted garments, a proportion that has risen since the 2008 global financial crisis (Bangladesh Bank 2015; MoF 2015b; see Table 8.1). Frozen and processed foods, engineering and chemical products, leather goods, ceramics, and pharmaceuticals are growing fast, but the export concentration on RMG exports has grown (Sattar and Ahmed 2012).[1]

Table 8.1. RMG as % of total exports, 2006-15

2006

2007

2008

2009

2010

2012

2013

2014

2015

Total exports (US$, millions)

10,526

12,178

14,111

15,565

16,205

22,924

24,288

27,018

30,177

Annual % change

21.6

15.7

15.9

10.3

4.1

41.5

5.9

11.2

11.7

Garments as % total exports

75.1

75.6

75.8

79.3

77.1

78.1

78.6

79.6

81.2

Source: Kathuria and Malouche (2015, 3).

More than half of industrial employment is in RMG alone: by 2012, 2.8 million of the 5 million workers employed in officially classified industrial sectors were garments workers (BBS 2013a). Trades union activity remains strictly, if unofficially and not always effectively, controlled, despite recent changes in the law (ILO 2014b). Minimum wages are set by the government.

Brand Bangladesh

Instead of the outsider's cheery account of social transformation through export industry (Sachs 2005), this book could have opened with the gruesome image of Rana Plaza, the cheaply built factory complex that collapsed, killing more than 1,130 workers and maiming and injuring 4,500 more, in 2013. That disaster was a parable of globalization, caused as much by the weight of poorly constructed masonry as by the pressures in a system that profits from implausibly low labour costs to produce disposable 'fast fashion'—cheap mainly because its social and environmental costs go unpaid (Siegle and Burke 2014). In a meaningful sense, Bangladeshi garment factories collapsed because low inputs costs have been key to competitiveness to date, and worker safety has been a low priority (and resistance remains to improving matters, despite massive efforts). This in turn reflects the fact that workers are effectively prevented from organizing and, as of 2011, Bangladeshis were the lowest paid export workers in Asia, with real monthly wages averaging USD 91 compared to 126 in Cambodia, 170 in India, 255 in Vietnam and a princely 325 in China.3 Please note these are real wage rates based on PPP (purchasing power parity) indexes (see Moazzem and Raz 2014 for details). Note too that this was after the minimum wage rises for which workers had fought in 2008-11, when costs of living rose exponentially with the global food crisis

Bangladesh's exports and the markets to which it sells are sufficiently diverse (Taslim and Haque 2011).

3 Calculated in terms of PPP or purchasing power parity, the commonly used means of comparing poverty lines, wages, and costs of living across the world. The analysis was by the Workers' Rights Consortium, reported in Moazzem and Raz (2014).

(Hossain and Jahan 2014). Anu Muhammad notes that the wage was 'still a malnutrition wage, and it is still the lowest wage for garment workers in the world' (2011, 24).

There is no argument that the low wages of its workers substantially explain the success of the RMG sector to date. Labour is a major part of the cost of garments manufacture, and RMG is a classic 'starter' industry for developing countries (Saxena and Salze-Lozac'h 2010), particularly ones with large poor rural populations of 'nimble fingers' and presumed docility (Elson and Pearson 1981; Beneria and Sen 1981; Beneria etal. 2000). In the early years, workers were recruited from owners' rural home districts, signalling protection of vulnerable women workers and establishing continuities between old rural patronage and new paternalisms in global export production (Kabeer 2002). At a global level, low wages created the conditions for the Multi-Fiber Arrangement (MFA), through which developed countries attempted to protect their own low-waged workers from competition from those in developing countries. The MFA inadvertently helped foster the manufacturing sector in labour- surplus countries like Bangladesh, although without incentives to improve productivity or build backward linkages to expand the scope of the industry: market share was guaranteed and, in Bangladesh, profits assured thanks to low-cost labour, easy credit on which to import supplies, and scope for on- selling of quotas themselves. By the time the MFA was phased out under World Trade Organization rules in 2005, fears that the Bangladesh industry would be unable to survive full-on competition with China had subsided. The sector had diversified, raised quality to some extent, and improved production times (Saxena and Salze-Lozac'h 2010). With labour costs—and associated workers' rights—still the most minimal among major manufacturers, the Bangladesh industry has continued to thrive in the twenty-first century. It actually experienced a 'Walmart effect' during the global recession, when European and American consumers bought more of its cheap goods (Taslim and Haque 2011).[2]

In the wake of Rana Plaza, the sector faced strong pressure to raise labour and ethical standards while also improving quality, raising productivity, and staying competitive. The balancing act needed was summarized in a World Bank trade diagnostic study: 'opportunities for growth in the apparel manufacturing sector lie in enhancing productivity within existing production value chains without adversely impacting social welfare in the sector' (Kathuria and Malouche 2015, 91). Productivity is low and lead times long. Orders take an average of eighty-eight days in Bangladesh from order to delivery, compared to 40-60 in China and 50-70 in India. This is partly due to the need to import cotton, delays at Chittagong Port, and problems with energy, but also to lower worker productivity in Bangladesh, where workers make 13-27 polo shirts in the time Chinese workers make 18-35, and produce more waste and rejects. So despite lower wages, the overall cost of the shirt is USD 3.46 in Bangladesh, USD 3.93 in China, and only USD 3.03 in Ethiopia (Kathuria and Malouche 2015, 92).

  • [1] Examining Bangladesh's performance in and recovery from the global economic recession,some scholars argue fears of overly high export concentration levels are overstated, and that
  • [2] There are a number of good detailed sources of the RMG industry at different stages of itsdevelopment. See Bhattacharya and Rahman (1999);Khatun et al. (2007);Kabeer (2002);Mahmudand Kabeer (2003);Rahman et al. (2009).
 
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