5 years ago

Breakthroughs & bottlenecks: RMG sector at the crossroads

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On April 07, 2019, the Bangla-desh Supreme Court will rule whether the Transition Accord will continue functioning in the country's factories. One might recall how the November 2012 Tazreen fire killing 112 RMG workers and the April 2013 Rana Plaza collapse killing about 1,350 RMG workers produced two reform networks instantly. One was the May 15, 2013 Accord on Fire and Building Safety as the reform vehicle for 1,600 plants (with 2.0 million workers), representing just under 200+ western firms. The other was the Alliance for Bangladesh Worker's Safety, established in July 2013 by 28 North American retailers to inspect 700-odd factories here. When these 5-year agreements ended last year, their missions were not entirely completed. We will know on Sunday next what the court ruling will mean: further continuation of those reforms, as those platforms desire, or ending them, as the government prefers.

That decision will come at a critical juncture for the global RMG industry, all the more so for Bangladesh given its own idiosyncrasies. Leading those peculiarities is the different reform interpretations made, on the one hand, by the government and on the other, by retailers, with many local producers/owners propping up the government position. New technologies simultaneously promise to boost RMG (ready-made garments) cutting-edge advantage for those countries willing to take them. A key question arises: how can Bangladesh climb the RMG export league to earn US$ 50 billion by 2021, as is the stated government goal, when to do so would worsen workplace conditions given the advent of anything technological, especially automation-related innovations?

As Hannah Abdulla observed in a February 25, 2019 Just-Style blog, based upon research of such workplace monitors as the Accord, the International Labor Rights Forum advocated a "corporate social responsibility" (CSR) platform far different from the traditional: in spite of the hitherto business-led CSR approach, the new version is "worker-centred and worker-driven." This labour-friendly enterprise smacks the Bangladesh garment workers right in the face: from late 2018, they have been protesting about wage disparities and better work conditions, criteria that have fetched partial compromises at best, but barely nipped the underlying labour concerns.

As this stop-gap tension plays out, isolated RMG plants have been scaling other heights, making environmental-friendly noises and experimenting with newer technologies. They have struck chord with an increasingly supportive consumer preference for recycling and environment enhancing products. Up to 67 RMG plants have secured the pivotal LEED (Leadership in Energy and Environmental Design) certification of the United States Green Building Council. Simply by regulating water, through particularly waste management, as well as a far more efficient use of energy, that is, turning slowly to solar sources and using natural light, huge costs have been cut; and though one-time infrastructural investment expenses must be made, the future still looks rosy: the number of RMG LEED plants are expected to quadruple, some plants even securing platinum-ratings.

While the future of green RMG industry looks promising in Bangladesh, there is also a flicker of hope in the highly environmentally-toxic fashion industry: as the second largest source of environmental pollution globally (after petroleum), high-fashion, because of the heavy reliance on one-time-usage and non-biodegradable inputs, is poised to take off in Bangladesh. If this happens, either pressure will have build to demand reforms, or changes in consumer tastes, whereby reusable fashion clothing is on the upswing, may force RMG plants to change production platforms.

Although the court decision will shed a lot of new light on where the country's RMG sector now stands, we must not make this a pivotal moment: that decision has already been delayed six times. In the interim, as the Accord and the Bangladesh government square off with contending claims, the factories seem to be splintering for one reason or another. Those with LEED certification seem set to charter new business territory, but those seeking an Accord abolition refuse to yield. Whereas the former seem open to acclimating to the changing global clime and choices, the latter remain evermore dependent on the government. Where the RMG future balance shifts could be anyone's guess at the moment, but a number of secular global developments must be recognised, the sooner, the better, before implementing any preferences.

First, though many Bangladesh RMG factories have multi-year contracts already in their hands (to which one might add that western retailers may not be gung-ho about local plant reform), the competition Bangladesh RMG factories faces is only intensifying, increasingly against Bangladesh: Cambodia, Indonesia, and Vietnam, among others, have more vibrant RMG plants than those in Bangladesh, and can switch more readily to innovation and market-search because of a friendlier owner-worker relationship.

Second, the US tariffs against Chinese exports have resulted in massive Chinese factory off-shoring, just to lower production costs for US sales. Corporate officials in China speculate up to half of low-wage, high-cost industries will eventually migrate (BBC News, April 03, 2019); and a bulk of them have stuck closer to China's borders than locations elsewhere. This accents the already-mentioned advantages that Cambodia and Vietnam carry.

Third, by off-shoring low-wage, high-cost plants, China also opens space for automated alternatives to human labour. Although these are unlikely to go into play straightaway given the off-shoring, they constitute a production Plan B that makes a Bangladesh alternative look even more vulnerable: we are hardly building a Plan B, unless an Accord-favouring court ruling provides Bangladesh producers one last chance. By the time our sticky-footed RMG owners embrace automation, it might become too late to remain competitive.

Finally, the power of the eco-friendly, gender-balancing, and labour-promoting social forces have been gathering too much momentum in typical importing countries of the west, so if we can short-shrift fire-regulations or building-codes in this Accord/Alliance-driven reform phase, we may be simply alienating potential consumers that our RMG producers have taken for granted. Living like the proverbial Romans when in Rome and with a going-with-the-flow attitude have been time-tested business practices we have not paid adequate attention to, if we want to build long-term RMG-exporting advantages in the global market.

One ascending domestic priority of reaching the upper middle-income echelons must be matched by a low-wage industry diversification. That does not necessarily mean dumping our top export-earning industry into the ocean: many other software industries are also shifting in low-wage directions for us to capture in our net, with the added advantage that low-wage software production meshes better with a middle-class society than the low-wage hardware production counterpart.

At that crossroads, Bangladesh would be better off seizing the emergent opportunities of pushing buttons with a green colour, making energy renewable, transforming the fashion industry, and experimenting with automation wherever possible. To stay with the status quo would bring in the bread-and-butter for a short while, thus nipping any alarm bells ringing the needs to reform, but the business hallmark of innovation is where the country needs to be. It is just about all that distinguishes producers and businesses in a copy-paste era from the masses at a time when the future mileage of free-riding is diminishing progressively.

Dr. Imtiaz A. Hussain is Professor & Head of the Department of Global Studies & Governance at Independent University, Bangladesh.

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