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The Financial Express

Garment workers

Between a pandemic of coronavirus and a pandemic of starvation    

Sadequl Islam | Published: May 15, 2020 22:13:34 | Updated: May 19, 2020 22:18:40


Many garment workers are facing job cut and non-payments 	—FE Photo Many garment workers are facing job cut and non-payments —FE Photo

Tragedy in the Greek literature is driven by character flaws in heroic figures while tragedy in the English or Shakespearean literature is more nuanced and complex.  In contrast, tragedy or misfortune for garment workers in Bangladesh is simpler yet more horrific. Tragedies for the garment workers come as recurrent phenomena driven by external forces, not as self-inflicted episodes.

Every tragedy or crisis in the real world exposes fault lines in a society and calls for remedial actions. The Rana Plaza tragedy was no exception. There was a paradigm shift in management and monitoring of worker safety. The new paradigm led to establishment of two agreements in 2013 involving international brands, retailers, trade unions, and other organizations: The Alliance for Bangladesh Worker Safety and the Bangladesh Accord on Fire and Building Safety. These agreements, which elapsed recently, significantly improved worker safety in the Bangladesh garment industry. Garment workers have made Bangladesh the second largest clothing exporting country in the world, a remarkable feat. Scholars and business leaders routinely highlight the price advantage of Bangladesh based on low labour cost. Indeed, garment workers in Bangladesh, with a monthly minimum wage of about US $105, belong to the bottom tier of clothing exporting countries. Garment workers of Bangladesh, about 80 per cent of whom are female, under normal circumstances, live on the precipice of starvation and economic deprivation. For four million Bangladeshi garment workers, the coronavirus  has created  a two-fold tragedy involving a  public health  crisis and an economic crisis.

Lockdowns in developed countries have plummeted demand for apparel  from supplying countries including Bangladesh. Lockdowns in Bangladesh have put garment workers, garment factories, and the Bangladesh government between a rock and a hard place. Social distancing and lockdowns protect public health but risk serious economic deprivation. In the short-run the critical issue is how to protect jobs and earnings of garment workers. This will require a shared approach involving factory owners, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the government, international brands, and international agencies.

Garment factories in Bangladesh are heterogeneous in terms of employment, volume and value of output, revenue, and profit. Big companies should be able to bear a significant part of the economic fallout from the coronavirus pandemic. For these companies, government credit and banking support as part of the TK 50-billion financial package for export-oriented industries to pay off workers' wages and benefits appear to be reasonable. However, for many medium and small garment companies operating on thin margins, the financial incentives are not adequate in meeting the challenges from the coronavirus and the economic blowbacks. Not surprisingly, many garment companies have laid-off thousands of  workers  sacrificing the prospect of government loans at  the  very low interest rate of 2.0 per cent. For many workers, lack of transparency and enforcement of laws and rules concerning lay-offs remain a problem.

In Bangladesh where social safety nets are weak, social costs of lay-offs far outweigh private costs.  Notwithstanding requests made by the BGMEA  and warnings from the Department of Inspection of Factories and Establishments  (DIFE) , as reported by the  ILO Better work,  some 370 factories missed the deadline  of April 16 for payment of workers' wages.  For thousands of  laid-off garment workers, life  has become more chaotic as displayed in familiar images: disgruntled workers gathered  in front of locked factory gates, voicing slogans, laying  themselves down  on streets blocking traffic, vandalising property,  and even desperately  engaged in  "factory owner tracing"  for non-payment  of wages  and  illegal  firing from jobs.  It is clearly evident that more coordination is needed among government agencies such as the DIFE, the Ministry of Health, labour unions, the City Corporations, the BGMEA, and other relevant agencies to provide accurate data on the number, location and type of garment factories, the number of workers,  places where workers live, the methods of payment for workers and the number of workers who are still unpaid. In a pandemic, it will be more appropriate for the government to prevent lay-offs by recalibrating the financial package for struggling garment companies with a combination of wage subsidy, grants and loans to companies.

The coronavirus pandemic has jolted the apparel industry supply chain and exposed the flaws in the payment mechanism involving international brands and retailers and suppliers such as Bangladesh. Many brands and retailers have invoked the force majeure clause (which allows cancellation of contracts during extraordinary crises such as wars and natural disasters) and cancelled orders exposing apparel exporting firms to huge financial risks. According to BGMEA, the total cancelled orders amount to US $3.20 billion affecting 2.28 million workers in 1,150 factories. Responses of international brands toward suppliers and garment workers have been varied.  As reported by the Worker Rights Consortium  on its online " Covid-19  Brand Tracker," several brands such as H &M, VFC, PVH, Target, and Marks & Spence have agreed to pay up for their orders. But  many others notably Walmart and Gap  are yet to make any commitment. In a world where consumers are ethically conscious, international brands can and should take into account their moral obligations toward garment workers. Indeed, responsible and transparent practices of brands make a difference in the lives of workers. For instance, as reported by Workerdiaries, the workplace initiatives undertaken by H & M improved economic conditions for workers in supplying factories in Bangladesh.

The current customer-supplier power relationship in the $2.5 trillion fashion industry is  highly asymmetric with major brands and retailers having enormous leverages over suppliers. Indeed, as the Mckinsey & Company highlights: the top 20 brands, the  " super-winners," dominate the industry accounting for about 97.0 per cent of industry's profits.  The financial crisis following the coronavirus pandemic calls for a new and a fair regime of the payment system involving brands, retailers, suppliers, and international agencies such as the WTO, IMF, ILO, and other stakeholders.

In the short-run, governments in developed countries can undertake policies which can mitigate the financial crisis faced by brands, retailers, suppliers, and garment workers. For example, the United States has announced a 90-day deferral of duty payments on some imports to help the retail sector in the US. It will be better if the US waives rather than defers payments of tariffs for a temporary period on imports of apparel  goods  from  low-and-medium developing countries including Bangladesh.

In the long-run, to minimise the adverse effects of  pandemic and negative shocks, Bangladesh needs to diversify its basket of apparel products and market destinations.  The share of non-traditional markets (other than the EU, USA, and Canada) for Bangladeshi apparel has remained low at 16.7 per cent in 2019. As reported in Just-Style in an article by Sheng Lu ( April 2), in a worst case scenario, in 2020, the  value of apparel export to the US market from Bangladesh may decline by 17.0 per cent, lower compared to China ( 23.0 per cent), but higher compared to Vietnam (8.0 per cent). A similar scenario holds for the EU market. Because of its diversified export markets, Vietnam is in a better position to counteract the negative effects of the coronavirus and could replace China as the leading exporter of apparel in the United States. Indeed, as reported by Emergingtextiles.com, in the first quarter of 2020, Vietnam became the largest supplier of apparel to the United States with a market share 18.9 per cent, followed by China (18.3 per cent), and Bangladesh (9.4 per cent).

The garment industry, being highly globalised, is vulnerable to supply and demand shocks, natural disasters, and pandemics. A major lesson for a major apparel exporting country like Bangladesh is that the government and factory owners through the BGMEA should maintain reserve or contingency funds which can be used to cushion the effects of global crises. Some countries maintain sovereign wealth funds and reserve funds; for example, the German Labour Department maintains a reserve fund which ensures job and income  guarantees for workers during economic crises through the Kurzarbeitergeld system. The Indian labour ministry also has a reserve fund which provides some unemployment benefits to permanent workers.

Few garment workers in Bangladesh have the financial capacity to save money for "rainy days." Still, the government and the BGMEA can create and offer saving schemes for garment workers with attractive incentives. For Bangladeshi expatriates, banks in Bangladesh offer various financial products such as wage earners bonds which offer attractive interest rates.  A similar scheme can be introduced for garment workers who, after all, account for the largest tranche of foreign exchange earnings for Bangladesh.

The Rana Plaza tragedy was a wakeup call for factory owners, the BGMEA, government agencies, and international brands with a simple message: worker safety matters. The coronavirus tragedy is another wake up call for all: worker health and worker living and housing conditions matter. Many garment workers live in congested, hazardous,  unhygienic and virus-friendly conditions in slum areas. In the long run, establishment of low-cost, safe housing for workers should deserve a high priority.

Aristotle highlighted the importance of catharsis in a tragic drama for spectators. What is needed for garment workers is a collective catharsis along with a collective action involving all stakeholders.

 

Dr. Sadequl Islam is Professor & Chair, Department of Economics, Laurentian University, Ontario, Canada.

 sadequlislam@fibreop.ca

 

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