Bangladesh Rmg Sector

For example, with the removal of the Multi- Fiber Agreement (MFC) in 2005, fear of imminent destine stroked in the hearts of the garnishs possessors. Despite the adverse predictions of different studies, the surfacegrowth domain of Bangladesh managed to pull by means of the abolishment of the MFC unscathed. Bangladesh later secured a position under the Generalized System of Preference (SSP), which al scurvyed the country to enchant privileged divvy up links with the Western producers. merely, after the nigh young tragedy of Ran topographic point where more than 1200 garments workers lost their lives, the US political sympathies suspended the SP of Bangladesh.Even though EX. promised non to withdraw SSP for Bangladesh it comes with stipulations attached. In this circumstance, the question that everyone is compelled to ask themselves is- Will the artillery empyrean of Bangladesh collapse with the recent crisis it is faced with, or lead it be competent to hold its gr ound? The Evolutionary Path of the limb Sector earlier delving further into the recent crisis and its impacts, lets first identify the contribution of leg field in Bangladesh delivery and its strengths that led to its immense growth over the rifle few decades. fort field is the highest foreign exchange generating sector of Bangladesh, constituting 79% of broad(a) export and around 22 percent of total GAP in FYI 2012-13. It is evident from graph 1 that the sectors contribution to total export and economy as a whole has plainly(prenominal) increased over time. before long it employs 44 million worker 80% of which be women. Therefore, it would non be wrong to say that ARM sector has become the lifeline of Bangladesh economy.Graph ARM export and Total Export hourly wage rate of ARM Sector source BAGGAGE Graph 2 Minimum ancestry complaint The global hegemony of Bangladesh in ARM sector can be ascribed to the fact that it enjoys a competitive advantage in terms of low wage s and lax regulation that trans organise into competitive global prices. With a minimum wage of USED 0. 26 per hour, the rate is one of utmost in the world (see Graph 2). The enormousgest earner of foreign exchange in Bangladesh has similarly been showered with favorable incentives such as back-to-back LLC, import and usage duty rebates and on the spur of the moment and long term interest rates discount.Harnessing on its cheap hollow, Bangladesh ARM sector has found a strong ground to sustain on its own. For example, the MFC quota system which had initi completelyy acted in favor of the Bangladesh ARM sector was phased out in allowing the abolishment. According to the McKinney report 2011, Bangladesh has all the potential of becoming the no. 1 apparel sourcing hotshot replacing China. Buyers at the cost of labor wages According to Doug Miller, professor emeritus of tot up chain ethics, In Bangladesh, you have a glut of buyers in depend of a cheap product wanting to place e normous orders, and the readiness is built hurriedly. With a clause of deferred requital in letter of character reference (L/C) I. E. The formal loan commensurateness for purchases, merchants in Bangladesh get products shipped out and sackful overcompensatements to manufacturers after months of delay of as much as 6 months. With payment organism deferred, Bangladesh manufacturers are real forced to subsidize the buyers. Garment-makers take loan, vacate of interest for 90 days, against the L/C in executing orders. So, for the end beyond 90 days, manufacturers have to fork out 1 PC interest.Moreover, an order worth a dollar that a buyer places actually does not add up to a dollar. On different pretexts and through underhand dealings, they take back almost 25 cents, leaving the manufacturers to thoroughgoing(a) the Job with the bideing 75 cents with which the manufacturer buy fabrics and accessories, make clothes, pay establishment costs, ship out clothes, and are expected t o pay workers clean and make good profit as well. Factory assembleations are shoddy, workers still in and lead times are too tight- all in order to minimize costs and attend to stringent deadlines.Since victims fear become off foreign buyers, the central bank and garment owners association has not yet beginnerd a reform. The Current Crisis Today thither is a large network of some 5,000 garment factories in Bangladesh, far more than any other low-wage country. They aim at churning out clothing pronto and cheaply without bothering to comply with rules and worker pencil eraser well-worns. Faced with a regimen imposed minimum wage of USED 38, the average factory owner seeks cost minimization by tweaking other variables such as infra bodily structure, author and freight.Such hard core profit seeking behavior has proveed in a restrictive disaster. According to Bangladesh institute of labor studies, at least 730 workers were killed and 4,700 garment workers have been injured in ARM accidents between years 1990 to 2012. cardinal deadly incidents from November 2012 through May 2013 brought rocker safeguard and labor violations in Bangladesh to world attention. However, the biggest, deadliest disaster so far has been the collapse of the factory construction in Saver which has led to the shoemakers last of over 1100 workers.The fatal accidents occurring in regular interval have put the bright succeeding(a) of Bangladesh ARM sector in Jeopardy. One of the five criteria that buyers look into while evaluating a destination/country as a major sourcing market is lay on the line (as outlined in a report by McKinney, 2011). Taking that into account, recent incidents in Bangladesh point out that there has been a age wallow in the risk factor surrounding the readmes garments (ARM) sector in Bangladesh. future(a) the collapse of Ran shopping center, the Western companies are now already seeking parvenu sources of ready-made garments.Well known companies al ready contemplating a move out, fearing that association with Bangladesh factories would ill-use their reputations. Low wage that once has been the main attraction circumstance it is only natural that competitors like China, India and Vietnam will snatch business away from Bangladesh. Regulations The regulatory disaster that the Bangladesh ARM sector is facing now is a result of ears of negligence and malfeasance. Laws ensuring the rights of workers are in place, but are scattered, outdated and not enforced properly. A National Labor Law centering was formed in 1992 to enact a Labor Code.The National Trade due north Leaders of The Labor Law Review Committee was reconstituted in 1998. However, workers rights are highly violated and quite a little unions are very weak. In 2008, the government had enacted the Dacha Metropolitan Building (Construction, Development, Conservation and Demolition) Rules aimed at ensuring construction of any structure in the capital Dacha in compliance w ith the prevailing construction deadlines. However rajah, the Capital Development Authority, has failed to enforce the legality seriously which further adds to the lean regulatory framework governing workers safety.Regulatory Capture The failure by the political bodies in Bangladesh to ensure the proper enactment of safety standards reflects regulatory subdue that occurs when policymakers or regulatory bodies favor special interest groups rather than work in interest the populace.. The perfect example would be the sanction of structure permit of Ran Plaza in Saver. The design of the build was not architecturally sound but as granted by an RAJAH authorization that wasnt authorized to issue such permits to begin with but he did it in any event in exchange of bribe thus serving the interest of the building owner.The regulatory agencies such as Ministry of Labor and RAJAH, created to act in public interest, instead advance the commercial or special concerns of interest groups that govern the industry or sector it is charged with regulating. Understandably the authority seems to turn a blind eye on this very matter as at least 10 percent of Bangladesh parliament members are consume owners of about 5000 garment factories in Bangladesh.The apparent inter-involvement reflects in the way there have been no convictions on any of the major disasters that had resulted in hundreds of death and injuries prior to the collapse of the Ran Plaza building in Saver in May 2013. The businessmen-UCM-politicians fear the pullout of Western buyers responsible for their profit margins as well as Arms contribution to the economy should the costs of implementing the regulations properly fount higher prices.Stakeholders Response Since the collapse of the building Ran Plaza and the corresponding world(prenominal) attention it has received, the reputation of Bangladesh ARM sector and its international buyers are in Jeopardy. Companies like Disney, Orion etc have terminated im port from Bangladesh while major US importers like Walter have not made any cover commitment to improve the running(a) conditions of the factories from which they import clothes for its outlets. Most of the big global companies have decided to stay and try to improve safety in their contractors factories and build inspection of some factories under which millions work.The most heartbreaking blow that the Bangladesh ARM sector has faced after the Tragic Ran Plaza incident is the suspension of Generalized System of Preference (SSP) quickness provided by the US overspent. This action comes as a result of Bangladesh governments failure to improve working conditions and ensure worker safety inside the country. In the short run, the suspension from US SSP is projected to reduce export by a meager 0. 8 % as ARM products (which make up most of the US import from Bangladesh) are not included in the tip of duty-free products in SSP.However, the cancellation of SSP will translate to majo r export spill for industries like ceramic products, processed and frozen prawn, tobacco, etc as these products used to enjoy duty free entry in US market. Most authoritatively, Bangladesh discover as a trade partner of the USA is tainted. Therefore, the prospect of future export growth of Bangladesh in US market seems dimmer as this may discourage US and other foreign investors, new and old, from venturing into Bangladesh. Nonetheless, the US government has assured that the suspension is temporary and accordance with the provided guideline will result in reinstatement of the facility.The key points of the guidelines are * Fast track adaption of unions * Increase the number of government labor inspector * Proper slaying of Factory standard and stricter punishment for failure to imply * Assess architectural soundness and fire safety of all apparel units * Close or relocate risky factories * A hot angle of dip for workers to unanimously report fire, building safety and rights viola tion * Amend PEG law to match international standard * Prevent harassment and violation against labor activists and resolve ongoing bitterness The repercussion of SSP suspension will be much more unplayful if adopted by European Union (ELI) since unlike USA, garments products enjoy SSP facility in ELI. EX. had previously threatened to remove preferential access of Bangladesh ARM reduces in EX. market if the government did not take measures to improve the working condition in Bangladesh factories. They have called for immediate safety improvements, and said they were considering changes in Bangladesh duty-free and quota-free status to encourage more responsible management by the countrys garment industry.The United Nations labor agency, International Labor Organization (ILL) had too sent an inspecting team a week following the building collapse, and has called for great commitment and social dialogue for the overall regulation of the ARM industry. ILL has welcomed an agreement si gned by some international fashion brands and retailers, and trade unions to prevent workplace disasters. Thus there is increasing oversight by the international community to oversee the safety of the industry drivers. Response of Bangladesh regime and Regulatory Bodies Back home, the government of Bangladesh is working to amend the Labor law to make it time-befitting as well as protect the interest, rights and security of workers. RAJAH has in any case started an inspection of unauthorized factory buildings.Moreover the Anti Corruption Commission (AC) will look into the alleged irregularities in the Manufacturers and Exporters Association (BAGGAGE) have excessively issued a list of tests and standards that must be met by all the factories. This list includes reports of soil tests and structural design to assess the suitability of the building to be used as a factory, to remove generators from the roof to the ground floor, to install equipments that would aid in a disaster and s o forth. These were requested of all factories and are to be submitted by the end of May, 2013. For the owners, the course of action is to initiate compliance with the international standards and assist BAGGAGE in all activities y providing the reports asked of in time.They besides need to educate and train their work force on the steps to take in the event of a disaster and as well conduct regular fire drills. Response of Civil Society The urbane society has also raised a voice and become increasingly involved in the brewing demand for regulatory reform. Not only have individuals and organizations offered assistance to the collapsed building victims but many have also offered corrective measures. Sir Faze Abed, founder of BRACE, has asserted that instead of Western buyers draw out, the buyers should invest in ensuring workers safety assure while the workers must also coalesce into unions and engage in collective bargaining.The government must also end neglecting worker safety i ssues and ensure Justice for the owners shepherds crook negligence. Nobel laureate Dry. Muhammad Yuans has recommended two proposals one is for the Bangladesh government and foreign buyers to Jointly fix a minimum international wage level, and work on increasing labor productivity, specialized labor skills, and build buyers trust in order to remain competitive. The second is to set up a Workers Welfare Trust Fund, so that he international buying company will pay 10% of the amount it has agree to pay the garment factory owners to work in the welfare of the workers. A citizen action group can also be created in order to accelerate the positive changes taking place in business.Conclusion The ARM sector as the biggest foreign exchange earner in Bangladesh, is considered a national treasure, therefore a tacit bi-partisan agreement between the politicians and businessmen to protect it was an outcome, albeit blindly. However the failure of regulations and prevailing of criminal negligence can be mitigated by stricter law enforcement and by the presence of a proper non-partisan regulatory body or watchdog to ensure transparency, mitigated corruption and the assurance of worker safety. For the government, the most important action is to ensure enforceability of the steps that need to be undertaken. More a great deal than not, it is seen that there is a flurry of activity right after an accident, which dies out soon with no significant changes that would prevent such an accident from being repeated.Trade unions and labor activism must not be shut down by the new Industrial Police to ensure transparency and accountability of the workers and their rights. The workers must be allowed to organize themselves and be allowed to function as gracious alikeness of the existing ARM owners associations, not simply as appendages The ARM sector to demolish the entire sector if not addressed immediately. These include poor people infrastructure, low compliance to international sta ndards, weak supplier performance and workforce supply, overconfidence on imported raw materials and lastly poor economic and political stability. The government must act swiftly to avert the impend doom one of the most important industries in the Bangladesh