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The economy of Bangladesh is dependent on agriculture

1.1

Introduction

Since independence, the economy of Bangladesh is dependent on agriculture as most of the people live in rural areas. The goal of the government policy is to reduce poverty by receiving the maximum output from agriculture and attains self-sufficiency in food production. Beside agriculture, the development of export sector is under greater consideration. Exports from Bangladesh have both grown and changed substantially as time goes on. After the birth of Bangladesh, jute and tea were the most export-oriented sectors. But with the constant threat of flooding, declining jute fiber prices and a significant decrease in world demand, the contribution of the jute sector to the country’s economy has deteriorated (spinanger, 1986). After that attention has turned to the role of manufacturing sector, especially in Garment Industry. The garment industry of Bangladesh has been the key export division and a main source of foreign exchange for the last 25 years. At present, the country generates about $5 billion worth of products each year by exporting garment. The industry provides employment to about 3 million workers of whom 90% are women. Two non-market elements have performed a vital function in confirming the garment industry's continual success; these elements are (a) quotas under Multi- Fiber Arrangement (MFA) in the North American market and (b) special market entry to European markets. The whole procedure is strongly related with the trend of relocation of production.

1.2 Development of Garments Industry in Bangladesh In the field of industrialization, role of textile industry is found very prominent in both developed and developing countries. Economic history of Britain reveals that in the 18th Century the cotton mills of Lancashire in Britain ushered in the first industrial revolution of the world. Moreover, during the last 200 years or more many countries of the world have used textile and clothing industry as an engine for growth and a basis for attaining economic development (Ahmed, 1991). Over the past few years garment industry is found to have played such an important role in the process of industrialization and economic growth. This industry is infect trying to put the wheel of her declining economic back to the track by giving essential life blood to it (Chowdhury, 1991). The growth of garment industry in Bangladesh is a comparatively recent one. In the British period there was no garment industry in this part of the Indo-Pak-Sub-Continent. In 1960 the first garment industry in Bangladesh (Then East Pakistan) was established at Dhaka and till 1971 the number rose to give (Islam, 1984). But these garments were of different type intended to serve home market only. From 1976 and 1977 some entrepreneurs came forward to setup 100% export oriented garment industry. Both domestic and international environment favored the rapid growth of this industry in Bangladesh. By mid seventies the established developed suppliers of garments in the world markets i.e. Hong Kong, South Korea, Singapore, Taiwan, Thailand, Malaysia, Indonesia, Srilanka and India were severely constrained by the quota restrictions imposed by


their major buyers like USA, Canada and European Union. To maintain their business and competitive edge in the world markets, they followed a strategy of relocation of garment factories in those countries, which were free from quota restrictions and at least same time had enough trainable cheap labour. They found Bangladesh as one of the most suitable countries. Available records show that the first consignment of garments was exported from the country in 1977 by Reaz and Jewel Garment. Desh Garment was the first biggest factory that started functioning at Chittagong in 1977. In fact that was the humble beginning of new joint venture garment factory in Bangladesh. Thereafter many entrepreneurs became interested and started to setup garment factories following the Desh garment and realizing the future prospects globally as well. Available records also show that one of the reasons of the growth of garment industry in Bangladesh is the collaboration of a local private garment industry, Desh garment with a Korean company, Daewoo. As part of its global strategies, the Daewoo Corporation of South Korea became interested in Bangladesh when the Chairman, Kim Woo-Choong, proposed an ambitions joint venture to the Government of Bangladesh which involved the development and operation of tyre, leather goods, cement and garment factories (Rock, 2001). South Korean Company, Daewoo, a major exporter of garments, was looking for opportunities in countries for using their quotas subsequent to the signing of MFA in 1974. Because of the quota limitation for Korea after MFA, the export of Daewoo became restricted. Bangladesh as a LDC got the opportunity to export without any restriction and for this reason Daewoo interested to use Bangladesh for their market. The reason behind this desire was that Bangladesh will depend on Daewoo for importing raw materials and at the same time Daewoo will get the market in Bangladesh. For this desire Daewoo signed a five years collaboration agreement with Desh Garment. It included collaboration in the areas of technical training, purchase of machinery and fabric, plant setup and marketing in return for a specific marketing commission on all exports by Desh (Rock, 2001). The outcome of the collaboration of Desh-Daewoo was significant. In the first six years of its operation, Desh export value grew at an annual average rate of 90 percent reaching more than $ 5 million in 1986-87 (Mahmood, 2002). Rahman (2004) argued that the Desh-Daewoo collaboration is an important factor to the expansion and success of Bangladesh’s entire garments export sector. In such a context, following Table-01 shows the trend of growth and development of garment industry in Bangladesh. Table 1.1: Growth of Garments factories in Bangladesh Year

No. of Factory

Compound Growth Rate in %

1971 5 1977 7 5.77 1981 78 82.70 1983 141 34.45 1984-85 384 65.03 1989-90 759 14.60 1994-95 2182 23.52 1999-00 3200 7.96 2004-05 4107 5.12 2005-06 4250 3.48 Source: Various articles and Annual Report of BGMEA

The Table-01 shows that the growth was very slow till 1977 and got momentum from 1977 to


2005-06 in terms of number of industry. But the compound growth rate was highest till 1981 and the rate was very good during 1989-90 to 1994-95 and thereafter i.e. 1994-95 to 2004-05, the industrial growth has been declined though the numbers of industries have been increased. The capacity as well as number of equipments is very good indicator to examine the actual position of the garment industry as well as size of the industry. In such a context, the following Table deals in this regard. Table 1.2: Garments Industries with number of Machine Year

Garment Industry having No of Machine Upto 100

101 – 200

Total

201 and over

2253 (64) 726 (21) 531 (15) 3510 (100) 2275 (62) 773 (21) 620 (17) 3668 (100) Source: Annual Report of BGMEA. Figures in parentheses indicate percentage 2004 2005

From the Table 02 it is found that more than half of the total garment industries in Bangladesh have the number of machines upto 100 or less than 100 and very few industries have the machine more than 200. It indicates that the small scale industries have been dominated in the garment sector.

1.3 Contribution of Garments Industry to the Economy Garments Industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during last two decades. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a key role in employment generation and in the provision of income to the poor. Nearly two million workers one directly and more than ten million inhabitants are indirectly associated with the industry (Ahmed and Hossain, 2006). The sector has also played a significant role in the socio-economic development of the country. In such a context, the trend and growth of garments export and its contribution to total exports and GDP has been examined the following table shows the position. Table 1.3: Growth and Trend of Garments Exports, and contribution to GDP (Amounts in Million USD) Garment Export Total Export Share to Total Share to GDP Year (Min USD) (Min USD) Export in % in % 1984-85 116 934 12.42 1989-90 624 (40) 1924 (16) 32.43 (21) 1994-95 2228 (29) 3473 (13) 64.15 (15) 5.87 1999-00 4349 (14) 5752 (11) 75.61 (3) 9.23 (9) 2004-05 6418 (8) 8655 (9) 74.15 (-1) 10.63 (3) 2005-06 7901 (23) 10526 (22) 75.06 (1) 12.64 (2) Source: Economic Review of Bangladesh, BGMEA and Computation made by author. Figures in parentheses indicate compound growth rates (CGR) for the respective periods.

It is revealed from the Table 03 that the value of garment exports, share of garments export to


total exports and contribution to GDP have been increased significantly during the period from 1984-85 to 2005-06. The total garments export in 2005-06 is more than 68 times compared to garments exports in 1984-85 whereas total country’s export for the same period has increased by 11 times. In terms of GDP, contribution of garments export is significant; it reaches 12.64 percent of GDP in 2005-06 which was only 5.87 percent in 1989-90. It is a clear indication of the contribution to the overall economy. It also plays a pivotal role to promote the development of linkage small scale industries. For instance, manufacturing of intermediate product such as dyeing, printing, zippers, labels has began to take a foothold on limited scale and is expected to grow significantly. Moreover it has helped the business of basing, insurance, shipping, hotel, tourism and transportation. The sector also has created jobs for about two million people of which 70 percent are women who mostly come from rural areas. The sector opened up employment opportunities for many more individuals through direct and indirect economic activities, which eventually helps the country’s social development, woman empowerment and poverty alleviation. In such a way the economy of Bangladesh is getting favorably contribution from this industry.

1.4

Garments Product Portfolio and its Diversification

The specific character of products and level o f industrial development indeed determines its variance of product diversification. In such a context, the product mix, product line as well as product diversification are very important strategies for any industry to develop its market by meeting the present market requirements. For the garments industry it is also very important because product diversification will call for developing capability for product development and product design specially in response to fast changes in fashion. The growth pattern of garments export can be categorized into two distinct phases. During the initial phase it was the woven category. Second phase is the emergence of knitwear products. On the other hand, an analysis of the product mix of the garments industry revealed that so far Bangladesh has been able to export very limited categories of products. In such a context, an attempt has been made to examine the growth and trend of product portfolio or categories of products exported from Bangladesh. The following Tables deal with the value and quantity of different garment products export including their growth pattern from 1992-93 to 2005-06. Table 1.4: Pattern of Woven and Knitwear Garments Export (Figures in Million) Year 1992-93 1994-95 1999-00 2004-05 2005-06 CGR (%)

Export in Million USD Woven Knit

Total

Export in Million Dozen Woven Knit Total

1240 (86) 1835 (82) 3081 (71) 3598 (56) 4084 (52) 9.60

1445 2228 4349 6418 7901 13.96

36 (77) 47 (75) 67 (60) 92 (43) 109 (40) 8.90

205 (14) 393 (18) 1268 (29) 2820 (44) 3817 (48) 25.22

11 (23) 16 (25) 45 (40) 120 (57) 165 (60) 23.16

47 63 112 212 274 14.52

Source: Garments Export Data, BGMEA and Export Promotion Bureau-EPB. Figures in parentheses indicate the share in percentage. CGR stands for compound Growth Rate.


From the Table 04 it is evident that the compound growth rate of knit garment export is more than woven garment export both in terms of value and quantity for the period of 199293 to 2005-06. The share of knit garments in total export has been increased significantly both in terms of value and quantity. The share of woven garment in total garments export has been decreased from 86 percent in 1992-93 to 52 percent in 2005-06. It is observed that the demand for knit garment is increasing in the export market. It is also observed that the export quantity of knit garments has been exceeded the export quantity of woven garments in 2005-06. The position can be better explained if we look into the more details of the product mix in the above categories of garments. The garment sector has been able to diversify the product base ranging from ordinary shirts, T-shirts, trousers, shorts, pajama, ladies and children’s wear to sophisticated high value items like quality shirts, branded jeans, jackets, sweater, embroidered wear etc. In such a context, an attempt has been made to classify the garments export into different products in order to understand product diversification strategy and its relative importance and performance as well. The following Table shows the picture in this regard. Table 1.5: Pattern of Export Performance of Different Garments Products (Amount in Million USD) Year Shirts Trousers Jackets T-Shirts Sweaters

Others

1994-95

791 (36)

101 (5)

147 (7)

232 (10)

N/A

N/A

1999-00

1021 (23)

484 (11)

440 (10)

564 (13)

325 (8)

1515 (35)

2004-05

1053 (16)

1668 (26)

430 (7)

1350 (21)

893 (14)

1024 (16)

2005-06

1057 (13)

2165 (27)

390 (5)

1782 (23)

1044 (13)

1463 (19)

CGR(%) 2.67 32.13 9.28 20.36 21.47 Source: Garments Export Data, BGMEA and Export Promotion Bureau-EPB. Figures in parentheses indicate the share in percentage. CGR stands for compound Growth Rate.

From the Table 05, it is evident that the highest compound growth rate has been found in Trousers 32.13 percent, followed by T-shirts 20.36 percent, Jackets 9.28 percent, and T-Shirt 2.67 percent respectively during the period of 1994-95 to 2005-06. The rate of Sweater is also significant during the period of 1999-2000 to 2005-06. It is observed that the share of Trousers and T-Shirt in the total garment export is increasing. On the other hand, the share of shirts and Jackets is declining trend. The Figures indicate that Bangladesh has concentrated in the production and export of Trousers, T-Shirts and Sweater. This mean’s that there is a scope and actually need for structural change in product mix. 1.5

Garments Market Diversification

The international textile and garment industry has undergone several shifts in production and marketing since the 1950s. The first shift occurred in the 1950x and early 1960s when production moved from North America and Western Europe to Japan. The second supply shift was from Japan to the Asian newly industrialized economics (NIEs)-Hong Kong, Taiwan, South Korea and Singapore- and this permitted the latter group to dominate global textile and garment exports in the 1970s and 1980s. Over the past 10 to 15 years, there has been a third shift as production within Asia has moved from the NIEs to China and South East and South Asian exporters and as exports from non-Asian countries, in particular control


America, the Caribbean, Eastern Europe and North Africa, have increased substantially. These production shifts have been influenced by a range of factors, including the distortions to international trade arising from MFA quota system and labour cost differentials. In this scenario, Bangladesh garment industry is well placed to withstand the increase in competition in its export markets. Our export market for garments products is spread over a vast space of more than 20 countries with USA, UK, France, Canada, Germany, Belgium and Middle Eastern countries being the major and notable ones. Initially, Bangladesh has concentrated only in a few markets. It has concentrated in USA, Canada and Europe. The competitors of Bangladesh, for example, India has continued to expand its trade, diversify its markets and change product mix of its exports. As the recent performances indicate, the production and marketing capabilities of Bangladesh have increased substantially. But still it lacks the core competence necessary to stay in a highly competitive market which one can anticipate in present post MFA period. If it wants to increase its world market share and competitive edge, it needs to diversity its products and markets. In this context, it is imperative to analyse the major export market for Bangladeshi garments product. The following Table shows the major share of export market in USA, EU and other countries in this regard. Table 1.6: Selected Region-wise share of Garment Export in percentage Year USA European Countries USA & EU 2001-2002 42.67 55.43 98.10 2002-2003 38.02 57.12 95.14 2003-2004 28.64 65.42 94.06 2004-2005 30.64 64.24 94.88 2005-2006 33.67 49.77 83.43 Source: Bangladesh Bank Quarterly; Publication of Bangladesh Bank

Other Countries 1.90 4.86 5.94 5.12 16.57

From the Table 06 it is observed that Bangladesh garment export market has concentrated in USA and EU till 2004-05 which indicates Bangladesh has successfully established a remarkable presence in the world markets, particularly in the US and EU markets. In the year 2005-06 a successful turnaround was observed in exports to third countries which is about 16.57 percent of total export market and it was only 1.90 percent in 2001-2002. It is expected that the trend of market diversification will continue and this will help to maintain growth momentum of export earnings.

1.6

Post MFA Scenario in Bangladesh

The textile and apparel industries have led industrialization n at the early stage of development in many countries of the world. Most developed countries which have lost competitiveness have imposed quantitative restrictions on the trade in textiles and clothing since the 1950s, although there has been progress in trade liberalization as a whole. Over the last thirty years, international trade and investment in the global textile and garment (T&G) sectors has been influenced by Multi-Fiber Agreement (MFA) quantitative restrictions (quotas) applied by the major developed country importers (the United States, the European Union, Canada and Norway) on T&G exports from (predominantly) developing countries. MFA quotas were negotiated bilaterally and applied on a discriminatory basis to some


exporting countries but not to others, thus differing from country to country in both product coverage and the degree of restrictiveness. In such a context, the Multi-Fiber Arrangement governed the trade in textiles and clothing from 1974 to 1994. This arrangement was superseded in 1995 by the Agreement on Textiles and Clothing (ATC) under the administration of the World Trade Organization (WTO). From 1 January 2005 all such quantitative restrictions on the trade in textiles and clothing were phased out, and finally abolished. Historically speaking that as per requirement of The ATC, all MFA quotas on T&G products be removed over a ten-year transition period split into three phases and ending on 1 January 2005, thus finally incorporating international T&G trade into general GATT rules that prohibit discriminatory measures and call for the reduction and elimination of quantitative restrictions. The quota system under the MFA has distorted international T&G trade and has resulted in global welfare losses since quota limits on the exports of selective producers have prevented an allocation of resources to the most efficient T&G producers and prevented prices in quota protected developed country markets from falling. Competitive exporting countries with comparative advantages in T&G production have been restrained from expanding under the MFA quota system, while relatively uncompetitive producers have enjoyed guaranteed market access (up to the quota limit) to developed country markets (Spinanger, 1999). In such a context, there was serious concern that low income countries, such as Bangladesh, Cambodia and the like, which relied heavily on the garment industry, would suffer from the keen competition expected to be triggered by the complete liberalization of trade in textiles and clothing from the beginning of 2005. From the many corners it was predicted that China would expand its exports and India would follow, and that the other relatively small exporters would suffered seriously from the competition of these two giants. However, it turned out that some garment-exporting Least Developed Countries (LDCs), such as Bangladesh, Cambodia and Haiti, faired very well throughout the year 2005. In this context, an attempt has been made to examine the export data of selected countries during MFA and post MFA to US and EU markets in order to assess the indicative impact of post MFA scenario in Bangladesh as well as other largest garments exporters. The following Tables show the picture in this regard. Table 1.7: Exports of Knit and Woven Garments to the United States Rank Origin Amount (Million US$) Rate of Change (%) 2003 2004 2005 2003-04 2004-05 1 China 8,690 10,723 16,808 23.39 56.75 2 Mexico 7,098 6,845 6,230 -3.56 -8.98 3 Hong Kong 3,732 3,878 3,523 3.93 -9.16 4 India 2,056 2,277 3,058 10.74 34.29 5 Indonesia 2,155 2,402 2,882 11.47 19.99 6 Bangladesh 1,759 1,872 2,268 6.45 21.15 13 Cambodia 1,229 1,418 1,702 15.42 20.06 Source: U.S. Department of Commerce, Bureau of Census cited in Yamagata, 2006 Table 1.8: Exports of Knit and Woven Garments to the EU Rank

Origin

1 2 3

All Countries China Turkey Bangladesh

Amount (Million US$) 2003 2004 56,918 65,552 10,913 13,714 8,112 9,348 3,471 4,578

2005 69,642 20,334 9,790 4,346

Rate of Change (%) 2003-04 2004-05 15.17 6.24 25.66 48.27 15.24 4.72 31.90 -5.08


4 Romania 5 India 4,124 19 Cambodia 2,599 Source: Eurostat cited in Yamagata, 2006.

4,572 3,020

4,285 3,988

10.87 16.23

-6.28 32.02

Tables 7 and 8 show the trends in garment exports to t he United States and EU from the five largest garment exporters and the two leading exporters among the LDCs, Bangladesh and Cambodia. It was revealed that China and India expanded garment exports to the US and EU, the world’s two largest markets. Along with China and India, Bangladesh and Cambodia have also increased their exports to the United States during 2005 by more than 20 percent. Though their garment exports to the EU declined between 2004 and 2005, the drops were not significant; and the growth in the same figures by more than 30 percent between 2003 and 2004 surpassed the decline in 2005 (Table 8). As a whole, the sum of garment exports to the two largest markets grew by 2.54 percent for Bangladesh and by 11.06 percent for Cambodia in 2005. Since the US and EU are going to be imposing new restrictions on textile and garment imports from China for at least a couple of years, exports from that country will slow down, making room for the remaining garment exporters to increase growth. Thus, the prospects for Bangladesh to continue expanding its garment exports are encouraging.

1.7

Displacement of Production in the Garment Industry

The global economy is now controlled by the transfer of production where firms of developed countries swing their attention to developing countries. The new representation is centre on a core-periphery system of production, with a comparatively small centre of permanent employees dealing with finance, research and development, technological institution and modernization and a periphery containing dependent elements of production procedure. Reducing costs and increasing output are the main causes for this disposition. They have discovered that the simplest way to undercharge is to move production to a country where labor charge and production costs are lower. Since developing nations provide areas that do not impose costs like environmental degeneration, this practice protects the developed countries against the issues of environment and law. The transfer of production to Third World has helped the expansion of economy of these nations and also speeds up the economy of the developed nations. Garment industry is controlled by the transfer of production. The globalization of garment production started earlier and has expanded more than that of any other factory. The companies have transferred their blue-collar production activities from high-wage areas to low-cost manufacturing regions in industrializing countries. The enhancement of communication system and networking has played a key role in this development. Exportoriented manufacturing has brought some good returns to the industrializing nations of Asia and Latin America since the 1960s. The first relocation of garment manufacturing took place from North America and Western Europe to Japan in the 1950s and the early 1960s. But during 1965 and 1983, Japan changed its attention to more lucrative products like cars, stereos and computers and therefore, 400,000 workers were dismissed by Japanese textile and clothing industry. In impact, the second stock transfer of garment manufacturing was from


Japan to the Asian Tigers - South Korea, Taiwan, Hong Kong and Singapore in 1970s. But the tendency of transfer of manufacturing did not remain there. The rise in labor charge and activeness of trade unions were in proportion to the enhancement in economies of the Asian Tigers. The industry witnessed a third transfer of manufacturing from 1980s to 1990s; from the Asian Tigers to other developing countries - Philippines, Malaysia, Thailand, Indonesia and China in particular. The 1990s have been led by the final group of exporters including Bangladesh, Srilanka, Pakistan and Vietnam. But China was leader in the current of the relocation as in less than ten years (after 1980s) China emerged from nowhere to become the world's major manufacturer and exporter of clothing.

1.8

Bangladesh Garment Sector and Global Chain

The cause of this transfer can be clarified by the salary structure in the garment industry, all over the world. Apparel labor charge per hour (wages and fringe benefits, US$) in USA is 10.12 but it is only 0.30 in Bangladesh. This difference accelerated the world apparel exports from $3 billion in 1965, with developing nations making up just 14 percent of the total, to $119 billion in 1991, with developing nations contributing 59 percent. In 1991 the number of workers in the ready-made garment industry of Bangladesh was 582,000 and it grew up to 1,404,000 in 1998. In USA, however, 1991-figure showed 1,106.0 thousand workers in the apparel sector and in 1998 it turned down to 765.8 thousand. The presented information reveals that the tendency of low labor charges is the key reason for the transfer of garment manufacturing in Bangladesh. The practice initiated in late 1970s when the Asian Tiger nations were in quest of tactics to avoid the export quotas of Western countries. The garment units of Bangladesh are mainly relying on the 'tiger' nations for raw materials. Mediators in Asian Tiger nations build an intermediary between the textile units in their home countries, where the spinning and weaving go on, and the Bangladeshi units where the cloth is cut, sewn, ironed and packed into cartons for export. The same representatives of tiger nations discover the market for Bangladesh in several nations of the North. Large retail trading companies placed in the United States and Western Europe give most orders for Bangladeshi garment products. Companies like Marks and Spencers (UK) and C&A (the Netherlands) control capital funds, in proportion to which the capital of Bangladeshi owners is patience. Shirts manufactured in Bangladesh are sold in developed nations for five to ten times their imported price. Collaboration of a native private garment industry, Desh Company, with a Korean company, Daewoo is an important instance of international garment chain that works as one of the grounds of the expansion of garment industry in Bangladesh. Daewoo Corporation of South Korea, as part of its global policies, took interest in Bangladesh when the Chairman, Kim Woo-Choong, offered an aspiring joint venture to the Government of Bangladesh, which included the growth and process of tyre, leather goods, and cement and garment factories. The Desh-Daewoo alliance was decisive in terms of getting into the global apparel markets at significant juncture, when import reforming was going on in this market following the signing of MFA in 1974. Daewoo, a South Korean leading exporter of garments, was in search of opportunities in nations, which had hardly used their quotas. Due to the quota restriction for Korea after MFA, the export of Daewoo became limited. Bangladesh as an LDC got the chance to export without any constraint and for this cause Daewoo was


concerned with the use of Bangladesh for their market. The purpose behind this need was that Bangladesh would rely on Daewoo for importing raw materials and at the same time Daewoo would get the market in Bangladesh. When the Chairman of Daewoo displayed interest in Bangladesh, the country's President put him in touch with chairman of Desh Company, an excivil servant who was seeking more entrepreneurial pursuits. To fulfill this wish, Daewoo signed a collaboration contract with Desh Garment for five years. The contract also incorporated the fields of technical training, purchase of machinery and fabric, plant establishment and marketing in return for a specific marketing commission on all exports by Desh during the contract phase. Daewoo also imparted an exhaustive practical training of Desh employees in the working atmosphere of a multinational company. Daewoo keenly helped Desh in buying machinery and fabrics. Some technicians of Daewoo arrived Bangladesh to establish the plant for Desh. The end result of the association of DeshDaewoo was important. In the first six years of its business, i.e. 1980/81-86/87, Desh export value increased at an annual average rate of 90%, reaching more than $5 million in 1986/87. It is claimed that the Desh-Daewoo alliance is a significant element for the growth and achievement of Bangladesh's entire garment export industry. After getting linked with Daewoo's brand names and marketing network, overseas buyers went on with buying garments from the corporation heedless of their origin. Out of the opening trainees most left Desh Company at several times to erect their own competing garment companies, worked as a way of moving knowledge all through the whole garment sector. It is essential to identify the outcomes of the process of moving production from high pay to low pay nations for both developing and developed nations. It is a bare fact that most of the Third World nations are now on the way to industrialization. In this procedure, workers are working under unfavorable working environment - minimal wages, unhealthy place of work, lack of security, no job guarantee, forced labour etc. The route of globalization is full of ups and downs for the developing nations. Relocations of comparatively mobile, blue-collar production from industrialized to developing nations, in some circumstances, can have troublesome effects on social life if - in the absence of efficient planning and talks between international organizations and the government and/or organizations of the host nation - the transferred action encourages urban-bound relocation and its span of stay is short. Another negative result is that the rise in employment and/or income is not expected to be satisfactorily large and extensive to lessen inequality. In connection with the negative results of relocation of manufacturing on employment in developed countries, we realize that in comparatively blue-collar industries, the growing imports from developing nations lead to unavoidable losses in employment. It is held that development of trade with the South was a significant reason of the deindustrialization of employment in the North over past few decades. After all employees who are constantly working under unfavorable circumstances have to bear the brunt. Work is under-control across the Bangladesh garment sector. Appalling working atmosphere has been brought to light in the Bangladesh garment industry. A research reveals that 90 percent of the garment employees went through illness or disease during the month before the interviews. Headache, anemia, fever, chest, stomach, eye and ear pain, cough and cold, diarrhea, dysentery, urinary tract infection and reproductive health


problems were more common diseases. The garment factories gave bonus of different diseases to the employees for working. With a view to finding out a link between these diseases and industrial threats, health status of employees has been examined before and after coming in the garment work. At the end of examination, it was come out that about 75 percent of the garment workforce had sound health before they entered the garment factory. The reasons of health declines were industrial threats, unfavorable working environment, and want of staff facilities, inflexible terms and conditions of garment employment, workplace pressure, and low wages. Different work-related threats and their influence on health forced employees to leave the job after few months of joining the factory; the average length of service was only 4 years. The garment sector is disreputable for fires, which are said to have claimed over 200 lives in the past two years, though exact figures are tough to find. A shocking instance of absence of workplace safety was the fire in November 2000, in which almost 50 workers lost their lives in Narsingdi as exist doors were closed. From the above analysis of working atmosphere of garment sector, we can state that the working environment of most of the Third World nations, particularly Bangladesh remind us of earlier development of garment industries in the First World nations. The state of employment in many (not necessarily) textiles and clothing units in the developing nations take us back to those set up in the nineteenth century in Europe and North America. The mistreatment of garment employees in the birth period of the development of US garment factories reviewed above is more or less same as it seen now in the Bangladesh garment industry. Can we state that garment employees of the Third World nations living in the 21st century? Is it a return of the Sweatshop? In a way, the Western companies are guilty of pitiable working atmosphere in the garment sector. The developed nations want to make more profit and therefore, force the developing nations to cut down the manufacturing cost. In order to survive in the competition, most of the developing nations select immoral practices. By introducing inflexible terms and conditions in the business, the global economy has left few alternatives for the developing nations.

1.9

Right Time to Make a Decision

There are two alternatives to tackle the challenge of the competitive world initiated by the continuous pressure of global garment chain. One can continue to exist in the competition by adopting time-honored work systems or immoral practices. But it is uncertain how long they can continue to exist. In connection with the garment industry of Bangladesh, we can say that this is the right time to follow a competitive policy, which improves quality. If the MFA opportunities are eliminated, will it be feasible to keep the competitiveness through lowwage-female labor or through further drop in female wages? Possibly not. Since the labor charges are so minimal that with such wage, a worker is not able to maintain even a family of two members. Enhancing the efficiency of female workers is the only solution to increased competition. Proper education and thorough training can help achieve these positive results. To rule the global market, Bangladesh has to come out of low wage and low output complex in the garment industry. Bangladesh can enhance labor output through constant training, use


of upgraded technology and better working environment. Bangladesh should plan a strategy intended for promoting skill development, speeding up technology transfer and improving productivity height of the workers. Another method is to adopt best system or ethical course. Those companies, which react to heightened competition by stressing quality, speedy answer of the customers, fair practices for laborers should have the most innovative practices. We think that we are now living in the age of competition in producing improved quality over cost-reduction policy. The objective of change efforts at the workplace has been modified over the time - from making the job humane in the 1960s, to job satisfaction and output in 1970s, to quality and competitiveness in the 1980s. It is necessary for a company to pursue a competitive policy that improves quality, flexibility, innovation and customer care. If they rely on low costs by dropping laborers' wages and other services, they will be bereaved of laborers' dedication to work.

Strength •

• • • • • • • • • • • • • • • •

Considerable Qualified/keen to learn workforce available at low labor charges. The recommended minimum average wages (which include Traveling Allowance, House Rent, Medical Allowance, Maternity Benefit, Festival Bonus and Overtime Benefit) in the units within the Bangladesh Export Processing Zones (BEPZ) are given as below; on the other hand, outside the BEPZ the wages are about 40% lower. Energy at low price Easily accessible infrastructure like sea road, railroad, river and air communication Accessibility of fundamental infrastructure, which is about 3 decade old, mainly established by the Korean, Taiwanese and Hong Kong Chinese industrialists. FDI is legally permitted Moderately open Economy, particularly in the Export Promotion Zones GSP under EBA (Everything But Arms) for Least Developed Country applicable (Duty free to EU) Improved GSP advantages under Regional Cumulative Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful track Investment assured under Foreign Private Investment (Promotion and Protection) Act, 1980 which secures all foreign investments in Bangladesh OPIC's (Overseas Private Investment Corporation, USA) insurance and finance agendas operable Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under which protection and safety measures are available Adjudication service of the International Centre for the Settlement of Investment Dispute (ICSID) offered Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD & Cellular services Weakness of currency against dollar and the condition will persist to help exporters Bank interest@ 7% for financing exports Convenience of duty free custom bonded w/house


♦ Readiness of new units to enhance systems and create infrastructure accordant with product growth and fast reactions to circumstances

Weakness ♦ ♦ ♦ ♦ ♦

♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦

Lack of marketing tactics The country is deficient in creativity Absence of easily on-hand middle management A small number of manufacturing methods Low acquiescence: there is an international pressure group to compel the local producers and the government to implement social acquiescence. The US GSP may be cancelled and purchasing from US & EU may decrease significantly M/c advancement is necessary. The machinery required to assess add on a garment or increase competence are missing in most industries. Lack of training organizations for industrial workers, supervisors and managers. Autocratic approach of nearly all the investors Fewer process units for textiles and garments Sluggish backward or forward blending procedure Incompetent ports, entry/exit complicated and loading/unloading takes much time Speed money culture Time-consuming custom clearance Unreliable dependability regarding Delivery/QA/Product knowledge Communication gap created by incomplete knowledge of English Subject to natural calamities

Opportunity ♦ EU is willing to establish industry in a big way as an option to china particularly for knits, including sweaters ♦ Bangladesh is included in the Least Developed Countries with which US is committed to enhance export trade ♦ Sweaters are very economical even with china and is the prospect for Bangladesh ♦ If skilled technicians are available to instruct, prearranged garment is an option because labor and energy cost are inexpensive. ♦ Foundation garments for Ladies for the FDI promise is significant because both, the technicians and highly developed machinery are essential for better competence and output ♦ Japan to be observed, as conventionally they purchase handloom textiles, home furniture and garments. This section can be encouraged and expanded with continued progress in quality


Threat ♦ The exporters have to prepare themselves to harvest the advantages offered by the opportunities.

1.10

Labor Unrest in Garments Sector

Labor is an important input in industrial production. This is truer in garment industry of Bangladesh. Mechanization and automation have not diminished the role of human element in industrial establishments. In fact, the role of the workforce has become highly critical in garment industry. Nor have the economic reforms belittled the significance of labor. Liberalization of economy has brought labor to centre stage. Human resource is taken to be an important factor to increase productivity, improve quality and reduce costs all necessary to survive in the competitive world. There are several issue related to labor. They are trade union movement, wage policy and industrial relation. Industrial labor in the garment sector has undergone important changes over the two decades. Most important changes are commitment to industry, protective legislation, status of the worker, employment pattern, growth of trade unionism, industrial disputes, political interference and in some cases unfair labor practices. Despite the prevailing positive labor management relationship, the spiraling labor unrest in the Bangladesh RMG industry started on May 2005 after a knitwear factory owner rejected an 11-point charter of demands. The factory was completely gutted in the blaze. Protesting workers forced their way into an exclusive industrial zone for foreign investors and damaged machinery. These workers demanding unpaid wages and a weekly holiday smashed scores of vehicles and burn down factories in Savar, an industrial town near Dhaka. Among the 250 damaged units, at least 30 were owned by foreign investors in the Savar Export Processing Zone. According to Bangladesh Garment Manufacturers and Exporters’ Association (BGMEA) nearly 300 factories, including 21 factories in the Savar Export Processing Zone (EPZ), were damaged during the three-day crisis. The total loss of the garment industry is around four billion taka (nearly $70 million). Many vehicles were also set on fire during the unrest, which left three workers dead and hundreds others wounded. This is reportedly the worst industrial rioting in Bangladesh in the ready-made garment industry which is the country’s biggest export earner. The violence also dealt a serious blow to the industry’s image apart from causing huge losses. Some trade union leaders blamed the outbreak on accumulated anger of workers, who even do not have any weekend. They alleged that some garment owners do not pay the worker their salaries in time and overtime regularly. The violent outburst of the workers crippled the industry for many days. Several quarters seen it sabotage behind this development. On the other hand, another quarters seen it is an explosion of anger that remains unresolved for long. Protests over low wages and other exploitative conditions continued in the month of June 2005 too. The garment workers continued to hold rallies and clashed with law enforcers, leaving many people injured and few dead. Defying a ‘red alert’ imposed by law enforcers at the Dhaka Export Processing Zone (DEPZ) and its adjoining industrial areas, workers were involved in clashes in the Savar, Ashulia and Gazipur areas. The deepening unrest in the garment industry forced the foreign investors to announce on June 2005 that they have shut their units as fresh violence flared up in the Export Processing Zone (EPZ). Investors of 92 units in the


EPZ said that they will not reopen the units until the government gives guarantee of law and order in the area. They also requested the EPZ authority to declare the EPZ closed indefinitely to cool off the situation. Leaders of the garment factory owners’ also urged the government to form an industrial police force to ensure a secure working environment for the apparel industry. They felt that the overall security situations in different industrial hubs were not risk free despite the government’s deployment of huge security forces. It was true that in the year 2005 the political instability has been made worse by the simultaneous labor unrest in the economic lifeline of Bangladesh that is its garment industry. Initially the government and the industry leaders underestimated the magnitude of the problem and tried to brush it aside by floating various conspiracy theories.

Trade Union in Existence 2.1

Overview

Trade unions aim to represent the interests of people at work and negotiate with employers for better terms and conditions for their members.

A trade union is an organized group of workers. Its main goal is to protect and advance the interests of its members. A union often negotiates agreements with employers on pay and conditions. It may also provide legal and financial advice, sickness benefits and education facilities to its members. The International Labor Organization this week again rapped Bangladesh for its continuing failure to provide full trade union freedoms in the country and for permitting serious violations of ILO Conventions both in law and in practice. In particular, it deplored the obstacles to the establishment of unions in Export Processing Zones and the arrest and harassment of union leaders and activists in the garment sector. And the ILO’s Committee on the Application of Standards singled out Bangladesh for special attention expressing concern over the escalation of industrial violence stressing that freedom of association could only be exercised in a climate that was free from violence, pressure or threats of any kind against trade union leaders and members.


Exclusions from union membership

The Committee demanded that the Bangladesh Government take measures for the amendment of the Labor Act and the EPZ Workers Associations and Industrial Relations Act so as to bring them into full conformity with the provisions of ILO Convention 87 which Bangladesh has ratified and is duty-bound to observe. The ILO called upon the Bangladesh Government to ensure that all workers were fully guaranteed the protection of the Convention and demanded that the necessary concrete steps to ensure this be taken without delay. The Government of Bangladesh was asked to provide full particulars to the ILO in respect of all arrests, harassment and detention of trade unionists and trade union leaders and urged to give adequate instructions to the law enforcement bodies so as to ensure that no person was arrested, detained or injured for having carried out legitimate trade union activities. Population: 149,700,000 / Capital: Dhaka / ILO Core Conventions Ratified: 29 87 98 100 105 111

-

182

Legal limitations on union recognition, the right to strike and collective bargaining remain in place. Many workers in the public sector and all teachers are still denied union membership. Legislation was passed allowing unions in Export Processing Zones, but not until 2006, and with restrictions. Garment workers were fired for trying to form a union while 350 women trade unionists were arrested while celebrating international women's day. The harassment of the nurses' union BDNA continued.

2.2 2.2.1

Trade Union Rights in Law Many Restrictions

. .

The Constitution provides for the right to form or join unions. There are many restrictions, however. Before a union can be registered, 30 per cent of workers in an enterprise have to be


members and the union can be dissolved if its membership falls below this level. Unions must have government approval to be registered, and no trade union action can be taken prior to registration . Candidates for union office have to be current or former employees of an establishment or group of establishments. The Registrar of Trade Unions has wide powers to interfere in internal union affairs. He can enter union premises and inspect documents. The Registrar may also cancel the registration of a union, with Labor Court approval. Under the Industrial Relations Ordinance, workers in the public sector and state enterprises may not belong to a trade union, with the exception of railway, postal and telecommunications workers. No teachers may form trade unions, in either the public or private sector. Managerial and administrative employees can form welfare associations, but they are denied the right to join a union. .

2.2.2 .

Right

To

Strike

Not

Recognized

The right to strike is not specifically recognized in law. Three quarters of a union's members must agree to a strike before it can go ahead. The government can ban any strike if it continues beyond 30 days (in which case it is referred to the Labor Court for adjudication), if it involves a public service covered by the Essential Services Ordinance or if it is considered a threat to national interest. In this last case, the 1974 Special Powers Act can be used to detain trade unionists without charge. The government may ban strikes for renewable periods of three months. Sentences of up to 14 years' forced labor can be passed for offences such as "obstruction of transport". .

2.2.3

Collective

Bargaining

Limited

. Only registered unions can engage in collective bargaining, and each union must nominate representatives to a Collective Bargaining Authority (CBA) committee, which is subject to approval by the Registrar of Trade Unions. The National Pay and Wages Commission, whose recommendations are binding, set public sector workers' pay levels and other benefits. . [

2.2.4

EPZ's

-

New

Law

on

Union

Recognition

. The EPZ Trade Union and Industrial Relations Bill 2004 was passed on 12 July. It provides for the formation of trade unions in EPZs from 1 November 2006. In the meantime, workers are allowed to set up "Welfare Committees", provided over 30 per cent of the workforce take part, with elected representatives who have the power to negotiate and sign collective


agreements. However, they are not allowed to strike or organize demonstrations. The trade unions will be subject to the same 30 per cent threshold, as for all unions in the country, and will also have to hold a referendum, in which over 50 per cent of the total workforce must participate. Trade unions have effectively been outlawed in Bangladesh's six export processing zones (EPZs) since their launch in 1980, as the zones have so far been exempt from the major laws establishing freedom of association and the right to bargain collectively. Faced with the threat of losing trade preferences for its exports to the US and Canadian markets, however, the government was to allow trade unions into the zones as from 1 January 2004. It then caved in to pressure from Korean and Japanese companies based in the EPZ's, delaying its decision until it found this compromise solution. There are still some limitations on the freedom of association in the new law, in addition to the 30 per cent rule. While trade unions in a particular EPZ will be allowed to form a federation, there can only be one federation in the area. Federations will not be allowed to form a single body or join any national trade union.

2.3

Trade

Union

Rights

in

Practice

. The trade union movement is relatively weak in Bangladesh. This is partly owing to the multiplicity of trade unions - there were 5,450 unions affiliated with 25 officially registered national trade union centres - and partly owing to the considerable intimidation imposed in practice, especially workers' fear of losing their jobs should they show any sign of union activity. Even though the government has ratified ILO Convention nos. 87 and 98, the right to freedom of association and to collective bargaining at the workplace is not respected in the garment sector or on the tea estates.

2.3.1

Strike Bans

.

The government makes use of the Essential Services Ordinance, hereby it can ban strikes. It continues to apply it to the Power Development Board, the Dhaka Electric Supply Authority and the Chittagong Port Authority. In May 2003, it also imposed the Ordinance on the Bangladesh Petroleum Corporation. .

2.3.2 .

Restrictions on Bargaining and Union Meetings

The government does not allow any collective bargaining authority in jute mills during production time. . Only pro-government supporters are allowed to hold meetings during work time and unions


not affiliated with the government's labor grouping are not allowed to hold protests even on their day off. .

2.3.3 .

Employers Take Advantage of Legal Loopholes

Private sector workers are discouraged from undertaking any union activity. The Industrial Relations Ordinance gives considerable leeway for discrimination against union members and organizers by employers. . Workers who try to create a trade union are not protected before registration and are therefore often persecuted by their employers, sometimes by violent means or with the help of the police. The names of workers who apply for union registration are frequently passed on to employers who promptly transfer or dismiss them, particularly in the textile sector. Even after registration, workers suspected of carrying out trade union activities are regularly harassed. One popular ploy is to dismiss a worker for misconduct, as they are then no longer entitled to become a trade union officer. A complaint to the Labor Court is of little use given the underlying corruption and serious backlog of cases, which, in some instances, can stretch back more than several years.

2.3.4

Export Processing Zones

.

Employers in the EPZs have been consistently hostile towards trade unions, claiming that many of the companies would be ruined and jobs would be lost if they had to have unions. Some employers in the zones take advantage of the absence of trade unions to commit violations of international labor standards, such as sexual harassment, physical violence, unpaid overtime, child labor, non-compliance with minimum wage regulations and deplorable safety conditions. .

2.3.5 Garment Industry Anti-Union

.

Textile workers outside the zones fare no better. An estimated two million women workers, working for 3,300 employers, make clothes for export in Bangladesh. Unions are registered in only 127 factories and fewer than a dozen employers actually negotiate with them. Workers are regularly sacked, beaten up or subjected to false charges by the police for being active in unions. The General Secretary of the United Federation of Garment Workers (UGFW) has been arrested 12 times. Meanwhile, the country's garment workers are among the lowest paid in the world. They work long hours with very little leave, and face physical, verbal and sexual abuse.

2.3.6

Ship Recycling Industry Outlaws Unions

.


The Bangladeshi ship recycling industry is based at Chittagong Port. Workers are contracted on an as-needs basis, have no contract and do not sign any document which could link them to a specific yard. Thus workers have no legal recourse in the event of a dispute. Largely owing to the fear instilled in them - through violence and the precariousness of their employment situation - workers have no way of standing up for their rights or even claiming their dues. Any claim would provoke instant dismissal. Unions are de facto forbidden on the sites and union organizers find it very difficult to gain access. .

2.3.7

No Progress on Legislation

.

Despite promises some years ago to "examine the issue", the government has not brought its labour legislation into line with ILO conventions. There has been no progress since it ratified Conventions 87 and 98 in 1972. .

2.4 2.4.1

Violations in 2004 Background

. .

The political scene remained volatile, with a wave of general strikes and protests, while the economy of this already very poor country was hard hit by weeks of flooding in July and August. Meanwhile, the garment industry, which accounts for around 75% of Bangladesh's export earnings, was facing potential heavy losses with the final phasing out of the Agreement on Textiles and Clothing (ATC). The executive chief of the opposition Awami League was killed on 7 May while addressing a political rally in Tongi. Ahsanullah Master was also Executive President of the Jatio Sramik League (JSL), an ICFTU-affiliated national trade union centre. .

2.4.2

Union Registration Refused

.

The Immaculate (Pvt.) Ltd. Sramik Union, an affliate of the Bangladesh Independent Garment Workers' Union (BIGUF), applied for registration in September 2003. Immaculate Pvt. Ltd. is a garment factory located in Mirpur, Dhaka. Over 40 per cent of the workforce joined the union, which was formed in July 2003 in response to appalling working conditions, including excessively long working hours and physical and verbal abuse. The union met the Registrar's demands for information, many of which were excessive and went beyond the legal requirements. When the Registrar failed to act on the request for registration after the 60-day limit set by law, the union appealed to the Labour Court. On 15 February 2004, the Registrar informed the Court that he had rejected the application for registration in a letter dated 27 October 2003. The BIGUF did not receive this letter, or any other information


relating to its application for registration. The grounds for rejecting the union's application, as given in the Registrar's statement to the court, related to minor administrative issues which had already been corrected. In the meantime, the union reported that its members faced intimidation and discrimination, and that seven of its most active members had had their employment contracts terminated. .

2.4.3

Mass Arrest of Women Trade Unionists

.

The police arrested 350 women trade unionists on 20 April when they were taking part in activities to mark Women's Day organised by the ICFTU-affiliated Jatio Sramik League (JSL). Among those arrested was the General Secretary of the JSL's Women's Committee, Shamsur Nahar Bhuiyan. They were released on bail on 25 April, and were due to face possible charges in court on 5 May, although the nature of those charges were unclear. .

2.4.4

Sacked For Organizing

.

When workers at International Knitwear and Apparels, in the Beximco Industrial park north of the capital Dhaka, tried to organise in order to improve their appalling working conditions, they lost their jobs. They decided to set up the union on 4 June. Shortly afterwards, a new managing director, known for his past bad behaviour towards workers, was appointed. The Managing Director started harassing the mostly women workers and even threatened to kill them if they joined the union. On 28 July, the prospective union president and general secretary were dismissed. Then on 1 August the factory was closed, after management accused some workers of attempting to disrupt production and leading illegal activities inside the factory. Thirteen workers had cases filed against them by management at the local police court. When the factory reopened ten days later, 186 unionised workers were refused entry, while others were asked to meet unrealistic production targets. On 15 August, thugs hired by the management entered the factory and started threatening and beating up workers. Twenty five workers were badly injured as a result. The next day, workers were again denied access to the factory by armed thugs and policemen. Three days later 25 other workers had cases filed against them at the police court. The company's main buyers Levi Strauss and Next began investigations into the incidents. At the end of the year negotiations were underway to resolve the dispute. .

2.4.5 .

Union Leaders Transferred To Weaken Union

On 26 November the Director of Nursing in Bangladesh issued a series of transfer notices to senior trade union leaders from the Bangladesh Diploma Nurses Association (BDNA) in an act clearly designed to weaken the union. Ten BDNA Central Executive members were given orders to transfer out of the capital city or to less important health centres. They included BDNA Senior Vice President, Ms. Krishna Beny Day, General Secretary, Ms. Israt Jahan,


Joint General Secretary, Mr. Glolam Hossain, and Organizing Secretary, Mr. Kamaluddin Ahmed. The transfer notices were issued just days before a major BDNA conference on 28 November called to review a set of proposals designed to improve health services, employment conditions and address the issue of pay equity. The BDNA believed the transfers were in contravention of the rules and regulations of the Ministry of Establishment. However the transfers were being put into effect and those concerned were given three days to make the transfer, otherwise they would face dismissal procedures. By the end of the year up 200 other union members had been informed that they would also receive such notices.

2.4.6 Action

Reprisals

for

Union .

On 30 November, employers closed down a factory without notice and without paying employees their November salary further to a dispute, including strike action, although the dispute had been settled. The 1,200 workers employed at the Suhi Industrial Park Ltd. had begun to organise with the assistance of the Shadhin Bangla Workers and Employees Federation in order to improve their working conditions. After the closure, the workers raised the issue with the International Textile, Garment and Leather Workers' Federation. In angry response, the factory owners began a new wave of assault. At the end of the year, the workers and organisers were facing police action, and some union organisers had been beaten up by thugs. One of the organisers was being held in jail and denied bail. .

2.4.7 .

Dismissed

and

Beaten

for

Joining

Union

Garment workers at the Square Fashions company in Dhaka were dismissed, thrown out of their dormitories, beaten and robbed because they joined a union. On 12 December employees at the factory stopped work in protest at the beating of a fellow worker for making a mistake. The following day, which coincided with the visit by a company customer, management announced the supervisor concerned had been dismissed, and that workers would no longer have to pay for their dormitories (initially offered to them free of charge, but rent was later imposed). A few days later the supervisor was reinstated. On 17 December 350 workers visited the BIGUF to seek assistance and join the union. The company had the workers followed, and they were subjected to body searches - including male guards searching women workers - when they returned. The guards made a list of the names of those in possession of union membership cards. On 19 December, 32 union members were fired. Those who lived in the dormitory were not even allowed to collect personal belongings. Many were given severance pay, but then handed over to local thugs who beat them up outside the factory gates and stole their money from them. Management also called the police to assist in turning the workers out. .


2.4.8

More Dismissals

.

Three union officials were dismissed by Coats Bangladesh Ltd. because of their union activities. The General Secretary of the Coats Bangladesh Employees Union, Mr. Nizam Uddin, the union's organising secretary and the office secretary were dismissed in October. Ostensibly the reason for their dismissal, as outlined in a letter from the company's Human Resources Director dated October 21, was that they had tried to instigate an illegal strike and a go-slow. There was no foundation to these allegations however. The dismissals came as the union was about to enter into negotiations on profit sharing. Mr. Uddin had just been elected Chairman of the Board of Trustees of the Workers' Profit Participation Fund, and had requested a copy of the Audit Report for the year 2003 to prepare for negotiations.

Recent Labor Dispute

3.1

3

Phase-Wise RMG Wage Increase Proposed

Wednesday, September 13, 2006 The National Wage Board at its 24th meeting yesterday failed to reach a consensus on minimum wages for garment workers despite a hectic seven-hour long negotiation. Failing to reach a consensus the board sent to the government, for its consideration, a threetier proposal to be implemented in three years with Tk 1,604 as gross minimum salary in the first year. The board proposed Tk 1,604 as gross minimum wage for entry-level garment workers for the first year up to June 30, 2007. Minimum gross salary would be Tk 1,890 in the second year during July 1, 2007 to June 30, 2008 and it would be Tk 2,117.50 in the third year starting from July 1, 2008. Annisul Huq, representative of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) on the board did not agree to the proposal, and Nazma Akhtar, representative of workers on the board did not sign the proposal, saying it did not match the expectation of the workers. However, Board Chairman Anwarul Haque, independent member on the board Iqbal Ahmed, and permanent representative of the workers on the board Zafrul Hasan signed the proposal. Permanent member of the employers on the board Kazi Saifuddin Ahmed was absent in yesterday's marathon meeting held at the board office in Dhaka.


"We could not reach a consensus but a majority of the members decided to send a proposal to the government for its consideration," said Zafrul Hasan after ending the meeting at 9:30pm. The proposal has to be kept in circulation for 15 days for opinions and objections, and the ministry concerned will take another month for its approval after which it will be put in a gazette. The board yesterday discussed three pay proposals -- one of them was proposed by the independent member and another was proposed by Zafrul Hasan but both of them faced strong oppositions from representatives of garment factory owners as they were much higher than the proposal sent to the government. According to sources, both the factory owners and workers were rigid on Tk 1,400 and Tk 1,800 respectively as a gross minimum wage. There are seven grades in the three-tier proposal. The gross minimum wage for the first year includes Tk 1,080 basic salary, 30 percent house rent and Tk 200 medical allowance totalling Tk 1,604. Gross minimum wage of Tk 1,890 for the second year includes Tk 1,300 basic salary, 30 percent house rent and Tk 200 medical allowance. Gross minimum wage of Tk 2,117.50 for the third year includes Tk 1,475 basic salary, 30 percent house rent and Tk 200 medical allowance. Annisul Huq said the proposal sent by the board to the government had been placed for discussion lately and it was not possible for him to go through it. "We don't know what would be the impact of this proposal on the industry. We sought three to four days time to study it but the time was not given. So, we did not agree to it. We will send our comments after going through it," he said. On the other hand, gross wages for Grade I workers in the first year would be Tk 5,400 including Tk 4,000 basic salary, 30 percent house rent and Tk 200 medical allowance. It would be Tk 5,725 including basic salary, house rent and medical allowance in the second year and Tk 6,050 in the third year and onward including 4,500 basic salary, 1,350 house rent and Tk 200 medical allowance. "The proposal sent to the government did not match the expectation of the workers. So, I did not sign it," explained Nazma. The board earlier held 23 meetings after it had been formed on May 31 but could not reach a consensus. Following a severe labour unrest in the country's premier export-earning garment sector, the government formed the wage board and asked it to recommend a pay structure for the workers within three months. The minimum wage for workers in the RMG sector is now Tk 930 which was fixed about 12 years ago. The government, garment owners and workers' leaders at a meeting on June 12 inked a 10point memorandum of understanding (MoU) after a series of discussions on May 24, June 1


and June 4 among the stakeholders in the garment sector and decided to implement those in phases to address labour unrest, and to ensure labour rights and peaceful atmospheres in the factories.

3.2 More Clashes in Bangladesh-The Issue of Energy

September 20, 2006 Textile workers in Narsingdi, central Bangladesh, yesterday fought police in protests against irregular power supply to their factory workplaces. They are not paid for time lost to interruptions. Over 1,000 fought with officers as they laid seige to the electicity company offices, setting fire to company vehicles, 2 transformers and a circuit breaker. 50 workers were hurt as cops baton charged, fired rubber bullets and tear gas. 10 cops were also injured by thrown missiles.

Energy is an important political issue in Bangladesh - there have been regular countrywide protests and riots this year over intermittent supplies, as well as the recent insurrection against the proposed Phulbari opencast mine project. Alongside the inconvenience of cuts in domestic supplies, cuts in power to workplaces mean cuts in wages. Due to maintenance problems/equipment failure the national supply is only functioning at little more than half its capacity at present. Interruptions occur several times daily and some areas only receive a supply for 6 hours per day. Several foreign investment projects have failed due to government corruption, bureaucracy and state reluctance to sanction often unpopular energy projects. In a country where arable land is limited, open pit coal projects and other forms of energy development - are not environmentally friendly, eat up scarce land resources and destroy thousands of homes. The deals agreed with foreign energy investors mean the majority of energy generated is for export, and the behaviour of foreign capital has also encouraged a general cynicism towards them. The American company, Occidental, had a major pipeline explosion in 1997 and issues


of compensation for environmental damage have still not been fully resolved; Occidental pulled out of Bangladesh several years ago, leaving the wrangling over compensation to be dealt with by Unocal, which took over their interests. There were also two incidents last year at facilities run by the Canadian company, Niko Resources. Here too there is confusion over what is happening about related compensation claims. In the south west, jute mill workers at Khulna ended a 2 week strike; they have received owed back wages and the employers have agreed to consider other demands such as "regularisation of their jobs, allocation of sufficient funds for jute purchase, smooth supply of power and opening of the laid off mills".

3.3

Garment Workers Struggles Escalate Again in Bangladesh

September 23, 2007 Tejgaon, Dhaka; yesterday morning (Saturday) new clashes broke out in the city's industrial zone. Up to 25,000 garment workers came out on wildcat strike and fought both police and management-hired thugs. Over 50 people, including cops, were injured - some seriously. The trouble began on Saturday morning at the Nasa Group factory. Supposedly one of the more 'responsible' employers - Nasa supply Primark in the UK and Wal-Mart in the USA amongst others - Nasa workers had been on strike for 2 days demanding payent of wage arrears, bonuses and extra holiday allowances. Whilst demonstrating at the factory gates - in defiance of the government's ban on all protests - workers learned that management had now decided to indefinitely lock them out of the factory. There are conflicting reports of what happened next; earlier reports state that 3,000 workers responded to the lockout by marching to the nearby Sepal Group factory to picket out workers there. The Sepal workers were reported to be unwilling to come out in support of the Nasa workers, so fighting broke out between workers from the two factories. But a later report claims that the fighting was actually between the Nasa strikers and thugs hired by factory bosses. It also states that the Sepal workers initially refused, but later did join the Nasa strikers - as did many other factories, bringing up to 25,000 workers on the streets. As the hired thugs joined forces with hundreds of cops and army personnel against the workers, a large area became a battlefield. 20 factories were damaged, buses were burned and roads blocked. By early afternoon, the intense fighting had died down. The background to the present unrest is the still unresolved enforcement of the minimum wage and conditions agreement of June 2006. Though the ready-made-garment (RMG)


employers federation the BGMEA claim 97% adherence to the agreement, unions say the real figure is that only 20% of 4,000 RMG factories have implemented the agreement. The government has said it will take action against any employer not complying by September 30th; yet the government has never enforced similar threats in the past, having already deferred the deadline twice. Unpaid wages and brutal work conditions remain commonplace strikers were quoted yesterday as saying that; Quote: the owner used to force them to work under inhuman conditions. They alleged that factory officials would forfeit a significant part of the salary and overtime bill if anyone was found taking rest even for a minute during work hours. One of them said, “They beat us up even for a minor mistake. (Daily Star, 23/9/07) Even the cops blame the employers for the unrest; Quote: We asked them to resolve the issue to avoid untoward incidents. But they said they were not bound to have talks with the workers,� said a top police official seeking anonymity. He added that when they urged the authorities to pay the workers their arrears before shutting down the factory, the factory executives said they would disburse the outstanding salaries sometime in future and a notice would be issued to that effect. Police sources said the incident took place due to arrogance on the owner's side. (Daily Star) Meanwhile the bosses once again resort to peddling a familiar myth; playing partly on regional prejudices and suspicions against neighboring India, they claim workers have no valid cause for complaint and that the trouble is stirred up by outsiders; the president of BGMEA laughably "alleged that this was not an act of general workers ... It may be a conspiracy of local and international collaborators." The renewed unrest is a setback for the caretaker government. It's western backers will be unimpressed with its inability to contain the class struggle, which has in recent weeks found a new burst of energy in the RMG sector. Nor will western buyers be impressed by more labour unrest; some were already put off by last year's major troubles in the garment factories. Garments are Bangladesh's biggest export earners with sales abroad earning more than nine billion dollars last year, or three-quarters of the country's total export earnings. On taking power in January the caretaker government presented itself as determined to clean up the rampant corruption throughout the political and commercial life of the country. The army has pursued relentless anti-corruption purges against leading politicians and businessmen (alongside World Bank/IMF-directed privatizations). But now, inevitably, evidence begins to appear that the present regime is taking its own advantages from its ruling position. Quote: We have already started seeing that, team of people backed by military, who took over power on January 11th with the promise of cleansing the country from the grips of corrupts and culprits, are also unfortunately getting into numerous questioned activities, either directly or through their children, which shall surely be written in the black book of corruption and irregularity in this country.


Despite the fact that the interim government is encouraging combating corruption and the Anti Corruption Commission has already called for statement of properties from various politicians and officials. The Chairman of ACC, former army chief Hassan Mashshud Chowdhury made a tremendous example by submitting his property statement right on the day of taking over the responsibility of the chairman of ACC But, ... the advisors in the interim government are not interested in submitting their wealth statements. .... It was reported in Weekly Blitz last issue that the son of the Information Advisor has applied for the broadcast license of a television channel. He [the son] has also started showing interest in gradually capturing the business of supplying programs to the state owned Bangladesh Television, which has been one of the questioned activities of the past government. (Editorial, Blitz 19/9/07) The continuing high level of militancy among RMG workers appears to have made government and employers so far reluctant to push for any decisive confrontation with the predominantly female (90%) workforce. Yet they have felt confident enough to largely continue to refuse to conform to last June's agreement on wages and conditions. Workers and their families suffer rampant inflation of basic goods and a decline in real wages - wages that are already less than adequate to guarantee survival. As conditions for the Bangladeshi poor continue to deteriorate, circumstances lead one to think that - sooner or later - something has got to give. If one accepts that things cannot go on long as they are, there seem limited options, given the forces involved. Insurrection, bloody repression, who knows?

3.4

More Clashes in Bangladesh-The Issue of Energy

January 16, 2008 Bangladeshi workers continue the protests and strikes that have been escalating in recent weeks. Trouble in the garment industry has continued in Dhaka several thousand workers again fought cops in the Dhaka Export Processing Zone (DEPZ). Workers gathered at 8am outside MBM Garments factory to continue pressing their demands for improved pay and conditions. They also called for the release of a worker, Shakhawat, arrested yesterday, who was prominent in drawing up the eight-point list of demands presented to the MBM bosses. Other workers nearby also clashed with police at around the same time when they arrived to find themselves locked out of their workplace.


Fearing further unrest and possible attacks on their properties, 350 factories closed for the day, swelling numbers of workers on the streets. As workers from 100s of factories converged, electric poles were used as barricades. Workers then split into groups to further spread the agitation. The disturbances spread over a wide area; several factories were looted as security forces struggled to regain control. Police baton charged and used tear gas; workers responded with missiles, burning tyres and blockades of main highways. The city's garment industry, hub of the national economy, was again completely paralysed. Two battalions of Bangladeshi Rifles troops were dispatched to the disturbances. This, along with the release of the arrested worker, Shakhawat, restored some calm; the day ended with a final mass demonstration outside the MBM factory to remind bosses of the workers' unfulfilled demands. Demands of the demonstrators centered on pay rises, holidays, medical facilities and immediate payment of arrears. Rampant inflation has constantly reduced real incomes and the grudging concessions won from reluctant employers have not come close to taking inflation into account. All of these events are occurring in complete disregard of the 'Emergency Power Rules' brought in by the military caretaker government when they took power a year ago. The emergency powers ban all public demonstrations. The apparent attitude of the police and government are expressed in this typical comment; Quote: Anwar Hossain, deputy commissioner of police (Mirpur Zone), told The Daily Star, "We have been trying our best to keep the situation under control. We believe it is very much their [workers'] right to press home their demands. But they must do so peacefully and remember that unruliness is not to be put up with." The security and political forces remain wary of the clear potential of worker unrest to destabilise and damage the country's main economic sector and to quickly spread disturbances among the wider poor. Their choice to tolerate such disturbances perhaps expresses both fear of the consequences of greater repression; but also the recognition that long term economic interests will benefit from certain legal rights being granted to workers. The garment bosses are reluctant to concede such rights to workers and existing labour laws


are regularly flouted. Initial capital investment is so low and wages so cheap that their profits so far remain high, even with competition from countries with higher productivity. Elsewhere in Dhaka; students and teachers arrested during the unrest in August last year at Dhaka University campus may soon be released after continued demonstrations and agitations by students. Fifteen students and four teachers of DU were charged with breaching the Emergency Power Rules. Four teachers and one student remain in jail.

3.5

Real Wages Decline As Living Cost Soars

The Daily Newspaper

Saturday, July 05, 2008

Real wages decline as living cost soars Labor leaders, economist say absence of trade unionism reduces workers’ bargaining power --Khawaza Main Uddin Real wages of the workforce in different sectors either stagnated or declined in recent times largely due to soaring costs of consumption with inflation offsetting nominal pay increments, official statistics show. Labor leaders and an economist have pointed their finger at the lack of employment opportunities and absence of bargaining capacity of the workers, apart from the price factor, for dealing severe blows to the living of the workers. Things are to go from bad to worse for workers in days to come, as job scopes in the public sector industries have squeezed with jute mills— once the biggest employer in state sector — being shut down one by one, they forecast. The rate of increase in real wages was zero in the 2005-06 fiscal, when prices started spiraling out of commoners’ reach. The general nominal wage increase the following year [2006-07] was 7.76 per cent, running almost parallel to the inflation rate at the time, according to data released in Bangladesh Economic Review-2008. Data on real wages in 2006-07 and 2007-08 fiscal years are not available with the economic review, a regular annual publication of the finance ministry. Shahidullah Chowdhury, a labour leader, said, ‘Since the real wages are determined by cost of living, it has declined in absence of natural increase in worker’s income and also because of no upward revision of salaries by authorities concerned in recent times.’ As per 2005 Wage Commission recommendations, the minimum pay to a state sector worker is Tk 2,450 while 45 lakh private sector workers of almost 40 sectors other than readymade garment industry are left out of its purview, he pointed out. ‘While the official pay structure remains


inadequate, how can we expect that workers in other sectors will get living wages?’ questioned Shahidullah. ‘Real wages fell precisely because market does not determine them whereas policies are being pursued on the basis of assumptions that it is a free market economy, which is not free practically,’ left-leaning economist Anu Muhammad told New Age. Inflation, which was in his view ‘generally anti-labor’, significantly contributed to increasing woes and agonies of the working class in Bangladesh. However, real wages rose 20.63 per cent since 1998-99, when per capita expenditure on consumer goods and services at market prices was Tk 13,516 compared to Tk 24,600 required in 2006-07 fiscal year. The nominal wage rate index rose 8.52 per cent in construction sector, 7.86 per cent in agriculture, 6.35 per cent in fisheries and 7.99 per cent in manufacturing during the 2006-07 fiscal. The economic review mentioned the food inflation at 8.12 per cent the same year. The food inflation is 19.65 per cent for garment workers, 19.81 per cent for rickshaw-pullers and 21.12 per cent for day-laborers, according to figures revealed in ‘Bangladesh Economic Outlook’ by Shamunnay, a research organization headed by economist Atiur Rahman. Furthermore, the distribution patterns of income in Bangladesh [Household Income and Expenditure Survey 2005] show the share of income of the top five per cent households was almost 27 per cent and that of the lowest five per cent was 0.77 per cent. General wages declined around four per cent due to higher inflation, propelled by 16 per cent food inflation in December 2007, revealed a recent study by Bangladesh Institute of Development Studies, the official think tank. It found 4.6 per cent decrease in real wage in agriculture, 2.37 per cent in manufacturing sector and 4.4 per cent in construction sector due to soaring inflation. ‘The real decline in the income level of the workers will be much higher than 4 per cent at present,’ said Hafizur Rahman Bhuiyan, a trade union leader in Khulna-Jessore industrial region and also a leader of Workers Party of Bangladesh.

Role of the Employers in Resolving Dispute

4

4.1

Overview

The term "Alternative Dispute Resolution" or "ADR" is often used to describe a wide variety of dispute resolution mechanisms that are short of, or alternative to, full-scale court processes. The term can refer to everything from facilitated settlement negotiations in which disputants are encouraged to negotiate directly with each other prior to some other legal


process, to arbitration systems or ministerial that look and feel very much like a courtroom process. Processes designed to manage community tension or facilitate community development issues can also be included within the rubric of ADR. ADR systems may be generally categorized as negotiation, conciliation/mediation, or arbitration systems. Negotiation systems create a structure to encourage and facilitate direct negotiation between parties to a dispute, without the intervention of a third party. Mediation and conciliation systems are very similar in that they interject a third party between the disputants, either to mediate a specific dispute or to reconcile their relationship. Mediators and conciliators may simply facilitate communication, or may help direct and structure a settlement, but they do not have the authority to decide or rule on a settlement. Arbitration systems authorize a third party to decide how a dispute should be resolved. It is important to distinguish between binding and non-binding forms of ADR. Negotiation, mediation, and conciliation programs are non-binding, and depend on the willingness of the parties to reach a voluntary agreement. Arbitration programs may be either binding or non-binding. Binding arbitration produces a third party decision that the disputants must follow even if they disagree with the result, much like a judicial decision. Non-binding arbitration produces a third party decision that the parties may reject. It is also important to distinguish between mandatory processes and voluntary processes. Some judicial systems require litigants to negotiate, conciliate, mediate, or arbitrate prior to court action. ADR processes may also be required as part of a prior contractual agreement between parties. In voluntary processes, submission of a dispute to an ADR process depends entirely on the will of the parties. These forms of ADR, and a variety of hybrids, are described in more detail.

4.2

History of ADR

Dispute resolution outside of courts is not new; societies world-over have long used nonjudicial, indigenous methods to resolve conflicts. What is new is the extensive promotion and proliferation of ADR models, wider use of court-connected ADR, and the increasing use of ADR as a tool to realize goals broader than the settlement of specific disputes. The ADR movement in the United States was launched in the 1970s, beginning as a social movement to resolve community-wide civil rights disputes through mediation, and as a legal movement to address increased delay and expense in litigation arising from an overcrowded court system. Ever since, the legal ADR movement in the United States has grown rapidly, and has evolved from experimentation to institutionalization with the support of the American Bar Association, academics, courts, the U.S. Congress and state governments. For example, in response to the 1990 Civil Justice Reform Act requiring all U.S. federal district courts to develop a plan to reduce cost and delay in civil litigation, most district courts have authorized or established some form of ADR. Innovations in ADR models, expansion of government-mandated, court-based ADR in state and federal systems, and increased interest


in ADR by disputants has made the United States the richest source of experience in court connected ADR. While the court-connected ADR movement flourished in the U.S. legal community, other ADR advocates saw the use of ADR methods outside the court system as a means to generate solutions to complex problems that would better meet the needs of disputants and their communities, reduce reliance on the legal system, strengthen local civic institutions, preserve disputants' relationships, and teach alternatives to violence or litigation for dispute settlement. In 1976, the San Francisco Community Boards program was established to further such goals. This experiment has spawned a variety of community-based ADR projects, such as school based peer mediation programs and neighborhood justice centers. In the 1980s, demand for ADR in the commercial sector began to grow as part of an effort to find more efficient and effective alternatives to litigation. Since this time, the use of private arbitration, mediation and other forms of ADR in the business setting has risen dramatically, accompanied by an explosion in the number of private firms offering ADR services. The move from experimentation to institutionalization in the ADR field has also affected U.S. administrative rule-making and federal litigation practice. Laws now in place authorize and encourage agencies to use negotiation and other forms of ADR in rulemaking, public consultation, and administrative dispute resolution. Internationally, the ADR movement has also taken off in both developed and developing countries. ADR models may be straight-forward imports of processes found in the United States or hybrid experiments mixing ADR models with elements of traditional dispute resolution. ADR processes are being implemented to meet a wide range of social, legal, commercial, and political goals. In the developing world, a number of countries are engaging in the ADR experiment, including Argentina, Bangladesh, Bolivia, Colombia, Ecuador, the Philippines, South Africa, Sri Lanka, Ukraine, and Uruguay. The experience of many of these countries provides important lessons drawn upon in this Guide.

4.3

Key Observation

Highlighted below are a number of the key observations that are explored in greater depth in this Guide. ♌ ADR programs cannot be a substitute for a formal judicial system. ADR programs are instruments for the application of equity, rather than the rule of law, and as such cannot be expected to establish legal precedent or implement changes in legal and social norms. However, ADR programs can complement and support judicial reforms. ♌ ADR programs can increase access to justice for social groups that are not adequately or fairly served by the judicial system— they can also reduce cost and time to resolve disputes and increase disputants' satisfaction with outcomes.


♦ When courts are systematically biased against women, ADR may be able to improve women's access to justice, especially when discrimination against women inherent in local norms or traditional dispute resolution mechanisms can be overcome in the new ADR mechanism. ♦ ADR programs can support not only rule of law objectives, but also other development objectives, such as economic development, development of a civil society, and support for disadvantaged groups, by facilitating the resolution of disputes that are impeding progress toward these objectives. ♦ Before developing an ADR program, it is critical to determine whether ADR is appropriate for meeting development objectives, or whether establishment of rights, strengthening of the rule of law, and/or creating a more even balance of power among potential users should precede the use of ADR. ♦ If ADR is appropriate in principle, program designers must assess background conditions to ensure that ADR will be feasible in practice. These include political support, institutional and cultural fit, human and financial resources, and power parity among potential users. ♦ If ADR appears feasible, program designers should ensure that the ADR program meets key preparation criteria— needs assessment and identification of goals, participatory design process, adequate legal foundation, and effective local partner. ♦ In addition to meeting preparation criteria, program designers should also ensure that the ADR program meets implementation criteria—effective selection, training and supervision of ADR providers, financial support, outreach, effective case selection and management, and program evaluation procedures.

4.4

The Characteristics of ADR Approaches

Although the characteristics of negotiated settlement, conciliation, mediation, arbitration, and other forms of community justice vary, all share a few common elements of distinction from the formal judicial structure. These elements permit them to address development objectives in a manner different from judicial systems.

4.4.1

Informality

Most fundamentally, ADR processes are less formal than judicial processes. In most cases, the rules of procedure are flexible, without formal pleadings, extensive written documentation, or rules of evidence. This informality is appealing and important for increasing access to dispute resolution for parts of the population who may be intimidated by or unable to participate in more formal systems. It is also important for reducing the delay and cost of dispute resolution. Most systems operate without formal representation.

4.4.2

Application of Equity


Equally important, ADR programs are instruments for the application of equity rather than the rule of law. Each case is decided by a third party or negotiated between disputants themselves, based on principles and terms those seem equitable in the particular case, rather than on uniformly applied legal standards. ADR systems cannot be expected to establish legal precedent or implement changes in legal and social norms. ADR systems tend to achieve efficient settlements at the expense of consistent and uniform justice. In societies where large parts of the population do not receive any real measure of justice under the formal legal system, the drawbacks of an informal approach to justice may not cause significant concern. Furthermore, the overall system of justice can mitigate the problems by ensuring that disputants have recourse to formal legal protections if the result of the informal system is unfair, and by monitoring the outcomes of the informal system to test for consistency and fairness.

4.4.3 Direct Participation and Communication between Disputants Other characteristics of ADR systems include more direct participation by the disputants in the process and in designing settlements, more direct dialogue and opportunity for reconciliation between disputants, potentially higher levels of confidentiality since public records are not typically kept, more flexibility in designing creative settlements, less power to subpoena information, and less direct power of enforcement. The impact of these characteristics is not clear, even in the United States where ADR systems have been used and studied more extensively than in most developing countries. Many argue, however, that compliance and satisfaction with negotiated and mediated settlements exceed those measures for court ordered decisions. The participation of disputants in the settlement decision, the opportunity for reconciliation, and the flexibility in settlement design seem to be important factors in the higher reported rates of compliance and satisfaction.

4.5

Goals and Possible Uses of ADR

ADR systems may be designed to meet a wide variety of different goals. Some of these goals are directly related to improving the administration of justice and the settlement of particular disputes. Some, however, are related to other development objectives, such as economic restructuring, or the management of tensions and conflicts in communities. For instance, developing an efficient, consensual way to resolve land disputes may be critical to an AID mission not because of its commitment to strengthening the rule of law, but because land disputes threaten the social and economic stability of the country. Likewise, efficient dispute resolution procedures may be critical to economic development objectives where court delays or corruption inhibit foreign investment and economic restructuring. Within the context of rule of law initiatives, ADR programs can:


♦ ♦ ♦ ♦ ♦ ♦

Support and complement court reform By-pass ineffective and discredited courts Increase popular satisfaction with dispute resolution Increase access to justice for disadvantaged groups Reduce delay in the resolution of disputes Reduce the cost of resolving disputes in the context of other development objectives, ADR programs can: ♦ Increase civic engagement and create public processes to facilitate economic restructuring and other social change ♦ Help reduce the level of tension and conflict in a community ♦ Manage disputes and conflicts that may directly impair development initiatives Experience suggests that ADR programs can have a positive impact on each of these development objectives, although the extent of the impact is very much dependent on other conditions within the country and the fit of the design and implementation of the program with the development objectives. The following matrix matches the general ADR systems with the purposes and development objectives to which they are best suited. Although any one ADR system can be designed in a variety of ways, this matrix may provide general guidance on which ADR model to choose. COMPARING ADR AND COURT PROCEDURES: HOW LIKELY ARE THEY TO ACHIEVE DISPUTANTS' GOALS? Disputant's Goals

Minimize Costs Resolve Quickly Maintain Privacy Maintain Relationships Involve Constituencies Link Issues Get Neutral Opinion Set Precedent

ADR Procedures

Court Procedure

Mediation/ Conciliation 3

Non-Binding Arbitration 2

Binding Arbitration 1

Adjudication

2

2

2

0

2

2

3

0

3

2

1

0

3

1

1

0

3

1

1

0

0

3

3

3

0

0

1

3

Key: 3 = Highly likely to satisfy goal 2 = Likely to satisfy goal 1 = Unlikely to satisfy goal 0 = Highly unlikely to satisfy goal

0


This table is intended to give a general sense of the relative advantages of different dispute resolution procedures under a wide range of conditions. The likelihood that a procedure will satisfy a goal in a given case depends on the details of its design, the skill and perceived legitimacy of the dispute resolution provider, and the behavior and beliefs of the disputants. Adapted from Frank Sander and Stephen Goldberg, "Fitting the Forum to

4.6

The Limitations of ADR

Although ADR programs can play an important role in many development efforts, they are ineffective, and perhaps even counterproductive, in serving some goals related to rule of law initiatives. In particular, ADR is not an effective means to: ♦ Define, refine, establish and promote a legal framework. ♦ Redress pervasive injustice, discrimination, or human rights problems. ♦ Resolve disputes between parties who possess greatly different levels of power or authority. ♦ Resolve cases that require public sanction. ♦ Resolve disputes involving disputants or interested parties who refuse to participate, or cannot participate, in the ADR process. A. ADR programs do not set precedent, refine legal norms, or establish broad community or national standards, nor do they promote a consistent application of legal rules. As noted earlier, ADR programs are tools of equity rather than tools of law. They seek to resolve individual disputes on a case-by case basis, and may resolve similar cases in different ways if the surrounding conditions suggest that different results are fair or reasonable according to local norms. Furthermore, ADR results are private and rarely published. As long as some other judicial mechanism exists to define, codify, and protect reasonable standards of justice, ADR programs can function well to resolve relatively minor, routine, and local disputes for which equity is a large measure of justice, and for which local and cultural norms may be more appropriate than national legal standards. These types of disputes may include family disputes, neighbor disputes, and small claims, among others. In disputes for which no clear legal or normative standard has been established, ADR may not be able to overcome power imbalances or fundamental disagreements over norms among disputants. On the other hand, in situations where there is no established legal process for dispute resolution, ADR may be the best possible alternative to violence. For example, in South Africa, a variety of ADR processes used before and during the transition appear to have prevented violence to some degree and helped set the foundation for peaceful political change.


B. ADR programs cannot correct systemic injustice, discrimination, or violations of human rights. As noted above, ADR systems often reflect the accepted norms of society. These norms may include discrimination against certain groups and populations. When this is true, ADR systems may hinder efforts to change the discriminatory norms and establish new standards of group or individual rights. In India, for example, the look adalats were generally credited with resolving large numbers of cases efficiently and cheaply in the mid-1980s before the system was taken over by the government judiciary. Women, however, did not like the system, especially for family disputes, because resolution of disputes was based on local norms, which were often discriminatory towards women, rather than on more recently defined legal rights. The same was true for members of lower castes. (See Whitson, 1992.)

C. ADR programs do not work well in the context of extreme power imbalance between parties. These power imbalances are often the result of discriminatory norms in society, and may be reflected in ADR program results. Even when the imbalance is not a reflection of discriminatory social norms, most ADR systems do not include legal or procedural protections for weaker parties. A more powerful or wealthy party may press the weaker into accepting an unfair result, so that the settlement may appear consensual, but in fact result from coercion. For the same reason, ADR programs may not work well when one party is the government. When the program design has been able to enhance the power or status of the weaker party, ADR has been effective in conditions of discrimination or power imbalance. In Bangladesh, for example, women who have submitted cases of spousal abuse to mediation have found that the village mediation system, which includes women mediators, provides better results than the court system which is even more biased against women in these cases. In general, however, ADR programs cannot substitute for stronger formal protections of group and class rights. D. ADR settlements do not have any educational, punitive, or deterrent effect on the population. Since the results of ADR programs are not public, ADR programs are not appropriate for cases which ought to result in some form of public sanction or punishment. This is particularly true for cases involving violent and repeat offenders, such as in many cases of domestic violence. Societal and individual interests may be better served by court sanctioned punishment, such as imprisonment. It is important to note, however, that victim offender mediation or conciliation may be useful in some cases to deal with issues unresolved by criminal process.


E. It is inappropriate to use ADR to resolve multi-party cases in which some of the parties or stakeholders do not participate. This is true because the results of most ADR programs are not subject to standards of fairness other than the acceptance of all the participants. When this happens, the absent stakeholders often bear an unfair burden when the participants shift responsibility and cost to them. ADR is more able than courts to include all interested stakeholders in disputes involving issues that affect many groups, such as environmental disputes. When all interested parties cannot be brought into the process, however, ADR may not be appropriate for multi-stakeholder public or private disputes. F. ADR may undermine other judicial reform efforts. There is a concern that support for ADR may siphon money from needed court reforms, draw management and political attention from court reform efforts, or treat the symptoms rather than the underlying causes of problems. While these concerns are valid, they will rarely materialize if ADR programs are not designed to substitute for legal reform. In most cases, ADR programs will be far less expensive to start and operate than broad-scale judicial reform efforts. In Ukraine, for example, the USAID mission considers the mediation program to be very inexpensive compared with other rule of law programs. And, in Sri Lanka, the Mediation Boards resolve cases at a fraction of the cost the government would incur through the ordinary court system. In general, ADR programs reduce costs for the state, and therefore for donors, at least as much as they reduce costs for disputants. In sum, ADR programs do not necessarily draw attention away from problems that can only be addressed through formal justice processes, as long as both development officers and government officials keep in mind the limitations of ADR programs.

4.7

Conclusion

As discussed in the Guide, ADR programs can serve as useful vehicles for promoting many rule of law and other development objectives. Properly designed ADR programs, undertaken under appropriate conditions, can support court reform, improve access to justice, increase disputant satisfaction with outcomes, reduce delay, and reduce the cost of resolving disputes. In addition, ADR programs can help prepare community leaders, increase civic engagement, facilitate public processes for managing change, reduce the level of community tension, and resolve development conflicts. The chart on page 50, Developing an ADR Program, provides in graphic form an overview of the issues covered in the Guide. An advantage of informal ADR systems is that they are less costly and intimidating for underprivileged communities, and therefore tend to increase access to justice for the poor. These systems are also less expensive for the state, and can be more easily placed in locations that will improve access for underserved populations. It is not possible, based on available data, to measure accurately ADR's ability to increase access or ADR's cost relative to formal


litigation systems. This inability to measure accurately, however, does not mean that the impact is not observable or significant. Although ADR programs can accomplish a great deal, no single program can accomplish all these goals. They cannot replace formal judicial systems, which are necessary to establish a legal code, redress fundamental social injustice, provide governmental sanction, or provide a court of last resort for disputes that cannot be resolved by voluntary, informal systems. Furthermore, even the best-designed ADR programs under ideal conditions are labor intensive and require extensive management. In the development context, particular issues arise in considering the potential impacts of ADR. First, some are concerned that ADR programs will divert citizens from traditional, community-based dispute resolution systems. This study has found a number of instances in which ADR programs have been effectively designed to build upon, and in some cases improve, traditional informal systems. Second, while ADR programs cannot handle well disputes between parties with greatly differing levels of power, they can be designed to mitigate class differences; in particular, third parties may be chosen to balance out inequalities among disputants. Third, there is no clear correlation between national income distribution and ADR effectiveness. ADR programs are serving important social functions in economies as diverse as those of the United States, Bangladesh, South Africa, and Argentina. Finally, it is not clear from the evidence to date whether ADR programs are more suitable for civil or common law jurisdictions. ADR programs are operating effectively within both, but not enough data exists to compare success rates under the two types of legal systems. This Guide is a first step in understanding the strengths and limitations of introducing ADR within rule of law programs. While past and present ADR projects have provided some significant insights into ADR, there is much still to be learned. More analysis is needed on the range of possible strategies for using ADR to support judicial reform, reduce 49 Conclusion power imbalances, and overcome discriminatory norms among disputants. Another important issue for study is how ADR programs may be replicated and expanded to the national level while maintaining sufficient human and financial resources. These and other questions about ADR's effectiveness can only be answered well by analyzing evidence gathered from ADR projects. Effective monitoring and evaluation of ADR systems are hard to find in developing and developed countries alike. Present and future ADR projects should have systematic monitoring and evaluation processes in place to ensure not only effective programs, but also continued learning. This Guide mentions ADR's ability to advance development objectives other than the rule of law, such as facilitating economic, social and political change, reducing tension in a community, and managing conflicts hindering development initiatives. Further exploration of non-rule of law uses of ADR is critical to complete the picture of the range of ADR's applications. More in-depth research and analysis in this area would be extremely useful to development professionals and others seeking to understand the strengths and limitations of ADR programs in developing and transitional societies.


Role of BGMEA 5 5.1

Overview

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is the officially recognized apex apparel export trade body of 4,490 apparel manufacturing units. The RMG sector earned over US$ 9 billion in 2006. The BGMEA helps to drive commerce by increasing sales of Bangladeshi-produced garments and pursues excellence in the Bangladeshi readymade garments (RMG) sector through its activities and programmes, including establishing and nurturing relationships with foreign buyers, businesses and trade associations, organizations, chambers, and research organizations. The BGMEA also acts as a pressure group to protect the interests of the RMG sector and acts as a facilitator of trade negotiations with global trade bodies such as the WTO, ILO, and UNCTAD

5.2

History of BGMEA

The BGMEA commenced activities in the late 1970s when the Bangladeshi readymade garments (RMG) industry was a negligible non-traditional sector with a narrow export base. Since its inception, the BGMEA has been working to promote and protect the interests of the RMG sector - it has helped boost RMG exports by 500%, allowing Bangladesh to become one of the chief RMG exporters worldwide. The BGMEA set up its regional office in Chittagong in 1985. Chittagong is a strategically important commercial port and the gateway for all RMG exports.

5.3

Role of BGMEA ♌ 100 percent workers of the RMG sector hold the opinion that the local factory owners should contribute in increasing wages of RMG workers. ♌ 100 percent of the workers of the RMG sector hold the opinion that the local factory owners should contribute in forming a welfare fund for the RMG workers of Bangladesh

The workers and the trade union activists of the RMG sector of Bangladesh are equivocal on the issues concerning the role of Bangladesh Garments Manufacturers and Exporters


Association (BGMEA).They have mentioned that the primary responsibilities facing the local manufacturers involve the followings: • •

• ��� •

BGMEA should immediate implement the tri-partied agreement which has been recently worked out among the BGMEA, Trade Unions and the Government of Bangladesh. BGMEA should immediately agree to the proposal of increasing the basic minimum wage of the RMG workers from Tk. 600 (US$ 8.6) to Tk. 3,000 (US$ 43.1), issue job-contract and implement the provision of one day weekly holiday. BGMEA should work to improve the work-place safety of the workers BGMEA should abide by the labor law of the country including that of the workers’ rights to organize. The national producers need to realize that rather than reducing or keeping the wage low they need to re-negotiate higher CM from the international buyers/brands.

5.4

Role of the Government ♦ 52 percent workers of the RMG sector hold the opinion that along with the local factory owners the government of Bangladesh should contribute in increasing wages of RMG workers. ♦ 39 percent of the workers of the RMG sector hold the opinion that along with the local factory owners the government of Bangladesh should contribute in forming a welfare fund for the RMG workers of Bangladesh

The workers (52 percent) find a clear role of the government in not just settling the basic minimum wage of the workers, but also of contributing financially if so deem needed. More than a third (39 percent) of the workers of Bangladesh RMG sector has also mentioned that the Government should contribute in forming a welfare fund for the workers of the RMG sector along with the local manufacturers.

5.5

Global Corporate Social Responsibility ♦ 34 percent workers of the RMG sector hold the opinion that along with the local factory owners the international buyers and brands should contribute in increasing wages of RMG workers. ♦ 96 percent of the workers of the RMG sector hold the opinion that if embargo due to poor labor standard is imposed on Bangladesh RMG export it will not help the Bangladesh RMG workers


♦ 48 percent of the workers of the RMG sector hold the opinion that along with the local factory owners the international buyers/brands should contribute in forming a welfare fund for the RMG workers of Bangladesh •

There is a need of reviewing and reforming the legal instruments to ensure that the national and international producers/buyers/brands are accountable towards implementation of a nationally agreed upon set of social obligations in addition to the provisions mentioned in the national labor laws. The present practices of the global buyers and brands reflect that they have adopted a policy of continual derogation of CM by exploiting the regime of free trade. They move away from one country to another in search of lower CM while they criticize the local producers of poor wage and labor conditions. The trade unions of Bangladesh find this a deceptive policy. The brands need to be made aware that the global civil society holds them responsible for the low wage in Bangladesh which is largely a consequence of the continual decreasing trend of CM offered by them to the national producers of RMG. There should be a commonly agreed upon code of conducts for these global market actors so that they cannot influence continual derogation of CM at the cost of poor wage and labor conditions. The international buyers/brands should not be allowed to withdraw from a source country just because they want to purchase cheaper products from another source. There should be provision of social auditing of any such move of trade diversion with respect to its impacts on workers’ livelihood and poverty situation in the source countries. Based on such analysis the level and mode of compensations to the workers and business should be agreed upon. In any case there should be a phase-out stage before any such move of withdrawal and an approval from a global process of corporate accountability. The international buyers and brands should be made aware that the consumers and workers of RMG sector around the world expect them to reinvest in social capital in source countries (e.g. Bangladesh) and share the costs of increased wage and other improved work conditions in these countries. At the same time these international actors should be monitored and kept accountable to a set of purchasing standards which should hold them responsible to invest in improving the wage and labor rights situation in the source countries such as Bangladesh. Over the last decades the international brands and buyers have appropriated the largest share of the profit from the manufacture and trade in ready made garments. The international buyers and brands were never unaware of the precarious labor practices in the cheap sources. Rather they have taken full advantage of these practices to produce and procure cheap products at the costs of degrading terms of trade for the workers. The international buyers and brands at this stage cannot portray themselves responsible just by pressuring the local manufactures to follow the standards. The international buyers and brands have to implement their own standards in the source countries such as Bangladesh by sharing the costs of ethical production. These may be carried out through equitably sharing the costs of:


1. Offering a higher CM such that the incremental CM is tied to a specific fund (e.g. welfare fund for Bangladesh RMG workers) responsible to bring about positive changes in work and living conditions of the RMG workers. 2. Setting up of a safe and humane residential, health and transport facilities for the workers of the RMG sector in Bangladesh. 3. Improving safety measures in production units 4. In development of workers’ skills 5. In ensuring the workers’ benefit and compensation package under the national laws and ILO Convention. In this regard, the Trust Fund (which is soon to be formed with the involvement of BGMEA, international buyers/brands, national and international trade union bodies and civil society organizations) to compensate the deceased and injured workers of the Spectrum Sweater factory - can be taken as a model.

5.6

Role of Trade Union

⇒ Without the trade unions, there is no other legal means at hand to ensure the interests and rights of the workers in Bangladesh RMG sector. ⇒ At present there is an embargo on trade unions within the Export Processing Zones; other than that the laws of Bangladesh ensure the trade union rights in the country. However, the there is an unofficial embargo imposed upon the trade unions in the RMG sector by the factory management. This creates a situation in which the trade unions are facing illegal threats and harassments whenever they try to organize at the factory level. The recent upsurge in the garment factories in Bangladesh reveals how deep the workers’ grievances are. It also reveals that if the trade unions are not considered as a legitimate workers’ body of collective bargaining, there can be no other means of maintaining peaceful industrial-relation. • The government, international and national factory owners, buyers and brands need to consider the rights of the workers including that of the rights to organize as an integral part of healthy industrial relation. • The national and international trade union bodies should be effectively involved in the factory inspection/ social auditing process of the international brands and buyers.

5.7 •

Basic Minimum Wage

The RMG workers in Bangladesh have presently come to a consensus regarding the basic minimum wage in the sector. They are demanding a wage of Tk. 3,000 (US$ 43.1) per month as the basic minimum. It should be noted that presently the gross monthly minimum wage is set at Tk.930 (US$ 13.4) and the basic minimum wage is Tk. 600 (US$ 8.6); this has remained unchanged since 1994. The basic minimum wage of the RMG workers should be such that it enables the workers to live at least over and above the poverty-line. Along with the national producers, the


government, international buyers and brands also has a role to play (both as source of source of economic resource and facilitation) in ensuring such a wage in Bangladesh.

5.8

MFA Forum and Global Civil Society ♦ 13 percent workers of the RMG sector hold the opinion that along with the local factory owners the development partners/donors should contribute in increasing wages of RMG workers. ♦ 13 percent of the workers of the RMG sector hold the opinion that along with the local factory owners the development partners/donors should contribute in forming a welfare fund for the RMG workers of Bangladesh

• •

There should be direct representation of female workers in the MFA forum. Any female workers’ body (national or international) may be taken as participants of the MFA forum. Trade unions alone cannot conform, monitor and facilitate that the national and global producers/ buyers and brands would perform their social responsibilities towards the workers of the RMG sector. To this end the broader civil society networking is a must. MFA forum can be a part of that global networking. MFA forum can evolve into a body or can facilitate a body which may monitor that the international buyers/brands are not moving away from countries like Bangladesh in search of cheaper sourcing in other countries. It may also work out modalities (compensations/ acceptable set of standards for withdrawal and timeframe of any such withdrawal) in close consultation of the workers and manufacturers of the sector of the respective source country. The MFA forum can work both to raise awareness and resources to ensure that a global mechanism of socially responsible sourcing of RMG products is in-placed.

Recommendation

6

6.1 Recommendation The Ready Made Garments (RMG) sector plays a pivotal role in the economy of Bangladesh. This sector accounts for approximately 76% of the total export earnings and nearly 10% of GDP. At present there are about 4,000 garments factories employing approximately 2.5 million people, among which 80% are women. Recognizing the growth potential of this sector, the growing international competition, and the current constraints, the South Asia Enterprise Development Facility of the IFC (SEDF) has designed a sector strategy to:


♦ Safeguard and increase global market sales of the RMG sector by strengthening market linkages, ♦ Increase productivity, and ♦ Increase adherence to social and environmental compliance standards. The government of Bangladesh should amend its national law to provide all workers with the right to join trade unions and engage in collective bargaining. The basic right of freedom of association must be extended to all civil service and security force employees, teachers & managerial and administrative employees. The union registration requirements need extensive reforms to bring them in line with the international labour standards of the ILO and ratified by Bangladesh – including the amending of the provision that obliges a quorum of support for union membership from 30 per cent of workers in an enterprise and the provisions that bar registration of a union composed of workers from different workplaces owned by different employers. This is especially urgent for workers in the garment factories.

The government of Bangladesh must amend its law and take adequate measures to prevent the common practice of discrimination by many employers against trade union members, officers or leaders. The government of Bangladesh must establish and implement effective penalties against violence by employers and crack down on collusion by local authorities and police with employers. Similarly, the Labor Court should be given adequate resources to handle its case load expeditiously and its decisions must be scrutinized to identify and eliminate corrupt interventions by employers. The government of Bangladesh must amend its national law to bring the right to strike and the Essential Services Ordinance into line with international standards ratified by Bangladesh in order to prevent arbitrariness by the government in declaring certain sectors essential or of public interest. The government of Bangladesh must bring the country’s export processing zones within the scope of the Employment of Labor (Standing Orders) Act, the Industrial Relations Ordinance, and the Factories Act in order to end restrictions on the basic right of freedom of association and the formation of unions. The government must equally take effective measures to ensure the application of the above mentioned legal instruments to all the EPZs. The government of Bangladesh must amend the EPZ Trade Union and Industrial Relations Bill 2004, as recommended by the ILO Committee on Freedom of Association and the ILO Conference Committee on the Application of Standards, in order to bring it into compliance with Conventions 87 and 98. The government of Bangladesh must undertake measures to tackle effectively and thus end discrimination based on gender, particularly in the EPZs where 80% of the workers are women. The government of Bangladesh must ratify ILO Convention No. 138 on the minimum age for employment. The government of Bangladesh must raise the minimum school leaving-age and provide for a minimum age for employment of at least 14, in line with the provisions of Convention No. 138, still not ratified by Bangladesh. The government of Bangladesh must channel more resources into education to tackle the low school enrolment rate and the scale of child labor in Bangladesh. The government of Bangladesh must carry out regular factory inspections that apply to all the economic actors in


the country, including in small-scale activities, with particular priority in order to eliminate child labor. The government of Bangladesh must take the strongest measures to stop the worst forms of child labor including prostitution, domestic servitude and camel jockeying. These actions need to be implemented immediately. The government of Bangladesh must end forced labor through enforcement of the Factories Act and Shops and Establishments Act. The government of Bangladesh must take effective measures to end servitude in domestic service. The government of Bangladesh must take more determined actions to prosecute those who engage in the practice of trafficking of women or children. In addition, new effective measures must be taken to rescue victims of such trafficking (e.g. Camel jockeys). The WTO should draw to the attention of the authorities of Bangladesh the commitments they undertook to observe core labor standards at the Singapore and Doha Ministerial Conferences. The WTO should request the ILO to intensify its work with the government of Bangladesh in these areas and provide a report to the WTO General Council on the occasion of the next trade policy review. The employers recognized the important role of the workers' organizations in the social dialogue, particularly from the standpoint of fostering the work culture and attitude for improvement in the product quality and value addition. It was believed that harmonious industrial relations environment across the industry would contribute to furthering the job quality and productivity.

Conclusion

7 7.1

Conclusion

Bangladesh has earned nearly $8 billion in 2005-06 by exporting garment products, mainly to Europe and the United States. This is about 75 percent of total export earnings of the country. The RMG industry has around 4,250 units across the country. It employs more than 2 million workers, most of whom are poor women. Whenever the country is criticized for its high level of corruption and confrontational politics, its garment industry is held up as a success story. After the end of the Multi-Fiber Agreement at the beginning of 2005 and the changeover to the new World Trade Organization regime, it was feared that the Bangladesh’s booming textile industry would suffer as it would loose business to countries like China and India. But fortunately for Bangladesh, so far this prediction has been proved wrong. In fact, the industry has continued to grow at a healthy rate of 20 percent. However, this does not indicate that the Bangladesh garment industry has become more competitive. The reality is that this increase has been largely due to restrictions imposed on China by the Western nations. As the quotas under MFA had led to an artificial trade structure, the international RMG market faces a restructuring process. Bangladesh’s exports


are heavily concentrated in the RMG sector, which has been a main driver of growth and poverty reduction. With more than three-quarters of exports RMG related, the country is vulnerable to the MFA shock, in particular since it is confronted with other problems that affect its competitiveness. These problems are not limited to the RMG sector, but will be exposed more fully there in the post-MFA world. The challenge is therefore to improve competitiveness, both in the RMG sector and economy wide, and diversify exports. Garment industry in Bangladesh has been facing multidimensional problems since its establishment. Acute power crisis followed by non tariff restriction, chronic labor unrest, lack of infrastructural facilities, inadequate supply of material and accessories, inability or lack of efforts to diversify the products and markets, irregularities relating to customs, bond, and shipping, financing and the like are the major problems hampering the production and increasing the cost of production significantly. Due to power shortage shipments are sent through air, thereby increasing its cost. Unfortunately the government has not taken any step to improve the situation. On the other hand, people have been shot dead for demanding regular supply of electricity. In this context, it is still right time to devote all out efforts by the relevant agencies and authority as to expansion and solutions of numerous problems that it faces now. In fact a well designed plan with diversified product manufacture still provides opportunities to use this sector for socio economic development of Bangladesh. In such a context, it is suggested that appropriate and relevant government and nongovernmental authorities/agencies can take some strategic and effective measures which includes liberal bank loan facilities for reviving sick garment units and BMRE; development of primary textile sub sectors for fulfilling the raw materials needs; arrangement for captive power supply for utilization of production and its continuation; adequate fiscal incentive for growing the sector; strategic arrangement or mechanism for quick resolution of labor dispute; creation of separate ministry for garment industry, establishment of cost reduction strategy and labor productivity cell to conduct various study in this field and other supportive policies relevant for the growth, development and survival of garment industry in Bangladesh. These may be helpful to overcome the problems and the contribution of garment industry towards socio economic development of Bangladesh will be improved and sustained through value addition.

Appendix Key Sources

1. Ahmed, R. S. (1991), “Garment Industry: A Quite Triumph,” Holiday, December. 2. Ahmed, M. N. and M.S. Hossain (2006), “Future Prospects of Bangladesh’s RMG Industry and The Supportive Policy Regime,” Mimeo, Bangladesh Bank, Dhaka. 3. Bakht, Z. (1993), “Social Dimension of Economic Reforms in Bangladesh,” Proceedings of the National Tripartite Workshop (Dhaka, Bangladesh): 71. 4. Bangladesh Garment Manufacturers’ and Exporters’ Association (BGMEA) (2005), Annual Report 2005 (Dhaka: BGMEA).


5. Chowdhury, S.I. (1991), “Garment Industry and The Economy of Bangladesh,” The Bangladesh Trade Journal, 1(2), August. 6. Islam, Mafizul A.F.M. (1984), “Notes on The Growth of Bangladesh Garments Industry,” The Journal of Management Business and Economics, 10(4): 536. 7. Mohmood, S.A. (2002), “How The Bangladesh Garment Industry Took Off in The Early Eighties: The Role of Policy Reforms and Diffusion of Good Practices,” Alochona Magazine; Website. 8. Rahman, S. (2004), “Global Shift: Bangladesh Garment Industry in Perspective,” Asian Affairs, 26(1): 75-91. 9. Rock, M. (2001), “Globalisation and Bangladesh: The Case of Export Oriented Garment Manufacture,” South Asiz, 24(1): 201 225. 10. Spinanger, D. (1999), “Textiles Beyond the MFA Phase-Out,” World Economy, 22(4): 455. 11. Yamagata, T. (2006), “The Garment Industry in Cambodia: Its Role in Poverty Reduction through Export-Oriented Development,” Discussion Paper No. 62, Institute of Development Economics, Japan. 12. Chaudhuri, Salma and Pratima Paul-Majumdar, The Conditions of Garment Workers in Bangladesh - An Appraisal, Report, Bangladesh Institute of Development Studies, October 1991. 13. Bangladesh Unnayan Parisad, A Study On Female Garment Workers in Bangladesh, draft report, Dhaka, May 1990. 14. Ahmad, Muzaffar, "Readymade Garments Industry in Bangladesh," Bangladesh Journal of Political Economy, Vol. 9, No. 2, 1988, 94-122. 15. Wiig, Arne, "Non-tariff Barriers to Trade and Development--the case of garment industry in Bangladesh," in Norbye (edited) Bangladesh Faces the Future, University Press Limited, Dhaka, 1990. 16. Ather, S. A., "The Readymade Garments Industry: Current Status, Problems and Prospects," Doc-TIP-MPU-B-11, June 1987. 17. Hossain, Najmul and Jagjit Brar, "The Garment Workers of Bangladesh: Earnings and Perceptions Towards Unionism," Journal of Business Administration, Vol. 14, No. 4, 1988. 18. Quddus, Munir., Entrepreneurship in the Apparel Export Industry of Bangladesh," Journal of Asian Business, Vol. 9, No. 4, Fall 1993, 24-46 19. Quddus, Munir, “Apparel Exports From Bangladesh: Brilliant Entrepreneurship or Spurious Success? Journal of Asian Business, Vol. 12, No. 4, Winter 1996, 51-70. 20. Islam, Anisul M, and Quddus, Munir, “The Export Garment Industry in Bangladesh: A Potential Catalyst for Breakthrough,” in Wahid and Weis (edited) The Economy of Bangladesh: Problems and Prospects, Praeger, Westport, 1996. 21. Reports published in the Amitech (News from Bangladesh) (http://216.32.117.57/news/), Internet editions of various daily newspapers in Bangladesh. 22. BGMEA Newsletter, September 1998, Special Issue, November 1998, and other issues. 23. BGMEA Newsletter, September 1998 issue. 24. This loss would be less than 5 percent of the total production that is in the $3.7 billion range.


25. According to Tofail Ahmed, the Commerce Minister, the readymade garment sector’s gross earnings in 1997-1998 financial year were $3.78 billion or 73 percent of total export earnings of Bangladesh. BGMEA Newsletter, Special Issue, 1998, page 8. 26. The World Bank and The Asian Development Bank, Bangladesh, Economic Trends and the Policy Agenda, May 1998, page 16. 27. Ibid. 28. World Bank 2020 Report. 29. Bangladesh Institute for Labour Studies, various reports. 30. Campaign for Popular Education, various reports. 31. ICFTU, Annual Survey of violations of trade union rights, 2006 and previous editions. 32. ILO legal and data base resources: ILOLEX, NATLEX. 33. ILO, Reports of the Committee of Experts on the Application of Conventions and Recommendations, 2006 and previous editions. 34. US Department of State, Report on Human Rights Practices, 2006


The economy of bangladesh is dependent on agriculture