On the garment sector’s woes

Posted in development, economic history, economics, institutions, labour, trade by jrahman on December 18, 2012

The scene of hundred something young men women locked in while fire and smoke start choking them. This is horror and sadness.  When I hear factory mid management started locking the gates after fire alarm goes off — I get angry.  Then when I hear the prime minister immediately puting the blame, without any investigation, on Jamaat-Shibir — I become speechless in disbelief. 

A friend wrote to me thus after the fire at Tazreen garment that killed over a hundred workers on 25 November.  It was followed by a lot of emotional facebook status updates, blog posts, newspaper op eds, and shouting heads in TV. 

Well, it’s now official — it was ‘sabotage’.  So that’s that, eh?  Well, not quite.  The official recommends taking legal actions against factory owner and nine mid-level managers for gross negligence that contributed to the tragedy.  Is there anything more to be said?  What about another facebook status update about ‘evil capitalism’?

Over the fold are some thoughts I haven’t seen/heard expressed.  And I promise, there is no infantile, emotional outbursts about ‘greedy killers’. 

Of course, we have heard a lot about ‘greedy factory owners’ in the aftermath of the fire.  And yes, of course the factory owners and managers who locked the gates after the alarm went off were criminally negligent, whether they were motivated by greed or not.  But is the depiction of greedy factory owners living a life of luxury in Dubai or Bangkok (yes, that has been the caricature) representative?

As discussed here, exporters have found it hard to navigate the European recession.  And it’s not just Bangladesh — exports seem to be stagnating around the region, as shown by the chart below (source: CEIC, smoothed by three-month moving average).


Now, which factory owner do you think are better placed to weather this stagnation — the one with three factories, each employing 5,000 workers, or the one with single factory of around a thousand worker?  It might be worth noting, with about a thousand employees, Tazreen was not a particularly big factory.

In addition to this cyclical problem, Bangladeshi manufacturing may be facing a structural problem.  I contend that the idea that typical garment owner is living a life of luxury while the workers burn is pure nonsense.  I contend that typical garment owners actually face pretty tough conditions.

And here is one way the conditions are made worse:

In the United States federal fiscal year that ended in September 2011, Bangladesh exported $5.10 billion in goods to the United States, of which less than 10 percent were eligible for exemption from import duties. On the rest, Bangladesh had to pay at least 15.3 percent in tariffs. The tariffs were equivalent to imposing a $4.61 tax on every person in Bangladesh, a country with a per-capita annual income of $770.

This year, according to news accounts, Bangladesh will have paid more than $600 million annually in American tariffs, even as the United States Agency for International Development said it was committed to $200 million in development aid to Bangladesh.

I see a lot of facebook status about Wal Mart.  Never mind that the impact of Wal Mart on the American working class is far more ambiguous than its detractors claim.  More relevant to Bangladesh is the tariff that hurts the industry.  I see no facebook status about that. 

Nor do I see any recognition of the fact that this kind of factory fire is a “distinctly South Asian” tragedy:

The causes of the fires reflect the industrial circumstances. Productivity in these countries is low, squeezed Western consumers want inexpensive clothes, and factories—and entire economies—must therefore compete on price. “Fast fashion” chains such as Zara, the Gap and H&M specialise in rushing new styles from catwalks to retail outlets at pace. This necessitates bursts of production at crucial moments in the style cycle. Large orders are sub-contracted to multiple manufacturers: the chain of intermediaries leading from Main Street to the labourer can be long and opaque. Factory owners take on extra staff, leading to over-crowding. The pressure to fulfil orders is intense. Speed matters. Safety standards slip.

Indeed, as Shubinoy Mustofi shows, this used to happen in the west too, once upon a time. 

In the west, compliance improved over time.  In Bangladesh, here is how things stand:

With the rule of having 6 per cent of workers per factory being trained by the Fire Service and Civil Defence, there are hundreds of applications pending on the BGMEA’s desk. Unfortunately, in spite of charging a straight Tk 16500 for 40 workers per application, neither the BGMEA nor the Fire Service has adequate manpower to train our factories. As far as licenses go, things have just gotten worse lately. Some check and issue licenses with diligence; some skip every process and issues them without checking. Building codes are not adhered to, water reservoirs are almost non-existent, fire extinguishers are mostly blocked, ebonite sheets are non-existent, circuit boxes have cobwebs, boilers and generators are not routinely checked, extinguishers are exposed to excess pressure…

If we had a functioning planning division, there would be a detailed study of the industry.  If we can’t do that, let’s not insult the dead with more facebook activism.

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