RMG Industry of Bangladesh

Currently, there are approximately 5000 manufacturing units with a 4. Million work force (Wisped 2012). Bangladesh does not have any natural advantage to flourish in ARM sector except cheap labor (Islam 2012). Undoubtedly, the dedicated work force with relatively low wages is the key driving force in this sector. It gives Bangladesh a competitive edge over the rivals. But unfortunately, employee satisfaction in the ARM sector seems to be fading. Since May 2006, the ARM sector has been beset with very serious labor unrest.The major disputes concern wages, working hours, appointment procedures, forced labor, child labor, health and safety, security, gender discrimination, sexual reassessment and trade unionism. Non-compliance of workplace health, safety and security regulations are prevalent in the industry. Due to hazardous factory environments many workers become sick or injured, or even lose their lives through accidents, fires and stampedes. Both the BAGMEN and the Government are s howing ‘Ostrich-Approach' in this regard, perhaps on the plea of maintaining price competitiveness in the global market.However, recent tragic fire incident at Instructions Étagà ¨re Garments factory has given a wakeup call for both the BAGMEN and the Government. The cancellation of equines ties by the world famous retailer Wall-Mart is seen by many as a disturbing and threatening symptom for ARM sector. At this backdrop, question arises behind the apparent success story of the ARM industry, â€Å"Does the ARM industry in Bangladesh perform its ethical responsibility towards employees? Can we term this industry a successful one? † A clear answer is essential for the continuous growth and sustainability of ARM sector in Bangladesh.This report shall present the answer to the aforementioned questions with considerable details. 1. 2 Objectives The broad objective of this report is to present the performance of the ARM industry f Bangladesh. To do so, we will first eval uate the industry from the traditional concept of business: profit-minimization and growth. Secondly, we will gauge the industry performance from ethical dimension focusing mainly on the workers socio- economic condition. 1. Scope This report will be based on the ARM industry of Bangladesh only.No comparative data will be available about other countries. Also this report will not include the employee rights of other industries in Bangladesh. 1. 4 Limitations Limited timeshare which has affected the survey and interview process Inadequate primary data Confidentiality of information 1. 5 Methodology To achieve an effective result both qualitative and quantitative research has been conducted. Qualitative research, mainly exploratory in nature, was carried out to study the entrepreneurs' ethical responsibility in ARM sector.Some in-depth interviews have been conducted for better understanding of the working conditions at various factories. An extensive literature review has also been ca rried out to collect relevant information on the subject issue. In addition, a survey was conducted on a sample size of 25 respondents using random sampling technique. This has helped in ascertaining the compliance of employee right as per law. Data analysis and presentation has been conducted as per frequency analysis method.Primary Data: Primary data for this research work includes the following- Case study of randomly selected garments workers Survey of the workers with a set of questionnaire Structured interview with legal and human right experts Unstructured interview with few top level managers of garments industry including BAGMEN officials Secondary Data: Review of related articles, books and research works on ARM sector of Bangladesh Online Journals and company websites Available official data from BAGMEN . Literature Review There is no universally accepted definition of ethics.It varies from culture to culture, society to society and of course, from industry to industry. T he principles, values, and beliefs that define right and wrong decisions and behavior can be termed as ethics (Robbins 2010. P. 101). Moreover, ethical values relate to what is right and wrong, and thus take precedence over non-ethical values when making ethical decisions (Powers 2012). A simpler yet comprehensive definition of ethical conduct is given by Bertrand Russell. He says, â€Å"An ethical person ought to do more than he is required to do and sees than he is allowed to do. The common perception about Bangladesh garments industry portrays one apparent success story. M. Surreal Islam in his write-up titled Wakeup Call for Government and ARM Sector Leaders' praises the ARM sector entrepreneurs. He considers that they have done a lot to be proud. They have given Bangladesh economy its biggest boost. With it over 5000 factories the industry employs nearly 5 million workers, and has been a basic factor of women empowerment in the country. However, the writer also expressed his c oncern over the low wage of the workers in the industry in the name of price-competitiveness.He mentions that the ARM workers receive IIS$ 45 monthly payment today at their entry level. The writer compares such low wages and the associated working conditions as a case of slave labor (Islam 2012. P-11). Md. Joanna Abiding in his research paper titled ‘Overall Problems and Prospects of Bangladesh ARM Industry expressed his concern over the labor disturbances in ARM sector of Bangladesh. He mentions that garment workers remain one of the hardest working segments of the labor force in Bangladesh. Their working conditions and benefits must improve as the industry matures.Abiding recommends that investing in worker-training and in improved irking conditions will certainly enhance productivity and growth. The writer urges that the factory owners must be proactive instead of being reactive regarding this important issue (Abiding 2008). Following the recent Unchristian Étagà ¨re G arments Tragedy, The Wall Street Journal's editorial page writer Joseph Sternberg expressed his deep concern over the lack of ethical responsibility in the ARM industry of Bangladesh. In his article, appropriately titled â€Å"Why Dacha Keeps Burning† the writer has flagged what is wrong in the industry.He mentions that ARM industry in Bangladesh is inefficiently and insufficiently developing. The writer criticizes special labor rules, including a ban on unionization, and regulated pay rates that depress wages in the name of competitiveness. Finally, he brands Bangladesh ARM industry as a ‘Monster Industry that now threatens to â€Å"devour† the government. 3. Business Performance from Traditional View 3. 1 The Growth of ARM Industry ARM industry is the biggest homegrown commercial success story till date in Bangladesh. The industry has significant contribution in employment generation, poverty alleviation and women empowerment.As a garment producer for the globa l market, at present Bangladesh ranks second, behind China only. More than four million workers, mostly women, are employed in approximately 5,000 garment factories. This sector has acted as an engine behind the country economic growth. Undoubtedly, the industry has made a significant socio-economic impact in contemporary Bangladesh. 3. 2 Profit Minimization: The Traditional Purpose of Business At present ARM industry earns around IIS$19 billion per year which accounts for approximately 80% of country total exports and around 17% of total economic output (Sternberg 2012).The percentage of ARM export to the total export of Bangladesh in last ten years is shown on the chart below: Figure-I: Percentage of ARM Export to the Total Export Source: Statistics Department, Bangladesh Bank. 3. 3 Potentials for Rapid Growth of Bangladesh ARM Industry McKinney & Company; a reputed global management consulting firm predicts that Bangladesh ARM exports will grow double by 201 5, and nearly triple by 2020 (McKinney 2011. P-22). Bangladesh is widely expected to become the top producer replacing China by virtue of its price competitiveness and capacity.The industry is expected to expand up to IIS$ 50 billion by next ten years. McKinney initiated a case study to know about the sourcing preference of the European and US apparel companies, accounting for IIS$ 46 billion in total sourcing value. They conducted an extensive interview based survey where the respondents were the Chief Purchasing Officers (COP) of the leading apparel players in Europe and US. Due to the rising labor cost in China, most of the buyers now consider Bangladesh as their alternative source. While China was once considered â€Å"the place to be† for sourcing, the light is starting to shine ever brighter on Bangladesh.For most Cops, Bangladesh will be the No-I sourcing hot spot over the next 5 years. (McKinney 2011. P-4). The result of the survey is shown below: Figure-2: Sourcing Preference of European and US Apparel Companies Source: McKinney COP Survey, September-November 2011 So, from the traditional understanding of business, the ARM industry of Bangladesh can surely be called as a successful one. 4. Performance of ARM Industry from Ethical Dimension 4. 1 Compliance of Safety and Health Regulations The recent Unchristian Étagà ¨re Garments fire accident at Savor claimed 112 lives.They were burnt alive inside the factory while they were working to earn their bread and butter. The most serious part of the tragedy was that the workers were locked inside a steel gate at each floor even after the fire went out of control. The fire service trucks and the equipment could not reach timely as the access road was built on agricultural land. These are serious flaws in compliance that BAGMEN officials tried to explain off later. Almost similar compliance failure is found in many of the factories till now.Compliances required factories to have two staircases to be built in each floor , and also to have a fulfillment doctor for the medical service to the workers. But most of the factories are yet to achieve that (Islam 2012). 4. 2 Maternity Leave: A Basic Woman Right Majority of the ARM workers in Bangladesh are women. They are often fondly called ‘Pashas Joana'; the daughters of garments. Everyone in the industry recognizes that ARM industry survives, and grows with their sweat. We wanted to know the industry performance about one of the basic need in every woman's life: Maternity Leave.Finding of our survey is shown below: Figure-3: Compliance of Maternity Leave in ARM Industry Source: Survey Conducted for the Research. 4. 3 The Issue of ‘Minimum Wage' It is, if not, the most controversial, at least, the most discussed issue regarding employee right in the ARM sector of Bangladesh. Tripartite body with representatives from Government, BAGMEN and Workers' Association agreed with the minimum wage of TX 3500. Most of the factories were also found compl iant with this wage policy. We initiated a case study to have a feel' of this minimum wage.One three member family; a couple with a 2 years baby was selected where both the spouses were ARM workers. Their monthly income was TX 9400. We made a balance sheet of their monthly earning and expenditure. Table-I : Balance Sheet of ARM Workers' Earning and Expenditure-A Case Study Earning Expenditure Husband 5200 House Rent 3500 Wife 4200 Baby Food 1 500 Medicare and others 1 oho Total earning Total expenditure 11000 *They often compromise with the bare minimum food they expect to eat to live It reminds the Bertrand Russet's saying, ‘An ethical person ought to do more than he is required to do. Surely, the entrepreneurs in ARM industry can do more than what they are doing for the ARM workers. And, mere compliance with the minimum wage policy is not ethical. 4. 4 Enforced Labor Mr. Safaris Islam, the president of BAGMEN said in an interview on AY Jazzier television that there is no enf orced overtime in Bangladesh ARM industry. However, our finding contradicts what the top man of BAGMEN claimed on international media. Enforced overtime is a common practice in many of the garments manufacturing units.The factory owners tried to Justify that they are sometime compelled to do so to meet the buyers' timeline as supply of raw material often gets delayed due to poor infrastructure in Bangladesh. The state of enforced labor in ARM industry of Bangladesh is shown in the next page: Figure-4: Forced Labor in ARM Industry 5. Conclusions Many have labeled the recent unrest in the ARM industry as a conspiracy to destroy the potentials that Bangladesh enjoys. However, we feel that there is no a conspiracy theories, but disturbances in the ARM sector.These disturbances are the legitimate outpouring of the frustrations of those whose sweat makes a IIS$ 20 billion earning for our nation. From the classical business concept of making money, we can surely term the ARM industry a suc cessful one. But, when we look at it from the ethical dimension, the performance appears to be ‘dark which is evident from the poor socio-economic condition of the ARM workers. They are living a life where even the basic physiological needs are not met. If a US$ 20 billion industry fails to uplift the workers lives above the level of ‘slavery, as many term it, that cannot be called successful.