The Garments Industry has been considered a lifeline for our economy for a few decades now. However, in recent years, it has not been seeing considerable growth.
We can see that not only has the number of new RMG factories every year has been increasing, it saw a significant drop during the 2013-14 period. This can be attributed to the decline in export as the graph below illustrates.
Adding to these, once Bangladesh graduates from the Least Developed Country (LDC) Status, Bangladesh will have to pay 6.7% additional tariff which will result in a loss of USD $2.7 billion every year.
Thus, it can be argued that Covid-19 has only been accelerating the inevitable demise of the garment industry. The main victims, if that were to happen, are the millions of the workers employed in the garment industry. The purpose of this article is to analyse what the future might hold for the hard working people employed in this sector and have been the backbone of the economy of Bangladesh for over two decades.
Currently, the garment worker population of Bangladesh is 3.5 million of which 60.8% are female and 39.2% are male. However, when it comes to managerial positions, the women are still lagging behind in managerial positions with only 0.5% managers and 9.3% of HR managers being women. Regardless of their number in the managerial positions, the RMG industry has been important in establishing women empowerment in the lower-income households.
98% of the garment factories are situation in four districts: Dhaka (38 per cent), Gazipur (28.9 per cent), Chittagong (16.1 per cent) and Narayanganj (14.7 per cent). A 2015 study on 90 respondents show the following age-distribution among workers.
As we can see, 92% of the Garment Employees belong in the ages 19-29. This could indicate that the garment industry usually looks for inexpensive and unskilled labour. The aforementioned survey was done in 2015 which was two decades since the Garment Industry in Bangladesh had started flourishing. This indicates high staff turnover, where the older workers are often replaced by the younger ones. The prioritization of the Garment Industry in inexpensive labour has resulted in the Bangladeshi Garment Industry to be one of the most inefficient ones among its global competitors.
Employment in the garments sector has not only contributed to the livelihoods of workers but has had a significant contribution in improving their children’s lives. The 2015 survey shows 100% of the garment workers contribute in the education and education materials of their children while 90% contribute in their clothing. Even if this is not reflected exactly in the entire population, it can definitely be inferred that the garment worker population is contributing to the education of millions of children.
A research survey by Penn State Center For Global Workers’ Right paints a grim picture of the garment industry. They have divided the crisis into three phases: Increased Raw Material Cost, Delayed Payments and Cancellation of Orders. However, as the following chart shows, the foreign buyers have given little support to the Garment Manufacturers to deal with this crisis.
|Question In The Survey||Responses|
|Did the buyers adjust prices to help cover the costs of raw materials increase?||Yes, adequately-2.96%|
Yes, but only a little-5.19%
|Have the buyers delayed their payments to you for completed orders?||Yes, by 1-10 days-10.87%|
Yes, by 11 or more days-68.84%
|When buyers have cancelled orders, have they agreed to pay for raw materials already purchased?||Yes-13%|
|When buyers have canceled orders, have they agreed to pay for production cost?||Yes-3%|
|Buyer Order Cancellations Impact On Operations||No Major Impact For The Moment-19.9%|
Partial Cut In Employment- 22.2%
Most Operations Are Shut Down-53.4%
These have caused the garment worker population to be in disarray. More than one million workers have either been fired or furloughed (sent home temporarily). Of them, 72.44% of the furloughed workers have no income while 80.40% of the workers have been paid no severance.
As seen in a recent survey, the impact of are already being seen in the lives of the garment workers. The biggest declines in spendings have been in the education and transport sector. While the decline in transportation is understandable in the lockdowns, the decline in educational spending is especially worrying and whether it will rebound post-lockdown remains to be seen.
The contribution of the Garment Industry has been more in providing employment to millions of Bangladeshis than earning foreign currency. Thus, a decline in this industry will hit them the most. The following suggestions can be considered to help this industry survive.
To conclude, the future of the 3.6 million garment employees might look grim right now. But it is possible that with proper and pragmatic steps, a sustainable future for them can be salvaged.
Kidwa Arif, Content Writer at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: [email protected]
The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.
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