Home The Washington Diplomat June 2013 ‘Made in Bangladesh’ Nets Profits for Some, Misery for Others

‘Made in Bangladesh’ Nets Profits for Some, Misery for Others

‘Made in Bangladesh’ Nets Profits for Some, Misery for Others

On May 10, the same day the death toll from the collapse of a Dhaka garment factory 17 days earlier officially surpassed 1,000, Bangladeshi Army soldiers pulled a young seamstress from the rubble. The woman’s dramatic rescue — watched by millions of Bangladeshis glued to their TV sets — was a tiny bright spot in an otherwise horrifying disaster that now ranks as the world’s worst industrial accident since the Bhopal gas leak in neighboring India claimed 3,787 lives back in 1984.

As tragic as it was, the Rana Plaza factory collapse is only one in a long string of misfortunes to hit the Bangladeshi garment industry.

In early May, shortly after the Rana Plaza disaster, a fire broke out at the Tung Hai Group clothing factory in Dhaka’s Mirpur industrial district, killing eight people. And last November, more than 100 factory workers burned to death in a fire at Tazreen Fashions, a nine-story garment plant on the outskirts of Dhaka.

And like the more recent tragedy, which ultimately killed more than 1,100 people, the Tazreen fire briefly made Bangladesh prime-time news and enraged U.S. and European human rights groups that have long called this Florida-size South Asian country of 160 million inhabitants the world’s biggest sweatshop.

While that sweatshop has been a death warrant to some garment workers (roughly 2,000 have died in fires and building collapses since 2005, according to the International Labor Rights Forum), it’s also been a lifeline to millions of Bangladeshis, many of them women with little or no education. With 3.6 million garment workers in 5,000 textile and garment factories across the country, Bangladesh ranks as the world’s second-largest apparel exporter, behind only China.

The garment boom is a relatively recent phenomenon. In 2005, a global quota system known as the Multi Fibre Arrangement agreement, which limited exports from developing countries, expired. Soon, retailers began flocking to Bangladesh and its pool of low-wage labor. Today, ready-made garments bring in nearly $19 billion a year to this desperately poor country, making them the nation’s most important export.

But to accommodate this explosive growth, safety took a backseat. Shoddy construction, nonexistent safety standards, dirt-cheap wages, rampant poverty and overcrowding, political cronyism, and the suppression of labor rights now threaten to topple an industry that up until recently had been viewed as a relative success story.

‘Happy’ Workers

Photo: Larry Luxner
Hundreds of women assemble sneakers at the South Korean-owned YoungOne factory in Chittagong, Bangladesh, the world’s second-largest apparel exporter.

Last year, The Washington Diplomat got an up-close look at the country’s economic development efforts when it joined a 12-member press delegation for a weeklong trip to Bangladesh hosted by the country’s Ministry of Foreign Affairs.

Suvashish Bose, vice chairman of the government-run Bangladesh Export Promotion Bureau, extolled the virtues of a system he practically likened to a worker’s paradise.

“People are satisfied with what they have,” said Bose, interviewed last year in his dingy Dhaka headquarters. “Bangladesh has about 5,000 garment factories employing about 3.6 million workers, 80 percent of them women. They are submissive, adaptable and trainable. They can understand everything very quickly, and these workers are abundantly available wherever you want to set up your factory.”

Pressed for an explanation to his rather condescending description, Bose proudly claimed that “a few years ago, Bangladesh was ranked the happiest country in the world, according to a survey conducted by the London School of Economics. Now Bhutan is the happiest, and Bangladesh is the second-happiest. It’s because the demand for basic necessities is very low.”

During an April 2012 trip to the Chittagong Export Processing Zone, this reporter tried to mingle with hundreds of such “happy” workers, but was prevented from doing so.

The massive industrial park — home to hundreds of factories churning out products for Nike, Reebok, JC Penney, Gap, Walmart, Kmart, Wrangler and Tommy Hilfiger — is located on the outskirts of Chittagong, a teeming port city whose 4 million inhabitants make it the second-largest metropolis in Bangladesh after Dhaka.

Upon our arrival at the Chittagong EPZ, we were warmly welcomed by the general manager, S.M. Abdur Rashid. “This zone was inspired by Robert McNamara, president of the World Bank,” he said proudly, pointing to a map of Bangladesh. “Accordingly, our government passed an act in 1980 to strengthen the country’s economic base by promoting investment and generating employment,” he explained, noting the development of seven other export processing zones throughout the country.

The zones together employ 324,000 Bangladeshis — 64 percent of them women — and Chittagong’s EPZ is by far the biggest. Rashid said 225 of the factories here are foreign-owned (from 37 countries), while another 63 are joint ventures and the remaining 113 are purely local investments.

In 2011, the Chittagong EPZ generated $2.35 billion in export revenue for Bangladesh, with most of its finished products going to its chief market, the United States. All told, Bangladesh racked up $23 billion in exports that year. Apparel, which includes woven garments, knit garments and home textiles such as curtains, towels, linens and pillowcases, accounted for 78 percent of the total.

“Thanks to reforms introduced in the 1980s, foreign investors can now invest any amount of capital and retain 100 percent equity ownership,” Rashid said. “Restrictions on the movement of foreign capital have been abolished. The law also guarantees against nationalization or expropriation of their assets.”

Short-Changing Labor

Bangladesh’s courtship of Western investors has certainly paid off. But there was one more thing prospective investors considering Bangladesh could count on: no pesky trade unions to make trouble. At $1.50 a day, Bangladeshis are the lowest-paid workers on Earth. The minimum wage is just $37 a month.

a3.bangladesh.garment.worker.storyFor years, activists at home and abroad have accused Bangladesh’s apparel export industry of paying its workers slave wages while maximizing profits at all costs — accusations local officials here told us were preposterous.

For instance, we asked Rashid why the Chittagong EPZ expressly forbids the establishment of unions — a situation that would be illegal in many other countries. The free-zone boss looked genuinely puzzled.

“We allow Workers Welfare Associations. It’s collective bargaining,” he said. “The workers enjoy it and they’re happy with the WWA. Unions might be affiliated with political parties, and we do not want our workers to be affiliated with political parties.”

Bose, the export promotion chief, also cautioned against labor unions. “If we allow unions, there might be strikes or other unrest, and foreign investors will have problems. Productivity will decrease, and we do not want productivity to decrease,” he told us last year.

Rashid confirmed the obvious advantage to restricting organized labor: It makes Bangladesh more competitive than any of its Asian competitors, including Pakistan (with average factory wages of $80 a month), Vietnam ($84), India ($109), Malaysia ($132), Indonesia ($135) and China ($250).

But the frustration over Bangladesh’s rock-bottom wages has been brewing for some time now.

In December 2010, thousands of workers attacked factories in a dispute over poor wages and working conditions. Police responded with live bullets and tear gas; three people were killed in the riots.

It was those demonstrations, in fact, that forced Prime Minister Sheikh Hasina to raise the minimum wage to its current $37 a month, not including overtime and bonuses; it had been only $21 a month prior to the protests.

Jef Van Hecken, a Belgian adviser to the Dhaka-based National Garments Workers Federation, said any worker who tries to organize a union is dismissed.

“There’s real harassment and death threats,” he said, pointing to the April 4 disappearance of labor organizer Aminul Islam. His body was later discovered, with signs he had been tortured, though so far no arrests have been made.

About a month after the Tazreen fire, a high-level investigation concluded that the Nov. 24 disaster had been a case of gross negligence. Supervisors apparently told the women working at their sewing machines that the fire alarm was a drill and padlocked the exits to prevent anyone from escaping.

Likewise, on the day the Rana Plaza collapsed, managers forced their workers to show up — threatening to dock their pay by a month if they didn’t — even though cracks had appeared in the building, dangerously compromising the structure’s integrity.

Changes Afoot

The United States is now considering revoking trade preferences for Bangladesh, excluding it from the Generalized System of Preferences, a program designed to spur manufacturing in developing nations. Similarly, the European Union is considering stripping Bangladesh of its duty-free and quota-free access to the lucrative EU market.

The Bangladeshi government, members of which were in Washington last month lobbying to keep the trade preferences, is responding to the avalanche of criticism. In mid-May, the cabinet approved a sweeping series of changes that will make it easier for workers to form labor unions. In addition, the move would offer worker benefits such as greater severance payments, direct deposit to prevent wage abuse, and modernized management practices. (Parliament must still approve the measures). Discussions are also under way to raise the minimum wage.

There is no denying that, however meager, garment salaries provide livelihoods for millions of workers, many of them women from impoverished rural areas who would otherwise be forced to work in the fields or marry young.

Bangladesh, in fact, has been widely praised for its progressive attitudes toward women. The Muslim-majority nation has a robust tradition of secularism, which has been challenged in recent months by pro-Islamic protesters pushing for an anti-blasphemy law, restrictions on women, and a greater say in the country’s political system.

The demonstrations, in fact, were in reaction to an earlier mass movement by secularists denouncing religious extremism and hard-line Islamic values in politics.

Though secularism is woven into the fabric of Bangladeshi society, the undercurrent of Islamization has been present since the country’s birth in 1971. So the government is keener than ever to prove that its Western economic model is the best choice for Bangladeshis, despite the Rana Plaza disaster.

Boxes of “Made in Bangladesh” sneakers sit on pallets at the South Korean-owned YoungOne factory in Bangladesh, awaiting export to the United States.

Gowher Rizvi, an international affairs advisor to Prime Minister Hasina, told the New York Times last month that the government is determined to improve working conditions and abide by international labor standards to rehabilitate its reputation.

“This is the goose that lays the golden egg,” he said of the nation’s garment industry.

Retailers’ Responsibilities

There is no doubt that the onus is on the government to improve working conditions in Bangladesh. The Rana Plaza disaster is emblematic of the political cronyism that has fueled the nation’s economic growth. The complex’s owner, Sohel Rana, was a well-connected, shady businessman “described in the local media as the archetypal Bangladeshi muscleman, known locally as a ‘mastan,’ or neighborhood heavy,” according to a BBC News profile. “His power, influence and money came from providing muscle to local politicians.”

Though he didn’t escape arrest, Rana did for years evade taxes and building inspections. So even if Bangladesh implements significant labor reforms, enforcement will remain a major issue for a government that could hardly keep up with the explosive growth in garment factories.

On the flip side of the coin, however, major name-brand retailers — for whom workers toil to make cheap apparel that gets shipped to Europe and the United States — also bear some responsibility.

In the wake of the Rana Plaza collapse, several multinationals including the Walt Disney Co. have announced they would phase out production in Bangladesh.

Disney officials told CNN that their decision had actually been made in March, following the Tazreen fire. “After much thought and discussion, we felt this was the most responsible way to manage the challenges associated with our supply chain,” said Bob Chapek, president of Disney Consumer Products.

Yet there’s no guarantee that working conditions are necessarily much better in similar garment-producing nations, even if the wages are higher. And some labor advocates say cutting and running would hurt the very people retailers claim they’re trying to help.

Shamarukh Mohiuddin, executive director of the Washington-based U.S. Bangladesh Advisory Council, said that as long as there’s a pool of workers willing to labor for dirt-poor wages, employers don’t have much of an incentive to change course. Yet a boycott — however well meaning — would be disastrous for the workers themselves, she told us.

“The one thing we as an organization hope won’t happen is for customers to start boycotting products made in Bangladesh. If that happens, you’d see companies scaling back their production, resulting in job losses for Bangladeshi women who are already poor,” she said, adding that over time, the growth of the apparel industry has played a major role in enabling women’s employment, reducing Bangladesh’s once-high birth rate, boosting school enrollment rates, and countering Islamist ideologies that threaten to reverse women’s advancement.

Unlike Disney, other retailers seem to be in it for the long haul. On May 13, Swedish apparel behemoth H&M and Spain-based Inditex, which owns the Zara fashion chain, signed a far-reaching agreement that would require retailers to finance fire safety and building improvements through strict, independent inspections. It would also bar retailers from doing business with factories deemed unsafe.

Other European brands have since signed onto the pact as well. H&M is the single largest producer of apparel in Bangladesh, and Europe accounts for 60 percent of Bangladesh’s clothing exports. But major U.S. retailers like Walmart and Gap refuse to join the effort, fearing possible litigation and saying they will institute their own safeguards. Critics call that a copout, and groups such as the International Labor Rights Forum and United Students Against Sweatshops, which launched a “Gap Deathtraps” website showing photos of the Rana tragedy, are working to pressure U.S. retailers into signing the accord.

Yet Jagdish Bhagwati, a senior fellow at the Council on Foreign Relations, said the blame for such industrial accidents should really fall upon local and national authorities who should be protecting workers — not companies like Walmart and JC Penney.

“By misassigning the responsibility for the recent tragedies to global retailers, Western media and consumer movements allow the real culprits to get away scot-free and further diminish the likelihood of governance reform in poor countries,” said Bhagwati.

Other analysts say Western retailers need to use their substantial leverage to pressure the Bangladeshi government to reform. Kimberly Elliott of the Center for Global Development said a much better approach would be for the United States and other countries that import Bangladeshi garments to encourage authorities in Dhaka to join the Better Work program, a joint effort of the International Labour Organization and the World Bank’s International Finance Corp.

“The program is really aimed at being a win-win,” she said in a recent wonkcast for the development think tank. “It’s trying to improve labor conditions in factories by working with governments and industries in a way that improves labor conditions and — simultaneously — the productivity of workers. Healthier, happier, better-rested workers are also more productive workers.”

And far from removing the country’s trade preferences, she said the United States should offer Bangladesh duty-free, quota-free access to U.S. markets. While Washington has extended preferential trading terms to many developing countries, garments are usually exempt. However, about 90 percent of Bangladesh’s exports to the United States are apparel, and these face an average tariff of 15 percent — translating into nearly $700 million in revenues for the U.S. Treasury.

Offering to eliminate that burden “would create an immediate 15 percent reduction in the factory’s costs because they wouldn’t have to pay the tariff.” And that, in turn, would ease pressure on U.S. retailers and help their suppliers cover the costs of improving worker safety, she argues.

A Look in the Mirror, And Our Closets

Elliott also has another uncomfortable suggestion for Westerners concerned about working conditions abroad: Be willing to pay a little more for that cheap shirt in your closet.

“This is an industry that’s very low wage, very low skill, highly mobile and highly competitive, so the incentives are for factory managers to cut costs as much as they can,” she said. “Buyers are looking around the world for the lowest prices they can find, and unfortunately we as consumers are complicit, because we’re looking for the cheapest clothing we can find.”

An analysis by the Washington-based Worker Rights Consortium estimated that bringing Bangladesh’s garment factories up to Western codes would cost $3 billion over five years — or roughly less than 10 cents a garment. But even if consumers were willing to pay more, Bangladesh would also need to restructure a system built on short-term contracts, low wages, and maximum profits.

During an interview in Dhaka, the country’s foreign minister, Dipu Moni, tried to put the calamity into perspective.

“Bangladesh is a poor country and there are a large number of people who still live under the poverty line. People here work really hard, and the garment industry’s wages are low, but it sustains them,” she said. “If our product becomes less competitive, then they don’t make money at all. So in order to remain competitive, industries keep their wages low. If we didn’t have these jobs, where would those 3 million women work?”

In 2010, Bangladesh raised the minimum wage by 87 percent, said Mohiuddin, but it still remains a “least developed country” with about 70 million of its 160 million inhabitants living below the poverty line.

But “wages are not the issue here,” insisted Mohiuddin.

“The issue is production costs. What consumers can do is ask brands to invest more resources into better working conditions,” she told us. “Obviously, this would raise production costs, but that’s exactly why we need consumers to push for that. If they care enough to shout for boycotts, then they should ask for the right solutions.”

About the Author

Larry Luxner is news editor of The Washington Diplomat.