Bangladesh Rebirth of an Industry
Following the Rana Plaza tragedy, labor laws in Bangladesh have received a thorough overhaul and the country’s garment industry can now offer more benefits to workers.
Labor Laws in Bangladesh may change for the better.
One of the first things you will learn in any course at business school is how important it is for businesses to achieve productive efficiency. This concept entails achieving the highest output from the least possible combination of inputs, which effectively leads to maximizing profits.
Large companies often achieve this ‘efficiency’ by capitalizing on the availability of cheap labour in developing countries. Controversies regarding the exploitation of such labour have surrounded companies like Nike and Apple and these have more to do with the management rather than with the workers being paid a minimal wage.
The kind of conditions that the workers are made to work in are also a cause of great concern and this has been highlighted all too well in the recent fire that caused the collapse of an eight storey building in Bangladesh. Over a thousand people were killed as the Rana Plaza, which housed five garment factories, burned down to ashes on 24th April. These factories produced clothes for international brands such as Mango, Benetton and Primark, amongst others. The devastating incident that has been ranked as one of the world’s worst industrial accidents occurred just five months after 112 workers were killed in a similar fire at a factory producing garments for Walmart and C&A.
These incidents call into question the existence and, more importantly, effective implementation of proper labour laws in Bangladesh. Such disasters highlight the cruel working conditions and serious safety hazards that the country’s 3.6 million garment workers are exposed to on a daily basis. In addition, they are the lowest paid workers in the industry (earning only $38 a month) on a worldwide basis and have no systematic unions to represent them. Apart from reflecting disregard for basic human rights, these fires can cause severe harm to Bangladesh’s garment industry, which contributes to 80% of the nation’s total exports, generating $21 billion annually.
As global corporations strive to achieve business integrity and comply with ethical standards to boost their image in the eyes of customers, having suppliers in countries with a poor record of effective labour laws can severely damage their reputation. Disney, which had been sourcing their manufacturing to Bangladesh decided it would no longer do so in March and local factory owners fear that other companies might pull out as well unless the industry can improve its outlook and way of working. Furthermore, President Obama withdrew a trade privilege for Bangladesh in the wake of the Rana Plaza incident, saying it has not done enough to ensure workplace safety. While this is alarming news for the world’s second largest garment producing country after China, Bangladesh has time to
convince its exporters that it is on its way to implementing effective labour laws.
Hence, in an attempt to portray the industry in a better light, a joint statement was issued by three stakeholders in May. The International Labour Organization, the government and factory owners pledged to introduce a Labour Reform package that would include a four-point plan. The plan, developed by IndustriALL Global Union aims at implementing the Accord on Fire and Building Safety, the right to form free associations, raising the minimum wage rate to reach living wage by 2015 and launching a massive project to ensure union presence in 5000 garment factories. As Jyrki Rania, the general secretary of the IndustriaLL Global Union pointed out ‘Rana Plaza and other industrial homicides have demonstrated why Bangladeshi garment workers need strong national unions and local level union and safety representatives. A labour law reform that guarantees the rights enshrined in ILO Conventions is a necessary starting point for that,’
The legislation was put into effect soon after in July and included a central fund for improving the standards of living of workers and the creation of employee welfare funds where 5% of annual company profits are to be deposited. Furthermore, the government and industry officials are to carry out a complete assessment of all export oriented garment factories. The assessment, which is expected to be completed by the end of the year, will include a comprehensive analysis of the structural integrity of these factories. Fire safety provisions will also be looked into and, depending on the results, remedial action will be taken.
Given many western brands’ reliance on the Bangladesh garment industry, it would be difficult for them to switch to other suppliers who would lack the capacity and skills that the Bangladesh industry has. As a result, there is a conscious effort on their part as well, along with local bodies, to bring the Bangladesh labour laws up to par with international standards. In July, some 70 European retailers announced a safety plan for Bangladeshi factories with US and Canadian retailers announcing separate pacts.
Along with support from international retailers, the new law seems strong enough to alleviate consumer concerns regarding workplace safety. It states that workers have the freedom to form their own union, whereas under the previous law, they had to seek permission from their employers. It also says that structural changes to buildings cannot be made without the approval of government inspectors. This is in response to serious concerns regarding the addition of new floors to buildings that cannot support their additional weight. This was also one of the alleged reasons for the collapse of the Rana Plaza. Cracks were said to have appeared in the building one day before the disaster and three floors had been added over the years to the original design. Padlocking exit gates is also banned under the new law - a cruel practice that prevented workers from fleeing the recent fires that eventually killed them.
While effective implementation of this law remains to be seen, the swift drawing up of the legislation by the government and other bodies is a step in the right direction for Bangladesh’s industries.