Financial Crisis & Garment Workers of Bangladesh
Garment Workers work harder but less food to eat
This paper presented by Farida Akhter at the workshop 'South Asia Regional Workshop on Global Financial and Economic Crisis and its Impact on Women: A Human Rights Perspective'; it took place on 22-23 August 2010 in Delhi, India and organised by UNIFEM, PWESCR and HEINRICH BöLL STIFTUNG. It was prsented as a Bangladesh country perspective on the impact of the current crisis on women, their livelihoods and human rights.
Bangladesh Economy in the face of global crisis
In Bangladesh, any change in the global economic situation is felt almost directly. The years from 2007 to 2009 have been very difficult because of the effects of global financial crisis on the local economy of the country. For Bangladesh, it is not only the global recession, but also other factors, such as domestic political unrest and natural disasters that add to the existing crisis and therefore the effects on people, and particularly on women, becomes more complex.
The political crisis was severe in 2006 resulting in an unconstitutional Caretaker government to be in power for two years (2007 and 2008). This was followed by election and taking over by the present government led by Bangladesh Awami League from January 2009. The cyclone Sidr occurred in November, 2007 and Hurricane Aila occurred in May 2009 affecting the southern part of Bangladesh. The newly formed government continued with economic policies undertaken by its predecessor Caretaker government.
According the Bangladesh Economic Review, 2009 (Ministry of Finance, government of Bangladesh) the economy of Bangladesh demonstrated considerable resilience during FY2008-09 despite the “twin shocks” arising from global recessions and the adverse effects of the consecutive floods and the cyclone-Sidr of the previous fiscal year (FY2007-08). The economy is estimated to have grown at a rate of 5.9 percent, slightly below the growth rate (6.2 percent) of FY2007-08. According to the Economic Review, the key feature of the economic performance during FY2008-09 is the strong recovery in agriculture sector coupled with moderate growth in industry and service sector. “The impact of the ongoing global financial crisis on Bangladesh economy has not been as severe as it was anticipated” – the report says.
The two main sectors which fuelled the GDP growth of 6% are the garment exports and the flow of remittances from the overseas workers, mainly in the Middle East and East Asia. On the other hand, more than half of the Gross Domestic Product (GDP) is generated through the Agriculture, fisheries and farming sector.
Among the three major sectors of the economy contributing to the GDP, the contribution of Agriculture to GDP is 20.16% , industry 29.95% and services 48.9% as of 2009-10, (source Bangladesh Bureau of Statistics). It is to be noted that the contribution of Agriculture to GDP is reducing fast from 23. 5% in 2006 to 20.6% in 2008-2009 fiscal year (Bangladesh Economic Review 2009).
The government acknowledges that “some weakening in remittance inflows and export earnings was observed in the months towards the end of the fiscal year of 2008-09”. Since the beginning of the global economic crisis, the new Government has been on high alert and has been monitoring its impact on the economy with the help of a Task Force involving the concerned stakeholders from both the public and private sector. The export growth rate reduced to 10.3% in 2008 -09 from 15.9% of the previous year. The Task Force set up by the government, recommended 34.24 billion stimulus package in April 2009, which included increase in cash subsidy to selected export industries by 2.5%, instant release upto 70% of total amount to be received as export support, Enhancement of Export Development Fund, increase in Export credit ceiling, lowering of bank interest rates on commercial lending etc. In 2008, the Caretaker government pursued a monetary policy aimed at sustaining high employment, but created higher inflation rates in the process.
Women’s participation in the Economy
Women, constituting 49% of the population, are active in almost all sectors of the economy, although not so much visible in the official statistics. Women’s economic participation rate has increased from 23.9% in 1999 - 2000 to 29.2% in 2005 – 2006. Women’s participation as labour force is increasing at a higher rate than male labour force over age of 15 years. At the national level, the male labour force increased from 30.6 million in 1996 to 37.3 million in 2005-6, while in the same period female labour force increased from 5.4 million to 12. 1 million. [BBS, 2009] That is the rate of increase for women was 124%, while for men it was only 22%. The participation of women increased both in the urban and rural areas. In terms of age, women are more engaged economically, (35.1%) in the age group of 40 – 44 years. About 50.86% women labour force (2005–06) has no education and over 85.69% women are engaged in informal sector and only 14.31% are in the formal sector. In 2005-06 at the national level 68.13% women were engaged in Agriculture, Forestry and Fisheries followed by 31.87% in non-agricultural sector, 19.35% in service sector 11.51% in manufacturing sector and the rest in other industries [BBS, 2009].
The participation of women in the ready made garment industries made them quite visible. The number of ready made garment workers is increasing significantly from 1.35 million out of 1.8 million workers in 2001–02 to 2.04 million out of 2.40 million workers in 2006–07. The percentage of women workers among the garment industries has been 75% in 2001–02 to 85% in 2006-07 [BBS, 2009]. According to the garment workers Association and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) the number has increased upto 3 million.
Women are also increasingly going abroad for employment, although the number is not yet significant enough.
Readymade Garment sector and the impact of the crisis
The Ready made Garment sector has been the most visible due to its contribution to employment of over 3 million workers (of which 85% are women) and secondly its contribution in terms of export earning which has increased from US $40 thousand in 1978 –79 to US $6.4 billion in 2004-05. Moreover, the industry is located mostly in the capital city, Dhaka and in the port city, Chittagong. No one can miss the scene of garment workers walking to and from the factories in large numbers, mostly the young girls in the early morning and late night respectively. Now there are over 5300 Apparel factories including 3000 RMG factories producing shirts, jeans pants woven apparels, 1250 Sweater factories producing woolen sweater and 1050 knitwear factories producing T-shirts, (half and full sleeved) [Source: Srama bikash Kendra, UBINIG]
While the Readymade Garment factories were started in late seventies of the last century, the new addition was in Knitwear and Sweater factories which started in 1990’s. Therefore, there are two major groups of apparel manufacturers organised by Bangladesh Garments Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). The Knitwear factories are mainly located in Narayanganj and Shiddhirganj areas. The Apparel industry was almost completely dominated by woven garments during the 1980s. The share of knit garments exports in total apparel export from Bangladesh rose from 17 percent in 1993-94 to over 43 percent by 2004-05, while the share of woven garments gradually declined. In the Sweater factories the wages are paid on production basis and apparently have higher wage rate than the woven factories. Yet, the workers are exploited by the management with delayed payment of wages and reduction of rate per unit production at the time of payment.
The apparel export goes to about 30 countries around the world, with over 45% to USA, 50% to the countries in EU and 3% to Canada and rest to the other countries of the world. The Woven garment exports are concentrated in the North American market, knitwear exports on the other hand are mainly sold in the European markets.
In 2007-08, the turnover from the export of RMG items was USD 10.69 billion in spite of the fact that the actual value addition that takes place locally is only a small portion of that figure. The growth rate of the industry over the last three years was 64% that has encouraged the RMG owners to set a target of reaching USD 18 billion by 2010 and USD 25 billion by 2013. [BGMEA, 2008]
The woven RMG industry is heavily dependent on the use of imported inputs, particularly fabric, - the foreign buying houses and direct importers to specify the sourcing of fabric and also due to the inability of the local primary textile sector (PTS) to supply fabrics of the required quality specifications. As a result, local value-addition in the woven RMG sector ranged between 25-30 percent in the eighties but subsequently rose to reach about 40-45 percent in more recent times. The gain in the country was nothing but the employment of women but at a cheap wage rate. Local value addition in the knit sector is about 70 percent [Rashid, 2006].
The impact of the global financial crisis was felt in the readymade garment sector since 2007. The export orders fell by 35% and export earning reduced by 23%. Over 300 factories, mostly sub-contract factories, had to be shut down. Among the three kinds of factories the most affected factories were the woven factories where over 5700 workers were terminated.
The main concern among the workers is the low wage. The wage of the garment workers is considered to be one of the lowest in the world. Even in Cambodia, the minimum wage is currently 54 dollars, and the workers are demanding for 64 dollars. In Vietnam it is 92 dollars, Sri lanka 92 dollars etc. According to the World Bank, a Bangladeshi garment work earns 290 dollars by making 2536 pieces of T-shirts, whereas in India a worker can earn 668 dollars by making only 56 T- shirts [ Chintaa, August, 2010 www.chintaa.com].
The present wage structure, before the announcement of the new wage structure, starts with Tk. 1200 (17$) per month for an apprentice, Tk 1662 (23 $) for Grade 7 worker to Tk. 5,140 (71$) for the Grade 1 worker. Since 2006, the workers denied of the right to unionise, carried out movement demanding the fair wage and also other issues such as non-payment of overtime, late payment of wages, lack of contract between the worker and the employer, no maternity leave, and other benefits deserved by the workers. The foreign buyers also demanded certain minimum standards to be followed by the garment owners commonly known as ‘compliance with social standards’, which instead of supporting the worker’s rights posed additional pressure on the owners. The owners were more willing to satisfy the buyers with compliance conditions which mostly looked at working conditions, but hardly supported the workers demand for fair wages.
The latest garment workers movement held during 2010 is for setting the minimum wage at Tk.5,000 was not accepted by the owners. However, new wage structure has been announced by the tripartite Minimum Wage Board for the apparel industry workers on July 29, 2010. According to this new structure an entry point worker (a helper) placed at Grade 7 would get Tk. 3000 (42$) a month (which is a rise from Tk. 1662 set in 2006). The wage for Grade 6 worker, (an Operator) is Tk. 3210 under the new structure. According to the experiences of the workers it takes about two and a half years to be promoted from Apprentice to Helper and another two years to become an Operator. Few workers may get it earlier depending on their skills. The rest of the Grade from Grade 5 to Grade 1 is not “workers” but belong to the administration and supervision. According to the workers they are the Malik Pokkho. The highest wage for Grade 1 worker is Tk. 9,300 (129 $). So the workers wages remain below Tk. 5000 even for the Operators who have gained skill over of a period of minimum 4 years of work.
Even for this low wage, the owners Associations did not agree to government’s proposal and sought extension of time for implementation till November, 2010.
Threat of Relocation
The Apparel manufacturers do not want to respond to the demands of the workers on the grounds that the garment orders will move away from Bangladesh to other countries. At this moment there is no other country to offer cheap labour for garment works as no other country can offer lower wage than Bangladesh. As we know that the relocation process started in the US when domestic producers found it difficult to compete with apparel imports from low-wage developing countries. The American producers first moved production to low-wage neighbour Mexico, and then subsequently to other low-wage countries like Japan in the 1950s, and to East Asian NICs, namely Hong Kong, Singapore, South Korea and Taiwan. These countries became large exporters of garments in the 1960s and 1970s. But as wages began to rise in the NICs, relocation countries such as the Philippines, Indonesia, Malaysia, China, India, Sri Lanka and Bangladesh which were offering lower wages. In a similar pattern, European producers moved to low-wage developing countries like India, China, Bangladesh and the North African countries [ Rashid, 2006]. But after Bangladesh, where can they go?
Being a low-technology and labour intensive industry the Apparel industry could use the large number of emerging female labour force with cheap labour since 1981. The wage advantage in Bangladesh for the owners was even more than another very poor country like Nepal (per hour wage was 25 cents in 1994) as compared to 24 cents in Bangladesh. Not only that the garment manufacturers could bypass other necessary requirement of ensuring labour rights such as not giving weekly holidays, maternity leaves and providing good working conditions. A number of studies have shown that violation of Factory Act 1965 and Factory Rules 1979 and the Minimum Wage Ordinance of 1994 are widespread in the garment sector. The garment workers are deprived of any severance payment even though they are frequently dismissed. By depriving the workers of the minimum wage and severance pay, garment employers have been able to reduce labour cost and increase their profits. The widespread use of child labour in the garment industry of Bangladesh is a violation of the core ILO labour standard relating to minimum age of a worker, which was ratified by the Bangladesh government.
The threat of loss of the market and relocation is used by the owners against the workers demands for fair wages. In 2007, the international orders for apparels reduced by 35%. In the US market the export of woven garments reduced by 10%. In Europe Germany was a good market for the Knitwear’s, which was reduced by 3%, and in France reduced by 23%. (Daily Manabjamin, 23 October, 2007)
There was also significant reduction in price per unit of garments. According to BGMEA, the Cutting and Making (CM) charge in Woven industries reduced by 15%. They used to get CM charge for a dozen cloth 10 dollars, but after the crisis it was reduced to 6 to 7 dollars [Daily Ittefaq, 15 November, 2008). The Garment owners frequently used the arguments of lower international price for garment products for not giving fair wages to the workers. As the workers have no knowledge about the global market situation, they have to believe whatever the Management says. However, they are never given the information whether the global market price is up.
In the post global financial crisis situation, certain government actions were taken. Among others these included particularly those addressing the workers issues were the following:
- A special fund amounting Tk.20 crore has been allocated for the skill development programme of the workers' of the RMG sector in FY 2007-08.
- Addressing compliance issues: To improve working environment, ensure safety and legitimate rights of workers as well as to see that the Bangladeshi RMG suppliers become increasingly socially compliant, a high powered `Social Compliance Forum' and two taskforces (Taskforce on Occupational Safety in RMG and Taskforce on Labour Welfare in RMG) have been formed for RMG' sector.
- A tripartite Memorandum of Understanding (MOU) has been signed by the owners, workers and the Government on 12 June, 2006 in order to ensure rights of the workers in the garment sector and its 10 points MOU are under implementation. 15 teams formed by the Ministry of Labor and Employment and 13 teams formed by BGMEA are working to oversee the implementation process of the MoU.
Impact of crisis on women’s overall wellbeing
The major impact of the global financial crisis aggravated by the global food crisis was the rising food prices in Bangladesh. According to a UNDP study, “between 2006 to 2008, the inflation became so high that it became difficult for the workers to survive with meagre wage. Indeed rising food prices are a big concern for most people in Bangladesh, where poor households spend nearly 70% of their income on food items. In December 2007 annual food inflation in Bangladesh reached 16% and prices of the most important essential, like rice and oil increased more than that in the last year. The situation compelled workers to take to the streets for their wage increase.” [UNDP, 2008]
The country’s RMG sector has experienced at least 72 incidents of labour unrest, over demand for payment of dues, in the six months from January 1 to June 30, reveals a report of the Bangladesh Institute of Labour Studies [http://www.bils.org]. UBINIG study conducted by its Labour Rights section called Sramabikash Kendra showed that the workers were forced to go to the streets because they could not manage to buy the essentials with the wage they were earning from working in the garment factory. In return the factory management controlled the movement by using police force, mastans and inhuman behaviour with workers. The workers were not eating properly, therefore, becoming sick while working in the factory. The death of a garment worker Salma, who felt stomach pain while working, and was not allowed to be taken to the hospital by the management created huge reaction, as it symbolised the sufferings of most of the workers. Salma died out of stomach pain. She might have been hungry and ill fed. This incident happened in 2007.
Reduced Food intake
Sramabikash Kendra conducted case studies by talking to the garment workers and leaders about the living conditions due to financial crisis, specially the increase of prices of food items. According to a garment worker leader Firoza Begum, a garment worker who has to walk up and down to the factory and work for 12 to 14 hours needs at least three quarter of a kilo of rice per day costing about Tk. 30, salt, potato and oil costs Tk. 30. That means for having only a three meals of rice with Alu Bharta (mashed potato) cost Tk. 60 per day. In a garment worker’s family with 5 members, minimum food cost per day is Tk. 300 but they can spend only Tk. 200 (if both husband and wife are earning). Being unable to meet these costs, they are eating less meals and less food per day.
During a week of observation (November, 2008) of the garment workers families, the garment workers were found to be taking left -over watered rice (called Panta bhat) with salt and red chili for breakfast, for lunch Bread (pau Rooti), banana, puffed rice (muri) and at night rice with papaya, arum (kochu) leaves, uncultivated sak like Kolmi, henchi, small dry fish, potato etc. whatever they could manage in each day. They reported that they could eat fish and egg only once a month. No meat was taken during this period. The children were mostly eating puffed rice in the afternoon. That means, only one full meal of rice and curry was taken per day. The consumption of egg was shared by family members, two eggs for four persons.
The house rent of the garment workers for one room with common kitchen and common bathroom is Tk. 1400 per month. Cost for children’s education is Tk. 200 per month. No health expenditure was mentioned as many diseases of the family members were not treated at all. It was found that most of the workers earning about Tk. 3000 had to spend Tk. 2800 on essential items of day to day living. Some were not able to manage within Tk. 3000 and were forced to sell household items like electric fan, TV, jewelleries, etc.
According to a study by the World Food Programme , (WFP, 2010) Household’s budget spent on food increased on average by 5% during the last 12 months to 60% in March 2010. This increase was due to food price inflation. In general, the share of education has decreased by about 20% during the last 12 months, due to the expanded coverage of free school books provision to primary and secondary school students, resulting in a reported 10% increase of school attendance, compared to 2009. Expenditures on health have generally increased due to increased costs of medicines. The report pointed out that in response to the challenges they face (i.e. price increases and income losses) households cope by cutting down consumption of protein sources, dairies and fruits. They also diversify their income sources by involving more family members, in particular women and children, in income earning activities (mainly casual labour). Reduction of health care expenses is another negative coping mechanism adopted by households.
The 2008 global food price crisis sent a substantial number of households back to poverty, with 25% of found food insecure by end 2008 [WFP, 2009]  The WFP shows that in end-2008, households spent about 62% of their expenditures on food, 10 percentage points up from 2005. The global food price crisis resulted in increased severe acute malnutrition rates (from 2.9% in 2007 to 3.4% in end-2008), severe underweight (from 11.8% to 12.3%) and severe stunting (from 16.1% to 20.1%) over the same period.
The readymade garment industry flourished in Bangladesh and gave employment opportunities to poorer women, which has been recognised as a very positive response of the global economic situation. But we keep on forgetting that this industry was here mainly for the cheap labour and for exploitation. The foreign exchange earned through garment exports goes back for purchasing all the raw materials. Only the wage for labour and the profit of the owners remain. The owners compete with the wages of the workers to keep high margin of profit. Paying less amount for wage to workers means higher profit for the owners. This time during the labour movement for minimum wage of Tk. 5000, a garment owner said, “I wanted to purchase Lexus model of car this year. But if I agree to pay Tk. 5000 as minimum wage, I will have to change the model of the car.”
The women workers by this time have become mature enough to respond to the movements, but majority of the workers are so poor and cannot afford to lose the job. They also cannot go back to their villages. Many young women are the sole bread winners of the families.
The government must take strong actions to support the workers for minimum wage as the industry can only gain by a healthy atmosphere of work and healthy workers.
 Gender Statistics of Bangladesh, 2008, BBS, Planning Division, Ministry of Planning, GOB
 Speech of the President of BGMEA at the launching of Switzerland-Bangladesh Business Forum on 23 August 2008. as quoted in Labour Rights in the Readymade Garment Industry in Bangladesh, Annual Report, 2008, ODHIKAR
 Rise of Readymade Garment Industries in Bangladesh: Entrepreneurial Ingenuity or Public Policy by Md. Ali Rashid, North South University, Paper presented at the Workshop on Governance and Development organized by the World Bank and BIDS at Dhaka on 11-12 November 2006
 UNDP, 18 March 2008, Kemal Darvis discusses global price shocks in Bangladesh.
 Impact of the global financial crisis: Bangladesh Follow up Case study April, 2010, WFP
 WFP, UNICEF, IPHN, Impacts of Recent Shocks on Food Security and Nutrition in Bangladesh, Joint Assessment, Dhaka, March 2009.