Despite facing countless daunting challenges, Bangladesh has transitioned from being a least developed nation to a lower middle-income country. A significant driving force behind this remarkable transformation and national development is the garment industry. Unfortunately, the American Apparel and Footwear Association (AAFA) voiced concerns over workers’ rights and safety in Bangladesh’s garment industry.
Though, AAFA relies on unverified, faulty information rather than factual evidence when making its statements. However, Bangladesh has made significant strides since the Rana Plaza tragedy in ensuring workplace safety and upholding workers’ rights. The Bangladeshi government remains committed despite criticisms. Today, Bangladesh stands as the world’s secondlargest exporter of ready-made garments, commanding a substantial 7.90 percent share in the global market. This sector not only contributes 9.25 percent to the country’s GDP but also generates over 80 percent of its export earnings. Bangladesh aims to achieve an ambitious goal of reaching annual Ready-Made Garment (RMG) exports worth $100 billion by 2030.
You can also read: How Tax Policy Can Transform Bangladesh’s Economic Landscape?
However, various domestic and foreign interest groups remain active in their efforts to undermine the garment industry, which began its ascent in the 1980s. They persistently exert pressure on various fronts, sometimes fueling labor movements, questioning wage levels, or raising environmental concerns. Despite continuous pressure from foreign buyers regarding these issues, they do not propose price increases for the products; rather, they suggest reductions. Moreover, they neglect to address the rising costs within the production sector, including increases in raw material prices and minimum wages worldwide. Today, we will delve into these aspects during our discussion.
READYMADE GARMENT INDUSTRY (RMG) IN BANGLADESH: AN OVERVIEW
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-157.png?resize=768%2C388&ssl=1)
The garment industry stands as Bangladesh’s largest export sector despite surmounting numerous challenges. From humble beginnings in the early eighties as a sub-million dollar industry, it has now burgeoned into a significant contributor to the nation’s economy. According to data from the Export Development Bureau, Bangladesh’s garment exports soared to US$ 47.39 billion in the calendar year 2023 (Figure 01).
Notably, the garment sector is not only the top earner in terms of exports but also the most attractive industry for foreign investment in Bangladesh. Presently, 82 percent of export earnings derive from the ready-made garment sector, while 81 percent of foreign investment flows into the textile industry. Hence, the pivotal role of the garment sector in fostering economic development and expansion in Bangladesh cannot be overstated.
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-158.png?resize=407%2C435&ssl=1)
WOMEN CONTRIBUTION IN RM
The significant role of women in the garment industry can be attributed to the silent revolution sparked by the women’s movement. Approximately 58 percent of the workforce in the garment sector comprises women, with men constituting 42 percent. This substantial female presence has propelled the sector to new heights. The evolution of the garment industry has facilitated employment opportunities for women beyond their homes in Bangladesh, consequently fostering social change. Consequently, there has been a notable increase in women’s participation in the labor market. The growth of the ready-made garment industry has ushered in profound transformations in the social fabric of women’s lives in Bangladesh.
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-159.png?resize=744%2C218&ssl=1)
Previously, many girls from impoverished backgrounds were confined to household duties or endured poverty, relying on their husbands’ or fathers’ income for sustenance, leading to a subpar quality of life. However, the emergence of garment factories has instigated a positive transformation in the economy by offering employment opportunities to women. Families now depend on the income these women send home, thus altering traditional dynamics.
The economic contribution of working women has empowered them as decision-makers and enhanced their autonomy within their families. Consequently, the social status of women workers has elevated, leading to shifts in patriarchal authority in some cases. Rural women are now actively involved in significant decisions regarding their lives. Furthermore, the prevalence of child marriages has declined, accompanied by a decrease in birth rates. Working women are prioritizing education, and sending their siblings or children to school, thereby boosting literacy rates.
GREEN FACTORIES In Bangladesh
Number of Green Factories 214
13 out of top 15 LEED-certified green factories globally
In the country, there are currently 214 green factories, marking a significant leap from just one eco-friendly facility about a century ago within the major export sector. Recently, another garment factory earned the prestigious Leadership in Energy and Environmental Design (LEED) certificate, denoting international recognition for its environmentally conscious practices. This accreditation, bestowed by the US Green Building Council (USGBC), brings the total count of green factories in the country to 214.
Mohiuddin Rubel, director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), highlighted that Bangladesh now hosts some of the world’s finest factories, with 13 out of the top 15 LEED-certified green factories globally located within its borders. Additionally, the Bangladesh government has implemented various environmentally friendly policies, including initiatives for climate change funding. Collaborative efforts with major buyers have facilitated the expansion of production capacities in factories.
CHALLENGES IN RMG SECTOR
Despite the significant advancements seen in Bangladesh’s garment industry, it confronts a dual set of challenges both domestically and internationally. Advanced economies grapple with inflation and recession, compounded by the ongoing crisis of the COVID-19 pandemic. Additionally, new geopolitical tensions, such as the conflicts between Russia and Ukraine, and Israel and Hamas, pose further obstacles. Inflation surged to a record high of 8.8 percent in 2022, up from 4.7 percent in the previous year, and remained at 6.8 percent in 2023.
This has notably impacted consumer demand for apparel in both the United States and Europe. Import figures for European countries dropped by 12.08 percent in the first nine months of 2023, with a 22.71 percent decline recorded for the United States from January to October 2023. Consequently, imports from Bangladesh to the EU fell by 15.87 percent, while the US market experienced a 24.75 percent decrease. These factors have exerted significant pressure on the pricing of key apparel items, resulting in a notable reduction in the average unit cost by 7 to 9 percent.
WAGE: A HEATED DEBATE
While certain individuals argue that the existing wage framework is equitable given the context and conditions in Bangladesh, numerous domestic and international entities persist in advocating for additional wage hikes. Why? But the facts tell different! Back in the 1980s, the minimum wage stood at a mere 627 taka. By 2006, it had increased to 1,662 taka for workers in this sector. Through the influence of trade unions, it rose to 8,000 taka in 2018. Currently, garment workers receive a minimum monthly salary of 12,500 taka, with 63% constituting the basic salary, marking a 56.25% increase. Moreover, the newly announced wage policy includes a provision for a 5% annual increment for these workers.
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-160.png?resize=634%2C532&ssl=1)
Fair and Acceptable
The minimum wage determined by the Wage Board for garment workers has been deemed ‘acceptable’ by the Bangladesh Garment Workers-Industry Unity. Sirajul Islam Roni, the convener of this coalition consisting of 14 organizations, stated, “I consider this wage acceptable because it ensures the minimum wage for entry-level assistant workers in garment factories.”
It’s worth noting that the current government, upon assuming power, increased the minimum wage from 1,662 taka to 3,000 taka in 2010. This figure rose to 5,300 taka in 2013 and further increased to 8,000 taka in 2018. Bangladesh Labor and Minimum Wages Board has recommended the draft minimum wage rates for all categories of workers employed in the garment industry sector, as per 2023:
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-161.png?resize=412%2C436&ssl=1)
RMG SECTOR AT A GLANCE
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-162.png?resize=673%2C822&ssl=1)
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-163.png?resize=673%2C358&ssl=1)
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-164.png?resize=685%2C512&ssl=1)
IMPACTS OF DOLLAR PRICE HIKE
In recent years, the US dollar-Bangladeshi Taka exchange rate has experienced significant fluctuations. The Taka has steadily depreciated against the dollar since 2019, with rates in 2021 ranging between Tk 80- 90. However, the onset of the Russia-Ukraine conflict in 2022 accelerated this decline, with the exchange rate surpassing Tk 100 per USD. Specifically, from January 2021 to June 2022, the rate rose from TK 84.83 to TK 93 per USD. In 2023, the Taka continued to weaken, hitting TK 105.50 per USD in January. Data from Bangladesh Bank shows a 5.77 percent depreciation in 2023, with banks and the open market devaluing the dollar by 22 and 19 percent, respectively.
By August 2023, the rate exceeded Tk 130, reaching a record high. As of February 2024, the exchange rate stands at Tk 110 per USD. Over two years, the Bangladeshi Taka depreciated by 28.21% against the US Dollar, coinciding with a 44.52% drop in dollar sales by banks.
Contrary to expectations, this currency devaluation failed to benefit industries as anticipated. Inflation and escalating production costs hindered exporters from capitalizing on the weaker Taka to enhance exports.
![](https://i0.wp.com/pressxpress.org/wp-content/uploads/2024/03/image-165.png?resize=232%2C410&ssl=1)
The economy grappled with elevated prices of imported goods and diminished export profits, notably impacting the textile industry. Import funding faced challenges, exacerbating foreign currency shortages and diminishing investor confidence in the volatile forex market.
INCREASED PRICE OF RAW MATERIALS AND HANDLING CHARGES
The RMG industry is facing threats to its competitive advantage in the worldwide market due to factors such as rising raw material prices and handling costs. The cost of raw materials and other resources denominated in US dollars is growing due to the devaluation of the taka, since RMG makers pay in dollars. A five percent decline in the value of the taka relative to the dollar results in a five percent increase in the cost of acquiring products and services denominated in dollars. Mohammad Hatem, the Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association, highlighted that the import costs of raw materials surged during January-June 2022 owing to the uptick in international market prices. Yarn, cloth, and cotton prices have nearly doubled during this period.
A price hike of this magnitude cannot be maintained in the long run. Yarn, fabric, and chemicals have all seen significant price increases of 40% to 80% in recent years (Table 03). The industry’s bottom line has taken a major hit due to this surge, which has been made worse by supply chain interruptions and geopolitical concerns. According to central bank data, Bangladesh’s imports of raw materials for RMG, including raw cotton, yarn, fabric, and dyeing materials, decreased by 17.3 percent year-on-year to $7.92 billion in the first half of FY24 and by 22.20 percent year-on-year to $17.31 billion for the entire FY23. Specifically, in the first half of FY24, raw cotton imports saw a 38.9 percent year-on-year decline to $2.68 billion.
In FY23, raw cotton imports dropped by 3.71 percent to $4.27 billion compared to $4.44 billion in FY22. Within a year in 2021, there was a startling 3000% increase in shipping costs, while the prices of yarn, polymer used to make poly bags and hangers, and kraft paper all increased by 100% to $4.8/kg from $2.4/kg, $1,600/ton, and $1400/ ton, respectively. Dye prices have jumped $90/kg in 2021 and chemical prices by $9–$12/kg in 2021. Rising manufacturing costs in the RMG industry were mostly attributable to these precipitous spikes in the price of raw materials. Retail piped gas price increases, in addition to those for fuel and kerosene, have added insult to injury for the industry’s already precarious financial situation. Retail piped gas prices increased by as much as 179% and diesel prices by almost 150% as a result of the government’s decision to reduce subsidies; consequently, garment makers’ operational expenditures soared.
The industry’s competitive edge has been further weakened by the cumulative impact of growing fuel costs, as manufacturers have become more reliant on diesel-run generators owing to power outages. To make matters worse for RMG exporters financially, private inland container depots (ICDs) increased handling fees by 23% in 2021. Additional threats to the sector’s sustainability and viability came from these operational cost hikes, on top of the already high prices of fuel and raw materials.
AAFA’S LETTER RAISE QUESTION
AAFA’s letter, urging an end to arrests and investigations into labor unrest incidents, reflects ongoing concerns, echoing discussions at the recent ILO session. While Bangladesh requested pending matters not be treated as formal complaints, AAFA’s concerns align with those raised in Geneva.
The letter emphasizes the importance of worker welfare in Bangladesh’s growing exports to America, expressing optimism for continued improvements under Prime Minister Sheikh Hasina’s leadership. Additional complications arise when American buyers reduce prices for Bangladeshi products by 20-25% while discussing worker rights, which could undermine AAFA’s ethical position.
In essence, the letters elevate labor voices, but their effectiveness is influenced by actual circumstances. Upon analyzing the policies of the Bangladesh Government, it becomes evident that AAFA’s concerns lack foundation as the Government has demonstrated through its policy execution that it supports all workers, including those in the Ready-Made Garment (RMG) sector.
DECLINING UNIT PRICE OF GARMENTS GOODS BY US, EU
Data from government agencies Eurostat and Otexa reveals a yearon-year decrease in unit prices for three apparel items sourced from Bangladesh by European Union (EU) and US buyers during the last July-September period. Eurostat reported that EU buyers paid 7.37 percent less for cotton T-shirts in July, 11.60 percent less in August, and 10.76 percent less in September. Similarly, prices for men’s and boys’ cotton trousers and cotton sweaters also decreased. Otexa indicated that US buyers paid 7.25 percent less for cotton T-shirts in July, 16.74 percent less in August, and 25.38 percent less in September.
Prices for men’s and boys’ cotton trousers and cotton sweaters also saw declines during the same period. Despite the implementation of a new wage structure in Bangladesh’s apparel sector in December of last year and buyers’ commitments to adjusting for increased costs, 79.1 percent of ready-made garment manufacturers report that their buyers have not yet increased product prices.
According to a survey conducted by Forum, a panel of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), only 3 percent of buyers have increased product prices by up to 5 percent. Every year, they continue to decrease the prices of goods, despite being the most vocal advocates for wage increases and workers’ rights protection. The relentless reduction in prices poses a threat to numerous garment factories, leading to closures and leaving workers unemployed, living in dire conditions.
Human rights advocates in the US and EU are contributing to this situation by slashing garment prices, exacerbating the plight of factory workers. The garment sector serves as a vital cornerstone of the nation’s economy, offering employment opportunities to numerous individuals and elevating the country’s reputation. It stands as the primary engine propelling economic growth, with its backbone being the dedicated workforce. It is imperative to remain vigilant against any opportunistic forces that may seek to infringe upon the rights of our workers.