Wage hike to put Bangladesh RMG sector in dire straits

Published: 00:43, Sep 21,2018 | Updated: 12:15, Sep 21,2018

 
 

Faruque Hassan

Senior vice-president of Bangladesh Garment Manufacturers and Exporters Association Faruque Hassan shares his views with New Age senior staff correspondent Moinul Haque

The newly announced minimum wages for the workers at Tk 8,000 will put up a big challenge for the country’s readymade garment sector making it tough to remain competitive in the international market, forewarns Faruque Hassan.
Asked why, he explains that the prices of products have not been increased but cost of doing business went up gradually in recent years, which will put the sector under pressure.

video by Abdullah Apu

The factory owners, he observes, will have to accept the new minimum wages as the amount is going to be settled through negotiation in the government-set minimum wage board and the hike in wages will blunt the competitiveness of Bangladesh’s readymade garment sector in the global market.
This, he fears, may lead to the closure of many factories.
‘We want to pay our workers more but first of all we have to remain competitive. If the sector loses its competitiveness, employment generation will be hit hard,’ he warns.
The government, he suggests, should provide support to the sector as it will be difficult for the factories to afford Tk 8,000 as minimum wage.
He says RMG sector has created a vast workforce, especially female workforce, in the country and adds that the sector played an unbelievable role in women empowerment in Bangladesh.
If the sector loses its competitiveness, he warns again, new employment generation will come to an end.
Faruq apprehends that the new wages may lead to manpower cut in the RMG sector as factory owners will have to introduce automatic and semi-automatic machines to enhance productivity to minimise the cost.
Small and medium factories will be affected most due to the increase in minimum wages and it will also hurt the large factories, which he says will force them to go for increased productivity and efficiency to meet the increased cost.
The country’s RMG sector is passing thorough difficult time as cost of doing business is going up every year due to hike of utility bills, port congestion and transport cost, he enumerates.
Many factories have been forced to close down their business in the face of growing challenges and the number of active BGMEA member factories came down to 3,000 from 7000 in recent years, Faruq says.
In fixing minimum wages, all have to keep in mind that readymade garment in Bangladesh is only the competitive product in the global market and the lion share of foreign currency comes from the sector, he points out.
‘We have no core raw materials of textile sector. Cutting and sewing is the main strength of our sector but our competitor countries including India, Vietnam and Sri Lanka have their own raw materials like cotton and petro chemicals and they have scope to offer more competitive prices than Bangladesh,’ Faruq mentions.
Opposing the demand of labour rights groups, the BGMEA leader says that considering the economic situation of the country the demand for Tk 16,000 as minimum wages is not logical.
‘They can demand but they should consider whether the amount will be sustainable for the sector or not,’ he puts forth.
Faruq, however, posits that it would have been possible for the sector to pay its workers more if the buyers would share their responsibility.
‘Within a few months of the implementation of new wage, its impacts will become evident,’ he notes.
Demanding export-friendly exchange rate, the BGMEA leader says that most of the competitor countries devalued their currencies against dollar but taka has remained stable.
‘We never demand a massive devaluation but an export-friendly rate is important to remain competitive on the global market. If the sector loses business, the country will be loser, the workers will be losers as no other export sector beyond RMG will flourish in the country,’ he concludes in a note of warning.

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