Transformation of RMG Sector: Not a Choice but a Dire Necessity for Sustainable Development for Bangladesh Economy
Nurul Aman, Professor of Economics, University of Massachusetts - Boston
While I was traveling in Shanghai, China in May 2015 with a delegate of US-China Exchange Program, our Tour Guide was telling us a story about rising trend of garment factory closures in all over China. She was also telling the move of those factories to Bangladesh and Vietnam. That trend of factory closures in China seems to be a great opportunity for Bangladesh to take the RMG sector to the next level of growth and sustainability. The recent goal of Bangladesh Garments Industry to achieve its export earning to increase from its current yearly figure of about $25 billion US dollar to $50 billion by 2020 is a major step forward for two important reasons, among others. First, Bangladesh RMG and related Textile sectors account for over 80% of country’s total export earnings, which solely contributed an impressive economic growth at an average rate of 6% per year since 1996. Second, the RMG/Textile sector is still the largest industry to employ over 4.5 million female workers who provide a great deal of hope and aspirations for giving better lives to their families. Their dedicated work certainly helps get themselves out of poverty and thus raise their children with a promise of providing better healthcare, healthy food and good education. There is no doubt about the new opportunities of RMG growth fueled by recent increasing rate of factory closures in the garment industry of China. The two key reasons for some factory closures in China are increase of labor wages and better production process generating high productivity with less need for labor hours. However, in order to take this new opportunity of comparative advantage of lower labor costs than in China or Vietnam, the RMG sector must take a very different strategy than it has been doing for the last three decades. This new strategic approach can be dubbed as RMG Version II. The key reasons for significant change of current strategy are: the rapid increase of global competition with raising the bar of quality and fashion design of apparel products; standardization of occupational safety and fire code at global scale; fairness of labor wages and workplace safety standard; rights for unionization for collective bargaining; and major shift in physical infrastructure in factories and supply chain. These changes are also the major challenges for the RMG sector to transform the industry structure into a new level of global standard to equally compete with its major competitors such as India, China and Vietnam.
In the context of these challenges, an International Conference was held at the Harvard University on June 5th and June 6th of 2015 under the theme “Transformation Challenges and Opportunities for Bangladesh Garment Industry”. Sponsored jointly by the South Asia Institute of Harvard and International Sustainable Development Institute (ISDI), this two-day conference was very significant event, where the high level experts in different areas of Garments Industry, Bangladesh Government Officials, officials of Alliance and ACCORD (helping RMG safety standard), the Leaders of BGMEA and BTMA and many Professors from the Academia participated. The participants extensively addressed the key challenges RMG facing today for its dire need for quick transformation. The key topics discussed in a total of 11 sessions were the best practices, work place safety standard and welfare, fire safety and standardization at global scale, pricing and retail marketing strategy, strategy for sustainable occupational healthcare for workers, strategy for business turnaround, and financing strategy for transformation into a global standard. While discussing these topics, the participants have delivered their expert opinions and years of experience with a great deal of passion and intellectual rigor. Their discussion covered not only the key areas of challenges and opportunities, but also explored many practical ways to address them and thus achieve the sustainability. The contents of the discussion in this event were extremely valuable. With active participation of the audience, the speakers of each of the sessions have done a wonderful job in delivering their priceless expert opinions about the best way to transform the RMG sector and thus to maintain its competitive edge as the second largest garment exporting country in the world.
The focus of this valuable conversation was mainly dedicated to the current issues and its policy implications for implementing the best practice to transform the RMG Industry into the 21st century standard of globalization. In highlighting the importance of transformation, the speakers have repeatedly emphasized the need for joint cooperation and coordination among the key stakeholders such as Government policy makers, factory owners and workers, BGMEA and BTMEA leaders, and Fire Safety Officials. In doing so, the constraints and challenges were discussed in details and urged the government leaders to help RMG achieve its goal of reaching the target of $50 billion export per year by 2020. At the closing ceremony of the conference, the organizing members of the conference have also urged the high officials of Bangladesh Government and BGMEA/BTMEA leaders to take the expert advice from this two-day event and to implement those policies with all available resources as a set of major tools for transforming the RMG into Global standard. Since the RMG sector is the life blood of Bangladesh Economy at its current structure, there is no doubt that transformation for RMG sector is not a choice but a dire necessity at this critical juncture of global completion with other emerging economies such as China, India, and Vietnam. The future growth and sustainability of RMG sector will certainly depend on how the transformation strategy is implemented by the stakeholders such as the Government policy makers, factory owners and employee unions with effective coordination with third party expertise who have been providing working capital, workers safety, fire safety, infrastructure development, and energy efficiency. In this context, the international organizations such as IFC (International Finance Corporation), the ILO, the Alliance and the ACCORD have been providing invaluable support to the RMG for its sustainability and growth. These trading partners are highly credited for providing huge incentives to the stakeholders towards rapid transformation and sustainability. Their integration process of coordinating all aspects of challenges is very impressive.
* The author of this Article, Dr. Nurul Aman, is a Financial Economist and Professor of Economics and Finance at the University of Massachusetts, Boston, USA.
July 2, 2015.