A recent column on 1st of August in The Business Standard penned by outstanding economist by all standards, Mr. Zahid Hussain, has caught my attention.
Mr. Hussain in the column refers to "inconsistency" in government policies which have supported the readymade garment sector. In all honesty, the financial distress is as real as it gets. The lockdown was in place for one full month before re opening took place in a very staggered and limited capacity ( gradually building up ) to ship out the orders that were still alive. What alternative realistic solution is the author exactly proposing? And what exactly can be offered as a solution when a sector faces $3.15 billion worth of cancellation eventually settling down as almost 75% reinstated in mostly more than vague payment terms.
To quickly clarify, the export oriented industries had a dedicated allocation of Tk5000 crores, out of which RMG accounted for 80%. The rest 20% went for settlement of other export oriented sectors. However, after April and May salary support through loans, an extra Tk2500 crores and then another Tk3000 crores for July were provided. This is a loan which still needs to be paid back. At the same time, it should also be noted that the government declared well beyond Tk1 lac crores in various stimulus packages across all the industries, the dedicated Tk10,500 crores for export oriented industries is merely 10% of the total stimulus package. And there is no reason to single out garments industry, as RMG does contribute 84% towards the country's export revenue, employing 4.1 million workers.
Further, the author has argued that the industry managed to pay the wage bill without any subsidies from the government in FY15 ( $25.5 billion) , just two years after the Rana Plaza tragedy, with exports lower than in the pandemic hit FY20 ( $27.9 billion ). The logical reasoning of above argument is astonishing and took me by surprise. I suggest that the author ought have considered that the industry does not have the same wage structure of 2015 and the industry pays 51% more now in wages. What about the other expenses, electricity, gas, oil, rents, transports so on and on, where were we in 2015 and where are we now, having experienced 29.8% hike in utility settlements.
Contrary to what the author has mentioned, the anti-export bias is strong and as real as it gets. For example, according to Mr. Hussain, "If an industry of the size and age of Bangladesh's garment industry cannot pay their wage bills for even a month without fresh subsidies, one has to wonder about the solidity of grounds the industry stands on and the economic merit of the policy regime supporting its survival." There are two very strong arguments against this: One, we have to look at the size and age of individual factories instead of the industry as a whole before drawing a logical conclusion. Contrary to popular belief, we only have two factories which are four decades old, and more than 50% of the factories have come into existence after 2000. And over this period, out of the 6,459 factories established, only 1898 are still surviving.
And secondly, with reference to Covid 19, the country went to general holiday on the evening of 25 March, but due to our market in the western world were hit before us, cargo shipments had almost stopped from beginning of March. Despite this, when the march salary was paid in following month, the factories had to manage from their own fund and paid one month's salary, contrary to the belief of the author. The industry paid $535 million as non-productive wages for 25 days in April and a few days in March. This was paid totally by the industry. For the following months of April-July, the fund availed under the stimulus package is a strictly refundable loan. In this regard it should also be noted that, as per the labour law of the country, under the existence of pandemic, if the factories are shut down, we don't need to pay any salary to workers below one year. But all the factories paid 65% to all the workers for the period of shut down. And they did this by taking a loan which they need to pay back.
At times like this, all of us need to realize that we have not diversified enough and for sure, covid 19 has exposed extreme vulnerabilities in manufacturing. But this is a challenge that cannot be overcome with solely critiquing; this is a crisis that demands rich minds like Mr.Hussain's to think through the next steps instead of cribbing about the government having supported us at a time when we needed it the most…so that we could save our industry and support the jobs of millions of women and men, who breed hope and survival for many to fall back on.