Bangladesh's readymade garment (RMG) industry faces immense pressure from its major buyers over a wide range of issues, including living wage and human rights, which might push the country's top export sector into a future of uncertainty if not rectified.
Concerns in these areas have been raised by the United States and the European Union, which along with the United Kingdom, collectively account for 70% of Bangladesh's apparel exports.
One issue after another, amid a recent wave of apparel workers' protests over wage, has kept the government scrambling to respond and the garment industry on tenterhooks about the future.
Bangladesh has been facing such heightened scrutiny on labour standards for a while in contrast to its close Asian competitors like Vietnam, Cambodia, and India.
So far, cheap labour has been the sole source of strength of Bangladesh's $47 billion export industry while ignoring labour rights, productivity and diversity issues.
Despite the latest 56% hike in the minimum wage since the previous revision in 2018, coming into effect from 1 December, a portion of the labour rights groups finds the new wage structure far lower than regional peers.
They say, when adjusted for inflation, the actual wage gains remain minimal in Bangladesh. In contrast, Vietnam implements annual minimum wage adjustments averaging 5%, keeping pace with inflation, which typically hovers around 4%.
Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD), told The Business Standard, "Despite long-standing calls from the international community for the development of Bangladesh's labour sector, we have failed to prioritise these concerns."
"We have neglected to address their key concerns, particularly in areas such as establishing trade unions in Export Processing Zones (EPZs), streamlining trade union formation processes," he said.
He expressed particular concern regarding the new warning issued by the United States against those who undermine labour rights, stating that it carries significant implications for Bangladesh.
On 16 November, Secretary of the US Department of State Antony J Blinken said those who threaten, intimidate, or attack union leaders, labour rights defenders and labour organisations will be held accountable.
A call for action ignored?
Pressures have mounted on Bangladesh from global rights groups, institutions and governments. The most concerning one comes from the US administration warning of trade penalties and visa restrictions on "those who threaten, who intimidate, who attack union leaders, labour rights defenders, and labour organisations."
Secretary of the US Department of State Antony J Blinken in his statement named Bangladeshi garment activist Kalpona Atker and pledged to use the US voice to make sure labour rights defenders are protected.
The day before, Geneva-based global rights group IndustriAll, said the new minimum wage of Tk12,500 (US$112) announced on 9 November, is "woefully inadequate and keeps workers under the poverty line."
Its local chapter earlier called for a reassessment of the declared minimum wage and to stop arbitrary arrests of workers and labour leaders.
In a letter to the prime minister, Fair Wear, joined by amfori, Ethical Trading Initiative (ETI), Fair Labor Association (FLA), and Mondiaal FNV, said the new minimum wage falls short of covering basic needs and a decent standard of living for the workers.
"The gap between the legal minimum wage and the average living wage in Bangladesh is the highest among major garment-producing countries," the joint letter said, posing challenges to Bangladesh's apparel sector to meet international standards and maintain its position as a responsible sourcing country.
Their concerns matter as the signatories represent over 2,500 international brands, retailers, suppliers, and workers across global supply chains, and have significant ties to Bangladesh with more than 2,900 factories.
Meanwhile, the Everything but Arms (EBA) review mission of the European Union (EU) visited Bangladesh recently and felt that Bangladesh needed to do more for labour and human rights for continued EBA benefits and access to GSP+ (Generalised Scheme of Preferences) in Europe.
The mission's evaluation will be reflected in the next EU GSP report expected later this month.
Concerns must be addressed: Analysts
Economist Mustafizur Rahman emphasised the urgent need to address labour rights concerns, not solely in response to international pressure but also for Bangladeshi workers and their overall well-being.
The recent 56% increase in the minimum wage for RMG workers marks a step forward, a measure deemed justifiable by both factory owners and the government, he said.
However, the economist believes that there is ample room for further improvement. He underscores the country's robust economic growth, with nominal GDP expanding at an average annual rate of 13%, resulting in a cumulative growth of over 70% in five years. In line with this economic progress, workers should expect proportionate wage increases.
"The government should shoulder the responsibility for aspects like workers' accommodation and food rations, without placing the entire onus on factory owners. Similarly, foreign buyers must also contribute to addressing these concerns," Mustafizur Rahman added.
Economist and Executive Director of Policy Research Institute (PRI) Dr Ahsan H Mansur said the need for prompt and effective measures to address the concerns raised by both international stakeholders must be met. Harsh treatment of workers is unacceptable and must be avoided.
Referring to the US warning, he said there was pressure on the garment sector in the past, but not like this time with the general elections approaching fast.
Acknowledging the growing complexity of the situation, Ahsan H Mansur cautioned about the challenging times that lay ahead. "We must initiate urgent dialogue with the US and the EU," he said.
"The US's recent decision is likely to exert psychological pressure on garment exporters, as the EU has historically followed suit," said Dr MA Razzaque, chairman of Research and Policy Integration for Development (RAPID).
Socialist Workers Front President Razekuzzaman Ratan told TBS that boosting productivity hinges on providing competitive wages. Bangladesh remains among the lowest-paying garment manufacturers in the region with the new minimum monthly wage set at $113, while India pays $171, Sri Lanka $160, Nepal $150, and Cambodia $200.
"Why can't our exporters match these standards?" he questioned.
Industry has its own say
Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), believes there is no need to panic about the US's announcement, but he recognises the need for caution and continued efforts to improve labour standards in Bangladesh.
"Bangladesh's overall labour standard is better than competitive countries like Vietnam, Cambodia, China, India, and Pakistan," he said.
"While workers may have justifiable demands for wage increases in light of rising inflation, it is crucial to strike a balance with the industry's capacity to bear such costs," he said.
Syed Nazrul Islam, senior vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said "We want to reassure the EU and the US that Bangladesh is fully committed to adhering to the ILO conventions. We are currently reviewing the matter thoroughly and will engage in open dialogue with the ILO, buyers, brands, and the EU and US to address any concerns."
Acknowledging the persistent neglect of productivity at the factory level, MA Rahim Feroz, vice president of DBL Group, a prominent RMG exporter in Bangladesh, conceded that rising costs have compelled factories to prioritise productivity enhancement measures.
"The pressure to remain competitive has forced us to focus on productivity improvement now," he remarked, emphasising the urgency of the situation.
Industry insiders have claimed Bangladesh's garment industry has achieved unprecedented levels of labour-friendliness and compliance, which should be showcased duly through effective communications with buyers, brands, and the international community.