The Rupp Report: Something’s Happening In Bangladesh

Thanks to very low labor costs, Bangladesh succeeded in the past decade in becoming the
second-largest supplier to international markets after China. In 2012, the country exported apparel
worth US$20 billion. About 50 percent is exported to Europe, and some 40 percent to the United
States. Most major Western fashion houses and retail chains produce in Bangladesh.

Two and a half months after the devastating collapse of a textile factory in Bangladesh
(see ”
Rupp Report: Cheap Textiles Paid For With Human Lives
,”, April 30, 2013)
, 70 international companies have promised
additional security in production. Now, it seems that something is happening to improve the
desperate structure of the national textile production. The suppliers in the textile chain must
sign an agreement that fire protection in the mills is guaranteed.

The Carrot And The Stick

Now, some days ago, the European Union (EU), Bangladesh and the International Labour
Organization (ILO) in Geneva signed an agreement to increase safety in the textile factories of
(See sidebar). The agreement is intended to ensure that a tragedy such as the one last
April in Rana Plaza will not occur again.

The EU is ready to help Bangladesh increase safety in its textile production. However,
Brussels is also ready to act if nothing changes. Bangladesh must understand that the duty-free and
quota-free imports of textile products from Bangladesh to the EU should not be simply taken for
granted. With this agreement, on the one hand, the security should be increased in the textile
factories. On the other hand, in the special economic zones, the workers have the right to assemble
and to negotiate collective labor agreements. However, this seems to be a theoretical issue.
Activists are convinced that these organizations would be important to represent the interests of
the poor and uneducated women textile workers.

On Monday, July 15, Bangladesh passed a law that gives workers the right to form trade
unions without approval from factory owners . In practice, however, up to now, all attempts have
been prevented in this direction by force.

To check the security of the buildings and improved working conditions, the Government of
Bangladesh committed itself to hiring 200 additional labor inspectors. The EU and the ILO will
support the implementation of the agreed-upon measures with financial and technical assistance. The
structural safety of buildings and improved fire safety in the factories must be implemented by
June 2014.

Of Outstanding Importance

The disaster was and is not a surprise. For years, the country has been in the headlines due
to fires and collapses of factories. However, the recent accident was the worst in the history of
Bangladesh, and Western retail companies that produce in the country worry about their image. Some
companies have already decided to relocate their production facilities because of the never-ending
horror stories. Vietnam, Cambodia and Indonesia are currently the most attractive destinations. In
2010, the minimum wage for textile workers has almost doubled to the equivalent of US$37 a month.
However, that is still much lower than anywhere else in the world. In Cambodia, for example, the
wage is at US$78; and in the southern Chinese industrial area of Guangzhou, US$210. Bangladesh
apparel workers are demanding that the salaries would be adjusted annually because of double-digit
inflation in the country.

In reality, a lack of capacity and significantly higher production costs make it virtually
impossible for most of the Western customers to leave Bangladesh overnight. The government needs to
urgently improve working conditions and safety in the textile factories if the country wants to
maintain its position in the market.

The loss of these big customers would be a disaster not only for the Bangladeshi textile
industry, but for the whole country as a whole. The sector currently contributes some 80 percent of
export revenues — US$19 billion. It also is the major employer. Nearly 4 million Bangladeshis —
almost half of the country’s industrial employees — are working in textile factories. According to
estimates, about 12 million of the 150 million inhabitants of the land directly depend on the
sector for their livelihood.

The foreign minister of Bangladesh says her country will do everything necessary to increase
the security in the textile factories and to improve working conditions. In recent years, EU
imports of textiles from Bangladesh were worth some 9.2 billion euros, which corresponds, according
to the calculations by Brussels, to roughly 2.2 million jobs. An abolishment of duty-free imports
of textiles from Bangladesh would have devastating consequences for the country.

Special Agreement In The U.S.

Up to now, the big American companies have rejected the signing of an agreement with
international brands and retailers. However, for image reasons, this situation has become critical.
Led by Walmart and Gap, 17 companies from the U.S. and Canada have announced their own agreement to
require more safety in the textile factories of Bangladesh: The current situation in the apparel
factories is unacceptable, CEOs of the involved companies declared some days ago in Washington. All
are called — the factory owners, the government of Bangladesh and the purchasers of the garments
and shoes all over the world — to change the situation quickly.

Their own agreement — the Bangladesh Worker Safety Initiative — foresees inspections of
factories and training for workers in the next five years. The agreement also includes the new fire
protection agreements and the requirement that defects must be repaired and renovation of factory
buildings must be executed. If there is danger to life, the factories could be even closed.

Sustainability Compact

The ILO has joined a major compact launched by the EU together with the Government of
Bangladesh — to improve labor rights, working conditions and factory safety in the ready-made
garment industry in Bangladesh.

It commits all parties concerned to a number of time-bound actions, including reforming the
Bangladesh Labour Law to strengthening workers’ rights; improving building and fire safety by June
2014 and recruiting 200 additional inspectors by the end of 2013.

In a joint statement issued after the agreement was reached, the Bangladesh government and
the EU welcomed and encouraged “the continued efforts of the ILO to bring together the various
relevant stakeholders to work together to address the challenges of labor standards and factory
safety in Bangladesh.”

The statement also stressed the need for reform and implementation of a new Bangladesh
Labour Law in conformity with International Labour Standards. In opening remarks, made before the
compact was announced, the ILO Director-General, Guy Ryder, said a new, amended labor law in
Bangladesh needed to be passed quickly to avert another tragedy.

“It is important to underline that it’s a matter of fundamental importance to the action
that we all need to participate in. The labour law needs to be brought into line with ILO Standards
relating to fundamental rights at work, freedom of association and collective bargaining. There
should be no doubt about the action required and we very much hope that the legislation will meet
these needs.”

Labour rights, safety and health at work and responsible business conduct are at the core of
the “Staying Engaged — A Sustainability Compact with Bangladesh.”

The ILO was supporting Bangladesh’s labor law reform process before the Rana Plaza building
collapse occurred — promoting the need for a national policy on occupational safety and health,
strengthening unions and labor rights.

Soon after the tragedy, the Organization sent a mission to Bangladesh. Building upon a
national tripartite plan of action, the mission issued a joint statement from the government and
its social partners.

In addition, ILO technical assistance to the Bangladeshi apparel sector has significantly
increased since April.

The Organization also acts as a neutral chair and facilitator to a private sector industry
accord on building and fire safety between two global unions and retailers that has, to date, been
signed by around 70 global brands.

The joint statement acknowledged the importance of ILO technical assistance and committed to
a follow-up meeting in 2014 to review progress.

Source: International Labour Organization

July 17, 2013