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Covid-19 -- exposing vulnerabilities in RMG sector

| Updated: November 09, 2020 21:03:02


Covid-19 -- exposing vulnerabilities in RMG sector

A policy brief titled 'The Crisis in the World of Work in View of Covid-19' was published in July 2020 by the Centre for Policy Dialogue (CPD) in collaboration with Friedrich Ebert Stiftung (FES) commemorating the Rana Plaza tragedy. This article reflects on the key issues of the policy brief.

The Covid-19 pandemic forced the shutdown of all kinds of economic activities in the country during late March 2020 to the end of May 2020 which severely affected businesses, employment, workers' wages and earnings, occupational safety and health (OSH) and workers' rights. The RMG sector is one of the most affected sectors in view of Covid-19. CPD conducted a study titled 'The Crisis in the World of Work in View of Covid-19' in April 2020 during the time of the 7th Anniversary of the Rana Plaza Tragedy. The main objective of the study was to examine and find out the strength of the partnership across the RMG value chain established after the Rana Plaza tragedy regarding its efficiency in crisis management in the times of the Covid-19 pandemic. Various national and international organisations have projected a lower level of GDP growth (between 1.6 per cent and 3.00 per cent in FY2020) (World Bank, 2020; IMF, 2020 & CPD 2020) due to the contractions in the economy because of Covid-19. On top of that, businesses, trade, personal, and public service have been projected to shrink between 0.05 per cent of GDP to 0.11 per cent (ADB, 2020). Loss of manufacturing employment has been projected between 0.38 to 0.95 per cent of total sectoral employment (ADB, 2020). Such an economy-wide crisis requires a strong partnership among key actors in the RMG sector. The study aims to review such a partnership among employers, workers, brands/buyers, government, and development partners which was formulated to collectively solve major crises across the RMG value chain over the last seven years.

IMPLEMENTING NATIONAL PLAN OF ACTION: Since the Rana Plaza tragedy in 2013, the key stakeholders of the apparel value chain have developed a partnership for improvement of physical and social compliance in the apparel value chain. A national plan of action (PoA) was initiated as part of achieving the outcome of the partnership. The focus of PoA includes regulatory reforms and policy measures, upgrading public administration, ensuring industrial safety, and rehabilitating workers and their injury insurances. Among them, public administration and industrial safety conditions have seen notable improvements. However, regulatory reforms and policy measures have seen moderate improvements. Still, there are several unaddressed issues under those broadly defined areas which limit the level of progress. Under the regulatory reforms and policy measures agenda, notable achievements are the formulation of a national occupational health and safety policy, amendment of the labour act, formation of labour rules. Still, the ratification of ILO conventions is yet to be established. Ministry of Labour and Employment (MoLE) and Fire Safety and Civil Defense (FSCD) have upgraded their organisational structure and activities. For example, the Department of Inspection for Factories and Establishments (DIFE) has seen a significant improvement in staff capacity and budget. However, the legal authority of DIFE is still limited. Workplace safety in garments factories has also seen a significant improvement. Over 90 per cent of the identified problems are solved by the factories under the inspection of Accord and Alliance initiatives. But only 32 per cent of the total problems are solved by the factories under the inspection of the National Initiative (NI). A major achievement in the post-Rana Plaza period is setting up the Rana Plaza donors' Trust Fund. This fund helped to compensate the victims of the accident. But there is still no national insurance policy for injured workers. The next course of action should be ensuring industrial safety beyond the RMG sector, setting up an industrial safety unit, ratifying ILO conventions. Covid-19 has also shown us that there should be an emergency preparedness at the industrial units.

FAULT LINES IN PARTNERSHIP: The Coronavirus pandemic has exposed the fault lines of the partnership in the RMG value chain. Back in January-February in 2020, supply of raw materials drastically declined due to the economic shutdown in China. Heavy reliance on Chinese raw materials with no sustainable alternative made Bangladeshi suppliers incur a lot of losses. After the raw materials crisis, came the crisis of order cancellation. During March-April of 2020, brands and retailers of major apparel importing countries cancelled/deferred their orders worth US $3.16 billion (BGMEA, 2020). During April 2020, the country's RMG export growth has seen a historical decline of -84.86 per cent (BGMEA, 2020). Contract law experts say that applying the 'force majeure' to cancel orders for which wages have been paid is questionable. The next phase of the crisis began when the government announced 'public holidays' due to the Covid-19 outbreak, which stayed from  March 29 to May 31 2020. Most of the factories were forced to shut down. The remaining open factories had questionable health and safety measures. Still, after all the factories have been operational, the production is at the level of 50-60 per cent of capacity.

FISCAL AND FINANCIAL STIMULUS PACKAGE: In this time of crisis, the government enacted several policies to support the RMG sector like allowing deferment of payment of VAT and quarterly Advanced Income Tax (AIT) till June 2020, raising the export development fund to $5 billion from $3.5 billion at 2 per cent interest rate, allowing delayed payment of loan till June 2020, relieving from late fees for credit cards, extending tenures of trade instruments, and increasing usance period of back to back LCs opened under supplier's/buyer's credit up to 360 days (from existing 180 days). The government has announced subsidised credit for export-oriented industries under which a total of BDT 100.00 billion was allocated for paying workers' wages. Most of the workers got this money through Mobile Financial Services (MFS). These initiatives had positive results in the short term, though these are inadequate to rebuild partnerships in the value chain.

PAYMENT TO WORKERS' WAGES, LAID-OFF AND RETRENCHMENT:  Workers who were in jobs received wages for four months (April-July, 2020). But various workers' organisations like National Garments Workers Federation (NGWF) claimed that those who got paid got less than their actual wage. The Garment Workers Trade Union Centre said, at least 30,000 workers were laid off during the first four weeks of the shutdown. Allegations were made against the employers for not following labour law provisions when laying off workers. These mismanagements have resulted in a declined state of a partnership between employers and workers.

DETERIORATED LIVELIHOOD CONDITION OF LAID-OFF AND RETRENCHED WORKERS: Workers' have suffered a decline in living standards because of the disruptions in the supply chain. Delayed payments made it difficult to afford rents, food, and other basic amenities. Massive layoffs pushed many workers below the poverty line. The government introduced initiatives of open market sales (OMS) to give workers food supplies. But workers were benefitted at small scale from these services. These show that workers need more than wage support.

EXPOSED LACK OF STRENGTH IN PARTNERSHIP: Covid-19 exposed the lack of strength in partnership between employers and workers. Workers' organisations claim that employers did not properly follow sections 12 and 16 of the labour act. The factories which are not a member of BGMEA and BKMEA or sub-contracting factories did not get any benefit from the stimulus package. There was limited effort to create a partnership among worker's organisations, employers, government, and brands/buyers to address workers' entitlements and rights. Both at the local and global level responsibility-sharing by key market players across the value chain was not strongly highlighted. There is a gradual rise in response from the sourcing countries as well as from the brands and buyers to rebuild the partnership. 

In conclusion, the policy brief shows how key market players acted during the Covid-19 pandemic, and the partnership that was developed in the post-Rana Plaza period is not in a firm state. In this situation, in order to strengthen the partnership among various actors of the value chain, the following policy measures can be taken: the worker's organisations need to be more visible and effective when advocating worker's rights; they should demand a strong role from brands/buyers to ensure worker's entitlements; OMS should be introduced in major industrial clusters; awareness should be raised among workers about health-related safety; the government should work beyond regulatory bindings in order to ensure 'minimum employment and income support' for the workers during this crisis period; the brand and buyers should demonstrate responsible business practices etc.

Khondaker Golam Moazzem is the Research Director, Centre for Policy Dialogue (CPD).

[email protected]

Tamim Ahmed, ASM Shamim Alam Shibly and Taslima Taznur are  programme associates, Centre for Policy Dialogue (CPD)

 

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