Published in The Financial Express on Monday, 28 April 2014.
One-fifth of RMG factories engaged in subcontracting
No guideline for their operation
Nearly one-fifth of the country’s readymade garment (RMG) factories are engaged in sub-contracting business and they are not members of any of the two major apparel sector trade bodies — the BGMEA and the BKMEA, sources said.
Besides, there has not been any specific guideline for conducting sub-contracting business, especially for the country’s apparel makers, they mentioned.
At least 784 out of a total of 3,497 garment factories are neither members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) nor the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), an official database revealed.
The Department of Inspection for Factories and Establishments (DIFE) recently launched the database.
Without having their affiliation with any of the apex bodies, most of them are involved in outsourcing business, according to informed sources.
However, industry insiders claimed the number of sub-contracting factories could be much more as many member-factories also do such indirect sourcing.
These units manufacture apparel products for factories that are directly involved in export of the same. If they export directly, they have to have membership either of the two associations on the basis of their product lines.
Without having utilisation declaration from the BGMEA or the BKMEA, none can export apparels directly, they added.
When contacted, DIFE Inspector General Syed Ahmed said these 784 units are not members of the BGMEA or the BKMEA.
“They mostly do sub-contracting,” he told the FE.
The 23 special teams of DIFE inspectors visited those units last year and collected information that was included in the database.
Earlier, the BGMEA and the BKMEA requested the government to identify those units which are not members of any of the two associations and take necessary steps to bring them under regulations.
The DIFE IG said these units are identified through the Department’s regular inspection which would be continuing in the future.
Replying to a question, he said the non-member factories would also be assessed by the government under the ILO-led inspection programmes.
Partially disagreeing with the number, BGMEA President Md Atiqul Islam said, some of them might do business locally or use local fabrics for export which does not need any certification from either the BGMEA or the BKMEA. “They do either indirect export or sub-contracting. They must be brought under the inspection programme by the government,” he said adding his association is also trying to identify such units.
There are also allegations that big garment manufacturing units are engaged in sub-contracting with non-compliant factories and Tazreen and Smart were among them.
The main buyers usually overlook third-party manufacturers but the issue of sub-contracting has now become a serious concern following devastating incidents like Rana Plaza building collapse and Tazreen fire incident, industry insiders said.
The big garment owners take direct manufacturing orders from buyers and, in many cases, they shift their assigned tasks to third-party readymade garment units to manufacture apparel products mainly for timely shipments at relatively low costs, they added.
After the Tazreen fire incident, Walmart, the world’s largest retailer, cut off its ties with its Bangladeshi counterpart for sub-contracting with the Tazreen saying it was not authorised by the retailer group. To avoid such incidents in the future, the government last year initiated a move and drafted a guideline, but it is yet to get any final shape, they alleged.
President of Exporters Association of Bangladesh (EAB) Abdus Salam Murshedy said there are various reasons which have made even a fully compliant factory non-compliant.
“Then these units engage in work on sub-contract basis for other big factories,” he added.
“When compliant factories slip into non-compliant ones, buyers do not give them work orders directly. They find no other options but to be dependent on others,” he said.
Mr Murshedy added if the international brands really want to improve work environment in Bangladesh factories, they would have to look into the situation prevailing at the sub-contracting factories.
Dr Khondaker Golam Moazzem Additional Research Director of Centre for Policy Dialogue said, the sub-contracting factories do not mean that they all are non-compliant and they are not in favour of closing all such factories.
The non-compliant units should be made compliant and competitive while the main responsibility lies with the local units that do business with them, he said. “The buyers also have play their role and take responsibility.”
The New York University Stern Center for Business and Human Rights in a recent report on “Business as usual is not an option: Supply chains and sourcing after Rana Plaza” revealed that indirect sourcing — a non-transparent practice of subcontracting — is a root cause of safety risks and poor working conditions in Bangladesh.
The report examined a range of measures undertaken last year, none of which has yet addressed the fundamental problems facing the garment industry.