Published in Daily Sun on Monday, 23 March 2015.
Direct competitors thru FDI not welcome: RMG owners
Invite foreign investment in tech transfer, knowledge sharing
Daily Sun
Local apparel makers and exporters have opposed joint-ventures (foreign investment jointly with local entrepreneurs) in the readymade garment sector in fear of labour unrest over the wage issue.
They argued that foreign investors under joint investment projects pay higher salary to the workers, which usually fuels labour unrest at the locally owned industrial units those offer comparatively lower wages.
These issues were discussed at a core policy-making meeting held at the Commerce Ministry early this month, but a decision in this regard is still pending.
Commerce Secretary Hedayetullah Al Mamoon and office bearers of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) were present in the meeting.
“We have noticed that the joint ventures are recruiting workers at salary higher than the government-approved wage structures for RMG workers. They start at Tk 8,000 for the low-skill workers while the wage board approves Tk 5,000 for this category. This is often resulting in labour unrest at the factories owned by local entrepreneurs. We do not want such situation again,” BGMEA vice president Md Shahidullah Azim told the meeting.
Some 300 joint-venture RMG units have been set up at the Export Processing Zones (EPZs) while the number is 20 in other industrial areas across the country, according to BGMEA.
Md Shahidullah Azim said the BGMEA and BKMEA leaders have also set two conditions for the government in case it approves any fresh joint-ventures in the RMG sector. He said the conditions are meant for protecting the local exporters.
The conditions said the government won’t allow the joint-venture RMG units to export products to the already established international markets and such joint-venture units will not be allowed to work on export orders for only cutting and making, a job usually done by the local factories.
“We have seen that some joint-ventures are collecting export orders for cutting and making only. It seems that they are the competitors of local manufacturers though the local factories are not capable of competing with them. We don’t need any foreign investment for cutting and making only,” the BGMEA leader said.
He also justified that the BGMEA and BKMEA are not against foreign investment in the RMG sector as the country needs more investment to generate employment and earn foreign currency.
“We are not against foreign investment. But, foreign investment under joint ventures can go for producing specialised items and high-value products that can transfer knowledge and technology into our local industry. The government should ensure policy support in this regard to safeguard the local entrepreneurs,” he said.
Since the late 70s, Bangladesh in its 40-year of journey towards becoming one of the world’s largest RMG manufacturers has maintained a significant growth in exports every year. During the last couple of decades, history says the RMG sector saw tremendous growth despite frequent labor unrest and industrial disasters.
Bangladesh’s apparel exports stood at $ 24.5 billion in the 2013-14 FY. In 2011, the WTO recognised Bangladesh as the world’s second largest RMG exporter.
As Bangladesh is thriving to attain more growth in RMG export, it needs huge foreign investment in the sector. The government has opened scopes for foreign investors with tax holiday, equity return and other benefits. Thus, many investors from Japan, South Korea and India became interested to invest in the RMG sector here.
In such a situation, the government is trying to enact a policy framework for foreign investment in the apparel sector by safeguarding the local RMG entrepreneurs.
Talking with daily sun, noted economist and RMG sector analyst Dr Khondaker Golam Moazzem said the local entrepreneurs should not be static on old policy over the wage structure for workers if they want to maintain competitiveness for longer term.
Dr Moazzem, also the Additional Research Director of the Centre for Policy Dialogue (CPD), also said the local entrepreneurs should think of producing high-value products and improving workers skills.
“They (local entrepreneurs) should think of equitable social development aimed at improving the living status of workers. By doing this, they can contribute a lot to take forward the collective efforts of making Bangladesh a middle-income country,” he said.
Dr Moazzem said foreign investment should be encouraged as a big target has already been set by the government and industry owners to take RMG export to $50 by 2021.
He said Bangladesh’s scope of expanding exports to new markets is widening as Brazil, Russia and South Africa will be emerging as giant apparel buyers.
“The government can start negations with governments of these three countries to obtain some benefits over tariff. It will benefit our local apparel exporters,” he said.