RMG export earnings rise, not workers' wages

Although export and various facilities in the readymade garment sector have increased amid the internal and external crisis, the wages of the workers in this sector are less in Bangladesh than the competitive countries.

The wages for the workers in the RMG sector in India, Cambodia, China, Indonesia, Vietnam and Pakistan are higher than Bangladesh.

Not only that, this sector of top foreign currency earnings is giving less wages than some important industries in the country.

Except for a short period of time, Bangladesh is the second top RMG exporting country in the world.  

Business in the apparel sector has increased despite the fire at the Tazreen Fashion, Rana Plaza building collapse and impact induced by coronavirus.

In the last one decade between 2013 and 2022, the RMG export has increased by 130 per cent.

With the increase in export of RMG, the government facilities in the sector have also increased.

Whereas other industries have to pay upto 45 per cent corporate tax, the RMG sector has to pay only 10-12 per cent tax.

Moreover, there are facilities of cash incentives, VAT rebate, and credit facilities in low interest from the Export Development Fund (EDF) and duty free import of raw materials.

During time for wage hike, the owners propose a low amount of increase every time. There was no exception this time.

The owners have proposed minimum wages of Tk 10,400 against Tk 20,393 proposed by the representatives of the workers at the Wage Board.  

As the workers aggrieved and took to the streets for demonstration which turned violent, the owners gave commitment to give a new proposal to the board. Earlier, two RMG workers were killed in Gazipur.

Wages for the RMG workers may be finalised at the 6th meeting of the Minimum Wage Board. Sources said the owners may propose over Tk 12,000. Leaders of several workers' organisations are doubtful whether the workers will be pleased if the wages close to the proposal by the owners are finalised.

Non-government research organisation Centre for Policy Dialogue (CPD) in a study last month said the workers need monthly wages of Tk 17,568.
The organisation said there will be no pressure on the RMG owners if the foreign buyers increase an additional seven cents for each item of garments.

CPD research director Khandaker Golam Moazzem, speaking to Prothom Alo on Monday, said, "During the fixation of wages, RMG owners threaten the factories have no capacity and the factories will be shut and the workers will be unemployed. This argument is not true. The times the wages increased in the past, the factories were able to pay the wages. The export also increased. That proved the capacity of this sector."

Khondaker Golam Moazzem said, "We have studied and found most of the factories have capacity to pay additional wages. Exports of all factories--small, medium and large have increased. The number of brands or buyers has increased. The size of factories has increased. So that the owners say, that is not acceptable."

Several RMG owners said the orders are less comparatively due to the Russia-Ukraine war. In a span of one and half years, the price of dollars against taka has increased by 27 per cent. The price of raw materials and gas-electricity has increased. However, the owners are getting additional take in dollars received from the export earnings.

The RMG sector faced four challenges in the last one decade. Tazreen Fashions was gutted in a fire in 2012 and in the following year, export slowed down due to Rana Plaza building collapse. But the trust of buyers was restored as huge work was carried out for the development of the work environment of factories. Exports increased.  The RMG sector faced difficulties due to the outbreak of coronavirus. Later RMG business turned around. The sector faced another challenge due to the Russia-Ukraine work.

Amid so many things, RMG exports have increased by 2.3 fold between 2013 and 2022. RMG items worth 38.77 USD billion exported in the first 10 months of this year. This export is 5.75 per cent higher than the corresponding period of last year.

Alongside increase of export, the RMG business has become stable. The dependence of the traditional markets including the US, EU and Canada has decreased. Exports to new markets including Japan, Australia, Russia, India, South Korea and China have increased. The destinations of around 16 per cent of total RMG exports were the new markets.

According to the World Trade Organisation (WTO), China captured the largest share of RMG exports, 31.7 per cent. Bangladesh stood second, 7.9 per cent. Besides, Vietnam grabbed 6.1 per cent, Turkey 3.50 per cent and India 3.1 per cent.

The RMG sector has been receiving various facilities for the last three decades. The owners are still taking a tax rebate of billions of taka saying that they need to retain capacity for competition in the world market. The National Board of Revenue in a report last week said a total of Tk 34.83 billion tax rebate has been given to the RMG, Textile and related sector in the fiscal year of 2020-21.

According to International Monetary Fund (IMF) conditions for USD 4.70 billion loan, this tax rebate has to be sliced.

Of the business entities, corporate tax is lowest in the RMG sector, only 12 per cent. The corporate tax is only 10 per cent if the factories are green and environment friendly. However, the exporters don't need to pay tax at the end of the year. If one per cent of tax at source on FOB is paid during the export, the corporate tax is adjusted.

However, other sectors have to pay 20 to 45 per cent corporate tax.

NBR sources said around Tk 20 billion tax is collected from the RMG and related sectors. But of the total tax collected from the sector, more than 175 per cent is rebated.

In addition to income tax, the garment industry gets 15 per cent cash assistance in different markets. Garment owners also get a bond facility. Under this facility, raw materials of the garment industry can be imported from abroad without any duty. Several other garment-related sectors, including packaging and accessories, also have this bond facility. However, this facility is available for a very few of the sectors. The other sectors don’t get this advantage.

Two years ago, the National Board of Revenue (NBR) conducted a research on the amount of duty tax exemption under this bond facility. According to the research, the amount of duty tax exemption under this facility was Tk 1,517.38 billion alone in the 2019-20 fiscal and around 80 per cent of this was exempted from the tax and duties of the garment sector.

The garment industry gets a tax benefit at a subsidised rate to import capital machineries and other equipment. Apart from that, the garment industrialists often get tax rebates by showing their personal cars and other assets as properties of their companies.

Speaking regarding this to Prothom Alo, former member of the Income Tax Division under the NBR, Syed Aminul Karim said, “This sector has been provided with every possible tax facility over the last four decades. Now it’s time to lift those facilities gradually. If a sector cannot be self-reliant in four decades, then when will it be?”

The dollar transaction rate was Tk 83.9 in 2018. The minimum wage at the time was Tk 8,000, which was USD 95.5 as per the then transaction rate. The transaction rate of the US dollar has risen to Tk 110.15 now. As such, the minimum salary of the readymade garment (RMG) workers now stands at USD 72.

The minimum wage of garment workers in India is USD 171, USD 303 in China, USD 200 in Cambodia, USD 242 in Indonesia, USD 170 in Vietnam and USD 110 in Pakistan. The garment workers’ minimum wage covers only 2.93 per cent of the per capita GDP of Bangladesh. China, and all the countries mentioned above are ahead of Bangladesh in terms of RMG worker’s wage.

A CPD research shows that a RMG worker produces exportable products worth USD 2030 or Tk 224,000 per month on average. It was Tk 168,000 in 2017. The productivity of the RMG workers gradually increased in the following years.

Asked about this, Bangladesh Knitwear Manufacturers and Exporters Association’s (BKMEA) executive president Mohammad Hatem told Prothom Alo, “There are several grades in our pay scale. However, all the talks circle around the lowest grade. The workers at a higher pay scale get more wage. In addition, our workers are less productive as compared to other countries. The RMG workers in Vietnam produce 300 T-shirts per hour. The number is 350 and 400 in Sri Lanka and China respectively, which comes down to 200 T-shirts in our country. Therefore, the existing RMG workers’ wage in our country is not less than our competitor countries by any means.”

The proposal placed in the minimum wage board by RMG owners’ representative Siddiqur Rahman on 22 October cited different problems on most parts. It said the prices of fuel oil and food products have gone up worldwide due to the Russia-Ukraine war. The US and member states of the European Union (EU) are facing high inflation rates. As a result, the sale of products except the daily commodities has declined. The sale of garment products also fell due to its impact. The EU and US-based buyers reduced the import of garment products exponentially.

The proposal further said, “The prices of fuel oil, LNG and power in the country have increased by 68 per cent, 180 per cent and 21 per cent respectively. Overall, the average production cost in the garment sector has increased by 40 per cent over the last five years. This sector is yet to cover the losses incurred in the time of coronavirus pandemic. Although the production cost and the prices of raw material skyrocketed, the prices of our products haven’t increased that much.”

On condition of anonymity, a garment industrialist told Prothom Alo, “We are struggling a little at the moment due to the Russia-Ukraine war. The number of purchase orders has declined as compared to normal times. However, we are hopeful that the situation will improve very soon. When the wages will be raised in all factories, the consumers will have no other option than buying our products at higher prices. However, that too will not be enough. The factories will have to strive for increasing productivity to survive. In the current context, the productivity rate must be raised by 5 to 6 per cent at least.”

Speaking to Prothom Alo, Bangladesh Garments and Industrial Workers Federation president Kalpana Akter said, “The garment owners are playing a dual role. At one end they are part of the government, and industrialists on the other. They don’t have any accountability in case the workers are subjected to suppression and oppression. This is why the trend of giving low wages to RMG workers is rising. However, the industry won’t be sustainable in this way. The buyer countries are legislating new laws ensuring a minimum wage of the RMG workers required for their survival. So things cannot go on like this for long.”

*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Rabiul Islam and Ashish Basu