RMG wage increase
Post government decision to increase wages by 80% , we are observing quite a few economists, intellectuals stating that even this is not enough & it should be Tk 5000 minimum.. Workers' demonstration, I can understand, given their lack of education , plus not to mention some politicians' & NGOs' instigation ... but hearing such comments from the country's elite group really puzzles me... Has anyone of them analysed (from a finance point of view & not just social ).. what is the implication of this huge wage increase to the industry?
Working in this sector for the last 14 years with a renowned organisation & having good client base (by which I mean, who pay decent gmt price), I really like to give public the true situation we are in... 1st of all, most garment makers in Bangladesh, practically work on CM basis (i.e. we charge only for Cut & Making), even if the term of selling is FOB or C&F... This means, for an export of say US100 , raw materials (fabric plus other accessories) comprises of US$ 75-80 ... Since Bangladesh backward linkage is very poor, so these fund goes back to the foreign suppliers... The local owners' pie is only 20% of export value.. Garment sector being a labour intensive industry (unlike some other industry such as pharmacy etc), labour cost alone takes up 80% of this CM value.. (i.e 16% of export value)... So now, when this field's (labor) cost is increased exponentially by 70-80%., at one go .. what does it leave for the owner? I really urge our financial experts to analyse this..
We also hear quite frequently, the owners are buying lexus & other cars. For some one who does 20 million dollar biz even with 1% profit, you can afford these luxury cars... so just having a car should not reflect the profitability /loss of the company... With the amount of stress running this biz, particularly dealing with this frequent worker unrest etc, & the profit margin squeezing to bare minimum , I won't to be surprised, if the current generation entrepreneurs (mostly 2nd generation) opt out of this trade & move to other areas (such as real estate etc, where involvement of labour is minimum )... which some are already doing... Then what will happen to our mass workers?
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RMG sector is considered one of the most promising and profit making sectors in Bangladesh. The country has been gaining a greater portion of its GDP from this sector. Because of the huge potential of the RMG, our country has also been getting a great amount of Foreign Direct Investment (FDI) in this sector. But it is a matter of great regret that unrest in RMG sector has gone out of bounds. From a bird's eye view, it seems that 'salary imbalance' is the only cause of this trouble But is this the only cause? We have also seen that many conspiracies were hatched in the past for destroying this sector. So, swift and effective action is needed to save the sector.
Khondoker Rezwan Tanvir, Dept. of Business Administration, SUST, Sylhet
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