Proceedings of 9th Asian Business Research Conference 20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9 Compliance Management Practices on Readymade Garment Industry in Bangladesh: An Exclusive Study Nazim Ullah1, Md. Misfar Abdulla Sunny2 and Md. Habibur Rahman3 The Readymade Garments (RMG) sector has a greater potential than any other sector in terms of employment, reducing poverty and make a contribution to the national economy. Specially, this sector contributes much more in creating employment reducing poverty and economic development in Bangladesh. Basically, the study is analytical in nature based on the data collected from published sources. This data were processed by using descriptive statistical tools. Our main objective is to find out an overview of the present compliance management situation, acceptability of the compliance management practices and problems and prospect of compliance management practices in the garment industry in Bangladesh. Bangladesh garments industry characterized by ineffective compliance practices. Keywords: Compliance, Compliance Management, RMG 1. Introduction The Readymade garments (RMG) industry of Bangladesh commenced its journey in the late 1970s and within a short period of time emerged as an important player in the economy in terms of export earning, employment generation, poverty alleviation and empowering of women. Bangladesh's garment industry provides employment to about than 3.6 million workers which 2.8 million are women (Mahmud R.B., 2012). So it will not be an exaggeration to say the economic progress of Bangladesh hinges upon the growth of this industry. Readymade garments industry along earned about 78.60% of the yearly foreign exchange earning of the country (BGMEA-members of directory-2012/13). The growth rate of RMG export was over 17% of the last two decades (BGMEA- member of directory-2012/13). The prospects of RMG sector, however, in Bangladesh not only depend on availability of cheap labor and government liberal policy but depends on compliance practices with its standers code of conduct. Compliance management means, it is a process which ensures that a set of people are following a given set of rules. The rules are referred to as the compliance standard or compliance benchmark. Compliance management can take many forms. It can be a mix of policies, procedures, documentation, internal auditing, third party audits, security controls, and technological enforcement. There are recognized compliance bodies worldwide like International Labor Organization (ILO), International standard organization (ISO-14001), Worldwide Responsible Accredited 1.Nazim Ullah, Department of Business Administration, International Islamic University Chittagong Email:kmnazim_90@yahoo.com. 2.Md. Misfar Abdulla Suuy, Department of Business Administration, International Islamic University Chittagong.E-mail:misfarabdulla@gmail.com. 3.Md.habibur Rahman, Department of Business Administration, International Islamic University Chittagong.E-mail:greenhabib@gamil.com. 1 Proceedings of 9th Asian Business Research Conference 20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9 Production (WRAP), Bangladesh Association of Consulting Industry (BAC), Energy Technology Institute (ETI), Social Accountability International (SAI) and Fair Labor Association (FLA). Bangladesh exports its RMG products mainly to the United States of America (USA) and the European Union (EU). To satisfy the foreign buyers RMG sector of Bangladesh needs to improve the factory working environment and social issues related to the industry. Because International buyers are particular about compliance practices with standers code of conduct before placing any import order. In this paper, the existing compliance management practices of RMG factory of Bangladesh, particularly in Chittagong are examined. This paper also tries to reveal acceptability of compliance management practices on Readymade Garments Industry of Bangladesh. Objectives of the Study: The objectives of the study are given belowI. To provides an overview of the present compliance management situation in the readymade garment factories in Bangladesh. II. To find out the acceptability of existing compliance management practices on RMG among the employers and employees. III. To find out the problems and prospects of compliance management in readymade garment industry. 2. Literature Review Most significantly ready-made garment sectors is the prime foreign earner contributing to about 80% of the country’s total exports earning and more to the point we have to improve our weakness through flowing the standard compliance practices (Sheikh Hasina-2012). BGMEA is an organization working for the buyers, workers and entrepreneurs-so that all parties work under some fair trade conditions/working conditions for the laborers. The RMG sector should give more rights to laborers in terms of better payment, safer working condition so that it encourages more people to work in this industry (RAISUL ISLAM-2013). Bangladesh garment manufacturers and exporters association (BGMEA) and Bangladesh knitwear manufacturers and exporters association (BKMEA) set standards for compliance management practices as like, factories must have alternative stairs, basic fire equipment, approved layout plan from concerned authority for ensuring safe building construction, group insurance for workers, hygienic sanitation facilities, first aid appliance as well as ensuring minimum wages and flexible jobs for the workers. We need to introduce new technology and mechanism in order to increase our productivity, strength, competitiveness, quality improvement, and exports diversification so that we can overcome the existing challenges of global economic downturn (Dilip Barua-2012). The government should put pressures on the buyers and clearly convey its message to the buyers that the apparel factories of the country will comply with the rules and regulation of this land the buyers or retailers must accept it. (Reaz Bin Mahmod-2013 ). German Embassy (2010) stated that progress, a joint project of the Bangladesh Ministry of Commerce and the German Federal 2 Proceedings of 9th Asian Business Research Conference 20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9 Ministry, has consequently turned its full attention to the area of social compliance and assisting the government in the following areas are implementation of the new labor law, media campaigns, training and retraining measures for compliance inspectors, advisors, and the introduction of a new monitoring and evaluation system. Bangladesh gets numerous benefits from garment sector not only that it is the key source of foring income in Bangladesh; the sector employs a great number of people from all over the country, lowering the unemployment status. The garments sector also to boost women empowerment and also said BGMEA is working mostly for workers and entrepreneurs, trying to create a settlement between both parties to ensure smooth operation at factories and fair working condition/ facilities for the workers ( RUHAMA TASNIM -2013). My thinking is quite positive when it is comes to the garment industry of Bangladesh, since I believe it is one of those important sectors that have a strong potential to build a better Bangladesh. All of the factories in Bangladesh should comply with labor practices that ensure the social welfare of their employees (SIFAT ISLAM-2013). According to Mckinsey perspective - as a developing country, Bangladesh is under close by nongovernmental organizations (NGOs) and corporate social responsibility (CSR) stakeholders regarding compliance. Both CSR exports and buyers report improved labor and social compliance standers, but there is still a board range of compliance seen across suppliers and as described in the following, many unsolved topics exist. Solving these issues and achieves ethical labor standers and sourcing practices are key prerequisites in Bangladesh’s apparel industry. Productivity at suppliers needs to improve, not only to mitigate rising wages, but also to close the existing productivity gap in comparison to other sourcing countries. Productivity in Bangladesh’ RMG factories needs to catch up to the levels seen in India if Bangladesh’s suppliers are going to be able to deliver on the unit demand growth that Mckinsey forecasts, now expected to be 2x to 2.5x through 2020. In this era of the globization, Bangladesh has emerged as a repdly developing nation, over the years. BGMEA leaders have played a key role in the economic development of the country by generation 36 lakhs jobs directly. Today RGM sector accounts really 80 percent of the total export earning of Bangladesh(Quader-2012). In the era of globization, our beloved homeland Bangladesh is moving rapidly towards becoming a peaceful and prosperous nation(muhith-2012). A factory works for several buyers, so different safety requirements of the buyers compel the factory authority to shuffle its safety and security sets-up with frequent intervals during audits. This only causes hassles for the factory functionaries and because of this frequent shift of set-ups a factory often fails to fulfill the compliance requirement of a buyer(Azim-2013). Garments workers are concerned with long working hours or double consecutive shifts, personally unsafe work environment, poor working conditions, standard wage with promotion exposure , gender discrimination, industries do not follow standard code of conduct, the owner of the industry do not follow code of constructing industry, improper stairs facilities , improper exiting door and Women workers face physical abuse and sexual harassment inside as well as outside the factories, though most work until after dark, there are no safety measures for them and no residential facilities or transportation facilities provided Kumar (2006). Bangladesh had been missed a golden opportunity to grab the orders worth billions of dollars(Golam-2011). According to International Labor Organization (ILO-2010), “buyers make sourcing decisions based on four factors: price, quality, how long it takes to get produce to the 3 Proceedings of 9th Asian Business Research Conference 20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9 marketplace and social compliance, including compliance with labor standards (ILO2010). Compliance management practices has emerged as a major issue in the Bangladesh RMG sector. Despite the additional costs these compliance demands place on the sector, there are sound economic reasons why the Bangladesh garment industry should meet them. If the RMG Industry fails to implement compliance practices according to International Labour Standards, it may lose its global markets. Ignoring social compliance could harm Bangladesh's competitiveness as a supplier of ready-made garments. This could have dire results: the closure of most of the garment industry with millions of employees losing their jobs; the decline of economic growth, and social disorder such as snatching, kidnapping, robbery, street hustling and prostitution. Alternatively ensuring compliance practices is very important in Bangladesh's garments industry to both maintain quality of products. In the RMG sector, a compliance Certification System could be offered through buyers to promote and certify lawful, humane and ethical working conditions in manufacturing processing, and the working environment as well as meet international labour standards. 3. The Methodology Descriptive research was conducted to identify different dimension of compliance management practices in readymade garment industry in Bangladesh. As result of researchers were prevented from visiting the factory. For this reason, we have ignored the direct data collection and surveys. Consequently the research technique has relied on secondary data, collected through Case studies, Journals, Research articles, Thesis papers, Newspapers, Online news and survey reports, garments Manufacturing Industries Annual reports, BGMEA Yearly report and Files. The data was collected through a number of techniques. 4. Findings This study has tried to measure the extent to which the garment industries are maintaning above mentioned objective. Collected data from different sources are studied properly with the line of the objective of the study. By analyzing all of the data we can say all that garment industry in Bangladesh they do not follow the compliance obligation with standards for this reason they have to face several types of the problems that become the source of the fall in danger. If we see at a glance, in the sight of the garment industry in Bangladesh, They become bound with problems such as, workers left their work place, worker do not give their effort to produce the standards products, supplies do not provides materials in just time, finally, foreign buyers easily shift or do not place order. As they do not know the legal provisions on employment contracts an excessive working hour is one of the most common labour standards problems in Bangladesh. Equally, worker has no choice; they are compelled to take up the excessive workloads. According to the Factory Act 1965, a worker being employed for 12 months is entitled to annual leave, casual leave, sick and medical leave, festival leave and maternity leave with pay (ILO and BGMEA, 2003; ILO, 2005). Women are entitled to leave during pregnancy period. In reality Pregnant women are worried about loosing their jobs and hide their pregnancy, as they do not know the legal provisions of their employment contract. The factory 4 Proceedings of 9th Asian Business Research Conference 20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9 owners dismiss a woman worker if they discover that she is pregnant or if she applies for maternity leave (majumder- 2009). As a matter of fact garments manufacturing factories in Bangladesh frequently violate the labour laws of 1965 by not providing an appointment letter, and in the areas of working hours and breaks, leave, minimum wages and fringe benefits (Begum N., 2008). To avoid unrest in the RMG sector, Khan (2006) argued for strengthening compliance issues and labour standards to improve wages, working hours, overtime, job security, the right to form trade unions, social security and also occupational health and safety. Most of the factories do not meet the minimum standards prescribed in building and construction legislation (Factory Rules 1979). As a result, fire is common, buildings often collapse and faulty building design regularly results in the death of workers. Compensation following an incident is rare. The Spectrum Factory building collapse the tragedy of Rana plaza is one of the critical issues here but it occurs due to the negligence of the compliance management practices. In this tragedy a lot of workers died, some were left their hand, some were left their leg and some were badly injured. It is not only there several accidents in the Bangladesh but also Tzaneen fashion. For this reasons foreign buyers do not want to place orders or they want to swift to the competitors or they want to hardly impose the roles and regulation in the garment industry. Most of the garments workers are not satisfied with their present job in the RMG sector. The level of wages is the most significant source of dissatisfaction for workers in the RMG industry. RMG owner often deny that they have the power to improve the wages or conditions of workers. On the other hand, prospects of promotion in the RMG industry of Bangladesh are uncommon. Without full payment or being paid on time, worker often worry and are anxious about the future. This results in low work productivity and job dissatisfaction (ILO, 2005; Morshed, 2007). There are many other labour sectors; unlikely child labour is a serious and growing problem within this sector. Although the RMG is a formal sector, there is no acceptance of the right to organise at the factory level and owners fear trade union. As a result labour unrest is common in the RMG sector.Finally; we can say that if we are able to avoid ineffective compliance practices rather than proper compliance practices in the garment industry all of the problems will be minimized. In the Table-1 showing three category garments, they are A, B and C category garments. A category garments are foreign garments and the overall performance of A category garments are excellent than B and C. B category garment are consisted by foreign and Bangladeshi entrepreneurs and B category garments performance are also similar to A. C category are totally Bangladeshi garments which performance is not good than A and B because there have some reasons which are low price, poor technology, and lack of good compliance management. The rating of Compliance management taken from Md. Mohshin Chowdhury (joint Secretary) However, factors that are fallen in the compliance practices should be given much more concentration. They are as follows: 1. The operation are handled efficiently 2. Organization improves monitoring and controlling system to minimize mistake. 3. Organization provides the equal employment opportunity 4. Organization removes fatigue to keep workers alert and productive 5. Organization does not have workplace violence. 5 Proceedings of 9th Asian Business Research Conference 20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9 6. Organization should provide the entertainment to the workers. 5. Conclusion Compliance management should be compromised by current HR and IR practices. An approach that pays attention to labour rights, global labour standards, fair labour practices, safety workplace as well as decent work in improving working conditions is needed (ferdous-2009). Further the Fair Labour Act, the Factory Act, the Occupational Health and Safety Act, Core Labour Standards, Code of Conduct, the ILO and the WTO Conventions are all contribute to a better work environment. This article has investigated compliance management conditions in the Bangladesh ready-made garments sector. It found the compliance management conditions are poor and challenges facing Social compliance, despite Bangladesh labour laws and the country's membership of the WTO and ILO. These include an inadequate application of labour standards and labour rights, law and enforcement, collective bargaining activities, fair labour practices as well as the government of Bangladesh and entrepreneur’s role in implementing the decent work in the RMG sector. It suggested monitoring was needed to ensure compliance with these laws. Lastly it suggested improved human resource management in RMG factories could ensure compliance management. The article looked at the roles of the main actors in HR and IR systems: non-government and government and the roles of the international community, civic society and stakeholder groups including the BGMEA, BKMEA, ILO and the WTO. Bangladesh government infrastructure was found to be poor, due to limited financial resources. The government also seems to lack the political commitment to improve working conditions in the RMG sector. The Bangladesh government needs to pay more attention to monitoring compliance. In addition a Code of Conduct and effective compliance monitoring cell are also required. The international textile business is tremendously competitive in the context of growing competitive among RMG exporting countries and consumer preference for products that meet internationally recognized standards , it is essential for Bangladesh RMG suppliers to improve compliance in there factories. Acknowledgement At the very beginning, we humbly acknowledge our heartful gratitude to the Almighty Allah, the most gracious, the benevolent and the merciful who has given us opportunity and strength to complete this great task within the desired time, than we would like to give thanks to secretary of the International conference on Business innovation entrepreneurship and engineering (ICOBIEE-2013). We are greatly delighted as a participant of this program. This is a great opportunity for us to write a paper. We have collected more reliable data related to the compliance management practices on readymade garments industry in Bangladesh and also we have expressed more innovative ideas and speeches of honorable persons who are related in this sector. In the mean time we faced some problems but we have become able to overcome that problems. We have tried our best level to collect data from different sources. We expect this paper will be published in the Journal by which we able to share our knowledge to the world and the reader will get real 6 Proceedings of 9th Asian Business Research Conference 20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9 knowledge about compliance management practices on readymade garments industry in Bangladesh. We give author to ICOBIEE- 2013 to publish this paper and oblige thereby.. 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