Understanding the relationship between
hazardous conditions in Bangladesh
RMG sector and MNCs’ reputation
Ion Buga
Laura Butiskyte
MD Nayamul Haque
Octavia Daniela Florena Radu
Yina Jin
January 2014
Education: Aalborg University - MSc International Business Economics / International
Marketing
Group number: 10
Subject: Understanding the relationship between hazardous conditions in Bangladesh
RMG sector and MNCs’ reputation
Supervisor: Mohammad Bakhtiar Rana
Delivery date: January 9th, 2014
Page count: 50
Total page count: 68
Ion Buga
Laura Butiskyte
MD Nayamul Haque
Octavia Daniela Florena Radu
Yina Jin
January 2014
Acknowledgement
We prepared this project as a part of our 1st semester Final exam in MSc in International
Business Economics / International Marketing.
During the project work we have shared our experiences and suggestions within the
group. The project would not be completed without the contribution and hard working of
each individuals of the group. We would like to express our big thanks to Aalborg
University, more specifically our IBC (International Business Centre) department,
Aalborg University Library and staffs for giving us the guidance and every single
opportunity.
Last but not least, we would like to express our gratitude for our supervisor Mr.
Mohammad Bakhtiar Rana for giving us the initiatives, right guidelines and all his useful
and valuable suggestions.
Executive summary:
In the contemporary time, hazardous problems within the RMG (Readymade garments)
sector Of Bangladesh has been attracted a serious concerned nationally and
internationally. Despite a great contribution on countries economy (79% of the total
export of the country) by exporting to MNC’s, this sector is also continuously affected by
the various infrastructural problems and Incidents. There are many internal problems and
incidents infested the RMG sector of Bangladesh. One of the major problems for the
RMG sector is labor unrest, causes for low wage, poor working conditions; misbehave by
the management, absence of labor union, absence of labor laws implementation, Physical
harassment and political intervention etc. On the other hand Incidents like building
collapse, fire attack causes for the poor safety and security maintenance, absence of fire
safety equipments, lack of emergency training, poor constructions and proper monitoring
by the local firms.
Due to the hazardous conditions within the RMG sector of Bangladesh, outsourcers or
MNCs are also affected on their reputation. The project is therefore design to see how the
hazardous conditions of RMG sector in Bangladesh affects on MNC’s reputation.
The project has focused on how the hazardous and institutional conditions of the RMG
sector in Bangladesh effects on the MNC’s reputation and legitimacy. In order to do that,
group has used secondary sources of data collection and critical incident technique as
research method by analyzing some the critical incidents of the RMG sector in
Bangladesh.
As the key issue of the project is to see how MNC’s reputations are affected by the local
firms’ incidents, group had tried to find out how exactly reputations affects from three
perspectives for instance: customer point of view, institutional point of view and
outsources firm’s point of views. In many cases it has found that MNCs tried to avoid
their responsibilities towards RMG firms in Bangladesh. A similarity has also found to
avoid responsibilities or rules and regulations with the local firms as well.
In order to avoid the incidents within the RMG sector and effects on MNC’s reputation
group has found some important points that need to be carried out by both, the RMG
sector factories of Bangladesh and MNCs as well. It has also found the importance of
both outsourcees and outsourcers to legitimize them towards the customers, institutions
and international organizations.
Table of Contents
1. Introduction ................................................................................................................... 1
2. Methodology .................................................................................................................. 4
2.1 Methodological approach ................................................................................................... 4
2.2 Paradigm .............................................................................................................................. 4
2.3 Choice of methodological approach .................................................................................. 6
2.4 Research methods ............................................................................................................... 6
2.5 Data collection ..................................................................................................................... 8
2.6 Limitation ............................................................................................................................ 8
3. Literature review ........................................................................................................ 10
3.1 Institutional theory ........................................................................................................... 10
3.2 Corporate Social Responsibility....................................................................................... 11
3.3 Supply chain management ............................................................................................... 12
3.4 Legitimacy theory ............................................................................................................. 13
3.5 Corporate reputation ........................................................................................................ 14
4. Analysis ........................................................................................................................ 15
4.1 Background........................................................................................................................ 15
4.2 Working conditions ........................................................................................................... 18
4.2.1 Wage and gender discrimination ................................................................................. 20
4.3 Critical Incidents ............................................................................................................... 22
4.4 MNCs’ Reputation ............................................................................................................ 29
4.5. Role of the Government ................................................................................................... 38
4.5.1 Labor training and safety measurement ....................................................................... 38
4.5.2 Financial support and role of bank .............................................................................. 39
4.5.3 Poor management and institutions’ initiatives ............................................................. 39
4.5.4 Politicalization of labour union.................................................................................... 40
4.5.5 Investment opportunity by the government ................................................................. 40
4.5.6 Infrastructural bottlenecks ........................................................................................... 41
4.5.7 Law and order .............................................................................................................. 41
4.5.8 Role of international organizations and their support .................................................. 41
4.6 Discussion........................................................................................................................... 46
Conclusion ....................................................................................................................... 49
References ........................................................................................................................ 51
1. Introduction
The RMG sector in Bangladesh has had a tremendous success over the last decades
(academia.edu, 2013). The apparel sector export is a multi-billion-dollar business in
Bangladesh, which contributes around 75% (RI. Habib, 2009) to the total export earnings
of the country. The impact of the ready-made garment exports is one of the most
significant economic and social developments in Bangladesh. It provides employment to
over 3.6 million people, 2.8 million of them being women (bgea.com.bd, 2012). Due to
rising labor costs in China and India, many foreign investors are coming to Bangladesh to
take advantage of the low labor costs. Several disasters in the factories, like Rana Plaza
collapse, have drawn attention of the society on the working conditions in Bangladesh
garment factories. MNCs outsourcing from those factories has their reputation affected
by the disasters. Most of the MNCs deny their collaboration with the collapsed factories
even though many evidences were found in the debris of the collapsed factories such as
garment products with some of the MNCs’ labels. The faulty management and superficial
collaboration between the factories and the outsourcing companies led to factories
collapse and death tolls.
Garment sector is the biggest employer of women in Bangladesh. The RMG sector has
provided jobs to women from the rural areas, which had no opportunity previously to be
part of the formal workforce. However, most of the women workers are facing many
troubles. Most of them come from low-income families. Low wages of women in the
garment industry has enabled the industry to become competitive in the world market.
Women are paid much less than men, mainly because they have no education.
Many researchers have investigated the working conditions in the Bangladeshi readymade garment industry (RMG) (F. Ahmed, 2013). The working conditions in the garment
industry do not meet the ILO (International Labor organization) standards. Labor rights
and standards are not respected in the garment factories, mainly due to the fact that there
are no trade unions; the payment is irregular and very low, wage discrimination and child
labor (Rana & Sorensen, 2013). Garment workers are worried about the unsafe working
environment, poor working conditions, wage and gender discrimination, long working
1
hours and double consecutive shifts (Kumar A., 2006). The employers treat the garment
workers as slaves, in order to increase their profits and maintain the garment industry
competitive against the increasing international competition (Kumar A., 2006).
The workers job contracts are only informal if they are compared to the standards of
more developed countries. Therefore the workers might lose their jobs at any time, as
they have no documental proof that they are even working in a particular factory. Still,
the workers fear of losing their jobs because they do not have any other job opportunity,
that is why, they continue in unsatisfactory employment (Bansari, 2010).
Bangladesh’s exporters are under continuous pressure to comply with international labour
standards. To maintain the quality of products as well as meeting the expectations of the
exports markets the MNCs had to ensure the Social compliance (F.Ahmed, 2013). Khan
(2006) proposed that trade unions, NGOs, civil society and other stakeholders should
collaborate in order to adopt the Code of Conduct for a feasible and competitive RMG
industry. Hazardous problems of RMG sector in Bangladesh are also affecting on MNCs’
business.
After understanding the Bangladesh RMG sector and its hazardous problems, working
conditions and other issues, we will be focusing on the institutional conditions of the
outsourcing countries, the behavior of the MNCs and how it directly affects their business
in host markets.
Under wage, low life-quality of the apparel workers, and the increasing hazardous
conditions of the apparel factories from which MNCs outsource directly affect the
MNCs’ business and reputation worldwide.
Our goal is to find out how the reputation of the MNCs is being affected. First of all, we
will analyze the life-quality of the workers and the hazardous incidents that have
happened in the RMG sector in Bangladesh is order to find out how the MNCs’
reputation is being affected. Secondly, we are going to describe the relationship between
the three: the government and the international organizations and the MNCs.
This leads up to our main problem:
2
-
How do the hazardous events of the RMG sector in Bangladesh affect the
MNCs’ reputation?
In order to answer this question, we have developed a structure that we are going to
follow in our analysis part. It contains two questions:
- How is quality of life of the workers and the hazardous conditions in the
outsourcing company affecting the quality of supply and reputation of MNCs?
- How do the government and the International Organizations support the RMG
sector of Bangladesh to act as a supplier for the MNCs?
3
2. Methodology
In this chapter, we will explain about methodological approach and research method to
the project, and which approach is choose and how does the approach help us to solve our
problem statement. Furthermore, it is about the way of data collection and limitation of
the project. Finally, we will write about which compositional structure we will use in our
project.
2.1 Methodological approach
The methodological approaches (Table X) can be identified as the practice through
knowledge, which related to paradigm, which represents the philosophical assumptions;
those assumptions cause suitable approach to encounter the issue (Arbnor & Bjerke,
2009).
Figure 1 - Methodological Approaches
Source: Arbnor and Bjerke (2009)
2.2 Paradigm
Arbnor and Bjerke formulated, paradigm is “any set of general and ultimate ideas about
the constitution of reality, the structure of science, scientific ideals and the like” (Arbnor
4
and Bjerke, 2009). And not only the researchers themselves influence the approach which
they choose to explain their topic, but also the approach vary based on the case study
itself. There are six paradigms which help to analyze the business problem:

Reality as concrete and conformable to law from a structure. Reality is tangible,
concrete and real, which can be exactly measured and observed.

Reality as a concrete determining process. Whole society is a developmental process,
and every factor influences the process, therefore, analyzing the problem is to
understand the relations from the holistic view.

Reality as mutually dependent fields of information. The developmental process
based on information exchange, and the relation is not fixed which is unstable, the
change affects another change.

Reality as world of symbolic discourse. Social reality is constructed on the subjective
interpretation of every element in society, and individuals explain reality by
interacting with each other.

Reality as a social construction. Reality is subjective and a continuous process, every
encounter is the element in building social reality, nothing is concrete.

Reality as a manifestation of human intentionality. Reality is a reflection of the
individual creative imagination, which means reality is created by individuals’
consciousness.
Methodological approaches
Base on the different paradigms, there are three methodological approaches:

Analytical approach. Reality is objective, and which assume that the whole is the
sum of its part. The researchers have to separate and analyze each part, also avoid
the influence by the surroundings, try to explain reality through logic.

Systems approach. Reality is as fact-filled system structures in the objective reality
and which are related to each other. The structures have their own characteristics,
and the researchers try to find influence of one structure to the other and their
relation.
5

Actors approach. Reality is as a social construction which built by the ones who
participate in it, which means the reality is based on human beings, and the
researchers’ actions and perceptions also influence the reality
The different methodological approaches are using for searching for different solutions.
The analytical approach obtains valid, objective and generalizable knowledge using
mainly quantitative methods, which tries to explain the whole through the analysis of the
single parts. The system approach is to obtain objective accessed knowledge, and which
explore a specific case, and then giving explanation or understanding of the parts through
the characteristics of the whole (Kuada, 2010). The actor approach is related to other
method, and which pursues subjective knowledge and understanding of the whole by the
characteristics of the parts.
2.3 Choice of methodological approach
Base on the discussion previous, system approach is the most suitable approach to this
project. Our topic is “How do the hazardous events of the RMG sector in Bangladesh
affect the MNCs’ reputation”, hazardous events of the RMG sector Bangladesh is the
social problems, which include many elements, such as role of government, role of the
multinational corporations and role of international organization, and the disaster
happened chiefly because the working condition did not meet safety standards. And the
hazardous events happened led to strike directly, because the workers ask to improve
working condition and life condition, which is catalyst for social change and company
reform. All the affairs like a circle and are related to each other.
2.4 Research methods
Research methods include two methods, quantitative research and qualitative research.
The details of each research method are showing in the Figure 2.
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Figure 2 - Research Methods
Source: Silverman, D. 1993; Neuman, L. 2006; and Bryman, A. and Bell, E. 2011
In this research qualitative research method is going to be used. The qualitative research
strategy “emphasizes words rather than quantification in the collection and analysis of
data” (Bryman & Bell, 2011). This quote shows main difference between quantitative
and qualitative methods – one is concerned with numbers and the latter is concerned with
words. However, there are other features are worth knowing about qualitative methods.
First, its relation to theory which is inductive, meaning that theory is generated out of
research (ibid.). Second, it’s “epistemological position described as interpretivist” (ibid.)
meaning that the participants of the social world try to understand it through
interpretations of its details. Lastly, it’s “ontological position is described as
constructionist” (ibid.), this means that the social reality is constructed through social
interactions between individuals (ibid.).
There are several qualitative research strategies, in this research the case study strategy is
going to be used. However the case study will be created using the critical incident
technique. This means that the case will consist of specific critical events that happened
7
in Bangladesh ready-made garment industry from (time we take as a start) until (time we
stop recording events). The events are going to be broadly described and then the content
of these events is going to be analyzed “in order to reveal the values that they reflected”
(ibid.). Most commonly way of making up the case using critical incident technique is
interviewing the respondents. However in this research incidents are going to be
described using the Internet sources.
2.5 Data collection
Since the distance between the authors of the project and Bangladesh it is not possible to
collect the primary data, we used secondary data to present the hazardous events of the
RMG sector in Bangladesh and analyze other relevant issues, which help us to achieve
our objective to explain “how hazardous events of the RMG sector in Bangladesh affect
the MNCs’ reputation”. Secondary data have been collected by other researchers or other
organizations, most of our data are from the official online sources and relevant public
articles. In order to provide more reliable and precise data, and make sure our research is
validity and reliability, we compare the data from one source to another one. Fortunately,
the result of our data is all most the same form different sources, like the average wage
and percentage of female labor in RMG industry.
2.6 Limitation
During the process of writing the project, there are several limitations. Most of the data
and information is secondary data, and the time is from 2006 to 2013 (This project is
focus on the nearly 10 years, and the period of time in some figures is broader). Although
we compared the data from different sources, still cannot ensure the data is precise, and
not all of the data can be found in different sources. Furthermore, the original research
may have the problem of “propensity”, which means the researchers’ subjective
consciousness may affect their research. Therefore, the secondary data include the
reliable data and the biased data. Due to these challenges the research is a time
exhausting process, which poses by itself a natural limit to this project.
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Hazardous event is complex social problem which include many elements, and these
elements also influence to each other, all the aspects affect MNCs’ reputation, based on
the limitation of time and data, this project research cannot include every aspects.
Moreover, there are four companies, which have given as examples in this project, which
cannot reflect each aspect to affect the reputation of MNEs in RMG sector in Bangladesh.
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3. Literature review
3.1 Institutional theory
Institutional theory mainly deals with deeper aspects in society, the organizational or
social structure. The theory is important because it deals with the norms, believes, rules
and routines of the organization or firms in relation to the society (Scott 2008).
Institutional theory says that it is important for MNCs or local firms to understand and
adjust their policies, rules and other activities from the social perspective. In order to
have a stable and longtime relationship with other actors within business environment,
MNCs should adopt the environmental rules, regulations and belief within the local
systems. In the same time institutions (local government, international organizations, for
example, human rights) also need to show positive attitude and willingness to cooperate
with MNCs or organizations. By practicing institutional theory MNCs or local firms will
be able to deal with more regulatory, social and cultural oriented dimensions within the
business environment. This means, that MNCs should follow responsible patterns of
behavior, follow generally accepted norms in the country.
Scott (2008) outlines three institutional pillars: regulative, normative and culturalcognitive system. In the project we will follow these institutional pillars to see the linkage
between MNCs or local firms within the overall institutional environment in the RMG
sector of Bangladesh.
The regulative pillar includes all the governmental legislations, laws, industrial
agreements, standards, rules and other preliminary policies or requirements of the local
government. We will try to show the linkage between MNCs institutional condition
within the RMG sector in Bangladesh from different perspectives like rules and
regulations, governmental assistances, assistance of social actors or other benefits.
The normative pillar basically deals with the organizational behavior or norms.
Normative pillar will help group see whether MNCs or local firms are following the
institutional norms of society and Values within the RMG sector of Bangladesh.
10
The last institutional pillar is known as cultural cognitive pillar that drives from the
cognitive turn of social science. In other words, as MNCs are doing business in many
countries, they are facing different kind of pressures or influences from the local country,
to react according they need to understand the local institutional environment (DiMaggio
& Powel, 1983). Cognitive pillar explains how MNCs and local firms could behave
subjectively (understand common beliefs), focus on constructed rules or meanings and
tend to developed relationship within the local environment gradually. Cognitive pillar
will assist the group to identify the actual involvement of MNCs activities and their
engagement in the RMG Sector in Bangladesh. The overall institutional theory will guide
the group to see the importance of MNCs’ and local firms’ involvement to fulfill
institutional conditions in order to gain cognitive and moral legitimacy.
3.2 Corporate Social Responsibility
Many authors use similar terminology when talking about corporate social responsibility,
however, the same terminology is not always used with the same meaning. In different
articles corporate social responsibility may mean legal responsibility, in other texts it is
used in more ethical sense, meaning the socially responsible behavior. Someone
sometimes equate corporate social responsibility with charitable activities. There are
many more meanings allocated for corporate social responsibility (later CSR), but most
of them have something in common, seeing CSR related to the legitimacy (Votaw, 1972).
Parsons (1961) has provided a starting point for the classification of CSR theories into
four groups, because according to him CSR theories are related to one of the facets of
social reality: economics, politics, social integration and ethics. Respectively, the theories
can be classified into: 1. instrumental theories, 2. political theories, 3. integrative theories,
4. ethical theories.
To explain very briefly, instrumental theories are concerned with wealth creation and
"understand CSR as mere means to the end of profits" (Gariga and Mele, 2004). Political
theories emphasize "social power of corporation [...] in its relationship with society and
its responsibility in the political arena" (Gariga and Mele, 2004). Integrative theories,
according to Gariga and Mele (2004) suggest that "business depends on society for its
11
continuity and growth and even existence of business itself", meaning that businesses
should focus on social demands. Finally, ethical theories, as title suggests itself, propose
that "firms ought to accept social responsibilities as an ethical obligation" (Gariga and
Mele, 2004).
In this paper the focus is on application of CSR theory from the integrative and ethical
perspectives, due to its relation to legitimacy and reputation. As mentioned earlier,
integrative theories are concerned with social demands, this means for the business to
survive it has to focus on social demands and act accordingly. However, there are no
specific activities that the corporation should engage in, but rather detect, scan and
respond to social demands "that achieve social legitimacy, greater social acceptance and
prestige" (Gariga and Mele, 2004). Ethical theories are based on the necessity to do "the
right thing" in order to create a good relationship between business and society. One of
the approaches that belong to the ethical group is universal rights. According to Cassel
(2001), "human rights have been taken as a basis for CSR, especially in the global market
place".
Looking to CSR theories from these angles leads us to assumption that failure in CSR
negatively influences business legitimacy and corporate reputation.
3.3 Supply chain management
Some authors equalize the terms of supply chain management and purchasing (Stuart,
1997). However, depending only on this function there is much to be missed of the
definition of supply chain management. Other researches define supply chain
management as having broader functions. For example, Giunipero and Brand (1996)
argues that supply chain management (later SCM) includes the development of
connections with suppliers, while Davis (1993) suggest "perspective embracing all
processes from sourcing [...] to final customers". However, there is no single and
"correct" definition of the concept of SCM, thereby we will adopt the more constructivist
approach - that is to understand how actors themselves engage in SCM meaning-creation,
what activities are included and what objectives are set.
12
The literature on SCM tends to move from "antagonistic" model to a collaborative model
(Matthyssens and Van den Bulte, 1994; Carr, 1999), in other words meaning that
cooperation is more emphasized than competition. Supplier management, supplierevaluation tools start to appear and being used more often (Carr, 1999). Another trend
idetified in SCM literature seems to be observing the "impacts" of SCM on purchasing
(Andersen and Rask, 2003), and the pressures made by the retailers that require their
suppliers to respond quickly and replenish the retailer stock based their sales (Abernathy
et al. 2000).
In our paper SCM theory is used for the analysis of the impact on the suppliers
(Bangladeshi RMG sector factories) put by retailers (MNCs), as well the the influence of
the quality of supply to the MNCs' reputation.
3.4 Legitimacy theory
According to institutional theory organization's perceived legitimacy is one of the
conditions for firm's survival (Powell and DiMaggio, 1991). Suchman's (1995) suggested
definition of legitimacy is a "generalized perception or assumption that the actions of an
entity are desirable, proper, or appropriate within a social system". Pfeffer and Salancik
(1978) say that the control of the organization's legitimacy lies within the outsiders, thus
the organization has to make sure to keep the favorable relationship with the
organization's stakeholders. Legitimacy is important because legitimate order guides the
social action (Weber, 1968) and influences the social adaptation of the organization in its
environment. Ruef and Scott (1998) say that the observers of the organization judge it
based on how consistent are they with the cultural modes and rules of the environment
they operate in. This explains the organizational adjustments to the environment that
firms engage in.
In this paper legitimacy theory in cooperation with institutional, CSR and corporate
reputation theories will help to analyze, whether the MNCs that are outsourcing their
apparel production manage to legitimate themselves within their business environment,
and how the legitimacy process is affected by the situation on Bangladesh RMG sector.
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3.5 Corporate reputation
Corporate reputation topic began being research since 1980s, however interest in this
concept grew significantly only in the year of 2001-2003, when the number of scholarly
articles in relation to corporate reputation increased many times comparing it to the time
period before 2000 (Barnett, Jermier and Lafferty, 2006). The corporate reputation
concept did not have a clear definition of what actually it is. This issue led Barnettm
Jermier and Lafferty (2006) to an attempt to categorize the definitions of corporate
reputation according to their similarities and differences that existed until now in other
researchers' works. First articles ever published on the topic of corporate reputation, all
were written from different perspectives, until the researches realized "how disjointed
this field of study is" (Barnett, Jermier and Lafferty, 2006). The reason of failure in
creating a unified approach to advance in this field of study is the confusion in relation to
understanding of main concepts used in the literature about corporate reputation (Barnett,
Jermier and Lafferty, 2006). Corporate image, corporate identity and reputation - these
terms used in different researches works have a different meaning. For instance, Fombrun
and van Riel (1997) see identity and image as components of reputation, the identity
presents the insiders' perception (employees, managers) and the image presents the
opposite - outsiders' perceptions who observe the firm. These two perceptions add up and
create the reputation of a firm: "A corporate reputation is a collective representation [...]
It argues a firm's relative standing both internally with employees and externally with its
stakeholders" (Fombrun and van Riel, 1997). Several other authors see identity and
image in similar perspective as Fombrun (1996), for instance, Markwick and Fill (1997)
understand identity as firm's presentation of itself to the outsiders and the uniqueness that
distinguishes it from other firms. Bromley (2001) understands image as "the internal
collective state of mind" that the firm tries to communicate to the observers through its
communication efforts.
Even though the above described perspective of the reputation isn't adopted universally, it
is used widely and will be adopted in this research. The corporate reputation concept will
be used in order to understand the change MNCs' reputation after the incidents in their
outsourcees' factories.
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4. Analysis
4.1 Background
In the past two decades, a large number of global garment brand owners established
Ready-Made Garment (later RMG) factories in Bangladesh. Until 2012, number of
garment manufacturers has rapidly grown up to more than 5000 (Figure 3).
Figure 3- Factory Growth in Bangladesh
Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA) website
In 2011, Bangladesh became the third largest global RMG exporter after China and Italy
(Figure 4). The RMG industry became the most important part of Bangladesh’s exports,
and its share reached 80% of Bangladesh’s total export in 2011/2012 (Figure 4). The
major reasons this industry is the fastest-growing industry is that Bangladesh’s domestic
textile industry has the cheapest labor.
15
Currently, Bangladesh’s garment manufacturers begin to move their position from CMT
(cut, make, trim) to OEM (original equipment manufacturing) (Gereffi, 2010). Under
CMT, the manufacturers are not involved in the product designing process, and the
buyer’s manufacturers are only paid for production process, not for the garment. In
garment industry, OEM is produced by customer specifications and design, and under
this arrangement, the manufacturers also provide sourcing and logistics capabilities for
full-package operations.
Figure 4 - Top 10 Clothing Exporters, 2005 vs. 2011
Source: Syed Z., Christina P., Preetika R. “The Global Garment Trail: From Bangladesh to a
Mall Near You”
16
Figure 5 - Comparative statement on export of the RMG sector and total export of
Bangladesh (in million $US)
Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA) website
However, even if RMG sector is the mainstay of Bangladesh’s economy, foreign
investment still dominates the garment industry in Bangladesh.
The main export destination for the Bangladeshi RMG products was the United States in
the early 1990s, followed by the European Union. These two big markets generate more
than 90% of the total RMG export earnings of Bangladesh (BGMEA and the Export
Promotion Bureau websites; and Quddus and Rashid, 2000). It is the 6th largest textile
and apparel supplier in the United States and European Union market. It is becoming a
bigger potential player by providing high quality with the cheapest price possible. Even if
bigger players like China and India control the market, the role of Bangladesh is still
important. Bangladesh is one among the very few suppliers that imports most of its raw
materials, but utilizes other factors of production, like cheap labor, to be able to provide
competitive prices. Cheap labor is one of the advantages of the RMG sector in
Bangladesh. It is almost twice cheaper comparing the wages of Bangladesh RMG
industry workers, to those from India and China (Islam S. 2001).
Bangladesh has an exclusive European Union duty free access. Therefore, many
international companies are merging in to use Bangladesh as a hub to manufacture their
product by outsourcing in Bangladesh and then gaining access to markets which were
previously unavailable to them. Bangladesh is taking advantage of the fact that they do
17
not fulfill the Multi Fibre Agreement (MFA), and it invites investors, and foreign
companies to place orders to attain this facility.
4.2 Working conditions
Currently there are approx. 3.6 million people working in the Bangladesh RMG industry,
2.8 million of them being women (Mahmud R.B., 2012). Most of them lack of
knowledge about the working conditions, labour standards and human rights.
The International Labour Standards and the Codes of Conduct regarding the working
conditions in the RMG sector are frequently infringed (Qudus and Uddin S., 1993;
Dasgupta S., 2002).
The Recruitment Policies are neglected, as the workers have no written formal contracts,
and therefore, they are unprotected by the law, and can lose their jobs at any time.
However, they continue to work in harmful conditions driven by the fear of losing their
job and no other employment options (Bansari, 2010).
In most cases, employers exploit their workers, especially women, in the factory without
any formal agreement or job contract. Therefore, the owners can dismiss workers without
any notice, compensations or payment for their work at the factory. It is easy for the
owners to find another worker at any time, due to the fact that there are many people
looking for work in the garment industry. For instance, if the workers do not succeed in
meeting the deadline of shipment or become loan defaulters, the owners close them in the
factory, where women have the most to suffer. However, the Bangladesh Government
recently amended the Labour Law, which contains changes such as the protection of
fundamental rights of women workers and the right to maternity leave. Bangladesh also
has signed the UN Convention on the Elimination of All Forms of Discrimination
Against Women (CEDAW), as well as ILO Convention 111 on Discrimination in
Employment and Occupation. Even though the legislations were applied, the women
workers’ rights are still ignored in the RMG sector.
Irregular and low wage payment is very common in the RMG sector in Bangladesh.
Usually, the factories do not provide any pay-slip. Since the enforcement of the laws is
18
poor in small to medium enterprises, the garment workers are deprived of any legal
rights.
In order for the employers to increase their profit and maintain a competitive terrain in
their industry sector, the workers are abused severely by the employers, which oblige
them to work over schedule or double consecutive shifts in an unsafe work environment
(Kumar A., 2006).
Most of the garment factories in Bangladesh do not have standard working hours, which
lead to forced labour, especially in the RMG sector. The workers have a quota to fulfill
and in case they do not finish in their working hours, they will have to work over
schedule without any payment.
An overtime of two hours is compulsory and if the workers refuse to work, they will be
dismissed, have their waged deducted or receive verbal harassment, which sometimes can
even end up in physical punishment. Moreover, the workers are not being informed in
advance regarding work after schedule. The owners often announce the workers in the
last moment at the end of the working day. In some factories, they are obliged to do night
shifts, up to 3 am even if the next shift is starting at 7 am, by locking the factories’ gates
(Majumder P., 1998).
In addition to this, most of the workers in the garment industry are not satisfied with their
present job and the main reason for that is the wage level this industry has. Even if the
laws mandate overtime payment or a minimum wage, workers in Bangladesh RMG
sector often work long hours for an abnormal low salary. This sector has the lowest wage
level in the world. In contrast with USA where the average hourly wage level in the
garment industry is $16.00, Bangladesh only pays $0.15. See the table below:
19
Figure 6 - Inter-country comparative average hourly wage in the RMG industry
No.
Country
Wage/hour (US$)
1.
Bangladesh
$0.21
2.
Cambodia
$0.24
3.
China
$0.93
4.
India
$0.55-0.68
5.
Indonesia
$0.35
Source: Institute for Global Labour and Human Rights, 10th of August 2010.
4.2.1 Wage and gender discrimination
The wage and gender discrimination is also a big concern in the RMG industry. Women
constitute 90% of workers in the RMG factories (Bhattacharya and Rahman 2000: 4).
They suffer the most from poor working conditions because they are employed in lowskilled jobs, such as: assembly-line helpers, machinists, finishing helpers and sewing
helper, where the hazards are greater due to overcrowding, poor ventilation and
inadequate fire prevention measures. Most of the women are young (average age 19),
unmarried, with no education or training and without any work experience (Absar S.S.,
2001).
They are poorly paid in this sector. As a result of sustained campaigning by women
workers, women rights and human rights activists and other trade unionists in
Bangladesh, the minimum wage for garment workers was raised in 2010 for the first time
in four years. Their wages depend on meeting the assigned production target. If
production targets are met, a sewing operator’s salary now starts at 3,861 taka
(approximately $45) a month and a helper’s wage at 3,000 taka ($35) a month (PaulMajumder and Begum, 2000: 26). This amount is inadequate in meeting the minimum
living standards in the urban areas.
20
The differences in the wages compared to the male workers are also lower. Moreover, the
discrimination is not only in the wages sector, but also in the positions occupied by the
women. So women are usually considered only for helpers, machinists, finishing helpers
and sewing helpers, positions with the lowest wage. Usually women do not get jobs as
cutting masters, production managers or supervisors.
Figure 7 - Gender differentials in wages in the RMG sector
Categories of workers
Male wages (Tk/pm)
Female wages (Tk/pm)
Operator
2,254
1,536
Cutting Master
3,935
-
Ironer
1,894
1,106
Sewing helper
1,200
762
Cutting helper
1,512
837
Finishing helper
1,209
1,023
Folder
1,528
1,157
Source: Absar, S.S. (2001). Problems surrounding wages: the readymade garments sector
in Bangladesh, LMD, Volume 2, No.7, pp-5
In the traditional economy, it is very difficult to relate wage difference with the
productivity difference because most workers are unskilled and the productivity
differences may not be captured by human capital variables. The perception of the society
regarding the women’s bargaining power plays a dominant role in this context. An
important socio-cultural factor behind the lower wage of women is that women are
considered secondary earners. The perception of women are secondary earners also
influences the institutional wage setting process. Male and female wage differentiation,
which is apparently link with pure gender bias, reflects the lower bargaining power in the
society. Women without male earner in the household are required to earn to ensure
21
survival and many women have to earn to save for dowry that they will pay to their
husband (Md. Gazi Salah Uddin, School of Business, 2008).
A problem faced by women working in the RMG sector, is the lack of a proper
accommodation. Khan (1993:77) mentioned that the accommodation is very expensive
for a single person. It is also difficult to find a landlord who would let out his place to a
single woman. It is also very hard for them to pay the rent, which consists almost 60% of
their total income. There are different types of accommodation: bostee, factory
accommodation, group housing or mess, hostels.
Another problem is the transport in the city. Thousands of workers struggle every day to
get to work, mostly on foot. Since few factories provide bus transportation for the
workers, most of them have to walk. The local transport is often too expensive for the
women. Often the buses are overcrowded and irregular. But the most dangerous part that
the transportation problem derives is the unsafely on the city roads. Zohir and PaulMajumder (1996) have done an extensive study on transportation of garment workers. In
their study they mentioned that the workers are often harassed. Harassment-related
incidences are under-reported. Zohir and Paul-Majumder (1996) found that attack by
mastaans, harassment by police and harassment by men on the streets are reported by
workers, but Hossain et al (1993) argue that attacks are under-reported or not entered into
registers.
4.3 Critical Incidents
In this part of the project we will focus on the four critical incidents from the recent years
(2010 to 2013) and in the end we will analyze what initiatives have been taken by the
MNCs and international organizational groups in order to restore the working conditions
in outsourcing firms in Bangladesh.
In order to explain the different incidents within the RMG sector in Bangladesh and how
it can influence the local firms, MNCs and local or international institutions, we would
like to present the overall situation by using one Critical Incidents table. The table will be
explained, starting from the most recent incidents to previous ones to the background of
22
those incidents and the effects they have on the MNCs, local firms and institutional
points. Next we will focus on how the overall incidents affect the MNCs’ reputation
along with the supply chain problems and additional costing for the MNCs.
Figure 8 - Critical Incidents, 2010-2013
Incidents (most
What
Why
How it affects
24 April 2013,
Collapsed/ more
Low safety and security
Caught attention
“Rana Plaza
than 1,200 people
system, weak
to the world
collapse”
died and 3,000 were
construction, corruption
medias, unveil the
injured
& lack of responsibility
political
showed by the owner of
corruption, create
Rana Plaza
negative impact
recent to
previous year)
on RMG industry
of Bangladesh
24 November
Got fire/ more than
Lack of Fire safety
Increase violence
2012, “Tazreen
111 people burned
system, low safety and
among the
Garments”
and 150 were
security system in the
garments workers,
injured
premises
labor unrest,
decline the overall
production, effect
on supply chain
Fire safety and security
MNC’s
14 December
29 workers died and
2010, “That’s it
about 20 were
reputation,
sportswear”
injured
efficient
productions, labor
unrest, questioned
on the overall
safety
maintenance
23
20 February
21 workers died
Lack of fire safety and
International
2010, Garib and
and more than 50
security systems
organizations
Garib,
workers were
pressure, workers
injured
safety issues,
overall RMG
sector safety
systems
First incident:
A big accident occurred in 2013 on April 24th in the capital area of Bangladesh where an
eight-story commercial building, named Rana Plaza, collapsed and took 1,129 lives
(Time World, 2013) and more than 22,515 people were injured (guardian, 2013). This
accident was one of the worst structural failures in the contemporary history (bbc news,
2013). This accident pressured the Bangladesh’s government to improve the poor
working conditions in the RMG industry.
The main cause of this incident was the poor maintenance of the building as well as
lacking responsibilities from the garment owners and the owner of Rana Plaza. The local
authority has warned the individuals to close down Rana Plaza as soon as possible and
also warned workers not to go back to work. However, the pressure from the garment’s
supervisor and the building’s authority, forced the workers to go back to work, which
ultimately resulted in the loss of their lives.
After the Rana Plaza incident local outsourcers were criticized both nationally and
globally which influenced the entire RMG sector. Workers went to the streets and
protested against the current conditions of this industry. Due to the protests, other firms
also had to close their production because of possible vandalisms from the workers.
The incident of Rana Plaza could be an example of the poor institutional performance of
the firm, for instance the commune’s construction regulations have showed the low level
of regulative performance. The building was lacking a substantial amount of safety and
security tools; the owner neither followed the (RAJUK) Dhaka city infrastructure scheme
24
nor the development authorities scheme. They even did not understand the norms and
values of the employees and stakeholders. This is a part of the normative pillar of the
institution theory (Scott, 2008). In a way they failed to understand what was important for
the local societies and workers. Another criticism about the Rana Plaza could be that they
did not understand the socio-cognitive factors in the RMG industry. It also affected the
other firms within the industry and their institutional acceptability and performance.
Due to the accident of Rana Plaza and the death toll, the international community raised
their voice. For instance, Micheal Connatry, one of the parliament’s member in the UK
encouraged its government to force all the major companies to check their supply chain
and ensure that the third country is not using their workers as slaves (Falkirkherald.co.uk
2013). The current EU trade commissioner also warned both the MNCs and Bangladesh’s
government to take further steps to improve the poor working conditions, otherwise they
would be facing legal consequences. Moreover he also asked the shoppers to notice
where and how the products were made, before buying from the retails stores (The
independent, 2013).
Wal-Mart’s international workers joined the striking employees in a demonstration
against Wal-Mart, stating that it should avoid future deaths in its international supply
chain. The demonstration was held in front of Wal-Mart’s headquarter. Rahul Sharma, a
public affair executive, said that a good reputation is built over a long period of time, but
can be ruined within seconds. He would advise the retailers to come up with a concrete
plan to overhaul the entire industry, and create a strong collaboration between the
retailers and the government as well as factory owners and labour unions (Rahul Sharma,
2013). The big companies though, have chosen another strategy. Wal-Mart for example,
said that there were no authorized productions of their clothes in the collapsed Rana Plaza
commercial building. H&M also said that there were no clothes produced in any of the
Rana Plaza factories (Kaj Johnson, 2013). This strategy of downplaying involvement in
Bangladesh's factory safety problems might work for the western consumers, which are
more worried about the retail prices rather than how and where the products were made,
but in Rahul Sharma’s opinion this is a risky strategy.
25
This collapse not only affected the international community but also influenced the
overall internal situation of RMG sector like labor unrest and violence.
Second incident:
On November 24th, 2012 the Tazreen fashion factory caught fire which was the cause of
117 confirmed death and more than 200 employees were injured (BBC, 2012). The
factory was mainly producing merchandise for USA retailers like US Mariens, Wal-Mart
(The telegraph, 2012). The factory also produced products for countries like France,
Netherlands and Italy. After this incident thousands of workers got more concerned about
the safety and security issues (The New York times, 2012).
The cause of the fire was an electrical short circuit (cnn.com, 2013), which is a clear
indicator of a low level of fire safety and security issues in the Tazreen garments. Fires in
the garments due to short-circuiting are not something new in this industry; it has
happened previously and still happening.
Lack of fire safety equipment as well as the lack of fire safety doors or exits along with
no fire emergency training caused the repetition of the same incidents within the industry.
All this issues create a negative impact on the employee’s safety and security within the
RMG sector of Bangladesh.
From these incidents it is easily understandable that Tazreen garments did not fulfill any
local or international institutional regulations. According to the institutional theory (Scott,
2008), regulative firms and organizations should seek the governmental legalization and
follow the rules and regulations within the industry. In contrast with this, the incident
indicates that Tazreen garments did not fulfill the regulative and normative norms like
understanding the moral value of the society and the employees. A weak governmental
law-and-order system could be responsible for this kind of incidents. For instance, after
the fire incident the police deemed the owners responsible for the incidents and
pressurized them to provide full compensation to the victim’s families, but due to
political influences the decision was not deployed.
26
After the Tazreen garment incident, workers came to the street and vandalized many
garment factories and blocked the highways, which later on turned into labor unrest. This
incident caused a huge loss for the local firms and the RMG sector itself.
The fire at Tazreen Fashions, directly affected Wal-Mart’s reputation when it was
discovered that the factory also produced products for Wal-Mart. Right after the incident,
Wal-Mart cancelled the partnership with its supplier to avoid any further criticism. It
states on their website: “The fact that this occurred is extremely troubling to us, and we
will continue to work across the apparel industry to improve fire safety education and
training in Bangladesh” (walmart.com, 2013).
To see Wal-Mart's responsibility towards public or Corporate Social Responsibility
(CSR), our group had a look on its CSR sustainability report during 2007–2012. The
report is based on the analytical framework, which was developed in the Weissman
Center for International Business (Sethi, S.P. 2013). It shows Wal-Mart being continually
rated zero in integrity assurance during the whole period covered by the report
(carnegiecouncil.org, 2013). This could affect their reputation.
After the factory fire in Tazreen, Wal-Mart's share price decreased due to finding some of
their products in the burned factory, which made Wal-Mart look like they were already
aware of the safety and low wages issues of their supplier.
27
Figure 9 - Wal-Mart Closing Stock Price
Source: S. Prakash Sethi, “The World of Wal-Mart”, 2013
Third and fourth incident:
On February 25th, 2010 a company called ‘Garib and Garib’ caught fire, where 21 people
died and approximately 50 workers were injured (cleanclorhes.org, 2012). MNCs like
H&M, Otto and Ulla Popken were the retailers for that company.
The cause of the incident was an electrical short-circuit, which reached a dangerous stage
because of very poor fire safety and emergency exit conditions, poor ventilation and
closed windows which were blocked with metal.
On December 14th, 2010 another incident happened as a result of poor fire safety in
‘That is it Sportswear’ (Ha-Meem group), where 29 workers died and more than 20 were
injured. The buyers of that company were USA retailers including: GAP, Target and JC
Penny (cleanclorhes.org, 2012).
An electrical short-circuit was the cause of this incident as well. The difference between
“Garib & Garib” and “That’s it sportswear” was the firms infrastructure. According to the
chairman of the Ha-Meem group (online.wsj.com, 2013) the owner of “That’s it
sportswear” said that they have been working hard to improve the factories’ safety
conditions. Unfortunately the incidents still occur.
28
There were also some other incidents which took place between 2006 and 2010 caused by
electrical short-circuits. Incidents like Spectrum garment, KTS factory and Phoenix
building have a bad effect on outsourcing businesses in the RMG sector of Bangladesh.
In most cases, local firms do not really focus on the institutional facts and fails to adopt
these within their factories. Factories understand and practice regulative, normative and
cognitive facts within the Bangladesh RMG sector for their stockholders and employees.
After these two following incidents in 2010, labor rights organizations called the
European and Americans MNSs together with the Bangladesh governments and BGMEA
to outline a unique safety and security plan for the RMG sector of Bangladesh
(digital.common.ilr.edu, 2012). After the incidents of “Garib & Garib”, international
retailers got more aware of the safety and security issues of the RMG sector in
Bangladesh.
4.4 MNCs’ Reputation
In this part we will analyze how all of the previously mentioned incidents can affect the
MNCs’ reputation, the supply chain and how this can increase the costs for MNCs.
The repetition of these incidents caught the attention of the international community,
which became more concerned about the corporate social responsibility and supply chain
issues of the MNCs. According to Wieland & Handfield (2013), it is important for the
MNCs to check their supply chain and products carefully, in order to see how and what
the actual process of the supply chain is.
In most cases, MNCs locate their outsourcers through middlemen. The benefit of this is
that the MNCs put the responsibility of finding a low cost factory to the middleman. In
this way, the retailers do not have to deal with the factory workers’ issues itself since they
are not directly implicated. From the retailer’s point of view, the price should always be
as low as possible (Sethi, S.P. 2013). Many government authorities, investors,
stakeholders, activists and religious sectors had warned the MNCs like Wal-Mart, GAP
and Benetton to be more careful with their garment manufacturing standards or they
29
might face a huge financial repercussion from customers, a drop in stock values as well
as public protests (Newtimes.com, 2013).
The media world and civil society organizations (CSOs) began to worry and agreed to
accept the term called “new normal" as a "fait accompli" (carnegiecouncil.org, 2013).
Where all the MNCs like, Wal-Mart will face all the external pressures within the
marketplace regarding: customer loyalty, industry best practices including the major
shareholders and investor communities, civil society organization (CSOs), local
government pressure and regulatory oversight (carnegiecouncil.org, 2013). Although all
these external pressures just began, nowadays they have extensive media coverage. It is
hard for the MNC to implement the new regulations, which involves additional
investments, and control the activities in the factories. Due to the affect on hazardous
issues in many developed countries are organized boycotts by the consumers, which are
concerned about the threats to health and safety issues in RMG sector in Bangladesh.
Despite all protests, public pressures and media coverage, everything is in vain, since
MNC’s like wal-mart do not care that much about the pressure. The MNCs
competitiveness is low because all the MNC’s basically use the same business format as
well as factories with similar cost structures and labor practices (carnegiecouncil.org,
2013).
After the sweater factory incidents at “Garib & Garib” in 2010, the South Asian Alliance
for Poverty Eradications (SAAPE) labor union demanded a proper implementation of the
safety and security standards in the RMG sector of Bangladesh (Sacw.net, 2010). The
labour group has appealed to the international human rights organization and the
consumers association asking them to be more focused on the MNCs who are buying
products from Bangladesh and also make sure that they follow the safety and security
standards (Sacw.net, 2010). This labour group also demanded the implementation of the
workers’ rights and code of conduct by the RMG sectors of Bangladesh.
So after the “Garib & Garib” incident, the RMG industry has immediately gotten the
attention of the international organizations, which influenced the local firms, institutions
and the MNCs’ reputation. Similar response has been showed during the “That’s it
sportswear” factory (Owned by Hameem group, Bangladesh) incidents by the different
30
international organization like ILRF (Interantional Labor Right Forum), WRC (Workers
Right Consortium) and MSN (Maquila Solidarity network) (labourbehindthelabel.org,
2010). The company and the retailers have been contacted by those organizations to
outline the proposal that specific safety and security should be followed in order to avoid
the continuous industrial incidents (labourbehindthelabel.org, 2010). All those
organizations argued that RMG sectors or firms, government and MNC’s failed to
perform their responsibilities, so they must compensate to the victims and future loss of
earnings.
After the incidents of Tazreen garments and Rana Plaza, Human Rights have also
expressed their deep concern over the countries safety and security situation (the daily
star, 2013). This has also put an impact on the MNC’s reputation. There are many human
rights group that came out on street and protested against the MNCs, that are less
concerned about the RMG sectors in Bangladesh. One of them is called ‘AVAAZ’. They
have been collecting 875,000 signatures from various customers and people to push GAP
and H&M to sign the fire safety and security improvements in Bangladesh (Nytimes.com,
2013).
Interestingly, when different international organizations, labor groups and human rights
forum blamed the local firms and their institutional failure, local government together
with the retailers/MNC’s of the RMG sectors stated to avoid their responsibilities and
denied their relationship with those collapsed factories, because all the incidents would
have directly affected their reputation.
Most of the MNCs as Benetton, Wal-Mart, H&M, KiK and Mango, denied that they had
suppliers in any of the Rana Plaza’s factories, though labels of these companies were
found in the rubbles.
Only a few companies, including Britain's Primark and Canada's Loblaw Inc., admitted
that they had production at Rana Plaza and promised compensation. Loblaw’s CEO said
that in those five factories were another twenty-eight brands and suggested them to end
their “deafening silence”.
31
Primark has also faced immediate strong protests from thousands of people on the Oford
street, west end of London. They surrounded the Primark stores and gave slogan by the
group called “WAR ON WAT”.
They said that Primark was not concerned enough about the safety and security of the
garments factories in Bangladesh. Specifically 1,115 deaths in Rana Plaza, could have
been avoided, and basically the MNCs could save those lost lives (metro.co.uk). Many
consumers came out to the street in United States and blamed MNCs that they do not
really care about their suppliers’ factory working conditions. They also blamed the
retailers that they are not aware about the situation in the factories from which they are
buying garment products (CNN.money, 2013)
Investors or stakeholders are also concerned about the MNC’s responsibility in the RMG
sector in Bangladesh. For instance, John C.Lui, New York City comptroller (city pension
funds owner), which owns about five million of Wal-Mart’s shares, warns the company
that if they would not handle the factory safety in Bangladesh carefully, they may lose
their image badly (Nytimes.com, 2013).
MNCs have never acknowledged that their demand for the lowest possible price and
extremely tight delivery schedules may have been a significant contributing factor toward
lower wages and hazardous working conditions in RMG sector of Bangladesh.
All the previously mentioned incidents affects on MNC’s reputations. This reputation
affects to legitimize MNCs towards the customers, local firms and international
organization. According to the legitimacy theory MNCs should have legitimized
themselves by gaining social acceptance and social – exchange by understanding and
following the rules, regulations, norm and values from the institutional environment (e.g.,
Dowing and prefer 1975; Suchman 1995a). So from the RMG sector perspectives and
specific incidents like Rana plaza or Tazreen garments tragedies show that the level of
MNC’s legitimacy within the local firms and institutions is low.
Due to the effects on the MNC’s reputation or legitimacy, they are being criticized. But
another factor also related with both MNS’s and local forms, is that this means extra costs
for instance due to the hazardous condition within the RMG sectors. Outsources could
32
continue their productions at the right time even though they already have raw materials
and close shipment date on time. Most of the cases they could not send shipments on time
which makes a huge financial loss for the local companies. On the other hand retailers
cannot receive the products on time and they begin to search another factory to produce
for them, or they could lose the LC (Letter of credit), running out of seasonal or
occasional time for selling of their products.
Furthermore due to the hazardous situations which affects not only outsources or
outsourcers but also affects the institutional actors like local government. For instance if
the outsource firms did not manage the date for shipment, government would not get any
Tax, VAT or shipment fees from them. MNCs need to receive their orders on time, so
instead of depending on the buying agents or firms itself they are willing to travel to the
country or set up their own agents and ship the orders by themselves. This involves a
higher cost for the MNCs. So all the mishaps not only affects the MNC’s reputations but
also cost a lot for both outsources and outsourcers.
In this part of the analysis we will discuss what are the initiatives taken by MNCs and
International organizational groups to restore working condition in outsource firms.
The alliance for Bangladesh worker safety:
All the top leaders within the apparel industry have realized the importance of the RMG
sector improvements in Bangladesh. So they have agreed to establish an alliance and
share their experiences, knowledge and expertise’s for Bangladesh worker safety, which
will be valid for a five-year period. The main purpose of the alliance is to help RMG
sector of Bangladesh to move swiftly, to minimize bureaucracy and work in collaboration
with all interested parties, to raise standards across the board. The alliance is also meant
to cooperate with the local government; garment factory workers, owners and other
organization which would also like to follow the same principals. In order to make their
activities transparent, the alliance should hire some third party to monitor and control the
overall activities and transparency. By establishing this alliance, the apparel leaders
would like to show their commitment, accountability and cooperation for better working
condition. With an amount of $ 42 million of safety fund, the alliance has started, and
33
more will be add on gradually. Some of the main members of the alliances are: Glenn
Murphy, Chairman and Chief Executive Office at Gap, Inc., Mike Duke, President &
Chief Executive Officer at Wal-Mart Stores Inc., Stephen G. Wetmore, President and
Chief Executive Officer at Canadian Tire Corporation, Limited, Kevin M. Burke,
President & Chief Executive Officer of American Apparel & Footwear Association, Bob
Kirke, Executive Director of Canadian Apparel Federation and so many.
The primary activities of the alliance are to make them aware of their empowerment
rights, increase the awareness of the indispensable component and consider those as a
violation, teaching them about their personal safety. The Alliance has also create a link
within many labor groups and different NGOs which will share the responsibility with
the local government, in order to established a strong economic foundation of the
country. The main commitment of the Alliance Members is to provide more visible safety
and security improvements and facilities to Bangladeshi RMG industry workers and other
family members. This will also be focused on improving Workers Safety and security and
other three major principles of accountability commitment and collaboration. The main
goals of the alliances is to help with continuous implementation, teaching the worker’s
empowerment, and providing support for a sustainable chain within the RMG industry of
Bangladesh, which is very important for the economic growth of Bangladesh.
Under the strategies of the alliances there are some certain issues they want to follow at
the beginning:
One of the main focusing areas will be factory inspection, training programs and
encouragement of worker’s empowerment. Among all these mentioned elements of the
safety issues, Alliance will focus on the standard uniform and faire safety equipment
activities together with the firm owners and workers. All the activities under this safety
and training programs will be monitored by third-parties to ensure the validity and
transparency (bangladeshworkersafety.org, 2013).
To ensure the quality of uniform standards, training activities, together with other
Initiative activities will be shared with all other potential stakeholders, including the
34
Bangladeshi government itself (bangladeshworkersafety.org, 2013). Some key focusing
areas will be discussed below:
Empowerment of the workers: The Alliance will hold a consultation among the factory
workers to discuss the installment of the new mobile technology. In order to identify the
possible areas of use, options and importance, that should be customized uniform based
on the overall survey or workshop with the factory workers. The alliance will also be
working on an anonymous “hotline” service for all the workers or employees to express
essential concerns about the safety and security (bangladeshworkersafety.org, 2013).
Fire and Building Safety Training: Another focusing area will be the faire and
building/Factory safety training for both Workers and the Management teams: The
Alliance will create an appropriate safety and security instruction program which will be
used as a standard learning tool for the workers and management. All the “best practices”
and recognized protocols of fire and building safety instruction will be include on that
guide. The standard safety uniform will be developed by taking into consideration the
overall essential instructions and standards (bangladeshworkersafety.org, 2013).
Development and Implementation: a specific committee with quality and expertise will
approve The Alliance for a Common Standard Inspections (bangladeshworkersafety.org,
2013). The main expertise of the committee will be in the fire and Building Safety
Standards.
Financial: The main focus of the Alliance is to ensure the best working facilities and
financial benefits of the Ready-Made Garment workers in Bangladesh. The Alliance also
wants to make sure the apparel industry of Bangladesh is a safe and sustainable working
environment by implementing oversight and regulation in collaboration with the
Bangladesh’s government.
Worker Safety Fund: currently the alliance raised $ 42 million for this fund and gradually
getting more funding (bangladeshworkersafety.org, 2013). Having these funds, the
alliance will provide different facilities like factory inspections for fire and building
safety, training and worker empowerment etc. The factories will receive an amount of
reserve of 10% fund in advance in order to give emergency help to support workers
35
temporarily
displaced
from
factories
safety
remediation
activities
(bangladeshworkersafety.org, 2013).
Affordable Capital for Building Safety: Under this point, there are some current barriers
to get financial capital in Bangladesh for business projects right now, but there are some
possibilities to get low-cost capital from the Alliance which are currently doing business
within the same supply chain (bangladeshworkersafety.org, 2013). But the process is
based on the prioritized requests (bangladeshworkersafety.org, 2013) from the
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the
Bangladesh
Knitwear
Manufacturers
and
Exporters
Association
(BKMEA)
(bangladeshworkersafety.org, 2013).
Besides the local government and international organization, MNCs also have some
individual responsibly towards the apparel sector in Bangladesh. According to the third
institutional pillar: cognitive which is summarized by Scott (2007). Individual behavior
represents the involvement of an organization, what it is and how it is accepted by the
society (Rana, M.B and Sorensen, O.J. 2014).
The impertinence of the MNC’s responsibility firstly got attention of the whole world
during nineties, with Nike, because one of the company’s outsource were found to use
child labor (Gopinath, C., 2013). At the beginning, Nike refused to take the responsibility
of this complain but later on by the pressure of consumer, they agreed to take
responsibility of those issues and agreed to take more necessary responsibility to
outsources by monitoring and auditing their companies.
As long as the readymade garments sector of Bangladesh does not have enough safety
and secure working conditions, it is the responsibilities of Bangladesh’s Government to
ensure the safety of the Apparel industry. So the government itself needs to take
initiatives by putting pressure towards MNC’s to perform their responsibility
accordingly/ effectively.
Workers, Labour activists and other organization raised their voice after facing the
tragedy of Rana plaza and Tazreen garment to ensure workers safety and security and
increase the wages up to $100 which is currently $37 (Gonchar, M. and Marshal, T.
36
2013). The factories do not spend that much for the safety and security of the workers
because of the strong competition within the industry (Gopinath, 2013). As the local
government has a friendly relation with some of the factory owners, that does not allow
the activist or workers to mange a governmental transparency efforts towards the owners
(Gopinath, C., 2013). So the only hope is to put pressure on MNCs and governments to
ensure the workers safety and security. It is very important for an industry to maintain a
standard in order to be a part of global supply chain (Gopinath, C., 2013).
‘‘The Foreign Corrupt Practices Act in the US and similar legislation in European
countries makes a local firm liable for prosecution if they are found to have bribed an
official overseas’’ (Gopinath, 2013).
Accord on Fire and Building Safety
At the meantime, Bangladesh and international labor groups laid down a legally binding
fire and building safety plan, whose role is to find an independent facility to inspect the
manufacturers. The main target of this agreement is to shut down unsafe manufacturers,
and require renovation financed by overseas retailers. Some of the overseas companies
and domestic companies accepted the plan, such as H&M (Swedish) and Primark
(Britain), moreover, Primark is one of the few retailers which have acknowledge that
their suppliers produced in the collapsed Rana Plaza building (Julhas Alam, 13th May
2013).
The accord on Fire and Building Safety is probably the biggest international action taken
after the disaster in Bangladesh, the collapse of Rana Plaza. The program makes various
international organizations, Bangladeshi worker unions and international brands and
retailers work together towards improvement of various health and safety measures. This
program works also towards making sure that the rights of the workers are kept. Some of
the guarantees provided are as follows:
Factories have an obligation to maintain regular payment and employment of their
workers and workers have the right to refuse to work if they are able to justify his/her
worries about safety.
37
It also binds the companies, which signed the Accord to stay in Bangladesh for at least
two years of the Accord, and other.
4.5. Role of the Government
In this section we will outline the role of government in RMG sector of Bangladesh by
considering different perspectives. We will use a figure for a better understanding and
later on we will describe it accordingly.
Figure 10 - Role of the government
Labor Training &
Safety Maintanence
Politicalization and
labour union
RMG
Sector
Financial support
& role of bank
Low level
management and
institutional initiatives
4.5.1 Labor training and safety measurement
In the Bangladesh RMG sector, one of the main disadvantages is the lack of
governmental involvement towards labour education and training. Most of the garment
workers are not highly skilled or properly educated for these jobs. This has a direct
influence on the firm’s productivity and total efficiency. The government should take the
necessary measures by training and educating the garment workers from the plant level to
supervisor level.
38
Safety and security measurements are not really performed by the government
institutions, due to the political corruption. Most of the factory owners had an
arrangement with the local institutions, making them avoid a proper safety regulation by
providing bribe or other gifts.
4.5.2 Financial support and role of bank
Bangladesh’s government has raised Tk100 crore through the central bank from Japan
International Corporation Agency (JICA) in order to improve the working safety and
security of the garment workers (bgmea.com.bd, 2013). By taking this step, the
government is showing their positive attitude towards the development of the RMG
sector in Bangladesh. Most of the factory owners could receive this financial assistance
from the local commercial banks with certain interest (about 10%). This means that they
will be able to re-structure their factories and set up new safety and security equipment,
as the government does not provide any specific funds that only support the RMG sector.
On the other hand, most of the small entrepreneurs will not get any loan facilities due to
the poor relation with the local banks, which would make the interest rate too high.
Bureaucracy is another important practice to get a loan from the bank. Where most of the
foreign banks charges only 0.25% interest rate for the first $50.000, local banks charges
almost 10-16% for any type of loans (dhakachamber, 2013). After adjusting different cost
on top of it, factory owners are actually paying almost 20% to 24%. The government
could influence the banks to make less profit from the RMG sector and provide the
financial fund with a limited interest rate around 6% to 8%.
4.5.3 Poor management and institutions’ initiatives
The RMG sector of Bangladesh has a huge involvement on the capital investment from
the nationalized banks. With a strong economical sector, RMG factory owners are treated
differently and worse than factory owners from other sectors, even though they have a
great need for the banks in terms of loans and other services. Poor governmental and
public sector banking policy, directly affects on the export and import activities.
Uneven facilities provided by the government also made a distinction between the
different export oriented RMG firms. For instance, the numbers of companies that exist
in Chittagong EPZ are given more facilities than the factories situated outside EPZ. A
39
bad influence from the government can also result in corruption of the Export Promotion
Bureau within the RMG sector. They are not seriously promoting the industry and its
activities, which can be done by transferring the responsibility to Bangladesh’s Garment
Manufacturing Export Associations (BGMEA).
4.5.4 Politicalization of labour union
The term labour union in the RMG sector in Bangladesh is not well established. Most of
the labor union organizations in the RMG sector of Bangladesh are politically influenced.
The leader of the organization usually has a good relationship with the level supervisors,
factory owners and government institutions. Political influence exists in the RMG sector
just as with associations like BGEMA, BKEMA and it affects the organizational
governing board election of BGMEA. Basically, political groups are divided in two parts
during this kind of governing body election. For instance, ruling government versus
opposition party.
4.5.5 Investment opportunity by the government
The local government created different investment possibilities for the new investors in
order to increase productivity and improve the market value of the RMG sector. For
instance, the investors can start a new RMG or Textile factory by investing privately or
assessing current public RMG factories. The current factories are usually invested either
as a joint venture or through leasing, as a financial service (boi.gov.bd, 2013). The
government is currently focusing on the spinning industry as well as establishing a strong
backup resource for the RMG sector. It is also supports the spinning industry by
providing different subsidies like cash incentives, tax benefits for importing machineries
and raw materials. Shafiul Islam Mohiuddin who is the head of the Bangladesh Garment
Manufacturers Association (BGMA) says that the local government is carefully
observing the possibility to provide food rations and housing support for the garment
workers (Pasricha, 2013). But there is still a new investment tax policy system for the
RMG export-oriented sector, which does not provide sufficient opportunities for the
investors.
40
4.5.6 Infrastructural bottlenecks
The main port of Bangladesh is Chittagong port, which the governmental authorities
manage. More than 80% import and 75% export activities among the total international
trade of the country goes through this port (dhakachamber, 2013). The main
infrastructural problem of this port is the labour union’s crisis, political influences, slow
workflow and strikes by workers. Due to these various problems, loading and unloading
are performed very slowly. Most of the time, manufactures cannot even get the raw
materials in time. As a result of this, their own shipments are delayed, which causes a
huge loss of contracting firms and also an occasional loss of foreign buyers. At the end,
the manufacturing firms are facing a huge financial loss. In some occasions, if the firms
are unable to ship their orders they are suffering the consequences of having a stock lot
problem. This is one of the major reasons for bottlenecks in the national ports like
Chittagong.
4.5.7 Law and order
The problematic law-and-order situation is another obstacle in development of the RMG
sector. Despite the existence of specific laws and regulations the RMG sector is still
facing various problems like labor unrest, violence within the industry and political
influences. For instance, the government hires private police forces to prevent vandalism
from the workers. Even though these forces are present in the industry area all the time,
garment factories are still facing many cases of vandalism from the workers. Instead of
ensuring safety and performing security maintenance, the government authorities are
avoiding their duties by accepting bribes. Due to the lack of proper law-and-order
enforcement, employees and owners of the RMG sector are facing various problems.
4.5.8 Role of international organizations and their support
In this part of the project we will present the support of international organizations based
on three perspectives: Outsourcing RMG firms, outsourcing MNCs, and the government
itself.
41
Figure 11 - International Organizational Support
Outsourcing
MNCs
Outsourcing
RMG firms
Local
Government
International
Organization
How international organizations affect the RMG firms
The international organizations are working as a watchdog within the RMG sector of
Bangladesh. The international organizations affect the RMG sector of Bangladesh in
many ways: In the recent year there were a lot of mishaps within the RMG sector of
Bangladesh. All these conditions like labor unrest, building collapse, fire, safety and
security issues got the international organizations attention. Based on these problems,
international organizations have taken various initiatives to overcome the situation in the
Bangladesh RMG sector. Moreover, after incidents like the Rana Plaza collapse and the
Tazreen garment fire attack, international organizations were more aware of the internal
safety and security issues in the RMG sector. As a part of their activities, the
International Labor Organization (ILO) and the local government agreed to start an
initiative program called “Better Work Program”, aimed to improve the working
conditions within the RMG sector (ilo.org, 2013). “The ready-made garments sector
is vital to Bangladesh’s economic growth but it needs to be safe and sustainable”,
said ILO Director-General Guy Ryder (ilo.org, 2013).
The aim of the project is to establish a safe and secure working environment, minimizing
the threats of fires and building collapses.
42
The Bangladesh government and the ILO have launched a 24,21 million (USD) initiative,
where developed countries like the UK and the Netherlands are jointly contributing 15
million USD of this total amount, in order to help ILO mobilize further resources. “The
Netherlands support this ILO programme because it contains all the crucial elements to
make the garment sector safe and sustainable. For us this is a perfect example of using
aid to promote responsible trade”, he added (ilo.org, 2013).
The estimated time of this program is three and a half year. The ILO has developed its
activities in association with the local government, officials and worker representatives.
Under this program, thousands of garment factories will get support with the structural
and safety issues as well as improvements of the working conditions in the RMG
industry.
Sarah Cooke, head of the UK Department for International Development (DFID) in
Bangladesh, said: “The sustainability of the ready-made garment industry has a pivotal
role to play in Bangladesh's continued social and economic development. This
programme is a key part of the UK's approach to help ensure safe working conditions and
improved productivity in the sector.” (ilo.org, 2013).
The Minister of State, Alan Duncan, has announced that the UK will support the RMG
sector of Bangladesh by providing skill training for 100,000 low-skilled garment and
construction workers, in order to maintain a high quality standard of products and also to
help increase the overall productivity. Moreover, the RMG sector will also get a fund of
approximately 1,8 million pounds in order to develop the working practices and improve
the conditions of the supply chain in order to maintain a good partnership between buyers
and owners. (foreignaffairs.co.nz, 2013).
This fund is aimed to create a more responsible and accountable garment sector in
collaboration with current development projects in order to improve the conditions of
vulnerable workers in the RMG production sector. The UK is also supporting the Ethical
trading initiative (ETI), which is an international alliance organization that mainly works
with NGOs to improve the life-quality of the workers. The United Kingdom has also
considered looking into other important issues such as better working conditions along
with improved safety and security within the working environment. This stands to argue
43
that outsourcers or buyers should take more responsibility of the whole supply chain of
production.
How international organizations affect outsourcing MNCs
As long as the major customers of the RMG sector in Bangladesh are MNCs like H&M,
GAP or Wal-Mart, incidents are less likely to happen because if any kind of mishaps
happens within the local RMG sector in Bangladesh it affects the retailers business as
well. In the recent time, two major accidents like the Rana Plaza collapse and the Tazreen
fire has highlighted situations with common weaknesses in the RMG infrastructure.
These incidents caught the attention of the international organizations and unveiled the
real picture of the industry along with the problems that the RMG sector is facing. Based
on these issues, Bangladesh’s government and international supporting organizations
tried to fix those problems together with the MNCs.
International organizations such as Human Rights and the ILO, work as a regulator for
this sector in Bangladesh, they pushed the MNCs to make sure they are focused and
provide sufficient incentives for this hazardous issues in the RMG sector.
The European Union has taken initiatives in order to improve the safety and security
within the RMG sector of Bangladesh together with the various MNCs. Another program
that international organizations support in collaboration with local governments, the
United States and International Labor Organization, is “Accord on fire and building
safety”. It will cooperate with global unions, global brands and buyers (MNCs) and the
alliances for Bangladesh’s worker safety. The program is currently ongoing in
Bangladesh and is financed by the US Department of Labor and the Kingdom of Norway,
which goes by the title “Fire Safety, Fundamental Principles and Rights at Work and
Labour Relations initiatives” (ilo.org, 2013).
The United Kingdom has also come forward to support ILO with an amount of £4.8
million, which will be used for “Improving the Working Conditions in the Ready Made
Garment sector in Bangladesh”. They plan on doing so by improving the security and
44
safety issues among the workers (foreignaffairs.co.nz, 2013). The idea of the overall
program will be explained in the steps below:
All the MNCs must gather with factory owners under the local government’s supervision
in order to create a coherent system of fire safety regulations, stating how factory
inspections should be performed. Introducing new themes like “better work” as an
initiative, this will improve the working conditions and the relationship between
employees and the industry on a national level. This initiative will focus on additional
inspections in the small and medium level factories, offering them more safety training
and creating awareness about health and safety through educational campaigns. The
program will also focus on Rana Plaza’s victims by offering safety training and helping
them get new livelihoods through rehabilitation. The program will also be working with
international organizations to help employees with disabilities in the garment sector.
How international organizations affect the local government
The international organizations function as a contributor to the local government of
Bangladesh. In many situations, international organizations such as ILO, Human Rights,
Japan International Cooperation Agency (JAICA) came forward to work together with
the local government of Bangladesh in order to make a better RMG sector.
According to the ILO constitutions, it ensures that workers should have financial
insurance that covers illness and injuries happening during their working shifts. This has
been mentioned in the ILO convention 155, which states that health and safety steps must
be taken by the firms and the government, but according to the ILO convention the
Bangladesh government does not obey to these regulations (ilo.org, 2013).
The United Nations’ (UN) guidelines regarding business and human rights, signed by all
the members, have also outlined the responsibility of the government and the firms
concerning human rights. Bangladesh is also a member of the UN, so they must also
follow the rules.
45
Due to the several mishaps that happened in the RMG sector of Bangladesh, the local
government got criticized a lot as well as being questioned by many international
organizations regarding their role in the incidents.
The ILO and the Bangladesh government agreed to work together on improving workers’
safety and security in order to achieve noticeable change within the RMG sector; this will
ensure a much safer working conditions for garment workers. The program also has
collaboration with the “Accord on Fire and Building Safety” program in Bangladesh and
the “Alliance for Bangladesh Worker Safety” initiative (foreignaffairs.co.nz, 2013).
During July 2013, the top 20 retail business leaders from the United Kingdom had a
meeting with the International Development Secretary Justine Greening and the minister
of state, Alan Duncan. They discussed the current issue of the Bangladesh garment
industry and how they can cooperate with the local government in order to ensure proper
safety and security throughout the total supply chain of productions. As an outcome of
the discussion, the United Kingdom sent three experts to inspect some of the factories to
ensure that the local building regulations were met.
4.6 Discussion
In the previous analysis part we found that different hazardous conditions of the
Bangladesh RMG sector affects on MNCs’ reputations. The main reason that the MNCs
outsource from Bangladesh is the competitive labour market. Due to the various
hazardous incidents within the RMG sector in Bangladesh, the MNCs’ reputation has
been affected. One of the main reasons their reputation took a hit was that the overall
supply chain had additional expenses as a result of the unexpected incidents.
To make the overall discussion understandable, we will start by discussing the
institutional point of view. For instance, how important the institutional practices are to
the MNCs. In order to set up a business, MNCs should follow the governmental
legislations, laws, industrial agreements, standards rules, preliminary policies and
requirements as a part of the regulative pillar of the institutions. Secondly, MNCs should
understand and act according to the business society’s normative requirements, just as
global NGOs should act according to their codes of conduct. Thirdly, MNCs also need to
46
realize the socio-cognitive practices such as customer values and their perception of the
products or other issues, international organizations values etc. From the analysis part we
have seen that MNCs were not able to follow the institutional regulations, which is why
their reputation was facing problems and even threats from customers, international
organizations, NGOs, Human Rights Forums and ILOs. There were arguments written in
a blog (Loomis, 2013) saying that all outsourcing corporations, either American or
multinational, should follow the same laws no matter where the factory is situated. If any
of these factory workers get injured they should compensated them according to the
American standards (Loomis, 2013).
Incidents like Rana Plaza, Tazreen, “Garib & Garib” and “That’s it Sportswear” raised
several questions towards MNCs regarding their failure to meet the institutional
regulations. Issues like the lack of safety, security, fire safety exits, emergency training as
well as the workers health pointed out the problems within this industry and the MNCs'
disregard of the working conditions. Due to these reasons MNCs lose reputation to their
customers and international organizations, which affects the MNCs’ ability to build a
stable legitimacy.
In order to legitimate themselves, MNCs need to fulfill the local institutional regulations
in the RMG sector of Bangladesh. Additionally they could provide technical supporters
or instruments for the factory, double check the safety conditions of the local firms and
observe the supply chain closely to avoid any international criticism.
MNCs could also involve themselves more on the Corporate Social Responsibility (CSR)
activities. Usually corporations or MNCs only focus on their performance in the market
and their profitability. However, the increasing pressure from the stakeholders, suppliers
and the community encourages MNCs to take responsibility for ecological issues. Ethical
and socially responsible behavior is becoming more and more important (KPMG &
Assocham, 2008). This results in an increasing importance of the CSR concept.
As CSR is a part of social facts and reality, so MNC’s could focus on integration and
ethics among the others (Instrumental and political) according to (Gariga and Mele,
47
2004). The reason behind integrating CSR was to put the focus of the MNCs on the
society and community growth, which in turn will divert into an overall business growth.
Another CSR aspect is that MNCs could focus on ethics, by understanding the social
obligations and ethical issues of the society. MNCs should understand the social demands
from the customers and take equal responsibilities across the whole business area - in
other words, the MNCs should show the same amount of responsibility for everything
from outsourcers to end customers.
Considering the overall situation, we can see the importance of the MNCs’ support and
positive attitude towards the factory workers. For instance, after a huge disaster in the
RMG sector in Bangladesh, on April 29th 2013, there was a conference in Frankfurt
where different MNCs like Wal-Mart, GAP, H&M along with other major retailers met
with labor groups and NGOs to make an action plan, in order to ensure a sustainable
working condition in the future to prevent those sort of disasters in the RMG sector in
Bangladesh (Shelly, 2013). This sort of activities will help MNCs to get legitimacy from
their customer, outsources and international organizations.
After discussing all the issues in the project, our group came with a hypothesis, which is:
“The higher the hazardous condition, more higher the affect on MNCs in terms of cost,
supply chain and reputation”. This above mentioned hypothesis could be experience by
the further empirical analysis.
48
Conclusion
In the recent couple of decades, many global brands moved their production to
Bangladesh. The reason of this movement was the lowest cost of labor i comparison to
other countries' ready-made garment sectors. Most of the MNCs that are outsourcing their
production are from United States, leaving the 'second place' for European Union. The
RMG sector is the most important employer in Bangladesh and create most of the
exports, However, behind this poor working conditions are hiding: International Labour
Standards and the Codes of Conduct regarding the working conditions are often
infringed, The Recruitment Policies are neglected leading to being unprotected by the
law, uncertainty about workplace. The employers often exploit their workers; wage and
gender are being discriminated (women are paid less and occupy lower positions than
men), working places do not apply to any standards.
Fortunately, Bangladesh Government made recent changes in Labour Law (fundamental
women worker rights protection, maternity leave). UN Convention on the Elimination of
All Forms of Discrimination against Women (CEDAW), ILO Convention 111 on
Discrimination in Employment and Occupation were signed. Sadly, it is very common
that legislations are not being followed due to poor enforcement of the law. This leads to
workers being deprived of any legal rights.
Several critical accidents have happened in the RMG industry factories in Bangladesh
that pressured Bangladesh’s Government and international audience turn their attention.
“Rana Plaza” factory collapse taking many lives, “Tazreen Garments” factory fire just to
name a couple. These incidents prove the poor following of the institutions, poor
application of the rules regarding the safety of the buildings. After these critical events,
international actors reacted: UK Parliament encouraged its government to force all the
major companies to check their supply chains and ensure that the third countries are
operating responsibly, the MNCs and Bangladesh's government were warned about
improving the poor working conditions and similar actions have been taken.
49
Due to the extreme reaction from the international organizations and customers, MNCs
agreed to cooperate together with the local government, to make sure the enough safety
and security within the RMG sector in Bangladesh, in particular, “The alliance for
Bangladesh Worker safety” and “Accord on Fire and Building Safety”.
The reputation of the MNCs has been influenced negatively, since the shoppers were
warned about the production from third countries and the conditions under which they
have been made. Another example showing the negative influence is Wal-Mart's workers
joining the striking employees against the deaths in Wal-Mart's international supply
chain.
50
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