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Donnerstag, 2. August 2012

"Garment workers enjoy a better standard of living than the average Bangladeshi."

Interview with Mr. Md. Fazlul Hoque, President of the Bangladesh Employers' Federation by Marianne Scholte

Mr. Hoque is the owner of two garment factories in Naranganj, with 600 workers each, and previously served three terms as the President of the Bangladesh Knitwear Manufacturers and Exporters Association, from April 2004 until July 2010.

Dhaka, 2 February 2012

Scholte: There was a lot of critical reporting earlier this year in Germany about labor conditions in Bangladeshi factories. Did you see it?
Hoque: Yes. I would like to go to Germany to talk to people who have a bad image of readymade garment producers in Bangladesh. We can organize seminars, we can invite the media. I would like to face them directly. Bring your questions and I will answer.
I have good connections with the employers‘ federation in Germany and I have the certification of the International Labour Organization (ILO) that Bangladesh is child-labor free and has relatively good working conditions. You can find it in the ILO annual report.
In 1996-97 we also had very bad publicity and orders dropped almost 50% because of bad press on child labor. Then we brought ILO on board and did a project with them. ILO will certify that we have no child labor today.
Scholte: But wages in Bangladesh are so low. How can workers live on them?
Hoque: The readymade garment sector is the only industry in Bangladesh that has a minimum wage: 3000 taka. This is the highest official entry level in the country. No one else pays this. The entry level is 3000 taka and the range goes up to 20,000. Workers paid on a piece-rate basis earn more. Most workers – 60% – earn 6000 to 10,000 takas a month.
The readymade garment industry is not isolated. You have to consider the overall economic, social, political situation of Bangladesh. This is not Germany. If you try and find a problem, you will find ten. I also see many problems in Germany. There are problems in any country.
If you take the Bangladesh standard of living earnestly, you will find that the garment workers enjoy a better standard of living than the average Bangladeshi. The working environment is one of the best available to workers in Bangladesh. You cannot take a yardstick from Germany and use it in Bangladesh. You have to think about the overall socio-economic situation in Bangladesh.
Scholte: Some of your critics charge that there is a wage gap between men and women – they say that for the same work, women are paid less.
Hoque: It may happen that women are given lighter work. Women work on the sewing machines, men less so. Men do the laborious jobs, like the heavy knitting machines. That is the difference. If you just look at the salaries, you don’t see this. But women workers have a huge majority on the floor level – do you think it would be possible to continue to deprive them of the same wages?
Scholte: What about compliance with social and environmental standards?
Hoque: We have been talking about social compliance for a long time now. With the support of many development partners – GIZ, UNDP, EU, UNIDO[1] – people have become very aware. The manufacturers are very aware that they must meet the buyers’ requirements.
Scholte: Mr. Hoque, you have two garment factories. Are your factories compliant with social standards?
Hoque: Well, compliance has different definitions, you know. The government has some basic rules. To us, if you follow the basic rules of the Labour Law 2006, you are compliant – maybe I overlook some details, but big things like no child labor, weekly holidays, overtime, maternity leave, working hours, enough health and security, these are the very basic things – then my factories are basically compliant.
Scholte: How do you certify that, how do you prove what you say?
Hoque: BKMEA and BGMEA[2] do a basic certification – they report that this factory is compliant up to this or that point. This includes child labor, security, etc. The next step is third-party auditors like SGS, IST, Bureau Veritas, TÜV Germany. We use TÜV SÜD and we are now undergoing certification by third party auditors for the Business Social Compliance Initiative (BSCI), which is the common certification of the European Union. We are doing this because we are now producing for a German buyer who is promoting BSCI certification.
It is a continuous process. You do not get a certificate for 10 years; it is continuous. We are still at the beginning. Every three months they come and check. They find things that need improvement. The first audit is very thorough. The next time they just walk through and look at those points.
The big buyers, like Walmart and other American firms, have their own auditors – not so much the Europeans, although H&M has their own auditors.
Scholte: So what is the actual level of compliance among the garment factories in Bangladesh?
Hoque: There are around 3000 factories in operation. The number of totally compliant “A” factories is around 1000.[3] These are big and medium-sized firms representing about 1.5 million workers. All the new factories outside Dhaka are totally compliant. Many of the 1000 totally compliant firms are also certified by third-party auditors. They can prove what they are saying!
Then there are maybe 1500 “B” firms, who have problems, for example, with lighting or toilettes – they represent another 2 million workers.
Finally there are 500 smaller “C” firms with bigger problems who employ around 500,000 people. And then there are the firms that are not even part of BKMEA and BGMEA. The problematic firms are usually small firms inside the city of Dhaka.
The buyers are very careful – they do not buy from firms that are not compliant. The non-compliant firms are small firms selling to wholesalers, small buyers, and on the street.
Scholte: You played a key role in promoting compliance when you were President of the Bangladesh Knitwear Manufacturers and Exporters Association and you encountered a great deal of resistance in the beginning.
Hoque: Yes a lot. You know I was the representative of the owners and they are always looking for support. They thought I should support them and protect them regardless of what they were doing. That is the normal expectation. But I did not do that. I had a lot of opposition from them. They told me I should not push compliance. I told them: “OK, today you feel that I am not protecting you, but after five years, you will appreciate that I protected you at the right time.”
Scholte: You understood that, earlier than most people.
Hoque: Yes, I think so and that is why I was not popular at that time. But now people appreciate that I showed them the right way to survive.
In 2008 I also proposed that wages be increased by 20%. The government formed a minimum wage commission to review the wage structure. But I said, “Why wait for the government to push us and then raise a hew and cry before we increase it? We as entrepreneurs should come up with a proposal to increase wages. That will improve our image – to government, workers, society, international buyers.
But it did not fly. We came up with another idea to help poor workers. We opened fair price shops for commodities like rice, pulses, sugar in different industrial zones because rice prices suddenly increased by 30, 40% in 2008.
Scholte: When was the last increase in minimum wage?
Hoque: In 2010.
Scholte: And what about the price you get for your garments?
Hoque: Prices have not increased that much. Actually sometimes they have decreased. There was a minor increase when the price of raw materials rose and the buyers were compelled to increase their offers, but in general, it is not an upward trend.
Scholte: Do the buyers push you on price?
Hoque: Always, always they push – to the absolute depths.
Scholte: Do they win? Do they pay less every year?
Hoque: They try to pay less. They try. It is a psychological game between producers and buyers. They always threaten that if you do not accept, they will go elsewhere. That is why I sometimes try to organize the entrepreneurs – they need to know how to say, “No.” It is a psychological game. If you say, “Go ahead, go,” you might lose one or two buyers. You will not lose them all. I have proven it. I have never reduced the price. Never – it is my bottom line policy. Never in my life. Sometimes because of my policy, I also lose some buyers. They get a cheaper price somewhere else. They know I never compromise with the price. They don’t like it. They think I am rigid.
Scholte: Do some of the brands pay more than others?
Hoque: Yes, some pay more than others, significantly more. I also have to be flexible. It is a psychological game. I try to understand the buyers, how much they can pay. If I think that the buyer can pay $3.00, why does he offer $2.50? It also depends on the size of the order.
Scholte: What would be the cheapest? What would a really cheap buyer pay for one T-shirt?
Hoque: One German discounter tried to pay less than $1.00. Other brands would pay $1.50 for the same shirt. The discounters have at least 25% of the market in Bangladesh – all the discounters, not just the German ones.
Scholte: So the criticism of some of the discounters is justified then?
Hoque: Yes, they are killing us. You ask them: how do they justify paying $1.00? Do the costing!
Scholte: But demand for garments made in Bangladesh continues strong?
Hoque: There are some signs of recession in different parts of the world – Europe, Greece, Italy, Spain, America are not doing very well, but despite that negative signal, we have a big positive signal, which we call the China factor. A lot of orders are moving from China, buyers are getting tired of dealing with China, because of the price, because of their policies. And China is so huge, that even if 10% of the orders move from China, this is big for Bangladesh. That is why we are not feeling the heat of the economic crisis in America. Otherwise, we would have been in a tough situation the last two or three years. So the China factor indirectly saved Bangladesh – not only saved us, gave us the positive momentum to grow faster even.
The opportunity is there and we have the potential, but we need to have enough preparation to grab the opportunity. You know, you can take 100 apples from the tree, but if your basket is small, you cannot bring 100 apples home. Our basket is not big enough, right at this moment, to grab all the opportunity we have. That is the biggest challenge we have.
Scholte: When did you start in garments?
Hoque: Fifteen years ago. Before that I had a job in a private company. I worked there for four or five years after I got my MBA. Then I started my own business. First I started in a rented house in Naranganj. Then I bought land in Naranganj and built my own factory. The first one was very small – 20 machines, 70-80 people. The machines were Japanese and my first customer was from France.
Scholte: You knew nothing about sewing machines or clothes?
Hoque: No, nothing like almost everyone else in this sector in Bangladesh.
Scholte: Thank you very much for your time, Mr. Hoque!

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[1] Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, United Nations Development Programme, European Union, United Nations Industrial Development Organization.
[2]Bangladesh Knitwear Manufacturers and Exporters Association and Bangladesh Garment Manufacturers and Exporters Association.
[3] The Government of Bangladesh, in conjunction with BKMEA and BGMEA, rates BKMEA and BGMEA member factories as “A,” “B,” or “C.”

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