Subcontracting in Bangladesh’s readymade garment industry

Md. Fazlul Hoque, former President of the Bangladesh Employers‘ Federation (2011-2013) and former President of the Bangladesh Knitwear Manufacturers and Exporters Association (April 2004-July 2010) discusses the consolidation of the readymade garment industry in Bangladesh in the post-Rana Plaza era and criticizes buyers, including German firms, who place orders with compliant, green factories with the understanding that their clothing will be made in much cheaper subcontracting factories where the working conditions are poor.          by Marianne Scholte

Dhaka, 15 September 2014

Scholte: I want to begin by asking you about subcontracting. A study by the Center for Business and Human Rights at New York University Stern School of Business[1] claims that subcontracting is the open secret of the RMG industry, also in Bangladesh. Suppliers apparently boost margins and reduce costs by subcontracting to factories that have lower standards than they have and this is where the worst working conditions are found. They also claim that this problem is not being addressed by the Accord on Fire and Building Safety in Bangladesh, the Alliance for Bangladesh Worker Safety, or the Government of Bangladesh.
Hoque: Subcontracting is not illegal, you know. Everywhere in the world, every industry has subcontracting.

There are three kinds of subcontracting. The first kind is when you are in trouble because you did not get the raw materials on time, you had power outages, there were other delays. Then you hire a good factory to produce 20% of your order, so you can get it out on time. No problem. That is a normal kind of subcontracting.

The second kind of subcontracting is when a buyer places an order and then the supplier secretly turns around and subcontracts to a factory that does not have the required standards. This happens, but not very much, because normally buyers can estimate the production capacity of the supplier they are working with. Last year, after Tazreen Fashion and before Rana Plaza, we had another fire – Smart Fashion – where some 23 people were killed. That was such a case.

Then there is a third kind of subcontracting that is going on, and this is the biggest problem right now in the Bangladesh RMG industry. Buyers sign a contract with a factory that has good social and environmental standards – and use this in their public relations to polish their image – all the time knowing that the goods will actually be produced by two to three subcontractors who are much cheaper. You know, some of the discounters are offering such low prices that no good factory will produce for them.

Scholte: How widespread is this practice?

Hoque: Of course there are no statistics, but I believe that it is 10-15% of RMG business in Bangladesh at the moment.

Scholte: German companies, too?

Hoque: Yes…

A huge competitive advantage for the garment industry of Bangladesh

  
Interview with Rob Wayss, Executive Director, Bangladesh Operations, the Accord on Fire and Building Safety in Bangladesh  by Marianne Scholte  

Dhaka, 23 September 2014

The Accord on Fire and Building Safety in Bangladesh has been criticized for closing readymade garment (RMG) factories in Bangladesh, failing to provide finance for necessary repairs and threatening the livelihoods of garment workers. Responding to these criticisms, Rob Wayss, the Executive Director of the Accord’s Bangladesh Operations, asserts that, rather than being a threat, the work of the Accord is a tremendous opportunity for the industry and for its workers and labor unions.

Scholte: How are the inspections 
coming along?  
Wayss: We just finished our initial inspections a week and a half ago. We inspected around 1100 factories, and we still have about 300 to deal with – common facilities with the Alliance. It has been a heavy schedule of inspections: we have been going non-stop for eight months.

Scholte: Of those 1100 initial inspections, how many factories had to be shut down, and of the ones that had to be shut down, how many have been reopened?

Wayss: We requested the government to evacuate 17 of the buildings we inspected. Nine were immediately reopened after some aggressive weight removal and load management measures – they had to remove stock, drain water tanks, partially or fully evacuate floors, etc. 

We had another four where the building had to be completely evacuated and it will never reopen. But those factory owners were able to immediately relocate all of the workers and all the production to other facilities they have.

And then we have four that were closed and remain closed. In two of those, the remediation, including the remediation financing discussions, are underway and we are hopeful that they will reopen. And then there are two tough cases where it remains to be seen whether the factory will reopen or not. In one of these cases, the factory owner filed a lawsuit against the Ministry of Labour and Employment Review Panel, of which the Accord is a defendant.

Scholte: Four out of 1100 factories inspected where the workers are presently not working. That is a relatively small number. But what about wages for workers in the closed firms?

Wayss: We are getting a fair amount of grief on the wage issue, but the problem has been substantially overstated. We have only a couple cases where the workers have not been properly paid. Under Article 13 of the Accord, the brands are required to make sure that the factory owner is paying wages during factory closures or partial closures due to our inspections. We are working with the brands, the owners and the labor colleagues now to determine to what extent the Accord has been violated, and we will work to rectify found violations.