Northern University Bangladesh

The collapse of the RMG factory at Savar and reactions from various corners of the world.

Writer : Professor M. Shamsul Haque.

The collapse of the RMG factory at Savar and reactions from various corners of the world.The value- chain is under threat as can be seen in retailer’s responses.

The man made tragedy at Savar has lost over 1000 lives and injured thousands of the workers in the collapsed building. One woman, Reshma, was rescued 17 days after the collapse of the 9-storey building.  There has been wades spread discussion on the tragic event as RMG industry has brought many positive changes in the economy of BD. It employs 3.4 million workers most of whom are young women migrated from the rural areas. Buyers of BD garments can be found all over the world because it is bought cheaper from the low cost producers in BD. Lately BD has attained the status of second largest exporter after China the manufacturing house of the world.

It is true the BD producers get roughly 20 percent of the value added. We know that final value or price is determined by the ultimate consumers. A NY Times  survey on the retailers reveal some interesting facts that indicates the pressure rising on them from the factory building collapsed in BD. “And retailers are doing what was unthinkable, handing over information about exactly how and where, their products were made” wrote Stephanie Clifford. She gave example from different companies such Everlane, Nordstorm and Bed Bath& Beyond as to how they are coping with the new information demand from customers. Some of the major companies, like Nike, Wal-Mart etc said “they were developing an index that will include labor, social and environmental factors even if environmental measures”.

Research done at MIT and Harvard showed that consumers are interested in discount prices but they were also willing to pay more for clothes that “carried signs about fair-labor practices.” In recent weeks, Government officials, including Chancellor Angela Merkel of Germany, and labor and consumers advocates have cited the BD collapse in calling for the adoption of fair-trade standards or labeling.

The focus is now also shifting to people –friendly besides being eco-friendly. The paper mentioned. The Sustainable Apparel Coalition has been testing an index called the Higg Index that will include social and labor measurements. One piece of information reported in the paper is the detail breakdowns given in a high- fashion online site by Honest by: “Take a cotton shirt that costs about $320: it took 33 minutes to cut, 145 minutes to assemble and 10 minutes to iron in Belgian factory, then the trip took an additional 10 minutes at a Slovenian plant. The safety pin costs 4 cents and transportation about $10.50”. This information is interesting to the RMG industry as it shows how much more money could be made by moving production to higher quality garments rather than the ordinary shirts and pants now being made and supplied cheaply in the international markets.

So the collapse in BD is definitely changing the consumer’s perception. The paper noted the reactions on the Facebook site of Joe Fresh which produced clothes at that factory in Savar. Customers are upset and the Lablaw Companies, the parent of Joe Fresh vowed to audit factories more aggressively and also compensate the victims. It seems economic recovery is gaining momentum in USA and consumers will certainly look for alternatives to BD garments once their incomes rise.

While I was writing this paper I read Dr. Yunus, the lone Nobel laureate from BD wrote a paper in the Daily Star urging up the   politicians to mend the cracks in the governance system before the economy collapses.   His proposal to collet 50 cents more for each garment from the buyers will be well received as can be seen from the report in NY Times of May 9, 2013. After Tazrin Fire deaths this writer published a paper in the Independent about introducing what Prof. Shillar of Yale University called as Livlihood Insurance for deaths, disabilities and loss of jobs at very low costs.   At my request one company, Met life, is working on the idea and we hope a good scheme will be offered to the RMG industry in BD so that workers are protected from losses in the future.

M. Shamsul Haque.
VC Northern University Bangladesh.

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