Justice and Profit Margins: the Garment Industry in Bangladesh

 

 

Sewing on the Factory Line

Sewing on the Factory Line

 

Tongi

We’re heading North from Uttara to the Tongi Industrial District. High-class apartment buildings and new high rise developments fade out to ramshackle tin-roof houses and bamboo and tarp shelters. Rumble through the potholes, past the bamboo lumber yards and open air welding sheds to the highway, and for the first time in two months I see green fields stretching out on either side of the road. Rice paddies, a few lumbering cattle, picturesque shallow-draft boats floating in green murky water, agricultural laborers taking their cha in the shadow cast by a billboard advertising mobile phones. Brick kiln smoke stacks dot the fields and belch black and white fumes. The sky is cross-stitched with power lines and the Tongi garment factories mass in the distance like a stage silhouette.

Garment production in Bangladesh is a $22 Billion per year industry. A huge source of income for a nation struggling with rampant poverty and frequently reeling from flooding and natural disasters. Before coming to Bangladesh, the vast majority of what I had heard about the garment industry was bad. The Rana Plaza disaster, called the deadliest garment factory disaster in history, in which over 1000 garment workers died when their building collapsed, slave labor conditions, fires, sweatshops, rich Westerners living off of the exploitation of oppressed Bangladeshis, and calls for the socially conscious to boycott major brands linked to injustice in the supply chain.

Shortly after I arrived in Dhaka, I met Naomi. Naomi manages a team that handles several major customer accounts at one of the top rated factories in the city. Over the course of several conversations, a great deal of research, and finally going to see the factory for myself, I realized that the realities of the garment industry, the system, the goods, and the evils, are far more complex than I had imagined.

The garment factories line the trash-strewn drag in Tongi, everything from unregistered single room set-ups to huge, sprawling complexes with corporate logos, shiny glass windows, razor wire, and as many as 20,000-40,000 workers inside. On the right, a mountain of baled up garment scraps that has been gathering for years takes up a square block of space. On the left, a bit in the distance, the top two floors of a hulking mass of a building are beat up and burnt out, now under construction.

“That’s where the Hameem Factory fire happened in 2010,” Naomi tells me later, pointing it out on the return trip. “They reported just over 100 dead, because it was during the lunch hour, but it had to be almost 1000. But the guy who owns that place is an MP, lots of retired military guys involved, so they can say whatever they want. Get away with anything.”

We enter the walls of “The Zone” through guarded gates, and everything changes. Less trash. More space. Trimmed trees and hedges.

“The Zone,” also called the BEPZA (Bangladesh Export Processing Zone Authority) or EPZ Dhaka, is an area cordoned off by the government (with literal walls and guarded gates), specially designed to attract foreign investment.

“There are advantages to working a factory in the zone,” Naomi says. “Tax-free holidays, foreign investment friendly, bank loan privileges, that sort of thing. But factories in the zone also are the ones that get inspected and actually have to meet compliance. Workers wages are much higher in the zone… and because we’re walled in, if there is trouble here it’s much easier for the BEPZA authorities to control. [They] have a set of Industrial and BEPZA police in the zone at any given time… Outside the zone they bring in the police and the army. They have these water hoses they use…”

Mob Mentality

Labor unrest in Bangladesh is no joke, and very common. Naomi has her share of war stories.

“When trouble happens in one factory, the foremen from other factories in the area will just tell their workers to get out,” Naomi says. “Better to let them go than destroy everything inside the factory.”

With factories containing thousands of workers apiece lining the road, you can imagine the potential for chaos. On the bad days, mobs of tens of thousands of angry workers can be out in the streets, hurling rocks, breaking and burning, clashing with police.

“Sometimes we’ll just be driving through and I’ll keep my head down in the car,” Naomi says. “You never know if a brick is going to crash through the window.”

The last time Naomi’s factory had significant unrest was 2012. A disagreement with management over broadcasting a cricket match on the PA system avalanched quickly and seemingly inexplicably into violence.

“They workers are rioting,” the voice on the other end of the phone line said – a warning call from another factory. “They’re beating up the expats in the lunch room. Get out now before it starts there.”

The office staff evacuated, and sure enough, the workers in Naomi’s factory were soon rioting as well, kicking off a weeks long standoff that ended in bloodshed.

The following weeks played out like a Hollywood thriller. Production was stalled and millions of dollars lost in the missed deadlines and lost time. Every day the factory head would brave the bricks and mobs to come in for negotiation, and all the while, behind the scenes a cloak and dagger game of who-done-it played out. Undercover agents, sent by factory management, infiltrated the crowds and discovered that a local NGO, concerned with worker’s rights and dangerous factory conditions, had been inciting the riots.

The coup de grace came when a factory exec darkly joked that the head of the NGO that had caused so much damage that he “ought to be shot.” Two days later the NGO head was shot dead. The investigation lasted for weeks. Rumors flying. Bengali intelligence? Company thugs? The consensus was that the murder was unconnected, but it shook everyone up.

In the months that came quietly on the heels of the riots, Naomi and the other managerial staff spent a good deal of time on the floor, walking the lines and talking to the workers to build report.

“I would ask one woman: ‘Why were you rioting?’ And she’d say: ‘I don’t know. Because that other worker was doing it,’” Naomi says. “And I’d ask that worker, and they’d say the same thing. No one knew what they were fighting for. The mob starts and there’s no reasoning and no purpose.”

But when I visit it’s quiet. The worker’s are content for the moment. In fact, Naomi’s factory has one of the highest retention rates of any factory in Dhaka.

Profit Margins and Justice

Inside the building, the factory’s welcome foyer is sparkling clean, well lit, spacious and professional looking. I’m following behind the factory production director, a smiley Sri Lankan named Sanjit who strides with a commanding air as we step through the door onto the production floor.

“They’re not all like this you know,” he says. “My god, in Bangladesh, most factories you go from first world in the offices to third world on the floor. Here, top of the line for all.”

Factory production line

Factory production line

The production floor is massive. And Sanjit is right: it’s clean, reasonably well lit, hundreds of spinning fans buzz and keep the air flowing, red and yellow and black lines are painted clearly on the concrete floors demarcating work stations, personnel, flow routes, and 3500 Bengali garment workers bend over their sewing machines and stitching up pockets, attaching buttons, sewing pant legs.

Sanjit takes me through the process from start to finish: from the rolls of fabric shipped from China to the measured, cut, sewn, clipped, buttoned-and-zippered, cleaned, tagged, and sealed packages sorted, bagged, boxed, and ready to be trucked to container ships and sailed across the seven seas to ports across the globe. In his office, Sanjit proudly shows me the entire operation broken down into its component parts, mapped out in sticky notes on a glass wall. The sheer complexity of all the moving parts to bring a product from conception to fruition is mind-boggling.

Naomi’s factory is one of the highest rated in Bangladesh. They are the top tier, 99% compliant with regulations, they provide transport and lunch for their employees and, as a policy, do everything in house, and they pay their workers a “living wage” as opposed to a “working wage.” That works out to around $70 – $140 (plus a 10% bonus for attendance) per month for work on the production lines. In other factories, until just this past year, workers would often receive only around $35-$55 per month, barely enough to scrape by in the slums or “hostels,” living cheek to jowl in cramped and basic living conditions in the urban flow. Just this past year the minimum wage was increased by 77% to $65 per month, but reports since have estimated that 40% of factories were failing to pay at the new requirements.

So why isn’t every factory like Naomi’s? In the face of disasters like Rana Plaza and international outcry over unsafe working conditions and poor pay, why don’t all the customers simply refuse to do business with the dicey factories and only employ responsible, well functioning, more secure factories like this one I look at with Naomi. The answer, as always, is money.

“Every [major brand] looks to average a 70% profit margin from factory cost to sale to make their targets for the season,” says Naomi. “So for someone like us who costs more because we’re more compliant and pay a living wage, they might only make a 60% or 65% profit margin. To make that up that means they have to have some factories at that 70% and some at 80%.”

Think of it like this: Bangladeshi garments factories can be broken down into three tiers. At the top are the factories like Naomi’s, largely compliant to labor regulations, secure, reliable, and mostly in the Zone. Most of the factories within EPZ Dhaka run much smoother and meet compliance much more consistently than those outside.

On the next tier down come the registered factories outside the EPZ. Outside Zone walls, the cost of labor immediately plummets because the factories are not subject to the same requirements and restrictions. These factories, though registered, often have extremely substandard work conditions, but most are still subjected to some sort of inspection system (enforcement is another story). However, to meet quotas, it’s a common practice for these factories to practice “indirect sourcing,” subcontracting to smaller factories to save money and meet quotas.

Many of these subcontracted factories make up the next tier down: the unregistered factories. These unregistered factories do business in cash, off the books, and completely unregulated and unrestricted by labor laws, safety inspections, or wage requirements. Low pay with forced overtime and dangerous work conditions, in crumbling buildings with little airflow, are the norm. Around 5500 garment factories are registered in Bangladesh. Naomi and Sanjit estimated that there are over 8000 total factories, making for an estimate of 2500 unregistered and completely unregulated factories.

Factories like Naomi’s function as the public face of their customers – operating within regulations and within the zone, they are a more secure bet, and they look good to consumers across the globe. Companies contract through factories like Naomi’s because then they can say: “Our clothing is manufactured at a facility that pays a living wage and meets compliance. One of the best in Bangladesh.” And for a fraction of the work, it’s true.

But to make their target profit margins, for every top-notch factory contracted by a customer, several cheaper factories, outside the Zone, with lower wages and worse conditions, will be hired on to cut costs and meet deadlines (and ultimately make the customer happy). These factories, in turn, will often subcontract parts of their order to unregistered factories. These third tier transactions take place off the books and in cash, allowing the customer a level of safer ignorance.

When it comes down to it, the customers want to make their profit margins and meet their deadlines, and not know more than they have to.

“Everybody does this,” says Naomi. “All the major players. Sure they’ll talk, but for every factory like ours that they use, they’ll hire five more that are cheaper.”

So What?

So what do we do with this? If the reality is that virtually every major clothing manufacturer making anything in Bangladesh is, whether on record or not, employing exploitative labor conditions in their supply chain, what do we do with that information?

Women at the embroidery station

Women at the embroidery station

The balancing act for consumers comes from pressuring transnational manufacturing companies to reform, to pay their workers a living wage, and to ensure safe working conditions, without pushing them so far that they pick up and leave. Genuinely good things have come from the garment industry as well, chief among them the jobs created directly in the industry for 4.2 million people, plus the jobs and economic development indirectly created to support the towering industry. The goal is not to shut down the garment industry in Bangladesh – that would only result in jobs and opportunities lost in a country desperately in need of economic boost – the goal, rather, is to push global brands, factories, and the government of Bangladesh itself, to improve working conditions and reduce corruption but keep the sector growing, without everyone jumping ship.

The profit margins are high enough, and the executives are making SO much money (a very apparent fact in Dhaka) that the clothing companies can afford to make some reforms for basic human rights without needing to jump ship. But, human greed comes into play here as well. Just because they can afford to reform, doesn’t mean they are willing. When labor becomes too expensive in Country A, moving to Country B, where the laws and regulations haven’t been inacted yet and labor is cheap, can seem a lucrative option.

Admittedly, in the wake of public outrage following the Rana Plaza disaster, just over a year ago, some significant progress has been made. The minimum wage has been raised for one thing, and two groups, known as the Alliance and the Accord, have banded together major Western brands and inspected some 2000 factories. Working in a context of some of the worst factory conditions in the world, in a massive industry under a hugely corrupt government, this is a tough job, to say the least. But the worst factories, registered and unregistered, remain uninspected and unregulated. It’s absolutely a step in the right direction, but the work is far from over.

Perhaps first and foremost then, is the need for transparency at every stage of the supply chain, big and small. Shady subcontracted deals done off the books that big companies can officially turn a blind eye to and claim ignorance of are, in reality, just as shady as if those companies were simply exploiting all their workers equally. A façade of justice is not the goal. Only real transparency and real accountability can result in real change.

 Finding what direct action we can or should take as individuals is tough though. I’m still wrestling through it myself. Should the socially conscious person or the justice-driven Christian boycott all clothing made in Bangladesh? I’d say probably not. That industry is providing jobs that allow opportunities for millions of Bangladeshis. But do we just take that as “good enough,” and ignore the injustices? No. For me, knowing that within Bangladesh and within the industry there is both good and bad, I feel compelled to learn more about where products come from and what’s involved in the process, and support the efforts to regulate and inspect factories and promote transparency to the public.

My friend Naomi is both proud to be part of an industry that provides millions of jobs to people who need them, and acutely aware of the shadiness that takes place on a daily basis. “I’ve been fortunate to work for one of the top factories in Dhaka [in regards to safety standards and treatment of workers],” she says. “That’s been a really good thing.”

Like so many things, I wish this were black and white, but like the Dhaka skyline, I find myself instead bogged down by a smoggy haze of grey. I wish I could unequivocally vilify heartless big industry oppressing the people, but I realize that that same industry provides millions of jobs and opportunities for those who otherwise might have nothing. This isn’t an issue that you can just throw a few dollars at, or go on a charity run. The industry is part of the global economy, and by extension, we are connected to it. Smoggy haze or not, whether or not we have solutions, you and I are part of this, and we ought to know as much as we can.

Works Cited:

Greenhouse, Steven and Elizabeth A. Harris. “Battling for a Safer Bangladesh.” New York Times, April 21, 2014. http://www.nytimes.com/2014/04/22/business/international/battling-for-a-safer-bangladesh.html?_r=0

Kristof, Nicholas. “Where Sweatshops Are a Dream.” New York Times, January 14, 2009. http://www.nytimes.com/2009/01/15/opinion/15kristof.html

Kristof, Nicholas. “My Sweatshop Column.” Nicholas D. Kristof Blog: On the Ground, January 14, 2009. http://kristof.blogs.nytimes.com/2009/01/14/my-sweatshop-column/

Labowitz, Sarah and Dorothee Baumann-Pauly. Business as Usual is not an Option: supply chains and sourcing after Rana Plaza. NYU Stern School of Business: Center for Business and Human Rights, April 2014. http://www.stern.nyu.edu/cons/groups/content/documents/webasset/con_047408.pdf

“Bangladesh garment factories failing to pay minimum wage” The Tribune, January 24, 2014. http://tribune.com.pk/story/662841/bangladesh-garment-factories-failing-to-pay-minimum-wage/

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