The RMG sector has a challenging decade ahead. Is the industry prepared?

The weaknesses in the country's RMG sector have once again been laid bare in recent weeks, as workers' protests over raising the minimum wage underscored the struggles they face in meeting their basic needs due to their existing low wages.

The authorities have since agreed to raise the minimum wage for garment workers by 56.25%, from Tk8,000 to Tk12,500, with an annual 5% increment, but not before the death of several protesting workers. 

Many workers still continue to demand the minimum wage be set between Tk20,000 to Tk25,000, given that their current earnings amount to less than half of what is necessary to maintain a respectable standard of living. Moreover, rising inflation has added to the financial burdens confronting these workers.

Despite such hardships, garment manufacturers have consistently asserted their inability to accommodate substantial wage hikes, citing challenges such as power and gas shortages, fluctuations in exchange rates, and reduced demand from key export markets.

Additionally, as Bangladesh prepares for LDC (Least Developed Country) graduation in 2026 and faces competition from countries like Vietnam and emerging African nations offering even lower wages, it becomes crucial to find ways to remain competitive for the RMG industry, which has been built on a model of gaining competitive advantage by forcefully keeping wages down over the years. 

According to economist Dr Akhtar Mahmood, former Lead Private Sector Specialist at World Bank Group, the RMG sector will not be able to sustain its current low-wage model for long without transitioning to a more sophisticated, developed, highly-productive industry.

"Low wage structure helps to sustain our industry now. But do we want that? The workers are in pain, and it is affecting their productivity. We will not be able to sustain the structure in the next ten years. We do not want such a low wage structure exactly because it will not sustain in the future," Dr Mahmood said in a recently published article in The Business Standard.

As we reached out to several garment manufacturers to delve deeper into the matter, they made the bold claim that the country's RMG sector is not solely reliant on the low-wage model, but attempts are being taken to increase productivity with the help of educated, skilled workers, combined with the embracing of modern technologies. 

Consequently, these garment manufacturers maintain an optimistic outlook, affirming that Bangladesh is poised to retain its standing in the global RMG market, notwithstanding competition from rival nations.

To begin with, most garment manufacturers dispute the idea that Bangladesh's RMG sector currently operates on  a low-wage model in the first place. 

Barrister Shehrin Salam Oishee, a director of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and also the director of Envoy Design Ltd., contended that the wages offered to garment workers in Bangladesh are not low but rather competitive. 

She based this assertion on factors such as per-worker productivity, actual value addition, and a comparative analysis of the cost of living in the countries under consideration. "We have a vibrant and young population. So we have a clear advantage of a competitive labour force," Oishee said. 

She emphasised the necessity of diversifying products through both horizontal and vertical expansion, particularly moving from basic items like T-shirts to more advanced clothing, to sustain competitive wages. She stressed the importance of automation, skills development, and innovation in achieving this strategic vision for Bangladesh and maintaining competitiveness in the global market.

That said, she acknowledged that "LDC graduation will certainly have some impact on our trade, as it will lead to some sort of shifting tariff structure."

She highlighted the importance of double transformation in the EU market, where 60% of Bangladesh's exports go through two stages, from yarn to fabric and then from fabric to garment. Hence, she called for the need for investing in backward linkage to maintain competitiveness in the EU market and navigate potential challenges in other markets if tariffs increase.

"But then again, the discussion we are having right now, if we can improve our efficiency and productivity, it would not be a challenge," she added. 

Meanwhile, according to Mohiuddin Rubel, another director of BGMEA and also the additional managing director of Denim Expert, the workers' wage is gradually increasing in the country and it will further increase in the future. 

Moreover, like their counterparts in other developed nations, Bangladeshi workers are increasingly acquiring advanced skills and education, preparing for the significant changes anticipated in the sector as new technologies continue to emerge.

Referring to China as an example, Rubel remarked, "once they too used to 100% rely on manual labour. However, with time, they honed their skills, leading to the emergence of new industries and job opportunities, propelling their sector forward. A similar trajectory is anticipated for Bangladesh." 

There is also a notion that Bangladesh might lose its competitive edge of low-wage workers due to automation. Currently, less than 15% of all operations in the RMG sector are mechanised. We are still not adapting fast enough to the rapid development in automation. 

Rubel also agreed that there is still considerable progress to be made as far as automation is concerned. However, he emphasised that changes are on the horizon, as garment manufacturers are beginning to recognise that failure to adopt automation promptly may result in losing ground to their competitors.

"While it's true that we are trailing behind several developed nations, we are making steady progress," he said.

Abdullah Hil Rakib, another director of BGMEA and also the managing director of Team Group, said that although complete automation is not yet possible, Bangladesh's RMG sector has seen a transformation towards semi-automatic processes. 

He went on to explain that fabric inspection, rolling, and cutting are extensively automated, yet the manual numbering of cut fabric continues. Similarly, although the sewing process has partially shifted to semi-automatic methods for component creation, human labour remains essential for assembly, alongside the integration of advanced sewing machines and productivity-measuring IoT devices like "Nidle." 

He also informed that quality inspection remains entirely manual due to the limitations of AI technology, while ironing and pressing are gradually shifting to semi-automation, and the packaging process remains entirely manual.

"There is no alternative to training to enhance the productivity of workers. It's not only about providing them with the skills of their process, it's also about sincerity, motivation, workplace safety, workers' wellbeing, mental health and so many other non-production matters," Rakib said. 

Meanwhile, Oishee also reckoned that factories in the Bangladeshi garment industry are undergoing significant technological transformations, with automation and multiskilling of workers becoming prevalent, from autocad and fabric optimisation to waterless dyeing and Ozone wash technologies. 

The adoption of advanced technologies, such as ERP (enterprise resource planning) for supply chain management and digital payment of wages, indicates a shift toward more efficient and digitally managed factory operations, disrupting traditional manufacturing practices.

Nevertheless, she conceded that when considering all these advancements in the overall context of Bangladesh, they may not be notably significant. These modern technologies and advancements are deemed insufficient in the broader perspective of the country.

"On average, Bangladesh is lagging behind many other countries. particularly, China, Vietnam, Indonesia. The scenario of Vietnam is different, because Vietnam is directly adopting Chinese technologies and automation with the assistance of China. Because of this, Vietnam has taken a different position, which is why their efficiency is much higher," she reasoned.

It is worth noting that in the context of productivity, Bangladesh's hourly productivity in the RMG sector is significantly lower than that of its counterparts, as the Asian Productivity Organization (APO) Database (2018) revealed that Bangladesh's hourly productivity stands at $3.4.

On the flipside, leading exporter China's productivity is recorded at $11.1, while Vietnam's productivity is $4.7, Sri Lanka's is $15.9, Indonesia's is $12.3, and India's is $7.5. Despite being the second-largest garment exporter, Bangladesh trails behind its Asian counterparts in terms of apparel labour productivity per hour, except for Cambodia.

Oishee agreed that "the productivity in Bangladesh has been historically low compared to the other major supplying countries." She noted various factors contributing to this, including low worker productivity, a gap in skills, and reliance on conventional manufacturing processes rather than systematic and scientific approaches.

According to her, in recent years, particularly in the last decade, many transformations have taken place in this area. Every factory has its industrial engineering team. They study the motion time efficiency, productivity and everything, and they balance everything accordingly by modernising the factory layout and adopting different processes, like inventory control, Just-in-Time (JIT) etc. 

"In addition, many factories are implementing tools like linen manufacturing, six sigma, etc. However, when we talk about workers' productivity, there are a lot of factors associated with this. 

"Like the use of technology, management systems. When it comes to the use of technology, then obviously it is very difficult to draw a general picture of the whole industry because we don't have advanced manufacturers who advance the state of modern technologies," she explained. 

However, A F M Towhidul Alam, director of Silken Sewing Ltd, attributed this low rate of our workers' productivity to the government's strict rules and regulations, in addition to the superior quality of products manufactured in Bangladesh compared to those from other countries. 

"After visiting numerous factories in China, Vietnam, and India, it is evident that our product quality surpasses theirs," he said, further noting that upholding such high standards compels Bangladeshi garments to maintain cost-effectiveness, while it also impacts productivity rates.

Additionally, he claimed that even after Bangladesh's graduation from LDC status, the RMG sector is not expected to encounter immediate risks to its current position, given its strong reputation and continual introduction of new products and innovations.

"Given our current standing, there won't be any better alternative to Bangladesh anytime soon. Our buyers have sought alternatives for lower-priced products in the past, but eventually, they have always returned to us. Therefore, I don't think there should be any question on the potential of our sustainability," he added. 

The director of another leading garment company in Bangladesh, who preferred to remain anonymous, also acknowledged the troubling issue of low productivity. However, he expressed his belief that the workers' skills are not lacking.

According to him, one of the primary causes of our low productivity is traffic congestion. The average travel time for workers from home to the factory and back, about two hours each way, significantly affects their efficiency and limits their productivity.

"Furthermore, there is also an issue of inefficiency at the management level within our factories," the director supplemented.

It is estimated that the efficiency of most garment factories could be much higher than the average 40%-45% in Bangladesh, compared to global benchmarks of 75%-85%, with necessary interventions.