Garment trade wields unusual power in Bangladesh

In the honking, congested heart of this overcrowded capital, one glass office tower stands uniquely alone, surrounded by water, accessible by a small bridge. It is a symbol of the power of Bangladesh’s garment industry, the headquarters of the country’s most powerful association of factory owners. It is also illegal.

So said the Bangladesh High Court, concluding that the land had been illegally obtained, the building had been erected without proper approvals and the location threatened a network of lakes that form the natural drainage system of the capital. The high court called the building “a scam of abysmal proportions” and ordered it demolished within 90 days.

That was two years ago. The building still stands. The case is now in a legal limbo - more proof, according to critics, of the power of the Bangladesh Garment Manufacturers and Exporters Association. Members control the engine of the national economy - garment exports to the United States and Europe. Many serve in Parliament, or own television stations and newspapers.

For two decades, as Bangladesh became a garment power, now trailing only China in global clothing exports, the trade group has often seemed more like a government ministry. Known as BGMEA, the organization helps regulate and administer exports and its leaders sit on high-level government committees on labor and security issues. Industry trade groups in the United States could only imagine such a role.

But the April collapse of the illegally constructed Rana Plaza factory building, which killed more than 1,100 people, has placed the entire global supply chain that delivers clothes from Bangladeshi factories to Western consumers under scrutiny. And the quasi-official garment group, in the eyes of its critics, presents a major conflict of interest at the center of Bangladesh’s troubles and is a big part of the systemic problems that have made the country a dangerous place for garment workers.

“You can’t put the fox in charge of the chickens,” said Rizwana Hasan, an environmental lawyer. “BGMEA has no regulatory authority under the laws of the country. It’s a clubhouse of the garment industry.”

Bangladesh is working to restore the garment industry’s credibility after last month’s decision by the Obama administration to suspend a special trade preference for the country. The European Union is also considering penalties. Bangladesh has responded by passing new labour laws and pledging to inspect the structural safety and legal compliance of the nation’s 5,000 garment factories.

In both instances, the garment group’s interests were well represented. It has hired a team of engineers and is helping oversee the post-Rana Plaza factory inspections - even as the high court cited the group for a litany of violations on its own headquarters. Meanwhile, the trade group brought its influence to bear in a lobbying campaign as Parliament amended the labour laws this month.

Bangladeshi officials promised to overhaul their labour laws, which fall short of standards defined by the International Labour Organization and tend to suppress unions, contributing to safety problems, labour advocates say. But the results of the overhaul were less significant, especially for the garment industry. One amendment required that industries create profit-sharing programmes for workers. But exporting industries, notably the garment sector, were exempted. Restrictions on labour organising were eased but far from fully lifted. The new law requires that 30 per cent of factory workers must sign petitions to form a union, a telling obstacle given that many factories have thousands of employees and have few places to hold meetings and organise.

Golden opportunity

“Bangladesh had a golden opportunity,” said Roy Ramesh Chandra, a labour leader, who said the political influence of factory owners diluted some of the amendments. “The employers have tremendous influence.” Business interests dominate Bangladesh’s Parliament. Of its 300 members, an estimated 60 per cent are involved in industry or business. Analysts say 31 members, or 10 per cent of the country’s national legislators, directly own garment factories, while others have indirect financial interests in the industry.

The trade group was formed in 1983 as Bangladesh, then one of the world’s poorest countries, was trying to build its economy by developing a garment industry. Initially, it had no headquarters and no bank account. “When I first went out there, the BGMEA was run out of a garage,” recalled Don Brasher, who worked as a trade consultant to Bangladesh for more than a decade. “It was not institutionalized at all.”

That quickly changed. Under the rules of global textiles, developing countries faced restrictions on garment exports and, in the case of the United States, were assigned trade quotas. Managing this quota system was critical and complicated. Bangladesh’s government decided to delegate administrative tasks to the trade group - including the authority to regulate certain transactions and collect fees.

“That was pretty extraordinary,” said Brasher, who lived in Dhaka for two years and worked closely with the group on the quota system. “Ordinarily, that is done by a government agency. There’s nothing like that, anywhere, but it was done out of necessity.”

Bangladesh’s government is notoriously corrupt and has limited bureaucratic capacity to handle the intricate mechanics of global trade. Politics is ferociously contested and marred by regular nationwide strikes, known as hartals. In this environment, the group became a stabilising force as global trade rapidly grew.

Even after the quota system expired in 2005, the trade group steadily expanded its regulatory responsibilities. Today, it enjoys a near stranglehold on exports: Only factories that are among its members are allowed to export woven garments, with some exceptions. The group regulates the importation of fabric and issues certificates of origin, the required proof that a garment is made in Bangladesh. It has arbitration committees to settle disputes and administers the often complex practice of subcontracting.

Many factory owners portray the industry as a public service, providing millions of jobs. The health of the garment sector is often seen as a national security issue, with the industry accounting for 80 per cent of Bangladesh’s manufacturing exports and providing critical foreign exchange. It is the trade group that maintains order in daily operations of the industry, owners say. “Otherwise, there would be chaos,” said Annisul Huq, a former president of the trade group. “Yes, we can criticize the BGMEA, but it has a very strong role. Somebody has to lead.”

Factory owners face many challenges in Bangladesh, including high interest rates on loans. But the heroic self-image of the sector is somewhat overstated. Garment factories enjoy subsidies and tax breaks not offered to other industries, and pay less tax. A recent study in a Bengali-language newspaper estimated that these subsidies and tax breaks exceeded tax revenues from the industry by roughly $17 million.

“The doors of the treasury are open for them,” said Badiul Alam Majumdar, secretary of the nonprofit group Citizens for Good Governance. “They extract all kinds of subsidies. They influence legislation. They influence the minimum wage. And because they are powerful, they can do, or undo, almost anything, with impunity.”