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Jun 5, 2014

Bangladesh budget offers minor incentives for garment industry safety

No new funds to relocate dangerous buildings
By Ruma Paul and Nandita Bose
    
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DHAKA (Reuters) — Bangladesh's finance minister on Thursday announced minor sops to improve safety in the country's $22-billion garment industry, after a factory collapse killed over 1,100 people last year, but did not allocate new funds to relocate dangerous buildings.

Garments are a vital sector for the South Asian nation, whose low wages and duty-free access to Western markets have helped make it the world's largest apparel exporter after China.

Abul Maal Abdul Muhith's 2014-15 budget removed import duties on raw materials needed to manufacture pre-fabricated buildings and abolished taxes on safety equipment such as fire-resistant doors and emergency lights.

The garment industry had been looking for government support to buy land and relocate factories in unsafe buildings to a planned industrial park in a bid to restore confidence of western buyers in an industry that generates 80 per cent of export earnings.

The collapse of the Rana Plaza factory complex killed more than 1,130 people in April last year, sparking a global outcry for improved safety standards in the world's second-largest exporter of ready-made garments, which employs four-million people.

Companies are split over how to improve conditions. Big European names signed an accord that would make them legally responsible for safety. U.S. firms like Wal-Mart Stores have broken ties with non-compliant factories.

Late last year, the government raised the minimum wage for garment workers by 77 per cent to 5,300 taka ($68) and amended its labour law to boost worker rights, including the freedom to form trade unions.

This is the first budget for Prime Minister Sheik Hasina's government since her party came to power for a second consecutive time by winning a violence-plagued election boycotted by the country's main opposition party.

The budget aimed to boost sagging growth to 7.3 per cent, from 6.1 per cent this year, after severe political unrest followed by days of strikes crippled the economy during the runup to the elections.

The government will raise spending by 15.9 perc ent to 2.5 trillion taka ($32 billion) in the coming financial year starting July, Muhith said.

Slowing private investment has become a major concern for the Hasina government as business owners hold back on new plans.

Global buyers have also slowly started pulling out orders from around 30 per cent of the garment factories in the country that are housed in unsafe, shared buildings and employ 1.5 million workers, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said.

"It is disappointing there is no provision for a soft loan scheme to relocate factories given the current investment climate," Shahidullah Azim, vice-president of the BGMEA, said.

Bangladesh government officials recently got involved in a controversy over their decision to not shut down six garment factories deemed unsafe by experts hired by western clothing brands.

The April 24 collapse of Rana Plaza, a factory built on swampy ground outside Dhaka with several illegal floors, ranks amongst the world's worst industrial accidents and has galvanized brands to look more closely at their suppliers. 

    
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