Faiek Fazal, Senior Manager, Corporate Division Wasiq Ahmed, Intern, Corporate Division
The Ready-Made Garments (RMG) Industry of Bangladesh which began in late 1970s, expanded in 1980s and boomed in the 1990s, has been a success story for the country. It is the country’s prime thrust sector with an unchallenged stake when it comes to earning foreign currency accounting for 83% of Bangladesh’s total export in FY 2019-20 according to BGMEA.
This industry along with inward remittance from the nonresident Bangladeshis almost defines the country’s balance of payment account. Thus, RMG sector can certainly be considered the linchpin in driving the Bangladesh’s economy with an 11.17% contribution to GDP while employing around 4.5 million people.
Expatriates in the RMG Sector
During the earlier days, Bangladesh lacked an abundance of technical expertise that was required for the booming RMG sector. At the same time, there was also a lack of adequate educational institutes that could produce qualified graduates for the industry. Consequently, the businesses at that time had no choice but to hire and rely on experienced technicians from neighboring countries like India, Sri Lanka, China, Taiwan, etc. to fill the gap. Indian and Sri Lankan nationals were being brought in on a contractual basis in Knit & Woven factories for the purpose of training local workforce on the new technologies and machineries that were being employed. Many Pakistani experts were hired in Textile & Spinning factories with Turkish experts in Dyeing factories due to their globally recognized expertise in the respective fields. With time, RMG manufacturers began to develop appreciation for these foreign experts, which resulted in them being recruited on a permanent basis. According to the official statistics presented by the Home Minister of Bangladesh, more than 84,000 foreigners from 44 countries were employed in various jobs as of 2018. But, these figures aren’t indicative of the total number of expatriates employed in Bangladesh as they don’t account for the significant number of foreigners who are employed without work permits.
There are no official statistical data on the number of total foreign employees in the country, but according to an unpublished study from University of Dhaka and The Centre of Excellence of BGMEA - 2018.These expatriates who are generally hired in positions such as CEO, COO, CFO, GM, Head of Design, Head of IE, Head of Quality Assurance, etc. of RMG have also been remitting more than $2 Billion per year from their salaries and allowances.
Why are Expatriates Infiltrating the Local RMG Job Market?
It is worth mentioning that most foreign professionals working in Bangladesh’s RMG sector are highly presentable, possess excellent communication skills, and are disciplined, task-oriented and devoted towards their work. However, the uncontrolled influx of expatriates in Bangladesh’s prime export sector is indeed a cause for concern to the national employment situation. If the performances of RMG factories led by expats are examined purely from a business case perspective, massive improvements in overall operational efficiency level are usually noticed. We focused on two narrowed-down fields where most of these improvements are demonstrated: Cost Management and Production Management. Even though, the basic principles of cost management are familiar to Bangladeshi business graduates and cost management accountants, expats usually achieve an efficiency level resulting in an 8-10% cost reduction within a year. An identified reason for this is that expatriates are renowned for taking a structured and detailed approach to the investigation of the cost-drivers of daily operations. Indian & Sri Lankan experts have been implementing Industrial Engineering (IE) in the production processes of RMGs. In a factory that we visited, we learned that the production director there was a Six-Sigma Black-belt holder, and his floor managers had a minimum of Six- Sigma Green belt certifications. They implement ‘Needle Tracking’ - a tracking mechanism that helps determine the productivity level of each worker in the production line through a software that generates real time reports. These reports can be utilized to improve efficiency on a micro level, ensuring maximum output from each production line. This also leads to higher worker satisfaction as they have a set of daily production target & once it’s met, they can leave work, even before the end of the shift. Interestingly enough, even though the same production management knowledge is available to Bangladeshi personnel, they are usually unwilling to implement it in practice because of the potential complexities that may arise as well as the additional workload they have to endure. Now, the question that arises here is whether our firsthand observations of the two RMG factories resonate with the reality across the sector or whether they were just isolated, uncorrelated events. As such, we have conducted interviews with some of the largest RMG companies of the country, in order to understand this employment dilemma from the employers’ perspectives. We asked them.
Why do RMG owners currently prefer to hire Expatriates instead of local professionals?
The common answer to this was the perceived superiority in skills and technical ability of the expatriates. Expats are renowned for their effective specialized and soft skills. Mr. Mesbah Rabin from Ananta Group cited a 2018-survey by economic think tank - Centre for Policy Dialogue (CPD), which found that a dearth of trained management professionals has been hampering the development of the readymade garment sector for some time. The survey, which was conducted among 3,856 factories across the country, discovered that while 51% of RMG factory managers had post-graduate degrees, one-fifth did not complete graduate level education. The need for skilled manpower has been further emphasized by Mr. Rabin, who highlighted the fact that the country’s apparel sector faced a shortage of about 1.47 lakh skilled workforce from floor to the executive level in 2017-18, a problem that will further exacerbate to a shortage of 1.82 lakh by 2021.
Even if we focus on management level positions, RMG investors estimates, the sector will need 1.89 lakh graduates and textile experts by 2021 whereas Bangladesh has the capacity to produce around 40,000 by that time. As per a study by Dhaka University, titled ‘Employment of Expatriates and its Alternatives in the RMG Sector of Bangladesh’, the number of specialized educational institutions, is grossly inadequate compared to the needs of the RMG sector. The annual enrolment at universities offering RMG relevant education is only around 15,000 a year, which includes Bangladesh University of Textiles, BGMEA University of Fashion and Technology, Daffodil International University, BUET, etc. Abdullah Hil Rakib, Managing Director of TEAM Group
and Director of BGMEA, explained that it is not the nationality rather the level of expertise that determines employability. A reason for expats seeming more adept is because countries like Korea, China etc. have moved into industrialization way ahead of Bangladesh. RMG employers acknowledge the increasing influence of foreign nationals in management, communication and marketing roles. They claim that having a diverse workforce helps create a multicultural environment within the company that can improve their ability to connect and
communicate with customers while delivering superior value. Perhaps, the most intriguing of all insights was unraveled in our discussion with another sponsor of a leading RMG exporter group (with annual turnover of $300 Million): Seeking anonymity, he explained international buyers like Walmart, H&M, M&S, JCPenny, etc, prefer to source from manufacturers who have foreign nationals employed in their hierarchy. Such manufacturers of ready-made garments are generally treated with higher degrees of trust and confidence which in turn is often leveraged by charging marginally higher prices.
But why is it that international buyers find such confidence in foreign nationals and not in Bangladeshis? It is because of the perception that has developed over decades which proved that Bangladeshi professionals show lack of commitment to clients in the form of compromised product quality, delayed deliveries, etc.
Why is the Current Employment Dilemma a Problem to be addressed?
Expatriates working in RMG sector might be a win-win situation for both owners and foreigners. Unfortunately, the major problem lies in the fact that, salaries of expats are paid in Dollars. Moreover, the influx of professionals from overseas is leading to a reduction in jobs available to Bangladeshi professionals. Furthermore, many expatriates currently working in Bangladesh don’t have valid work permits. Factories outside EPZs, oftentimes don’t follow the guidelines when it comes to employing expatriates. As a result, relevant authorities are in the dark when it comes to the actual number of expatriates working Bangladesh and determining the total outflow of foreign currency. It is estimated that foreigners employed in Bangladesh siphon off around $3.15 Billion per year, depriving the government of approximately BDT 12,000 crore in revenues.
To address the issue, authorities have started allowing non-EPZ firms to pay foreign staff in their respective foreign currency (FC) accounts from the company’s export retention quota (ERQ) accounts. Export-oriented businesses, who were previously allowed to pay a maximum of 50% of employee salaries from ERQ, can now transfer up to 75% from these ERQ accounts. - meaning a larger number of expatriates and a higher portion of their salaries can now be paid through official banking channels bringing them under the Bangladeshi tax net. The Securities Services Division of the Home Ministry also made it mandatory for Indian and Pakistani citizens to register with the immigration authorities upon their entry into Bangladesh in an effort to stop overstay of visas and illegal employment in the country.
RMG Sector as a Potential Career Path for Talented Local Graduates
Managerial roles in RMG do not necessarily need to be occupied by graduates from textile and related fields, even though it may be preferred. Hence, with so many brilliant graduates produced by Bangladesh’s top universities like BUET, Dhaka University, NSU, IUB, BRACU, BUP, etc., we should be able to appropriately meet most of the needs of RMG sector. For majority of the students from Bangladesh’s top educational institutions, this sector holds no appeal except for a few who may be attracted by some of the larger organizations. Centre for Policy Dialogue (CPD), Siddiqur Rahman, former-president of BGMEA, cited frequent labor unrests as well as the tragic incidents of past like the Rana Plaza collapse and Tazreen Garments fire, to be some of the primary causes of this situation. A survey was conducted among 60 students and recent graduates from the nation’s top universities in order to explore their perspectives regarding RMG sector as a potential career launch pad. 68% of the respondents replied that they don’t see themselves working in the sector, while 18% were open to the idea. The remaining 13% said they would only consider based on factors like compensation & benefits, reputation of employer and scope of personal growth.
Do you see yourself working in the RMG sector?
i)Among the 41 survey responses which rejected the idea of working in the RMG sector had a wide range of reasons:
ii)The consensus perception here is that the industry does not allow scope for personal career growth due to the underlying nepotism in recruitment.
iii)Concerns regarding the difficulty of migrating to different job sectors like FMCG, telecommunications, etc. later on in the career.
iv)Distances of factories from the Capital-Dhaka
v)A staggering 90% of the surveyed believe that the industry mindset is primitive and offers poor work-life balance as well as little job security.
vi)RMG companies tend to overlook the employer branding aspect leaving graduates with a shallow idea of the workplace culture.
Summary of Survey on “RMG Sector as a PotentialCareer Path?” conducted among University students:
What Do We Do?
Preparing a skilled and capable local workforce for the RMG sector will require long term planning and a structured implementation of proper policies with direct involvement of all stakeholders, including the government.
First, BGMEA, must assume a leading role. The recent ‘Brand BGMEA’ initiative has been successfully branding the country’s RMG sector in new light to the world. However, at the same time, BGMEA must focus on attracting the country’s brightest youth to come forward and work in this sector, which has also been resonated by Mr. Abdullah Hil Rakib, MD, TEAM Group. He highlighted the need for RMG owners to come up with ‘Employer Branding’ strategies in order to entice fresh graduates to apply.
Second, the government could undertake a comprehensive approach to help establish RMG as the ‘new’ golden sector of Bangladesh in a bid to develop the social and physical infrastructure that are required for the sustainable growth of this industry. Simultaneously, the government may initiate demonstration of the incredible impact of RMG sector on our socioeconomic system in the form of women empowerment, export earnings and economic growth.
Third, RMG Employers must also develop education support policies for employees through a process of reimbursement of educational fees subject to obtaining specialized degrees and excellent results from ranked universities.
Fourth, Career Placement Departments of universities can be encouraged to visit key RMG industry players in order to learn about the organizations’ business processes, culture, employment facilities and benefits. Additionally, universities may devise and offer specialized courses like Operations and Supply-Chain Management, Product Marketing, Quality Management, Industrial Engineering, etc. with focus on the garments sector to develop employability of graduates from different disciplines.
According to Mr. Miran Ali, Managing Director of Bitopi Group & Director, BGMEA, Industrial Engineering (IE) departments focused on RMG might be introduced to the top engineering universities like BUET, KUET, CUET, IUT, NSU, BRACU, BUP, etc.
Finally, Administrative bodies like BIDA, BEPZA, NGO Affairs Bureau, etc. could be tasked to conduct a needbased review of sector-wise foreign expert requirements. Accordingly, regulatory initiatives can be taken to reduce the number of expatriates systematically. A collaborative effort of the Government Institutions, BGMEA, RMG owners and Educational Institutions will be required to prepare local workforce for the challenges in the days to come.
Steel and Re-Rolling industry: fast paced recovery from pandemic on the cards
The Steel and Re-rolling industry, one of the prominent growth drivers of Bangladesh, has had its fair share of hit by the Covid-19 pandemic. This has been reflected on numbers as world crude steel production recorded a 3.2% decline compared to figures recorded in the same time period last year. As a developing nation with increased focus on to infrastructural development and lined up mega projects, Bangladesh sees massive growth potential in the Steel industry. With a market size of around BDT 450 billion the local Steel market employs nearly 1 (one) million people directly or indirectly across the country. The market has been growing at a rate of 15%- 20% for the past 2 years and contributes largely to the country’s GDP. However, the market for steel is turning into a perfectly competitive one from an oligopolistic structure as small players are now gaining efficiency and reaching competitive levels of their larger peers such as AKS, BSRM, KSRM etc. With the growth of the smaller companies, it is safe to say that the challenges that come with surviving in the Steel industry – such as, abundant supply of power and gas, availability of raw materials etc. are being well taken care of.
The Steel industry strategically runs on overcapacity. It is seen that the utilization is around 75% of total capacity which came down to 40% due to the pandemic wave. The prices of raw materials and finished goods are also seen to fall. However, as a resilient nation, Bangladesh is adapting fast to the new challenges that came with the pandemic. And, as we look towards a new normal, companies in the Steel industry must work in collaboration with regulators in order to sustain the growth and maintain the level of efficiency reached prior to the pandemic.
IDLC Finance Limited