Bangladesh textile industry is in the news over the wage review, as the minimum wage in Bangladesh has been brought at par with Pakistan. This, along with growing political crisis in Bangladesh, has offered opportunity to Pakistan to grab some of Bangladesh’s share in garments exports. Last financial year, Bangladesh export under Chapters 61 and 62 (knits and woven) was $47 billion, almost three times that of Pakistan’s total textile exports.
In Bangladesh, the minimum wage is revised up after five years from 8,000 Bangladeshi taka (BDT) ($72) to BDT 12,500 ($113). There has been no revision of the minimum wage since 2018, except partial upticks.Labor has demanded much higher increase up toBTD 23,000 ($210), while the industry was offering BTD 10,400 ($95). However, the government led wage board has determined minimum wage at BTD 12,500 ($113). The workers believe the wage increase isn’t sufficient.
Interestingly, now the minimum wage in Bangladesh (at $113) is close to Pakistan’s Rs 32,000 ($113). Moreover, there are add-ons such as Worker Participation Fund, Old Age Benefits, and compulsory one month bonus which brings the cost for Pakistani textile players up to $150, while these top ups are lower in the case of Bangladesh where effective cost for textile manufacturers comes around $125.
Even after all the addons, the gap between the Pakistani and Bangladesh’s minimum wage cost is narrowing. The usual norm in Bangladesh is to revise the minimum wage every five years – roughly coinciding with the election cycle whereas in Pakistan it is an annual exercise.
The political chaos in Bangladesh is making things even worse. A few weeks back, tens of thousands of garment workers who work for manufacturing units making products for Zara, H&M and Gap went on strike, as the government refused to increase the minimum wage adequately, or to compensate for the growing cost of living.Reportedly, four of the protestors were killed during the riots. And the new wage award at $113 equivalent, from earlier offing of $90 is about to be implemented from 1stDecember 2023; but it is still much lower than the demanded.
These riots and labour suppression may not bode well for Bangladesh as it could become target of the recently released US presidential memorandum onlabour rights, as labour issues in Bangladesh were specially referred to by the US Secretary of State at the launching ceremony of the memorandum.
One can smell politics here. Elections are around the corner in Bangladesh,while the current PM has been in power since 2009, and the country has faced democratic backsliding on her watch. The country’s scorecard on human rights and media freedom has also worsened. The US does not like it, and that could have an impact on the country’s exports to the US. No wonder, Bangladesh is worried.
Bangladesh enjoys Least Developed Country (LDC) status, and thus suffers fewer volume restrictions for exporting to the EU. The bulk of the Bangladeshi textile advantage is based on low labor, more than two third of which are women. Rise in per capita income, along with pressures on enhancing wages means the country may have to relinquish the LDC status 2026 onwards, as it goes up the development ladder. And by 2030, Bangladesh may receive similar treatment in the EU as Pakistan receives today.
The point of this snapshot is to bring to notice of textile players and Islamabad that there is a potential to grab some of the Bangladesh’s market share, as the country faces politico-economic flux. Its economy is too textile dependent and buying markets are suffering too. All we need is to expand sustainably in apparel and garments and bring more women in the working force.