Bangladesh too cheap for comfort for some brands

AFP - The process of outsourcing production by Western companies is all about finding cheap labour to cut costs. But in Bangladesh, some retail groups are finding the wages too low for comfort.

As Chinese labour prices increase, Western giants such as Wal-Mart and H&M are increasingly shifting production to factories in Bangladesh -- where some have found themselves on the same side as the unions in an unusual alliance.

The South Asian country of 144 million suffers chronic power outages and poor infrastructure but is one of the cheapest manufacturing destinations on Earth, largely because factory worker wages are set at just 25 dollars a month.

Conditions on the factory floor are cramped and frequent accidents such as a fire last month that killed 21 people at a factory producing knitwear for H&M, worry image-savvy Western companies.

For the first time, they are now speaking out.

"It's absolutely unacceptable that minimum wages are just 25 dollars," the Dhaka-based head of a top Western store, speaking on condition of anonymity, told AFP.

"We pay enough to factory owners, but we don't think that the benefits trickle down to workers or are being spent on improving conditions," he added.

In January, buyers including Wal-Mart, H&M, French giant Carrefour and Levi Strauss wrote to the prime minister saying that "below the poverty line wages... contributed to unrest" among workers and should be addressed.

Current minimum wages "do not meet the basic needs of the workers and their families," the letter said, adding that the government should set up a review board to reassess the minimum wage.

"The increased cost of living during 2008 and 2009 has contributed to the unrest among workers in the garment sector as wages have not been regularly revised," the letter added.

Bangladesh's 4,500 garment factories are the country's largest employers -- providing jobs to 2.5 million people or 40 percent of the nation's industrial workforce.

Last year the country was one of the world's top three garment exporters, with shipments up 10 percent to 12.3 billion dollars -- around 80 percent of the country's total exports.

"But workers are as poor as ever. You can't buy food with 25 dollars a month, let alone pay rent," said Mosherefa Mishu, a middle-aged woman who heads the country's best known union, the Garment Workers Unity Forum.

For Mishu, a "vicious cycle" of greedy factory owners, Western buyers and a government keen only to see export figures grow has "trapped thousands of workers in poverty."

With campaigners such as Mishu in action, improving pay is now a practical issue for buyers as the industry has been paralysed by strikes since food inflation hit double digits last year.

But the apparent concern of Western buyers is dismissed as a publicity stunt by factory owners, who say wages are low because order prices were being slashed on falling global consumer spending.

"It's not fair that they want us to hike workers' salaries while the buyers continue to cut order prices," said factory owner Shafiul Islam Mohiuddin, who is vice president of the country's leading exporters group.

Experts agree, saying the retailers are trying to shift blame to the factory owners to avoid negative publicity in their home markets.

"Ethical buying is a hypocrisy," said Mustafizur Rahman, a trade analyst and a former professor at Yale University.

"Buyers talk of compliance issues like labour conditions, increased wages and safety. But when it comes to placing orders, they always prefer the factories that offer the lowest rate," he said.

However, the Dhaka-based Western buyer said retailers were increasingly sensitive to revelations about working conditions in their supply chains, aware that consumers are interested in how and where their cheap clothes are made.

Since the start of 2010, numerous international brands which have long sourced clothing from Bangladesh have set up their own local liaison offices in Dhaka.

Spanish label Zara, American brand JCPenney, Japan's Uniqlo and British retailers Tesco and Marks and Spencer, who formerly sourced garments via middlemen in Delhi or Hong Kong, now all have branches in the capital.

This will allow them to monitor "supply chain management and compliance issues," the Western buyer said -- in other words, keep an eye on the conditions in which their branded goods are produced.