Moreover, unrest and violence has occurred in Bangladesh throughout much of 2013, as the ruling Awami League has pushed through war crimes trials against political rivals for their actions during the 1971 war for independence from Pakistan. The ongoing labor strikes and protests are a reminder of the polarization between factory owners and workers as well as within the rest of Bangladeshi society ahead of upcoming national elections.
Bangladesh's garment sector has seen steady growth in recent years, moving from the world's sixth-largest supplier of garments in 2009 to its second-largest supplier (behind China) in 2012. Much of this growth has been fueled by Bangladesh's ability to sustain lower wages than its competitors. With an average minimum wage of $38 per month, Bangladesh has kept its labor costs lower than those of China ($200), Kenya ($133), Sri Lanka ($60) and Tanzania ($44). These low labor costs have helped attract investment into Bangladesh's textiles and garments manufacturing sector, despite sporadic levels of domestic unrest and violence.
But decades of the government's work with factory bosses to keep wages low and investment flowing in, coupled with a lax and corrupt regulatory environment, have begun to take their toll. In April, a multistory textiles factory in Savar collapsed, killing approximately 1,100 workers and injuring more than 2,500 in one of the deadliest building collapses in modern history. The building allegedly was owned by an Awami League youth mobilizer in the Dhaka area, foreshadowing the links between labor disputes, corruption in Bangladesh's textiles industry and the coming political tension that will likely be seen when the current government's term expires in October.
Bangladeshi Workers' Demands
Frustrated with the lack of real reform and the confusing and conflicting set of promises made by foreign companies relying on Bangladeshi labor, workers have taken to the streets demanding an increase in minimum wage (closer to $100 per month), better working conditions and safer facilities. Such changes would cut into the profitability of textile and garment manufacturing in Bangladesh, where low wages and loose labor regulations compensate for a political culture beset with frequent strikes and poor infrastructure development.
The ruling Awami League government has met the ongoing protests with a strong police presence. More than 100 garment factories were forced to close Sept. 23 as workers clashed with security forces in incidents reminiscent of disputes earlier this year between Jamaat-e-Islami supporters and police forces. Despite the unrest, textile and ready-made garment exports still posted a year-on-year increase of more than 5 percent for the first two quarters of 2013, indicating that public unrest -- even when violent -- has become expected in everyday life in Bangladesh, and is taken into account in the planning and operations of textile companies.
The Political Aspects of the Labor Protests
The garment sector has become a significant source of revenue for the Bangladeshi government. Garment exports accounted for more than 75 percent of Bangladesh's total exports and approximately 16 percent of gross domestic product, becoming the largest source of foreign currency needed to help offset Dhaka's negative trade balance. Moreover, the sector has become an increasingly politicized and lucrative patronage system for the country's ruling parties.
The ruling authority in Dhaka cannot afford to dramatically reform the country's labor laws and run afoul of both powerful international retailers and local labor and factory bosses, all of whom are vital to Bangladesh's future economic stability. But as the Awami League has learned, the government must also give at least rhetorical support to the country's large, poor labor pool or run the risk of public protests and shifts in political support, as seen in recent electoral victories by the Bangladesh National Party in Awami League strongholds like Chittagong.
With the state so dependent on textile export revenue, the Bangladesh Nationalist Party -- the Awami League's well-organized political opposition -- can be expected to try and motivate workers to protest, with behind-the-scenes negotiations and promises of change if the workers vote the Awami League out in upcoming elections. The current government's term ends Oct. 25, and the Bangladeshi constitution requires fresh elections to be held within the following 90 days.
Bangladesh is about to enter a tense period of political negotiation, lending new urgency to what would normally be seen as relatively commonplace workers' demonstrations.
Neutral, military-backed caretaker governments have been fixtures of Bangladesh's political system since the end of military rule in 1990, overseeing the regular transitions of power between the Awami League and Bangladesh Nationalist Party. Following constitutional changes that were pushed through parliament by the Awami League in 2011, such unelected governments are now illegal and would constitute a coup.
In the lead-up to new elections, however, Bangladesh's political opposition will attempt to create a higher level of widespread instability and violence in an effort to force the military to act to return law and order to the country. Bangladesh's textiles sector, having benefited from the relative stability seen during the past few years of the most recent Awami League government, will be a natural casualty of this broader political competition. Although they have demonstrated a high tolerance for unrest and disruptions to business continuity in the past, foreign investors may reconsider allocating more resources to Bangladesh's textiles sector if domestic unrest leads to extended disruptions in manufacturing.
The Awami League likely will attempt to negotiate with the military and the Bangladesh National Party to avert a break in national order. However, investors' doubts could lead them to expand operations with Dhaka's regional competitors, potentially benefitting neighboring Myanmar, Southeast Asia and even India, which all boast similarly low wages but currently lack Bangladesh's level of textiles investment.
Courtesy : Stratfor (www.stratfor.com)