Reasons behind market failure in garments industries in Bangladesh || market failure

 Market Failure

Introduction

 Market Failure is an economic term that encompasses a situation where, in any given market, the quantity of a product needed by consumers does not equate to the number supplied. In economics, market failure is a situation that allocation of products and services is not efficient. The garment industry is the main source of foreign exchange of Bangladesh. It has been the key export division for the last 25 years. Almost 80% of export come from garments industry. Garment factories provide employment to 40 percent of total industrial workers of Bangladesh. So garment industry is the source of employment in Bangladesh. But without the proper laws the worker are demanding their various wants and as a result, conflict begins with the industry. 

Reasons behind market failure in garments industries in Bangladesh:

 The garment industry of Bangladesh has been the key export division and a main source of foreign exchange for the last 25 years. National labor laws do not apply in the EPZs, leaving BEPZA in full control over work conditions, wages and benefits. Garment factories in Bangladesh provide employment to 40 percent of industrial workers. But without the proper laws the worker are demanding their various wants and as a result conflict is began with the industry. 

Raw materials:

 Bangladesh imports raw materials for garments like cotton, thread color etc. This dependence on raw materials hampers the development of garments industry. Moreover, foreign suppliers often supply low quality materials, which result in low quality products

Unskilled workers: 

Most of the illiterate women workers employed in garments are unskilled and so their products often become lower in quality. They cannot use every technology properly which result in low quality product.

 Improper working environment: 

Taking the advantages of workers’ poverty and ignorance the owners forced them to work in unsafe and unhealthy workplace overcrowded with workers beyond the capacity of the factory floor and improper ventilation. Most of the garment factories in our country lack the basic amenities where our garment workers sweat their brows from morning to evening to earn our countries the major portion of our foreign exchange. Anybody visiting the factory the first impression he or she will have that these workers are in a roost. Improper ventilation, stuffy situation, filthy rooms are the characteristics of the majority of our factories. The owners’ profit is the first priority and this attitude has gone to such an extent that they do not care about their lives.

 Lack of managerial knowledge: 

There are some other problems which are associated with this sector. Those are- lack of marketing tactics, absence of easily on-hand middle management, a small number of manufacturing methods, lack of training organizations for industrial workers, supervisors and managers, autocratic approach of nearly all the investors, fewer process units for textiles and garments, sluggish backward or forward blending procedure, incompetent ports, entry/exit complicated and loading/unloading takes much time, time-consuming custom clearance etc.

 Division of labor:

 In the garment industry in Bangladesh, tasks are allocated largely on the basis of gender. This determines many of the working conditions of women workers. All the workers in the sewing section are women, while almost all those in the cutting, ironing and finishing sections are men. Women workers are absorbed in a variety of occupations from cutting, sewing, inserting buttons, making button holes, checking, cleaning the threads, ironing, folding, packing and training to supervising. Women work mainly as helpers, machinists and less frequently, as line supervisors and quality controllers. There are no female cutting masters. Men dominate the administrative and management level jobs. Women are discriminated against in terms of access to higher-paid white collar and management positions. When asked why they prefer to amply women for sewing, the owner and managers gave several reasons. Most felt that sewing is traditionally done by women and that women are more patient and more controllable than men. 

Wages: 

The government of Bangladesh sets minimum wages for various categories of workers. According to of Minimum Wage Ordinance 1994, apprentices’ helpers are to receive Tk500 and Tk930 per month respectively. Apprentices are helpers who have been working in the garment industry for less than three months. After three months, Apprentices are appointed as helpers. Often female helpers are discriminated against in terms of wages levels, and these wages are also often fixed far below the minimum wage rate. A survey conducted in 1998 showed that 73% of female helpers, as opposed to 15% of their male counterparts, did not receive even the minimum wage. Minimum wages are not obey by the garments company. 

Insufficient for loan:

 Insufficiency of the loan in time, the uncertainty of electricity, delay in getting materials, lack of communication, the problem in taxes etc. Often obstruct the industry. In the world market, 115 to 120 items of dress are in demand whereas Bangladesh supplies only ten to twelve items of garments. India, south Korea, Hong Kong, Singapore, Thailand, Taiwan etc, have made remarkable progress in garments industries. Bangladesh is going to challenge the garments of those countries in the world market. So they need a big amount of money for capture the future market for loan 

Working hours: 

Though the wages are low, the working hours are very long. The RMG factories claim to operate one eight-hour shift six days a week. The 1965 factory Act allows women to work delivery deadlines; however, women are virtually compelled to work after 8 o’clock. Sometimes they work until 3 o’clock in the morning and report back to start work again five hours later ar 8 o’clock. They are asked to work whole months at a time the Factory Act, which stipulates that no employee should work more than ten days consecutively without a break. This result in a production of low level production.

 Poor accommodation facilities:

 As most of the garment workers come from the poor family and comes from the remote areas and they have to attend to the duties on time, these workers have to hire a room near the factory where four to five huddle in a room and spend life in sub human condition. For four to five workers there is one common latrine and a kitchen for which they have to pay from Tk=2000 to Tk=2500/-. They share this amount among themselves to minimize the accommodation expense. One cannot believe their eyes in what horrible condition they have to pass out their time after the almost whole day of hard work in the factory. After the laborious job, they come into their roost, cook their food and have their dinner or lunch in unhygienic floor or bed and sleep where they take their food. They share the single bed or sleep on the floor. The owners of these factories must not treat the workers as animals. The owners of these factories who drive the most luxurious car and live in the most luxurious house do ever think that these are the workers who have made their living so juicy. Will these selfish owners ever think of these workers of their better living for the sake of humanity by providing better accommodation for these workers in addition to providing with the job?

Safety Problems:

 Because of the carelessness of the factory management and for their arrogance factory doors used to be kept locked for security reason-defying act. Safety need for the worker is mandatory to maintain in all the organization. But without the facility of this necessary product a lot of accident is occur incurred every year in most of the company. Some important cause of the accident are given below-

Routes are blocked by storage materials

Machine layout is often staggered

Lack of signage for escape route

No provision for emergency lighting

Doors, opening along escape routes, are not fire resistant

Doors are not self-closing and often do not open along the direction of escape

Adequate doors as well as adequate staircases are not provided to aid quick exit

Fire exit or emergency staircase lacks proper maintenance

Lack of proper exit route to reach the place of safety

Parked vehicles, goods and rubbish on the outside of the building obstruct exits to the open air

Fire in a Bangladesh factory is likely to spread quickly because the principle of compartmentalization is practiced

 Political crisis:

 Garments industries often pay dearly for political unrest, hartal and terrorism etc. The international market has withdrawn quota advantage over garments export form Bangladesh since December 2005. Bangladesh has to advance cautiously for getting the better position of her garments in the world market. Finally destruction of twin tower on 11 September 2001. Invasion of Afghanistan and Iraq and depression in world Economy have seriously affected the export trade of Bangladesh. 

Price competitiveness:

 China and some other competitors of Bangladesh have implemented sharp price-cutting policies in exporting garment products over the last few years, but Bangladesh has failed to respond effectively to such policies. China was able to drop the export price of 29 garment categories by 46 percent on average in the United States within a year, from $6.23 per square meter in December 2001 to $3.37 per sq meter in December 2002. Bangladesh needs to respond to such price-cutting policies of its rivals in order to remain competitive in the quota-free global market.

 Lead time: 

Lead time refers to the time required for supplying the ordered garment products after the export order has been received. In the 1980s, the usual lead time in the garment industry was 120-150 days for the main garment supplier countries of the world; it has been reduced to 30-40 days in the current decade. However, in this regard the Bangladesh RMG industry has improved little; for example, the average lead time is 90-120 days for woven garment firms and 60-80 days for knit garment firms. In China, the average lead time is 40-60 days and 50-60 days for woven and knit products respectively; in India, it is 50-70 days and 60-70 days for the same products respectively. Bangladesh should improve its average lead time to compete in the international market.