Counting the Cost

Bangladesh: The cost of fashion

Is there any prospect of a properly regulated garments industry in the country, and what would it mean for the market?

Last Modified: 25 May 2013 10:12
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A building collapsed killing more than 1,000 garment workers in Bangladesh last month. The disaster showed the terrible working conditions, and lack of safety, for millions of workers there.

Both Bangladesh and the global community are coming to terms with their roles in the disaster, because whether consumers shop at Walmart or at Giorgio Armani, the clothes they buy are probably produced in Bangladesh, which is ranks number two in the world for garment production.

And that is because garment workers in Bangladesh are the lowest earners in the world. Workers expect to earn 24 cents an hour, with some wages as low as $38 a month - a lot lower than the rate in the world's other big apparel producing markets. 

The fashion trade has reshaped Bangladesh's economy. It employs four million people, mostly women, and brings in $19bn a year from the sale of garments. Still, the money Bangladesh makes is minimal compared to the revenue of, for example, Walmart, the big American retailer, which has refused to sign up to any legally binding safety agreements in factories that produce the clothes it sells.

So, Bangladesh faces a multilayered situation. Even though there is anger that people are being paid a pittance, there are equal concerns that international corporations could now abandon clothes that are 'Made in Bangladesh' due to safety problems.

Muhammad Yunus, the country's Nobel laureate, told Counting the Cost that Bangladesh's factory workers are being treated like slaves: "We want to have a country with dignified women working with their beautiful skills so that they can make everybody happy with our products, and at the same time, we earn a decent income for ourselves. That's the whole idea," he said. 

So it seems a properly regulated garments industry in Bangladesh is what people are looking for. As an example, they may well look to Sri Lanka, which has a voluntary campaign called 'Garments without Guilt' - something that brought in minimum standards for manufacturers and earned the country something of an ethical reputation.

Sri Lanka may not be the cheapest place in the world to make clothes, but industry leaders say it has proved that the cost of complying with best practices is worth the investment.

So, can Bangladesh make a change to a properly regulated garments industry? And what would this change mean for the industry? We discuss the options on Counting the Cost.

Tax avoidance: A big inconvenience  

Aggressive tax avoidance is dominating politics right now, with the G8 leading nations and the European Union making it a key issue at their meetings.

Governments are struggling to revive growth and raise revenue, so people get taxed. Yet some nations are making it easier for corporations to pay less by lowering their tax rates.

The Organisation for Economic Cooperation and Development (OECD) has called this "a race to the bottom" on corporate rates, and it creates a pretty big problem as $21tn has been stashed away by rich individuals and corporations into offshore accounts.

This has led to the EU saying that tax avoidance and evasion costs it $1.3tn a year. There are two nations that have come under intense scrutiny, the Netherland and Luxemburg, which together have attracted $5.8tn in Foreign Direct Investment - which is more than the US, UK and Germany combined. 

Much of that money has come from corporations like the online retailer Amazon.com, which routes its European operations through Luxembourg. Amazon has had sales of $23bn in the UK over a six year period, but during that same period, only paid $9m in taxes.

Google, operating from Bermuda and Ireland, is being accused of "immorally" avoiding tax payments in the UK. In 2001, Google had revenues of $4.8bn but paid $9.6m in the same 12-month period.

Apple has also had to explain its tax affairs before the United States.

"Apple is a great company, but no company should be able to determine how much it’s going to pay in taxes, how many profits it’s going to keep offshore, how they’re going to bring them back home, using all kinds of gimmicks to avoid paying the taxes that should be paid to this country," US Democratic senator Carl Levin said. 

So, what solutions can be implemented to regulate this problem? And how much damage could tax avoidance generate for different economies? Counting the Cost discusses.

Watch each week at the following times GMT: Friday: 2230; Saturday: 0930; Sunday: 0330; Monday: 1630. Click here for more Counting the Cost.

Follow Kamahl Santamaria @KamahlAJE and business editor Abid Ali@abidoliverali


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