1

D R A F T NOT FOR QUOTATION

Globalization and Decent Work: A report for the Decent Work Pilot

Programme in Bangladesh

April 2004

International Labour Office Dhaka

2

Preface

In early 2001, the Government of Bangladesh requested the International Labour Office (ILO) to include it as one of the countries in the ILO’s Decent Work Pilot Programme (DWPP). This request was renewed by the national tripartite delegation at the International Labour Conference in 2002 in discussions with the Director-General of the ILO. The DWPP aims to test and demonstrate the relevance of an integrated policy and programme approach, built around four strategic objectives of the Decent Work Agenda: (1) fundamental principles and rights at work, (2) employment opportunities for women and men, (3) social protection, and (4) social dialogue to meet the goals and priorities of ILO constituents. The DWPP focuses on a limited set of priority issues in a pilot country in order to maximize the impacts, the collaboration among social partners and the ILO, and the lessons for subsequent work. These national priorities are identified at the country level, through elaborate consultations and joint planning by the national government, employers, workers, national experts, and the ILO. At the first of these consultations (October 2002, Dhaka), a number of concerns emerged that revolved around the theme of globalization or, more concretely, around the opportunities for economic and employment gains while not losing focus of the uncertainties and increasing pressures on competitiveness, productivity and employment. A second round of consultations (March 2003, Dhaka) between the ILO, the tripartite partners, and other stakeholders reviewed the theme. The third round of consultations (July 2003, Dhaka) between the government, trade unions, and the Bangladesh Employers’ Federation reached a tripartite consensus to focus on four inter-related policy areas—(1) the interfaces between globalization, growth, and poverty reduction; (2) enhancement of employment and competitiveness in global markets; (3) overseas employment; and (4) measurement of decent work in Bangladesh’s context—at a National Policy Dialogue on decent work. Following this, national consultants from the academic community were engaged to prepare background papers on each of these issues. In January 2004, the national consultants presented their papers and recommendations to each of the social partners: government, workers. and employers. A key milestone in this process of consultation is the National Policy Dialogue, which aims to accomplish the following. 1. Initiate a broad-based dialogue among the social partners and other national stakeholders on

national issues and challenges arising from globalization and its impact on growth, poverty reduction, and employment.

2. Elicit alternative policy measures that address these issues and feasible courses of action that could constitute the Bangladesh DWPP.

The DWPP is a project of national constituents and evolves through consultations among them. This paper reflects the views in these consultative processes and outlines a decent-work-integrated framework where good quality, productive employment is the key path out of poverty and a strategic ingredient of economic and social development. Herman van der Laan Gopal Bhattacharya Director, ILO Sub Regional Office Director, ILO Dhaka for South Asia, New Delhi

3

Acknowledgements Members of the team that prepared this report are as follows, in alphabetical order: Ingrid Christensen Sukti Dasgupta Anne Drouin Gopal Joshi Amelita King-Dejardin Mohamed Muqtada John Woodal Valuable comments and suggestions were provided at every stage by Pong Sul Ahn and Rajen Mehrotra, and the team was led by Sukti Dasgupta and Amelita King-Dejardin. This report draws on the background papers prepared by the following national consultants: A.F.M. Mafizul Islam Momtaz Uddin Ahmed with Bazlul H. Khondker and Abdur Razzaque Mostafa K. Mujeri Rushidan Islam Rahman Tasneem Siddiqui

4

BANGLADESH: THE NATIONAL CONTEXT The Bangladesh economy performed well in the 1990s, relative to previous decades, with its gross domestic product (GDP) growing steadily between 4 percent and 5 percent. Together with a fall in population growth, this led to a rapid rise in GDP per capita in the second half of the 1990s. Poverty declined at a modest rate of 1percent per year over the 1990s. The non-income dimensions of poverty showed faster progress than income-poverty during this decade. There were particularly marked declines in child and maternal death rates as well as in gender disparity in primary school enrolment. There was also a greater thrust on women’s empowerment in terms of increased participation in paid, non-agricultural employment. Bangladesh has initiated several policy reforms and measures to accelerate economic growth since the 1990s. These include stabilization and adjustment measures aimed at improving the country’s external payment balance and reserve position and at containing the fiscal deficit, as well as measures to boost exports and liberalize imports. Generous incentive packages have been provided for foreign investors and exporters; restrictions on private sector participation have been reduced, and efforts to privatise state-owned enterprises (SOEs) have been renewed. However, while these measures led to a higher rate of GDP growth, employment grew at a relatively slower rate of 1.6 percent per annum in the latter half of the nineties, implying a largely jobless growth for the Bangladesh economy. With the labour force growing faster than employment potential, the unemployment rates—though modest in Bangladesh as in most other developing countries—increased over the 1990s. Manufacturing employment also declined. Of greater concern is the fact that in spite of declining poverty rates, inequality increased during the same period (from a Gini coefficient of 0.259 to 0.306). A major implication of this was that the benefits of growth in the Bangladesh economy were not transmitted to all sections of the population equally. In terms of economic structure, Bangladesh remains a primarily agricultural country. Although the contribution of manufacturing in employment has declined, the garment industry has created a sizeable chunk of manufacturing jobs and provided foreign exchange earnings to the country. However, agriculture, services, and construction remain the mainstays of the economy in terms of contributing to the GDP and creating jobs. Formal sector jobs are few, while the informal economy accounts for over three-quarters of the non-agricultural employment1. Exports from Bangladesh have grown significantly, but they are highly concentrated in terms of commodities (readymade garments [RMG] and knitwear, frozen shrimp, leather and jute goods) and markets (European Union [EU] and United States [US]). This narrow export basket renders Bangladesh very vulnerable to uncertainties and risks in global markets. The RMG sector comprises the bulk of the exports, equivalent to two-thirds of gross export earnings in 2001. It has generated jobs for some 1.4–1.8 million workers and expanded women’s formal labour market participation. However, it imports almost all inputs other than labour. The fast-approaching termination of the Multi-Fibre Agreement (MFA) poses a serious threat to the RMG sector.

1 W. Mahmud, 2001, Informal Sector in Bangladesh – a macroeconomic perspective, Report prepared for the ILO as in input to a National Action Plan for Employment Generation in the Informal Sector, ILO, Dhaka.

5

Table 1.1: Bangladesh economy from 1980/81 to 1999/2000 (annual average growth rates)

1980/81–1984/85

1985/86–1988/89

1990/91–1994/95

1995/96–1999/2000

Growth in GDP 3.72 3.74 4.40 5.21 Population 2.13 2.19 1.98 1.60 GDP per capita 1.59 1.55 2.41 3.61 Agriculture 2.86 2.40 1.55 4.89 Crop production 2.69 2.69 -0.43 3.86 Fisheries 3.06 1.64 7.86 8.56 Others 2.40 2.21 2.53 3.3 Industry 5.70 5.80 7.47 6.44 Manufacturing 4.69 5.27 8.20 5.59 Construction 6.44 5.59 6.27 8.80 Others 11.50 10.86 6.43 4.90 Services 3.83 3.58 4.14 4.81 Source: S.R.Osmani, W.Mahmud, B. Sen, H.Dagdeviren, and A. Seth, 2003, paper prepared for the UNDP Regional Project on the Macroeconomics of Povery Reduction, Dhaka. Table 1.2: Sectoral distribution of employment (percentage shares) Year 1989 1990/91 1999/2000 Agriculture 64.9 66.4 63.1Manufacturing 13.9 11.8 7.5Other Industries 1.5 1.2 2.6Services 19.6 20.6 26.7Source: Compiled from data in Bangladesh Labour Force Surveys, 10+, extended definition. Since the 1980s, parallel to the fastest growing export items (frozen fish and shrimps [FFS] and RMG), the fastest growing sub-sectors are fisheries and manufacturing. Yet, the largest contributions (at about 40 percent each) to the incremental growth in national GDP were made by the services sector and industries in the 1990s. While crop production has grown, its (and agriculture’s) contribution to total GDP has been low and declining. On closer examination, it is the non-tradable sectors (services (largely informal), agriculture, construction, and small-scale and non-farm activities) that have contributed much of the economic growth in the 1990s. Significant in this growth is the demand-driven boost from crop agriculture, RMG, and overseas workers’ remittances. Remittances from Bangladeshis working in foreign labour markets, amounting to US$ 1.7 billion per annum, represent the biggest net inflow of foreign exchange. Foreign direct investment (FDI) flows are low and mainly limited to the gas and power sectors and RMG. FDI in export processing zones (EPZs) accounted for less that 10percent of total manufacturing investment in the 1990s.

6

In spite of several positive developments on the economic front, as noted earlier, unemployment has increased over the 1990s. Privatization and restructuring of SOEs has led to significant job losses. In the absence of remunerative job opportunities, coupled with lack of effective social protection measures, retrenched workers are likely to join the ranks of the unemployed or work in the informal sector. In the post-MFA situation, RMG enterprises—and thus women’s employment—are likely to face serious threats. The social cost in terms of losses in employment and incomes can be significant. This results in the need for a systematic approach to identifying winners and losers and assessing impacts, and for well-designed active labour market policies to support worker mobility, retrenched workers, and vulnerable groups. Coupled with lack of remunerative employment opportunities and increasing numbers of laid-off workers, child labour remains Bangladesh’s growing contemporary concern. The country’s prompt ratification of the adoption of the ILO Convention No. 182 on Worst Forms of Child Labour (WFCL) indicates its commitment towards addressing this issue on a priority basis. Different studies reveal that children in Bangladesh have been engaged in over 300 occupations, of which about 47 occupations have been identified as hazardous. It is estimated that a substantial number of child workers are exposed to risks to their health, safety, or morals—often referred to as the ‘worst forms of child labour’ or WFCL—and that there is anecdotal evidence that this number is increasing. It is expected that more children will be caught in the WFCL in the coming years if appropriate steps are not taken immediately. While measures to combat child labour in specific sectors continue, it is also widely recognised that poverty-reducing and egalitarian economic development is crucial to eliminating child labour and ensuring that children go to school and do not work in exploitative conditions. One way of ensuring that the benefits of growth reach a larger section of the population is to make the growth employment generating. This is especially important because in a developing country such as Bangladesh, where universal social protection measures do not exist and where resource constraints make the provision of such universal measures difficult, remunerative work remains the main—and often only, way out of poverty. The overarching national development priority for Bangladesh is poverty reduction as voiced in its strategy document titled A National Strategy for Economic Growth, Poverty Reduction and Social Development (hereafter referred to as National Strategy) 2. Decent work and the National Strategy The National Strategy recognizes that economic growth and macroeconomic stability must be combined with proactive measures for social development. Furthermore, the National Strategy’s rights-based framework conveys a clear recognition that various economic, sectoral, and other policy considerations need to be embedded in, and formulated within, society’s overall goals. To quote the National Strategy:

‘The vision proposed… adopts a comprehensive approach premised on a rights-based framework, which highlights the need for progressive realization of rights in the shortest possible time.’ (Chapter 4, para 4.1)

2 Ministry of Finance, Government of Bangladesh, Bangladesh: A National Strategy for Economic Growth, Poverty Reduction and Social Development, March 2003.

7

Box 1.1: Decent work ‘Opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity, in which women and men have access on equal terms’ Work is central to human existence, identity, and well-being. It empowers people to make choices. It promotes cohesion and stability of societies. Decent work sums up the aspirations of people in their working lives. Everyone—farmer, farm worker, fisherfolk, home-based worker, factory worker, street vendor, rickshaw driver, construction worker, government employee, teacher, nurse, manager and others —has a right to decent work. Decent work is relative and country-specific, because countries differ in social and economic situations and none can aim for the same absolute conditions of work. Each country will have to set its own targets for decent work. The following integrated agenda of policies and measures in four mutually reinforcing areas is required to achieve decent work goals. 1. Respect for, and protection of, basic human rights at work 2. Promotion and creation of opportunities for full productive and remunerative employment 3. Broad social protection 4. Sustained social dialogue among social partners: workers, employers and private business,

government However, there is a universal social floor that applies to all countries. This is the respect for the following basic human rights. Freedom from oppression and forced labour Freedom from discrimination Freedom of association Right of children to learn and develop rather than work

Gaps between people’s decent work aspirations and reality exist everywhere. The challenge is to reduce these ‘decent work’ gaps. Progress towards decent work should be the central goal of all economic and social policies and strategies. Sources ILO, Decent work, Report of the Director-General, International Labour Conference, 87th Session, Geneva, 1999. ILO, Reducing the decent work deficit: a global challenge, Report of the Director-General, International Labour Conference, 89th Session, Geneva, 2001. Towards the realization of this vision, the National Strategy emphasizes the need to remove hunger and chronic poverty and to accelerate the pace of social development ‘with particular emphasis on empowering the poor and achieving gender equality’. Several targets for the year 2015 (coinciding with the country’s commitment to the United Nation’s Millennium Development Goals) have been identified. These range from targeted reduction in the incidence of poverty to universal primary education to reduction of gender disparities to extension of

8

support to vulnerable groups in society. The pursuit of these targets warrants the design of a policy agenda that fosters progress towards a well-defined and consistent construct of economic and social ends. The ILO’s Decent Work Agenda espouses a framework of development, the core objective of which is to promote opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security, and human dignity. The agenda is pursued through four inter-related strategic objectives: (1) promotion of employment, (2) promotion and safeguarding of fundamental rights at work, (3) social protection, and (4) the promotion of social dialogue to forge fair compromises and consensus on otherwise conflicting issues of distribution and conditions of work (see Box 1.1 titled ‘Decent work’). Such an agenda, if pursued within an integrated approach, widens the mandate of an economic regime committed to poverty reduction. Through a simultaneous pursuit of its four strategic objectives, the Decent Work Agenda calls for an ‘integrated’ approach, where economic and social policies and institutions mutually reinforce each other to achieve common development goals. Policy coherence and integration imply determining, a priori, the social legitimacy of economic policies as well as the economic legitimacy of the social order. In this framework, if negative social effects are seen as linked to, or originating from, the economic order (as often attributed to macroeconomic policy reforms), it is perhaps not enough to devise policies that mitigate these negative social effects. Such an integrated agenda widens the mandate of an economic regime committed to poverty reduction. Many decent work goals are already contained in some form or the other in the Constitution of Bangladesh, in its National Strategy, and in its various commitments to national statutes (labour laws, etc.) and international declarations (on human rights, fundamental rights at the workplace, etc.) The National Strategy’s vision of a ‘rights-based framework’ strongly mirrors the commitment of the Decent Work Agenda towards social dialogue. To quote:

‘…the strategy would broaden the social dialogue on labour policies to include dispute settlement along with issues related to skills development, social protection, productivity, gender discrimination and child labour.’ (p. 28, para 5.5)

A framework for development and poverty reduction in the Bangladesh economy must be seen against the backdrop of Bangladesh’s increasing integration with the world economy. While globalization offers a window of opportunities to pursue domestic strategic goals, it is also associated with challenges (and threats) to economic and social progress, and to population groups within the country. A careful mix of economic and social policies within an integrated framework, and strengthened legal and institutional reforms (good governance) are all the more urgent to ensure better and more effective participation on global transactions.3 Measuring decent work in Bangladesh: broad trends and issues The challenge of promoting decent work requires an assessment of its benchmarks in the country and a monitoring of its progress over time. For the purpose of measuring levels of decent work, this multifaceted, integrated concept may be disaggregated into 10 main elements, presented in Box 1.2.

3 World Commission on the Social Dimension of Globalization, 2004, A fair globalization: Creating opportunities for all, Geneva, ILO.

9

Box 1.2: Decent work indicators Decent work can be assessed and measured on 10 broad dimensions. 1. Employment opportunities: All persons (women and men) who want work should be able

to find work, and the decision to work should be voluntary, in accordance with the minimum age of access to employment.

2. Not unacceptable paid work: This requires that work should be freely chosen and not forced on individuals along with the condition that certain forms of work are not acceptable e.g. bonded labour, slave labour, and child labour. Also workers should have the freedom to join workers’ organizations.

3. Adequate earnings and productive work: It is essential for the workers to have acceptable livelihoods. There should be remuneration for all work carried out, and the remuneration from work—especially in the case of wage workers—should correspond to a fair and living wage. Work for equal value should ensure equal pay.

4. Fair and equal treatment in employment: There should be fair and equitable treatment and opportunity at work, absence of discrimination at work and in access to work on grounds of sex, national origin, race, and age, and absence of harassment on these same grounds.

5. Decent hours of work: Working time arrangements concerning daily and weekly working hours, regular and overtime work, and breaks and rest periods should reflect fair and acceptable practices, and be compatible with social and family life. Work intensity leading to excessive hours threatens physical and mental health, and interferes with the balance between work and family.

6. Fair balance of work and family life: Workers with family responsibilities (those with young children or elderly and sick to care for) should be able to exercise their right to engage in work if they wish to, without being subject to discrimination. Family responsibilities fall heaviest on women.

7. Safe work environment: The physical work environment should avoid extreme conditions (heat, dust, noise, workload, etc.) and ensure a safe working environment with appropriate prevention of work-related accidents, injuries, and occupational diseases.

8. Stability and security of work: This recognises workers’ needs to limit insecurity associated with the possible loss of work and livelihood.

9. Social protection: Work conditions should be mindful of the need to help safeguard health, pensions, and livelihoods and to provide adequate financial and other protection in the event of work-related injuries or health-related contingencies.

10. Social dialogue and workplace relations: Workers should be treated with respect at work, and should be able to voice concerns and participate in decision-making about working conditions. Workers’ freedom to organize and represent their interests collectively is an essential ingredient of ensuring dignity.

Source: R. Anker, I. Chernyshev, P. Egger, F. Mehran, and J. Ritter, 2002, Measuring Decent Work with Statistical Indicators, Working Paper No. 2, Policy Integration Department, Statistical Development and Analysis Group, ILO, Geneva. An initial attempt towards an assessment of the status of decent work in Bangladesh has been made by Mujeri (2004),4 using available national statistics along with the list of indicators suggested by the ILO. The Annex provides a broad picture of selected indicators; it is an 4 M. Mujeri, 2004, ‘Bangladesh decent work statistical indicators: a fact-finding study’, Paper prepared for the ILO, January 2004.

10

incomplete and rough picture but shows progress as well as major decent work gaps on certain aspects. Some of the key challenges that emerge are low growth in wages, inadequate employment opportunities, persistent gender inequalities with respect to employment and wages in spite of the increase in women’s share of wage employment in manufacturing, inadequate coverage of existing social protection schemes given needs, and remaining decent work gaps with regard to child labour and trade union rights. A few words of caution on the decent work indicators are in order.

Decent work is a multidimensional concept, comprising quantitative and qualitative aspects. Thus, it conforms neither to the achievement of a single statistic (e.g. per capita gross national product) nor, at present, to a composite index (e.g., the Human Development Index of the United Nations Development Programme [UNDP]).

Decent work encapsulates outcomes of economic, social, legal, and institutional changes

(hence positive and normative elements). Thus, the identification of some relevant variables and indicators of progress would require judgement.

The statistical indices that the ILO has identified for measuring decent work are,

individually, widely used and generated by national statistical systems (e.g. labour force surveys, population censuses, establishment surveys) but they are often not pieced together to produce a composite picture.

However, these statistical indices are relevant and applicable mainly for monitoring

progress at the national (or regional or sectoral) level. The design of more appropriate measures of decent work at the enterprise, sub-sector, and local levels might be required.

There are problems in respect of data availability and, in some cases, proxy variables or

some subjective measurement need to be introduced. Improvements in current statistical systems seem to be an area where work would be needed to support the national Decent Work Agenda.

Broad policy challenges Progress towards a policy framework that holds the seeds of decent work and is committed towards poverty alleviation has already been embedded in Bangladesh’s National Strategy. Since growth is essential for realization of decent work goals and poverty reduction, it is indeed welcome that the National Strategy has set a target annual growth rate of 7 percent over the next several years. While not unfeasible, this is a tall order, given that the average growth rate over the past 10–12 years has hovered around 5 percent. Moreover, the growth needs to be accompanied by a number of policy interventions, some of which are identified by the ILO as the following.

A poverty reduction strategy would be sustainable if it is consistent with a well-articulated employment strategy towards the goal of full, productive employment. This needs to be complemented by a social protection strategy that aims at reducing the vulnerability of the population living in poverty, enabling the poor to meet basic needs, and preventing people from falling into poverty as a result of contingencies.

11

Sustained labour demand would depend on sustained growth of output. The composition of output growth is equally important, particularly one that encourages and supports sectors that generate employment and income entitlements to the poor.5

Macroeconomic and sectoral allocation and incentive structures would need to be reviewed from the standpoint of the requirements for greater investment and growth. Over the past years, stability has been the overriding criterion of macroeconomic policy frameworks. It is now fairly evident that creating a stable environment is only part of the story.6

Macroeconomic instruments, such as fiscal strategy, would need to be related to an appropriate financing of the development strategy. This would depend not only on markets, but also on prudent public interventions—in physical and social infrastructure as well as other fields—to induce further private investment. In Bangladesh, public investment has remained virtually constant while private investment has risen modestly. An effort to enhance effective demand would require an increase in autonomous expenditure, especially through prudent and focused public expenditure and enhanced private investment. A mildly expansionary fiscal policy may entail a degree of inflation, but as long as it is within the bounds of tolerable price rise and debt–service ratio, it can, in fact, be conducive to reducing idle capacity and unemployment.

There is a growing recognition that the role of the government, which was substantially rolled back over the past two decades, needs to be strengthened, especially in its direct and catalytic support to economic, physical, and social infrastructure building and to fostering growth of private investment.

In the current era of globalization, the sources of output and employment growth are likely to keep constantly shifting in importance, giving rise to prospects of some gainers, some losers. While new sources of growth must be tapped continuously, measures must be in place to mitigate and manage the negative consequence of globalization and job loss.

Social protection assumes significance not only in mitigating pervasive income/job shortfalls but also in reducing insecurity and vulnerability. Social protection has a proactive role in demand management, growth, and employment.

The collection of laws relating to labour and employment – the “Labour Code” - in Bangladesh dates back many years. The need has been recognized for over a decade for a modern and cohesive Labour Code. The completion of this task has become highly desirable, and may be expected to provide, amongst other benefits, the formal framework for a modern policy of employment promotion, recognizing the vital role of social dialogue and for developing more effective systems of social protection.

Policy issues for the National Policy Dialogue The social partners of Bangladesh have identified a number of concerns and specific policy challenges around the theme of globalization and how these impact on the economic growth of the country, on poverty reduction and employment creation, and on the competitive position of Bangladesh in the global economy. On closer examination, many of these challenges are linked to issues of decent work. The subsequent chapters address these issues from a decent work perspective.

5 I. Islam, 2003, The nexus of economic growth, employment and poverty reduction: an empirical analysis, Issues in Employment and poverty, ILO/UNDP, June 2003, Osmani [et al.], op cit., 2003 6 M. Muqtada, 2003 Macroeconomic stability, growth and employment: issues and considerations beyond the Washington Consensus, Employment Paper 2003/48, ILO, Geneva; Badhuri, 2004, Development with higher employment and productivity in the era of globalisation, (mimeo), ILO, Geneva.

12

COMPETITIVENESS AND GROWTH AREAS Securing and accelerating economic growth while also ensuring employment generation and, thus, higher rates of employment remain major challenges for Bangladesh. The employment growth trailed behind economic growth in the 1990s, and as Figure 2.1 shows, higher rates of growth in the Bangladesh economy in the 1990s was associated with higher rates of unemployment. In the manufacturing sector, employment shrank in both absolute and relative terms. As regards Bangladesh’s position in the global economy, export growth has been robust. However, the high commodity concentration of Bangladesh exports renders the economy vulnerable to global market forces, such as the fast-approaching termination of the MFA.

Sources: Data in Bangladesh Bureau of Statistics, Labour Force Surveys, and APO, 2003, Asia-Pacific Productivity Data & Analysis, Japan. These challenges demand that attention be given, among others, to the following.

• Sectoral composition of economic growth, with particular consideration for the employment implications of growing and declining sectors

• Productivity and competitiveness of Bangladeshi enterprises (or their products), especially in the context of global markets7

Economic growth and sectoral trends: implications for employment Taking a sectoral view of GDP, it is clear that while agriculture performed better in the second half of the 1990s, industry growth was at a higher level in the first half. Services, in contrast, maintained a steady rise throughout the decade.8 In terms of share of incremental GDP, services contributed 41percent—roughly the same as industry but greater than agriculture (Table 2.1).

7 The competitiveness of enterprises within the economy is an important factor in benefiting from globalization and contributing to the creation of quality jobs. See World Commission on Social Dimension of Globalization, 2004, op cit. 8 Refer to Table 1.1 on annual growth rates of sectors.

Figure 2.1: Growth in GDP and unemployment

0

1

2

3

4

5

6

7

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

Perc

enta

ge

GDPunemployment rate

13

At the sub-sector level, construction grew at an accelerated pace throughout the 1990s, notably faster than the manufacturing sub-sectors of industry. A major part of the construction industry is located in the informal sector. Small-scale industry, on the other hand, had relatively low growth rates. Table 2.1: Sectoral contribution to growth of GDP between the 1980s and the 1990s

Sector Incremental GDP growth (billion taka)

Sectoral share in incremental GDP growth (percentage)

Agriculture 48.31 16.86 Crop production –1.73 –0.60 Fisheries 43.21 15.08 Others 7.19 2.51 Industry 119.97 41.86 Manufacturing 79.51 27.75

Large and medium 58.12 20.28 Small-scale 21.41 7.47

Construction 39.42 13.76 Others 1.04 0.36 Services 118.28 41.28 Total GDP 286.56 100.00

Source: Osmani (et al) 2003 op. cit. This leads to the following observations.

Some export-oriented sectors, such as manufacturing and fisheries, have contributed significantly to economic growth.

There is increasing importance of domestic-oriented sub-sectors, specifically construction and services, which are largely non-tradable and operate to a great degree in the informal economy.

The growth performance of small-scale manufacturing has not been good, which might have unfavourable implications for employment since it is generally more labour-intensive.

Employment performance The fast-growing sectors, however, have not been the best generators of employment. The employment share of manufacturing declined in sharp contrast to its GDP performance from 13.9 percent in 1989 to just 7.5 percent by 1999/2000 (see Table 1.2). This may be the result of two developments.

1. Output growth has largely been posted by medium and large manufacturers, which are less labour intensive than smaller-scale enterprises.

2. The closure of large SOEs has also led to job losses. However, the situation in the late eighties compared to the nineties was somewhat different (Table 2.2). In the late eighties manufacturing grew at a rate of 6.5 percent, and for each unit of value addition in manufacturing, 3.01 units of employment was created. In contrast, in the early nineties, manufacturing

14

grew at the rate of 9.5 percent, but for each unit of value addition there was a decline in employment. Furthermore, real wages grew faster in the late eighties than in the early nineties – with the latter period characterised by faster growth rates but lower labour absorption. Table 2.2: Growth in employment and real wages

1985/86 – 1990/91 1990/91 – 1995/96

GDP Empl. Elasticity Real wage

GDP Empl. Elasticity Real wage

Agriculture 2.8 2.2 0.78 3.2 2.2 0.8 0.36 1.9

Manufacturing 6.5 19.2 3.01 2.4 9.5 -6.2 -0.65 1.6

Construction - - - - - - - -

Services - - - - - - - -

Total GDP 4.4 2.8 0.64 2.5 5.3 3.1 0.58 1.3

Note: GDP and Employment are shown in terms of percentage change per annum

Source: LFS-1999/00 and Statistical Year Book of Bangladesh, 2001 as quoted in M. Islam, 2004, op.cit., and real wages from Mujeri, 2001, Globalization poverty links in Bangladesh Table 2.3: Sectoral labour productivity and employment intensity, 1995/96 Labour Force Survey (all values at 1995/96 prices) Sector Value added (VA)

per worker (taka) Employment per million taka of VA

Labour Intensity Index

Agriculture 14,797 67.6 2.27 Manufacturing 60.086 16.6 0.56

Large and medium 90,031 11.1 0.37 Small and cottage 30,890 32.4 1.09

Electricity, gas, and water 240,090 4.2 0.14 Construction 109,993 9.1 0.31 Trade, hotels, restaurants 35,976 27.8 0.93 Transport, storage, communications

62,970 15.9 0.53

Community, social, and personal

28,589 35.0 1.17

All 33,608 29.8 1.00 Notes: VA is from GDP accounts in Bangladesh Bureau of Statistics, Statistical Yearbook, 1999. Employment from the Labour Force Survey has been adjusted for underemployment (for women in agriculture and construction) by multiplying number of workers by 1/40th of actual weekly hours of work. Labour Intensity Index for a worker is workers per VA for the sector divided by overall ratio of employment (adjusted for underemployment) to GDP. Source: ILO, ‘Employment for poverty reduction in Bangladesh: projections and policies’, a report prepared under the UNDP-funded project BGD/00/001 for providing technical support to the Planning Commission, Government of Bangladesh. Geneva, September 2002.

15

An analysis of different sectors in terms of productivity and employment intensity in the mid nineties (Table 2.3) reveals that agriculture, small and cottage manufacturing industries, and community, social, and personal services are the most labour-intensive, but also those that post lower levels of productivity. It may also be mentioned that the labour-intensive small-scale and cottage industry often operates in the informal economy. The informal economy in Bangladesh employs about three-fourths of the non-agricultural labour force.9 The informal economy outside agriculture may be divided into two broad geographical segments: the urban informal sector and the rural non-farm (RNF) sector. Estimates for 1991 showed that the RNF sector accounted for nearly 60 percent of total non-agricultural labour force. The RNF sector continues to be a very important to the Bangladesh economy. Since the 1980s, there has been a continuous shift of labour from agriculture to the RNF sector. While the shift to the RNF sector in the 1980s took place primarily at the lower end of the productivity scale (mainly in the form of low-earning self-employment and unpaid family work), in the 1990s the expansion occurred more in the larger-scale enterprises that created wage employment opportunities.10 Nevertheless, though a major source of jobs, the informal economy is known for its low earnings, low productivity, and high exposure to vulnerability. The challenge for Bangladesh, therefore, is to move to a growth path where higher levels of labour absorption are associated with higher levels of productivity. Export-oriented sub-sectors: growth trends, issues Bangladesh’s export base is narrow and, during the past two decades, there has been some dramatic structural transformation as a result of which the dominance of jute and jute goods in its export basket has been overwhelmingly downgraded by RMG products (Table 2.4). Other important export items are leather and leather products and FFS. The main export sector, RMG, is however, severely dependent on imported inputs and intermediate goods, resulting in very low domestic value addition. Cheap labour is regarded as the only comparative advantage of this sector. In jute and jute goods, Bangladesh dominates the world market, but then the world market is shrinking with synthetic products substituting jute goods. The growth of the RMG industry has been a result of the ‘managed’ trade regime in textiles and clothing operated through the MFA. Apart from the reserved market status under the MFA quota in textiles, another important factor that has contributed to the growth of RMG exports to the North American and EU markets is the preferential treatment of Bangladesh’s products granted under the Generalised Systems of Preference (GSP). Although the growth of the RMG sector has been pretty robust, there are genuine concerns about its future performance. First, under the Uruguay Round of Agreements on Textiles and Clothing, all quantitative restrictions related to the RMG sector will be abolished by end-2004. This implies that from 2005 onwards, Bangladesh’s RMG exports will be subject to fierce competition from all other major suppliers whose exports have so far been constrained 9 W. Mahmud, 2001 op cit. 10 This observation was based on several sets of evidence including the share of self-employment and unpaid family labour of RNF workers, per capita rural income, and concentration ratio of income from salaried employment. See Mahmud, 2003, Strategy for Pro-Poor growth in Bangladesh, paper prepared for the Seminar on Accelerating Growth and Poverty Reduction in Bangladesh, World Bank and Bureau of Economic Research, Dhaka. and Osmani, 2003, op cit.

16

under the MFA. Thus, future export performance critically hinges on how Bangladesh can compete with these other suppliers on the basic economic principle of comparative advantage in the post-MFA era. The question is whether sub-sectors that contribute to export earnings do fully utilize the comparative advantages that Bangladesh has (for example, natural and human resources) and whether they can maintain and improve their global position.

Table 2.4: Changing structure of export: 1980/81–1999/2000 (in million US$, percentage share of total in parentheses)

Item 1980/81 1990/91 1999/2000 Growth rate

(percentage), 1990–99

Primary commodities 209 (29.4)

306 (17.8)

469 (8.2)

4.9

Raw jute 119 (16.8)

104 (6.1)

72 (1.3)

Negative

Tea 41 (5.8)

43 (2.5)

18 (0.3)

Negative

Frozen food 40 (5.6)

142 (8.3)

344 (6.0)

10.3

Other primary 9 (1.3)

17 (1.0)

35 (0.6)

8.4

Manufactured goods 501 (70.6)

1411 (82.2)

5283 (91.8)

15.8

Jute goods 367 (51.7)

290 (16.9)

266 (4.6)

Negative

Leather and leather goods

57 (8.0)

136 (7.9)

195 (3.4)

4.1

Woven garments 3 (0.4)

736 (42.9)

3083 (53.6)

17.3

Knitwear 0 (0.0)

131 (7.6)

1270 (22.1)

28.7

Chemical products 11 (1.5)

40 (2.3)

94 (1.6)

9.9

Other manufactured goods

63 (8.9)

78 (4.5)

375 (6.5)

19.1

Total exports 710 (100)

1717 (100)

5752 (100)

14.4

Source: Export Promotion Bureau, as quoted by A.F.M. Maifzul Islam, ‘New growth areas and employment: the Bangladesh perspective’, an unpublished paper prepared for the ILO, 2003.

Comparative advantage, productivity, and competitiveness The comparative advantage of Bangladesh resides in its natural and mineral resources (cultivable land, climate, rivers, shoreline, etc.) and its abundant workforce. These resources, particularly the abundant workforce, are being utilized but the potential for higher productivity and incomes is still far greater

17

than what has been achieved. Bangladesh ranks quite low in the World Competitiveness Index (98th in 2003).11 Bangladesh also draws strength from a combination of factors that present the opportunity to exploit the market, such as the quota system that has favoured its RMG exports. In building comparative advantages into competitive ones, the aspects of governance, policy and regulatory environment, effective support mechanisms, and infrastructure play critical roles. The stability that results from social dialogue between workers and employers’ organizations and a strong foundation of tripartism influences the policy environment as well.

Figure 2.2: Labour Productivity Growth

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

1990 1992 1994 1996 1998 2000 2002Year

Perc

enta

ge

Source: APO, 2003, Asia-Pacific Productivity Data & Analysis, Japan.

Figure 2.3: Capital Productivity Growth

-10-8-6-4-201990 1992 1994 1996 1998 2000 2002

Years

Perc

enta

ge

Source: APO, 2003, Asia-Pacific Productivity Data & Analysis, Japan.

Figure 2.4: Total Factor Productivity

-2-1.5

-1-0.5

00.5

11.5

1990 1992 1994 1996 1998 2000 2002

Year

Perc

enta

ge

Source: APO, 2003, Asia-Pacific Productivity Data & Analysis, Japan.

11 World Competitiveness Report 2003.

18

Although the large labour force offers a substantial comparative advantage in terms of relatively low wages, the realization of its full potential is constrained by the low existing level of education and skills. Currently, the literacy rate in Bangladesh is 52.9 percent. The capacity for technical and vocational education in the country could also be improved. Given its huge supply of low-skilled labour, Bangladesh has used its comparative advantage in human resources, but on the basis of low wages, and low productivity.

During the 10-year period from 1992 to 2001, labour productivity in Bangladesh grew by an average of 1.52 percent annually, but the growth has been erratic with negative growth in the mid-1990s (Figure 2.2). Capital productivity has been negative and worsening since the early 1990s (Figure 2.3). This not only shows that capital is being used inefficiently but also that it is yielding poor results. Usage of outdated and second-hand equipment, lack of proper maintenance, high labour–capital ratio, and poor management may be the reasons for poor capital productivity. Total factor productivity has remained negative except for a spurt in 2000 (Figure 2.4). This shows that economic growth is driven not by efficient use of means of production but rather by increased quantities of resources. Table 2.5: The hidden cost of service

Service Standard waiting time

Informal payment for faster service (taka)

High-tension electricity connection n.a. 100,000–150,000 Low-tension electricity connection n.a. 10,000–15,000 Gas 3 months 40,000 Water 3–4 months 14,000–20,000 Phone 10–12 years 50,000–70,000 Trade license for garments factory 1 year 5,000–8,000

Source: The World Bank, 1996, Government That Works: Reforming the Public Sector, as quoted by A.F.M. Mafizul Islam, ‘New growth areas and employment: the Bangladesh perspective’, an unpublished paper prepared for the ILO, 2004.

Besides skills, infrastructure is an important factor in ensuring efficient usage of factors of production. Bangladesh has a dense network of roads and railways and an expansive river system and shoreline, but these are inadequate to efficiently handle the traffic of goods and services.12 Telecommunication connections are adequate, thanks to investments in modern technology. Access to electricity has also improved through the 1990s, but one-fifth of the urban households and four-fifths of the rural households are still without electricity. It is estimated that half a percentage of the GDP is shaved off due to shortage of power.

12 A World Bank study found that due to lengthy bureaucratic procedures and labour unrest, moving goods through Bangladesh’s main seaport—Chittagong—was the most expensive route to international trade, with a handling cost of US$ 640 for a 20-feet container compared to US$ 220 for the competing port of Colombo in South Asia. Inland transportation also suffers from such problems as illegal toll collection, bad road connection, congestion at ferry ghats, and frequent disruptions in transportation due to political programmes and labour unrest. See World Bank, 1995, Bangladesh Recent Economic Developments and Priority Reform Agenda for Rapid Growth, Report No. 13875-BD, Country Operations Division, Country Department I, South Asia Region.

19

Governance plays a major role in the expansion of job opportunities through enforcing law and order and implementing conducive policy and regulatory environments, specifically for micro and small enterprises. Complex regulations and policy biases towards large enterprises discourage the growth of micro and small enterprises that are essential in building the competitiveness of the economy. Transaction costs (as exemplified in Table 2.5) for business—resulting from hurdles placed by policies and regulations, processing time, and expedition costs—reduce competitiveness. Decent work: the high road to productivity and competitiveness It is often believed that enterprise growth and higher productivity and incomes should come first in order to generate the resources and capacity to not only create more jobs but also ‘better quality’ jobs. However, Momtaz, et al. (2004)13 provide statistical evidence that there is a significant relationship between good working conditions, i.e. decent work, and productivity in Bangladesh. Basing their analysis on data from a survey on micro, small, and medium enterprises (MSMEs),14 they observe that there are significant positive relationships between:

decent work and output of firm; decent work and total factor productivity; and decent work and labour productivity

even after controlling for relevant factors.15 Decent work has many dimensions, some with more direct links to enterprise productivity and efficiency than others. For example, occupational health and safety (OHS) hazards and workplace accidents and diseases translate into loss in production hours and output. Workers’ efficiency and productivity are directly affected by their skills, as well as by their state of health, level of fatigue or energy, degree of satisfaction, and commitment to the enterprise. The workers’ physical capacities could be eroded by long working hours, poor working environments, lack of personal comfort facilities, and poorly designed work organization and methods. Industrial relations also feed into competitiveness. Weak social dialogue coupled with absence of freedom of association (in EPZs) or absence of effective dispute settlement mechanisms do not contribute to harmonious and productive situations in the industry. The sooner these issues are sorted out in tripartite and bipartite environments, the better would be the competitiveness of any given sub-sector. In global markets, new grounds of competitiveness have emerged. In addition to cost and quality factors, specific labour standards (child labour, workers’ right to organize, health and safety, etc.), in addition to environment standards, are increasingly being imposed on exports of developing countries. Although these ‘social clauses’ might be regarded as protectionist measures, the fact is that they do 13 Momtaz Uddin Ahmed, Bazlul H. Khondker, and Abdur Razzaque, 2004, ‘Improving enterprise competitiveness and decent work: a study of Bangladesh’, paper prepared for the ILO, February 2004. 14 The survey of MSMEs was carried out between March and June 2003, and covered enterprises with 100 and more workers. See L. Daniels, 2003, ‘National private sector survey of enterprises in Bangladesh, 2003’, prepared for the Department for International Development, the United States Agency for International Development, the Swiss Agency for Development and Cooperation, and the Swedish International Development Cooperation Agency. Out of 52,036 enterprises in Daniels’ survey, Momtaz and team used data from 2750 enterprises. The decent work indicator that was used from the survey was limited: ‘benefits beyond standard wages’ included labour standards, overtime benefits, maternity leave, healthcare facilities, safety clothing, and safety equipment. 15 Details in Momtaz, et al. (2004), op cit.

20

matter to an ever-growing segment of global consumers. It would thus be worthwhile to search for the best ways to address these pressures. Growth areas: prospects In view of the preceding discussion, the report examines a few key industries in Bangladesh in terms of their potential for growth and employment generation. Readymade garments industry Undoubtedly, the RMG industry has generated substantial benefits for Bangladesh, not least being paid employment and cash earnings for hundreds of thousands of young women workers. Everyone recognizes that these gains and Bangladesh’s global position in the RMG market are threatened by the termination of the MFA. Apparently, some RMG enterprises have already begun to prepare themselves for the new scenario. The RMG industry has so far based its competitive strength on low labour cost and the favoured shelter of the MFA. Average labour cost, reflected in the wages, for a garment from Bangladesh remains the lowest among competitors in South Asia but productivity is lower too (Table 2.6). There is a need to develop new sources of competitive strength. Proceeding towards a downward spiral of low cost is not sustainable—economically nor socially. Table 2.6: Labour costs and productivity in the garment industry in select Asian countries

Country US dollars per hour Productivity Bangladesh 0.16 890.1 India 0.27 3,146.1 Pakistan 0.27 3,236.1 Sri Lanka 0.35 1876.1 China 0.25 - Indonesia 0.28 - Thailand 0.71

Source: Moore, 1997, Table 2; Ramaswamy and Gereffi, 1998; Islam, 2002, as quoted in G. Joshi (ed.), Garment industry in South Asia: rags or riches?, New Delhi: ILO. For continued growth of the RMG sector in Bangladesh, the following issues need attention.

• The RMG industry needs to diversify its products and markets and build its own brand name. The industry needs to restructure, and this may entail social dislocations and costs. Cushioning social costs has to be a major concern for discussion among the government, employers, and workers.

• External support may be needed in the form of proactive roles by the government and employers in improving design centres and enhancing workers’ skills. Sourcing companies can play important roles in scaling up the garment production in Bangladesh.

• Attention needs to be placed on compliance with core labour standards leading to the achievement of decent work objectives. Sourcing companies have attempted, at various times, to enforce voluntary compliance, but they have also insisted on labour-union-free EPZs. Good practices of these factories and workshops need to be publicized.

21

• Regional sharing of production and marketing has been growing around the world to counter the threat of globalization. Bangladesh, without inputs of its own and the inability to immediately penetrate high-value markets, may wish to consider such an arrangement, indications of which are already evident in its agreements with neighbours in the east and west.

Frozen food Exports of frozen food, particularly marine products such as prawn and shrimp, have been rising since the mid-1990s. Bangladesh appears poised to harness the potential of its long shoreline and extensive river networks. Food manufacturing in general provided jobs to 122,000 workers in 2000. The issues with regard to this sub-sector include the following.

Ensuring adequate supply of skilled workers Meeting hygiene standards of export markets Exploring linkages with other food processing industries that might use prawn- and shrimp-

based products Encouraging efficiency Countering the negative effect of the salinity of water and waste produced by the industry on

cultivable land Only a very small number of students (25 per year) graduate with a diploma in marine subjects from technical institutions in Bangladesh. The government may wish to examine, in collaboration with industry, the research and training facility for the industry as well as the specific requirements of the (small-level) operators in this industry. Leather and leather goods In 2000, there were altogether 313 leather-related units in Bangladesh, employing over 40,000 workers. Bangladesh possesses advantages in unit labour cost and productivity in comparison to its neighbours (Table 2.6). However, immediate neighbours and East Asia, particularly China, pose intense competition. China is probably best organized in the production of intermediate value products while developed countries, including Italy, market high-value accessories. Leather quality, its treatment process, product design, and the manufacturing process may need to be examined in the quest to modernize the industry. Most manufacturing remains fragmented and not well integrated into the value chain in production and marketing, although there are backward linkages to a certain extent in footwear manufacturing. Table 2.7: Unit labour costs for finished leather Unit labour cost

(dollars per 100 square feet)

Wages (dollars per year)

Productivity (100 square feet per worker)

Bangladesh 3.19 880 276 India 3.51 587 167 Pakistan 7.99 1948 243 Sri Lanka 12.85 1071 83 Source: A.F.M. Maifzul Islam, 2004, ‘New growth areas and employment: the Bangladesh perspective’, an unpublished paper prepared for the ILO.

22

Tourism There is potential for generating a large number of jobs through tourism. Bangladesh has varied natural features and habitats, numerous historical monuments, many riverbanks, and an extensive shoreline to attract tourism. Currently, it attracts only about 200,000 tourists every year, a negligible number compared to neighbouring countries in south-east Asia. It has, so far, exploited only a fraction of its potential, and the tourism industry can provide tremendous employment due to its labour-intensive nature. However, building this industry requires sustained efforts at developing infrastructure and a skilled workforce. Agro-based products Although Bangladesh has the cultivable land and climate for abundant agricultural production, most of its activities remain subsistence-oriented; the potential for employment generation through agro-processing and value addition remains untapped, even though a major proportion of Bangladesh’s population lives in rural areas. Agro-processing (e.g. fruits and vegetables) has significant backward and forward linkages. Bangladesh may have a comparative advantage in the production of rice, jute, and vegetables and could gain from increased production of these crops provided the surplus production is exported.16 Being a developing country, Bangladesh is exempt from commitments to reduce domestic support and export subsidy. The challenges to exploit the potential of agro-based industries include the following.

Losses of cultivable land (about 80,000 hectares annually) Decline in soil fertility (due to rice mono-culture, unbalanced use of chemical fertilizers, and

deficiency in organic matters in soil) Lack of proper processing Post-harvest losses High quality standards required by exports

Other emerging sub-sectors Pharmaceutical Bangladesh’s pharmaceutical industry grew rapidly in the 1980s and maintained a healthy growth rate during the 1990s as well. In 2000, drug manufacturing provided employment to 32,000 workers in over 300 units. The quantum of pharmaceutical exports remains small at a value of $228 million.17 Although Bangladesh has the largest pharmaceutical industry among the least developed countries, currently it is only able to carry out final production of generic products using imported active generic ingredients. As a least developed country, Bangladesh has until 1 January 2016 to bring its patent regime into compliance with the TRIPS Agreement (trade-related aspects of intellectual property rights) by granting patent protection for pharmaceutical products. Now, if Bangladesh wants its pharmaceuticals industry to be self-sustainable, it must develop a strategy related to TRIPS for the period prior to 2016 and some additional considerations after that date. The information technology industry In 1989, the Bangladesh Computer Council (BCC) was established as an autonomous body for facilitating public–private partnerships to promote the information technology (IT) sector. During the second half of the 1990s (1995–98), IT organizations grew by 53percent and were involved in hardware and software manufacturing, data processing services, and back-office services. In 2002, the Bangladesh government approved a national policy aimed at developing an IT park and broadband

16 Shahabuddin, 2002. 17 United Nations Industrial Development Organization, 2002 .

23

linkages for high-speed data transmission. However, the country is plagued by the shortage of skilled workforce in the sub-sector as well as the apprehension that computers will replace human jobs. Some other sub-sectors, which have done well during the last few years, include bicycles, ceramics, cement, and cosmetics. The export of bicycles increased about 10-fold in only four years (1998/99–2002/03) while that of ceramics nearly doubled over the same period. Production of cement and cosmetics, which mainly serve the domestic market, increased robustly during the past decade. Jute: a declining industry? The jute industry, which has been traditionally very important to Bangladesh, has declined both in terms of production and employment. Many SOEs in this sector have closed down, leading to major job losses. In the current scenario, the jute industry does appear to be a sunset industry. However, both in Bangladesh (through government directives) and elsewhere, there may be a demand shift towards natural fibre and away from products like polythene, which have adverse environmental implications. Jute products remain ideal for packaging, but there needs to be marked quality improvement in the packaging, with greater emphasis on some forms of standardization as well as flexibility to meet particular market needs. This sector retains potential viability to expand, if proper measures, including the following, are undertaken.

Aggressive marketing of jute products Promotion, particularly marketing and government assistance in possibly banning of plastic

bags to be substituted by natural fibres such as jute Diversification of end-uses of jute: going beyond packaging material into production of pulp

and paper, absorbents, handcrafts, etc. Encouragement to cottage-based manufacturing industry to generate increased employment.

Table 2.8: Production and employment in the jute textile industry (Index: 1989–90 = 100)

1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 Production 81.69 87.52 82.75 83.46 79.46 80.13

Employment 89.21 86.14 80.51 77.25 74.37 72.7 Source: Bangladesh Bureau of Statistics, 1998, Statistical Yearbook of Bangladesh, Dhaka. Conclusions and strategy for decent work The preceding discussion yields the following main elements that could feed into an appropriate strategy for Bangladesh.

Public–private partnership for transforming growing sub-sectors into creators of quality jobs through diversification and higher value addition

The SME, as an essential feature of competitive, growth-oriented sub-sectors - Flourishing of SMEs requires adherence to the decent work concept, conducive policy and regulatory environment, and effective support mechanisms.

Related to the above, policy and appropriate measures and programmes aimed at improving productivity and earnings in the informal economy

Greater importance on human capital: higher education, core competencies, more relevant technical skills, health, etc.

Effective social dialogue and tripartism as the cornerstones of creating decent work, to then provide full participation of the workers in creating and sharing the value in a growth-oriented economy

24

Local production and marketing system comprising numerous small entities facilitated through supportive mechanisms

Encouragement to growth of selected sub-sectors (such as leather, ceramics, and similar industries) that can help improve job quality and generate employment not only in enterprises, but also in the supply chain.

Policy areas and actions that may be considered Skills development Formulation of a medium- to long-term strategy for skills development, aimed at raising educational attainment of men and women (at the minimum to completion of higher secondary level), including reducing gender disparity at higher level, and equipping training institutions with capability and orientation to respond to skill requirements of emerging growth areas This would require social consensus on priorities, target groups, training content, and so on. In the short term, this calls for a joint programme of the private sector and the government to design a strategy aimed at upgrading ‘core competencies’ (including communication, problem analysis and solving, teamwork, and computer skills) of young workers graduating from secondary schools and those already in the RMG and other industries, thus already possessing workplace experience. This would necessitate social consensus on what constitutes core competence for Bangladesh and consideration of adjustment in secondary school curriculum and on-the-job training. Improving enterprise productivity and decent work Design of a strategy and a set of methods and tools, specifically suited to Bangladesh, for raising productivity and efficiency alongside improvements in decent work dimensions at enterprise level (including working conditions, health and safety, and basic rights at work) This would build on good practices and expertise in Bangladesh, and may be piloted in a particular sub-sector or an area-cluster of sub-sectors. Policy environment for small and rural non-farm enterprises Development of an SME policy, including a strategy that involves integrated support to RNF enterprises, especially those in semi-urban, semi-rural areas

25

OPPORTUNITIES AND ACCESS TO EMPLOYMENT

One of the basic principles of the ILO’s Decent Work Strategy is the existence of opportunities for work, and equitable access to such work. Within the ILO’s Decent Work paradigm, such work must also be freely chosen, productive, and adequately remunerative. There is no doubt that healthy economic growth is a prerequisite for the growth of employment opportunities in any economy. However, GDP growth in itself is not enough. The Bangladesh economy has witnessed moderately accelerated growth in the 1990s compared to earlier decades, leading to a per capita income growth of 3.6 percent in the latter part of the 1990s. However, this has not led to a comparable increase in employment opportunities in the economy as a whole, enough to absorb the growth in the labour force. In the late 1990s, labour force grew at the rate of 2 percent per year whereas employment grew at the rate of 1.6 percent.18 Opportunities for employment An indicator of opportunities for employment in the labour market is the unemployment rate. A higher unemployment rate indicates that there are fewer opportunities available than those seeking work. However, in developing countries, where social protection measures are not available to a vast majority, people cannot often remain unemployed, as income from work remains the major coping mechanism. This results in relatively lower open unemployment rates in developing countries than in industrialized countries. Therefore, the unemployment rate may not capture the actual situation as regards opportunities of employment. A useful indicator in this context is the underemployment rate—devised to capture those working in low productivity, low income work—also often characterized by less than full-time hours of work.19 Underemployment tends to exist widely in most developing countries and also tends to have a higher incidence among women workers than men. This is because women, more so than men, balance paid work with unpaid care at home. In reviewing the unemployment and underemployment rates in Bangladesh over the late 1990s, we find the following contrasting trends, also presented in Table 3.1. Open unemployment has increased The total open unemployment rate, the male unemployment rate, and the female unemployment rate all increased in the 1990s. Moreover, urban unemployment rates among both men and women in urban areas tended to be much higher than rural unemployment rates. SSC educated unemployment rate higher than that of other groups While unemployment rates for the better educated are higher than those for the uneducated and degree holders, the rate of unemployment for women who hold a Senior Secondary Certificate (SSC) has increased at the highest rate over the late nineties.

18 R. Islam, 2003 Labour Market Processes in Bangladesh: Analysis of Access and Mobility based on 15-plus age group and usual definition 19 In Bangladesh, underemployment is measured in terms of less than 35 hours of work per week.

26

However, underemployment rate has fallen Total underemployment rates, including those for men and women, registered declines during the same period. The group that had the highest underemployment rate was rural females. These figures imply that in Bangladesh, while the labour market was creating opportunities for work for those who were relatively less skilled as evident in fall in under employment rates and low rates of unemployment for the uneducated, there were not enough opportunities for employment for those who were better educated – the situation been worst for young women workers who were educated at the middle level. Table 3.1: Selected labour market variables in Bangladesh 1995/96 1999/2000 All Male Female All Male Female Unemployment rate

All workers 2.5 2.7 2.2 3.7 3.7 3.5 Urban 4.4 4.4 4.3 5.3 5.0 6.2 Rural 2.1 2.2 1.9 2.8 2.8 2.8 Uneducated 0.6 0.8 – 0.9 2.5 SSC – 9.7 12.9 – 8.6 26.6 Degree holders

– 8.4 15.2 – 6.8 14.3

Youth (15–24 years of age)

5.6 8.0 7.0 10.7 11.04 10.3

Underemployment rate

All 38.5 13.7 79.0 31.9 8.4 71.2 Urban 22.1 10.9 5.2 18.2 4.9 52.0 Rural 42.1 14.5 82.4 35.0 9.3 74.2 Status of Employment

Self-employed 32.2 46.8 8.3 35.1 49.4 10.8 Employer 0.3 0.4 0.1 0.2 0.3 0.0 Employee 11.9 14.6 7.6 12.6 15.1 8.2 Unpaid family helper

37.7 12 .7 78.3 33.8 10.2 73.2

Day labourer 17.9 25.5 5.7 18.3 25.0 7.8 Type of employment

Public 5.8 6.0 – 6.5 3.5 Private formal 11.7 14.80 – 20.4 5.4 Private informal 82.5 79.2 – 74.1 90.7 Source: Bangladesh Bureau of Statistics, Labour Force Survey reports, as quoted in Islam (2004), op cit., and Mujeri (2004), op cit., based on extended labour force definition and 15-plus population, except in status in employment.

27

Women’s employment The employment challenge relates not only to opportunities for employment but also to equal access to such employment for women and men. In Bangladesh, as in other parts of South Asia, the patriarchal, feudalistic social system practises discriminatory practices against women all through their life cycle, and markedly so during their working period. Nevertheless, certain significant developments have characterized women’s employment in Bangladesh. Feminization of manufacturing employment In Bangladesh, a significant development has been women’s increased participation in the manufacturing sector. Manufacturing employment has more than doubled during the 1990s, with a major proportion of this increase being accounted for by women workers. In 1990/91, women constituted 28.5 percent of all workers in the manufacturing sector; in 1999/2000 this increased to 41.7percent. However, this feminization of manufacturing has been accompanied by a fall in women’s participation in the labour force. If the extended labour market definition is considered women’s labour force participation fell from 39.3 percent in 1990/91 to 37.4 percent in 1999/2000.20 Creation of more employment opportunities for women by the growing RMG sector The RMG sector has been the fastest-growing export sector in the Bangladesh economy over the 1990s. This has also led to growth of employment in the RMG sector, and women’s employment in particular. Between 1992 and 2000, the share of women workers in the RMG sector increased from 85 percent to 91 percent.21 Decline in share of unpaid family workers Data on status in employment in Bangladesh over the same period shows that the category ‘unpaid family workers’ has declined, which is indeed a positive development because a majority of unpaid family workers tend to be women (Table 3.1). Women, therefore, are moving away from working without pay in household enterprises to working for payment. However, though men are less likely to be unpaid family workers, over the latter part of the 1990s, the share of men in unpaid family work has fallen faster than the share of women in unpaid family work.22 Increase in casualization of work, especially of women workers Along with certain positive developments for women in terms of opportunities for work and income in the RMG sector, labour market statistics in Bangladesh during the 1990s indicate an increase in casualization of the labour force, and of women workers in particular (Table 3.1). During the first part of the 1990s, there was a sharp increase in the numbers of both men and women employed as day labourers. For men, it grew at the rate of 6.6 percent while for women, it grew at the rate of 24.2 percent . In the latter part of the 1990s, this casual labour category grew at the rate of 1.3 percent for men and 9.1 percent for women. Taking into account the entire decade, the annual rate of growth of the number of day labourers was higher than the growth of the number of employees.23 Greater likelihood of women being found in the informal sector Women are more likely to be found in the informal sector than men and, as is well known, work in the informal sector is more likely to be low-paid, low-skilled, and also relatively more

20 Data from Mujeri, 2004. op. cit. 21 Islam 2004 op cit. 22 Data from Islam, 2004, op cit. 23 Data from Islam, 2004. op cit.

28

vulnerable. Islam (2004) based on LFS data shows that while the informal sector employment component for men has fallen over the 1990s, it has increased steeply for women from 79.2 percent in the mid-1990s to 90.7 percent in the end-1990s (Table 3.1).

Figure 3.1 Percentage distribution of women and men by education, 1999/2000

010203040506070

No education Class 1-V Class V-X SSC/HSC Degree andabove

Others

Source: BBS, Labour Force Survey, 15 +, extended definition.

Perc

enta

ge

Men Women

Based on these labour market trends in Bangladesh, one can conclude that the labour market has generally become more open to women in certain sectors. There has been a fall in unpaid family workers, many of whom are women. Perhaps, this implies increased access to women to paid work, which has been absent in the past. However, women are more likely to be found in casual daily work, and also more likely to be found in the informal sector. Therefore, feminization of manufacturing employment in Bangladesh has been accompanied by a flexibilization of the workforce. While more women work now than earlier, the forms of work they are engaged in are likely to be relatively more insecure. Women’s access and opportunities in the labour market are largely determined by the fact that women have less access to education and skill development. Figure 3.1 shows the educational gaps between women and men; women are usually more likely to not have any kind of education. This also leads to significant wage differential between women and men in the labour market in Bangladesh where women’s wages are 58.2 percent of those of men’s.24 Youth employment25 Nearly 22 percent of the labour force (extended definition) in 1999/2000 was comprised by youth (15–24 years) although the share of the youth in the total population was only 10 percent. Youth employment has special significance in Bangladesh since its nature and extent are important indicators of the additional employment generating capacity of the economy. Alternatively, the extent of unemployment of youth labour indicates the failure of the growth process to create enough jobs for the new entrants to the labour force and, consequently, the loss of potential income and welfare.26 24 For data source, see Annex. 25 Data in this section are taken from Mujeri ,2004, op cit. 26 It is worth noting that the definition of youth labour is subject to varied interpretations in Bangladesh. The ILO practice, which is adopted in this study, is to treat the 15–24-year-olds as the youth. In Bangladesh, however, the youth population has experienced changing definitions. For example, the

29

Rise in rate of youth unemployment During the 1990s, the overall number of employed youth declined by the extended definition. The disadvantaged situation for youth is reflected in the high and increasing youth unemployment rate compared with the overall unemployment rate in the country. While the unemployment rate for the labour force as a whole increased from 2 percent to 3.7 percent during the 1990s, the youth unemployment rate was recorded at 11 percent for the extended definition in 1999/2000. Both female and male youth unemployment rates increased sharply, as did the youth unemployment rates in both rural and urban areas.

Figure 3.2 Educational distribution of unemployed youth, 1999-2000

0

10

20

30

40

No education Class 1-V Class V-X SSC/HSC Degree andabove

Source: BBS Labour Froce Surveys, 15+, extended definition

All Women Men

Likelihood of unemployed youth to be better educated Figure 3.2 shows the educational status of the unemployed youth labour force during 1999/2000. A majority of unemployed youth (63 percent) had secondary or post-secondary certificates and higher education. The situation does not differ much between females and males: 60 percent of the unemployed female youth hold secondary or post-secondary education compared to 66 percent of the males. However, the pattern of youth unemployment indicates that rates that are higher for those with middle-level education, with relatively lower rates for those who have no education at all. Those who have high level of education (i.e. hold a degree) also display relatively lower rates of unemployment. This has implications for the skill mismatch at the middle education level. Perhaps what is needed is greater market-driven skill training for those possessing secondary-level education. Low likelihood of youth to be engaged in agriculture Only 48 percent of the youth are engaged in agricultural activities compared to 63 percent of all workers by the extended labour force definition. However, amongst the youth, as amongst the overall workforce, agriculture dominates. Industry and services, on the other hand, are more prevalent amongst the youth population than amongst the rest of the population; these categories 1999/2000 LFS considers that the age group of 15–29 years comprises the youth labour force while the recently framed National Youth Policy, 2003, considers all people in the age group of 18–35 years as belonging to the youth population. See Report of the Labour Force Survey Bangladesh 1999-2000, Bangladesh Bureau of Statistics, Ministry of Planning, Government of the People’s Republic of Bangladesh, Dhaka 2002, and National Youth Policy 2003 (in Bangla), Ministry of Youth and Sports, Government of the People’s Republic of Bangladesh, Dhaka 2003.

30

engage 10 percent and 27 percent of the total labour force respectively, while they engage 18percent and 34percent of the youth. Mobility of Retrenched workers In 1993, A Privatization Board was created in Bangladesh to spearhead the privatization process of SOEs. An immediate effect of privatization is the retrenchment of workers. Furthermore, non-privatized SOEs have also adopted a labour retrenchment policy under a voluntary separation scheme (VSS). It has been estimated that about 120,000 employees of SOEs have lost their jobs since the early 1990s. Total SOE employment has also declined from 0.3 million in the early 1990s to 0.23 million in the beginning of this decade.27 The government’s assistance to retrenched workers is in the form of compensation package ranging from 10 percent to 27 percent of gratuity payment—commonly known as the ‘golden handshake’. An example of an average compensation package of workers retrenched from jute mills during 1993–95 ranged from Tk 44,000 to Tk 80,000.28 However, in more recent years, it has been claimed that when the Adamjee Jute Mill closed down, the workers were given three months’ salary as compensation.29 The money received as compensation is by no means enough to guarantee a lifelong income. The workers need to find alternative employment. Moreover, loss of work also has implications for loss of access to various social protection facilities that often characterize a government job. What happens to workers who lose their jobs? Do they find alternative employment in other enterprises? Do they move to the informal sector? Do they remain unemployed? Or, do they go in for some training to improve their future prospects? So far, there is no credible information on this issue of labour market mobility of workers. This area of research needs urgent attention as labour market policies for retrenched workers depend to a large extent on the reality that retrenched workers face when they are laid off. Any programme on retraining of workers affected by privatization needs to address some issues related to the skill profile of workers, the existing training infrastructure in the country, and identification of trades in which retraining should be provided. As far as the skill profile of the workers is concerned, an ILO study finds that half the retrenched workers fell into the skilled labour force category. About one-third were semi-skilled, while one-fifth were unskilled.30 Following the phasing out of the MFA, it is likely that the RMG sector will undergo some restructuring and possible job loss. Restructuring of the RMG sector would particularly affect women, many of them migrants from rural areas and possess poor educational skills. Loss of work and lack of opportunities for alternative work could make the women workers slip further into poverty.

27 Figures from Osmani, et al., 2003, op cit., p. 62. 28 Figures from ILO, 1999, Retraining and redeployment of workers affected by privatization in Bangladesh, p. iii, ILO, Geneva. 29 R. Islam, 2004, op cit. 30 Figures from ILO, 1999, op cit., p. 59. Data used in the study is from the Ministry of Finance.

31

Conclusions and recommendations Labour market trends show that while there have been some employment opportunities for the less skilled, comparable opportunities for the better skilled—especially better skilled youth—are relatively lesser. This has partly to do with the loss of jobs in the public sector where educated youth used to find employment. This is also because many of the jobs being created are of a low wage–low productivity nature. • A prerequisite for any informed policy and analysis on the labour market is an effective

labour market information system. Definitional aspects of the LFS could be resolved and made uniform with other countries following the UN system of national accounting. A few questions may be added to generate important information on labour market mobility—both horizontal and vertical. Furthermore, all data should be disaggregated by sex.

• Information on ‘jobs and vacancies’ could be publicized regularly. Currently, two main sources of such dissemination are: (1) friends and relatives who are employed, and (2) notices displayed on the spot. Informal mechanisms will continue to play important roles in both formal and informal sectors but a formal mechanism could emerge gradually. Although it is somewhat unfashionable to talk about employment exchanges, such institutions may be revived, especially with a view to provide services for retrenched workers.

• Skill Development Councils may be set up in different regions, with the participation of workers’ and employers’ groups. These councils could identify new markets and run training programmes, for example in non-traditional skills.

• A Skill Development Fund through a corpus could be set up by the government. This could have schemes involving suitable levies on wage bills similar to those implemented by the governments in Singapore and Malaysia.

Recommendations targeted at the youth

• The problem of unemployment affects the youth more than it does other groups in Bangladesh. This suggests that for addressing the worsening unemployment situation, the economy needs to generate employment opportunities for the youth at a much faster rate than in the past. The youth should also be encouraged to go in for self-employment by creating more facilitating environments for them.

• The large majority of the unemployed youth are educated but deprived of employment

opportunities, largely due to a mismatch between supply and demand in the labour market, inappropriateness/inadequacy of skills to effectively perform in the labour market, and the slow pace of job creation, particularly in the formal sector. The policy implications are clear: in order to meet the challenges in the labour market, Bangladesh needs to create jobs for the educated youth at a rapid rate, and these will come mostly through rapid expansion of productive and skill-intensive activities.

Recommendations targeted at women • Casualization has been a general feature of the labour market but has affected women

relatively more. In this context, it is necessary for the government to actively intervene to open up more opportunities of employment for women, so as to help diversify women’s employment in other more skilled areas. This is also essential to ensure equal opportunity

32

and treatment in employment for women, especially given the rather high unemployment rate for better-educated women.

• For ensuring gender equity in employment, some legislative changes deserve attention. For

example, the night work law may be reviewed. Enacting laws on equal pay for equal work must be considered. Moreover, the implementation of laws is as important as formulation of good laws and this is true for labour laws as well.

• Skill and educational gaps that women face must be addressed in order to improve

women’s position in the world of work. • Recognizing the economically active female labour force as a potentiality of the labour

movement, workers’ organizations could set up a so-called ‘women’s committee’ within their fabric to address the interests and demands of women workers as well as gender issues. Trainers’ training for female unionists—that can increase future participation of women in trade unions, as well as increase gender sensitivity for male union members—may be designed and implemented.

Recommendations targeted at retrenched workers A survey of retrenched workers could be undertaken to explore some issues relating to their

mobility in the labour market and their coping mechanisms. The survey should be based on a structured questionnaire with some open-ended questions, so that the workers’ own views may be captured.

33

DECENT WORK AND INTERNATIONAL MIGRATION FROM BANGLADESH Migration of workers from Bangladesh has increased remarkably in recent years. Between 1976 and 2003, there was an almost 30-fold increase in the number of migrants from Bangladesh, the large majority being workers in search of employment abroad. According to official records, Bangladeshi migrant workers continue to head mainly for the Gulf. According to data from the Bureau of Manpower Employment and Training (BMET), of all migrants since 1976 till September 2003, 96percent have departed for the Gulf31. In Bangladesh, a country where employment creation has not increased at a rate proportionate to the growth of labour force, both push and pull factors have worked to make migration a major livelihood strategy for many Bangladeshis. Migration, defined here as voluntary short-term movement of labour across national borders, is therefore one of the main options for employment for Bangladeshis. In the process, it has two major impacts on the Bangladeshi economy. • It eases the employment situation. • It generates foreign exchange. The contribution of remittances to GDP has grown from only 1 percent in 1977/78 to 4 percent in the 1990s. If unofficial flows of remittances are included, then the figure is likely to be much higher. Remittance flow also has a multiplier effect on national income. It has been found that an increase in remittance by Tk 1 results in an increase in national income by Tk 3.3. In spite of these positive effects of migration on the macroeconomic front, there remain some concerns especially in terms of managing migration from Bangladesh, poor working conditions in their destination country, and often exploitative employment relations that Bangladeshi migrant workers are subject to. This is closely linked to the fact that a majority of migrant workers from Bangladesh are low-skilled (See fig 4.1). Of all workers who have migrated between 1976 and September 2003, official estimates reveal that 47 percent—almost half—were unskilled (examples being agricultural labourers, menial labourers, cleaners, cart loaders, etc.) and 16 percent were semi-skilled (tailors, masons, etc.). Together the unskilled and the semi-skilled, who comprise the ‘low-skilled’ group, made up 63 percent of all migrant workers from Bangladesh. Only 4percent were professionals (doctors, engineers, teachers, nurses, etc.) and 31percent were skilled (drivers, factory workers, etc.). Following an official ban on migration of women workers in 1981, official estimates of women migrants show that less than 1percent of all migrant workers during 1993–2003 were women. However, some researchers suggest that the estimated number of unofficial female migration is likely to be much higher than the official figure. In 2003, the government eased migration of only those unskilled and semi-skilled women who were aged above 35 years. Needless to say, the unofficial nature of women’s migration only adds to their vulnerability, discrimination and abuse. 31 Calculated from data provided in T. Siddiqui , 2004, Decent Work and International labour migration from Bangladesh, paper prepared for the ILO .

34

Figure 4.1 Distribution of migrants, by skill level

010203040506070

YearProfessional Skilled Semi-skilled Unskilled

Source: Compiled from data in Siddiqui (2004), op cit.

Low-skilled workers, because of their illiteracy and lack of access to information as well as lower bargaining power in the labour market, are more likely to be subject to difficult working conditions and exploitation. Unfortunately, in Bangladesh, not only are the majority of migrant workers low-skilled and less educated, but also on the rise in recent years. This raises legitimate concerns about the conditions of employment and work of a majority of migrants from Bangladesh. Managing migration When migration is increasingly being used as a livelihood strategy by many Bangladeshis, and is also adding to relieve the foreign exchange constraint, it is important for the government to manage migration in a manner that will help reap the maximum benefits while minimizing costs. With this aim, the Bangladesh government has set up some institutions for managing migration in the pre-departure phase. Examples of these are the BMET, the Bangladesh Overseas Employment Services Limited (BOESL), and registered private recruitment agents (Box 4.1). In addition, the various ministries and overseas missions of the government are also involved in promoting migration— in a regulated manner—in countries and sectors where demand for Bangladeshi labour exists. Overseas missions explore potential labour markets for migrant labour, attest documents pertaining to recruitment, provide consular services to Bangladeshi workers, and ensure welfare of migrant workers. However, in spite of these efforts by the government, in reality, most recruitment is done on the basis of individual contracts, where often unregistered agents or dalals control the process. Figure 4.2, which shows the relative importance of different agencies in recruiting migrants for employment abroad, highlights the importance of individual contracts which are generally operated by dalals. The government’s role has been rather limited in this pre-departure phase of migration with private registered recruiting agents accounting for 41 percent of all recruits and individual agents accounting for 58 percent of the total. In fact, what is also of concern is the relative decline of the role of the BMET in recruitment of migrants and the concomitant rise in the relative importance of dalals.

35

Box 4.1: Institutions for managing migration Ministries The Ministry of Expatriates’ Welfare and Overseas Employment, the Ministry of Home Affairs, the Ministry of Foreign Affairs, the Ministry of Finance, and the Ministry of Civil Aviation and Tourism are the main ministries that deal with international labour migration. Until 2001, the Ministry of Labour and Employment was in charge of international labour migration. The current government, in responding to the demands of expatriate Bangladeshis and the migrant workers, created a new ministry in December 2001. The powers of implementing the rules framed in 2002 under the Emigration Ordinance, 1982, and accordingly promoting, monitoring, and regulating the migration sector are vested with the new ministry. The activities of the ministry are concentrated in two broad areas: (1) to create employment overseas and (2) to solve problems of expatriates and ensure their welfare. Bureau of Manpower Employment and Training (BMET) The executing agency of the Ministry of Expatriates’ Welfare and Overseas Employment, the BMET was created in 1976 to ensure maximum benefits for labour export. Since the promulgation of the Emigration Ordinance, 1982, it has been working as the implementing agency of the Ordinance. Currently, the BMET is involved in control and regulation of recruiting agents, collection and analysis of labour market information, registration of job seekers for local and foreign employment, development and implementation of training programmes in light of specific labour needs (both in national and international labour market), materialization of apprentice and in-plant programmes in existing industries, organization of pre-departure briefing sessions, and resolution of legal disputes. Bangladesh Overseas Employment Services Limited (BOESL) In 1984, BOESL was set up to take on the role of direct recruitment. Private recruitment agencies Since 1981, private recruitment agencies have been active in Bangladesh. These work under a license from the government. On their own initiative, they collect information on demands and orders for foreign employment. After taking permission from the BMET, the agencies recruit workers as per specifications of the foreign employers and then process their cases for deployment. Over time, the recruiting agencies have become organised under the Bangladesh Association of International Recruiting Agencies (BAIRA), which was formed in December 1984 with representatives of 23 recruiting agencies. In 2002, BAIRA had a membership of around 700 agencies. There are also some mechanisms in place to ensure rights at work for migrants (Box 4.2). These include some international instruments such as the UN International Convention on Protection of Rights of All Migrant Workers and Their Families and ILO conventions on migrant workers. Unfortunately, neither Bangladesh nor its receiving countries have ratified these conventions.

36

Figure 4.2: Relative importance of recruiting institutions

020406080

100

Year

Perc

enta

ge o

f all

mig

rant

s re

crui

ted

BMET BOESL

Pvt/ Recruiting Agent Individual contracts

Source: Compiled from data in Siddiqui, 2004, op cit. Box 4.2: Institutions to protect rights of migrants International instruments The 1990 UN International Convention on the Protection of Rights of All Migrant Workers and Their Families (ICMW) ensures rights to both regular and irregular, male and female migrants. It upholds that migrants are both social and economic beings. The ILO, in its first session in 1919, highlighted the issue of equality of treatment between nationals and migrant workers and coordination of migration policies between states on the one hand and government, employers, and workers’ organizations on the other. ILO conventions on migrant workers include Migration for Employment Convention (Revised), 1949 (No. 97), the Migrant Workers (Supplementary Provisions) Convention, 1975 (No. 143), and the Migrant Workers Recommendations (No. 151). Convention No. 97 came into force in 1952 and Convention No. 143 in 1978. National instruments The Emigration Ordinance, 1982, is the key regulatory instrument in the field of migration. It allows only persons with valid travel and proof-of-employment documents to emigrate. Illegal emigrations—as also unlawful recruitment efforts—are punishable with imprisonment of up to one year with a fine not exceeding Tk 5000. Under the Ordinance, recruiting agencies are prohibited to charge higher than the prescribed amount of fees for their services. The Ordinance has provisions for penalizing individuals who, in breach of contract with foreign employers, abandon their employment. Bilateral agreements and memoranda of understanding The Bangladesh government has signed a memorandum of understanding (MoU) with Malaysia in 2003. Under the MoU, Malaysia will take in 50,000 Bangladeshi workers over the next few years. Along with the number of workers to be taken over the stipulated period, the agreement also lays down rights at work (wage scales, working and living conditions, etc.), level of social protection (provident fund, gratuity, medical care, compensation, etc.), and access to instruments of social dialogue (freedom of association).

37

The government’s emigration ordinance is also aimed at protecting migrant workers by regulating certain kinds of migration. In the absence of the ratification of international instruments by the receiving countries and Bangladesh, bilateral agreements or MoUs are important instruments through which protection of rights of migrants can be ensured. There is, however, a general reluctance on the part of labour-receiving countries to sign any bilateral agreement and MoUs that have legal bindings. Therefore, a minimum set of standards for sending labour has been formulated by the government even though this understanding does not have hold the receiving country to any legal obligation to indeed follow the minimum standards. Challenges of migration Even though all the institutions shown in Boxes 4.1 and 4.2 exist for the benefit of migrant workers, the experience of those migrating from Bangladesh is fraught with difficulties, mainly because a majority tend to be low-skilled migrants, dependent on dalals to take care of the process for them. The challenges associated with migration can be broadly categorized into three groups: (1) pre-departure, (2) post-arrival, and (3) after return. Pre-departure Procurement of passport and work permit Procuring the passport and work visa and receiving emigration clearance are essential steps in the process of migration. These are largely conducted by dalals or recruiting agencies. Recruiting agents often have to pay a fee to employers in destination countries to purchase the visa and ticket for the migrating worker; this fee is charged to the worker. Buying and selling of visas has become a big business, and securing visas through regular channels has become extremely difficult. The dalal system works intensively in villages from where workers are recruited—and most of their operations are informally done—bringing in much scope for fraudulent practices. To meet the costs of visa and travel, prospective migrants often sell off their lands or mortgage their meagre assets. Post-arrival/ in employment Poor working conditions in host country These may range from unsafe working conditions to non-payment or late payment of wages. In addition, working hours are often long, and excess working hours are not always paid for. Furthermore, on arrival in the host country, workers often find that they are being hired for a job quite different from what they had been promised. Workers also often face sexual violence or other kinds of violence at the workplace. Discrimination at the workplace Low-skilled migrants tend to receive lower wages than the national minimum rate set in host countries. Moreover, to restrain migrant workers from changing jobs, their passports and work permits are often taken over by the employers, creating a situation of extreme vulnerability for these workers. Lack of social protection Since low-skilled Bangladeshi migrant workers are more likely to work in the informal sectors in host countries, they are not entitled to pension. Healthcare is available to workers in those countries in the Gulf (such as Saudia Arabia), which have a policy of ‘health for all’. In other countries, some employers have authorized medical service providers. In most host countries,

38

migrants are obliged to take the mandatory Human immunodeficiency virus / Acquired Immune Deficiency Syndrome (HIV/AIDS) test on an annual basis, while women workers have to undergo pregnancy tests. If the tests are found positive in either case, the workers face dire consequences, including dismissal from work and deportment. Lack of voice of migrant workers in the workplace Trade unions in Bangladesh are not actively involved with migrant workers, mainly because residence in another country restricts the ability of a Bangladeshi trade union to legitimately represent these workers. Trade unions in host countries are not always open to migrant workers. In addition, Bangladeshi labour-receiving countries in the Gulf region (such as Saudia Arabia) do not allow trade unions. Kuwait, Qatar, and Bahrain have trade unions but migrant workers cannot become members. (Some trade unions in Bangladesh do have contacts with trade unions in South Korea and Malaysia.) There are however, migrant associations in the host countries, which organize cultural programmes and often provide support services to migrant workers. A section of returnee migrants have also formed organizations in Bangladesh. These include the Association of Bangladeshi Returnee Employees, the Bangladesh Migrant Centre (BMC), and Bangladesh Women Migrants’ Association (BWMA). Remitting money Even though remittances add considerably to the foreign exchange reserves of Bangladesh, the prevalence of illegal agents and the sending of money through non-official channels diminish their impact. The bulk of the money transfers from the Gulf to Bangladesh takes place through the hawala system of informal money transfers. It is a system, which is widely trusted to make the transfers easily and quickly and it benefits the migrant and her/his family. Others bring back their remittances on their person when they return, a practice that is not very safe. Mental and physical stress of being away from family Migrants undergo stress of separation from family in a foreign land. At the same time, families left behind may also suffer from the absence of the main breadwinner, even though remittances do compensate for the financial problems. After return Finding employment Return migrants may come back somewhat more empowered by their experiences abroad but finding a job in and integrating with the domestic economy may be a problem. Conclusions and recommendations As noted earlier, such migration must be managed in a form that is most beneficial for the migrant and the economy, while minimizing associated costs. In this context, the following measures may be considered. Foreign employment strategy Safe migration Decent work for migrant workers Financial assistance for remitting money Integration of return migrants

39

Foreign employment strategy Such a strategy would involve effective government mechanisms to better manage migration, while providing more information to migrants about employment prospects abroad.

• Many labour-receiving countries have projection plans of development work and concomitant labour needs. Following the example of The Philippines, these projection plans need to be collected and analysed on a routine basis. Accordingly, human resources and skill enhancement could be pursued in specific sectors where migrant labour is in demand.

• Supportive institutions could be built to improve migration management, and to disseminate information on job prospects and skill requirements for migrant workers.

• To counter abuse of women migrant workers in foreign countries, the Bangladesh government has banned migration of women aged under 35 years for unskilled and low-skilled work. Instead of imposing a blanket ban on women’s migration, the situation could be reviewed and efforts made to eliminate abusive employment.

Safe migration This scenario would see reducing harassment of migrants at the hands of the middlemen.

• The recruitment industry, characterized by fraudulence and harassment at every stage, has indeed accelerated undocumented migration from Bangladesh and should be better regulated. Bangladesh might in this context, consider ratifying ILO Convention 181 on Private Employment Agencies.

• Renewal of licenses of private recruiters should be made contingent on performance. Furthermore, currently, only concerned government functionaries can lodge complaints against recruiting agents for violation of the provisions of the 1982 Ordinance. This has to be changed so that migrant workers have the right to seek redress directly.

• Before embarking on short-term contract migration, migrant workers should receive pre-departure orientation training. Information about the destination country, general job condition, and rights and duties under the legal regime of the country concerned and under international law should be disseminated through such training. The government may consider not providing such training itself, but encouraging selected specialized agencies, NGOs, and migrant support groups to impart residential, pre-departure orientation training in different migration-prone areas. Women migrants may be specially trained to handle sexual exploitation at work and reach out to avenues for redress.

• Handouts on health services, HIV/AIDS, and OHS could be prepared in Bangla and disseminated through the missions and various associations of migrant workers in destination countries.

Decent work for migrant workers This involves ensuring workplace rights and social protection for migrant workers. It also includes enhancing the scope of social dialogue.

• A major shortcoming in this regard is that neither Bangladesh nor its major labour-receiving countries have ratified the UN or ILO conventions on rights of migrant workers. Nor are bilateral agreements or MoUs in place with most countries. It is in the interest of a major labour-sending country such as Bangladesh to ratify the UN and ILO conventions to strengthen its own bargaining power vis-à-vis its labour-receiving countries on issues of protection of migrant workers.

40

• The role of foreign missions in labour-receiving countries could be redefined. Protection of the rights of migrant workers should be a priority concern. The government should consider establishing a migrant workers resource centre (MWRC) in major receiving countries, within the premise and under the administrative jurisdiction of Bangladesh missions. These foreign missions could also look into harassment cases, including those involving non-payment of wages to Bangladeshi workers.

• The current practice of forcible repatriation of migrant workers in case of contracting diseases such as HIV/AIDS is contrary to workers’ rights. Social protection measures for HIV/AIDS victims, especially when such diseases are contracted in the foreign country, need to be formulated.

• Bangladeshi trade unions have practical difficulties in working as institutions of collective bargaining in a country of destination. Migrant workers’ associations have emerged both within Bangladesh and in the countries of destination. However, they lack institutional capacity to pursue advocacy with respect to establishing workers’ rights. Expert bodies and civil society organizations may hold consultation meetings with local trade unions to familiarize them with migrant workers issues. In this regard, complementary linkages should be established between trade unions and migrant workers associations. Cultural associations and helpline services could be encouraged.

Financial assistance for remitting money This would ensure more efficient flow of remittances through official channels.

• Bank officials should be regularly trained, updated, and motivated about the importance of migrant remittances; they should also be made customer-friendly. Private banks may be encouraged to get involved in remittance transfers.

Integration of return migrants It is important to create conditions for continued employment for returnee migrants as well as for their social integration into the local community.

• To ensure continuous employment and earning upon return, migrants should be informed about the need to save. To encourage small savers, proper incentive programmes need to be undertaken. Bonds, shares, and mutual funds at attractive rates may be offered. They also need to be informed about various forms of saving instruments offered by the government, non-government, and private agencies. Return migrants also need to invest their savings productively to maximize the benefits out of such savings.

• Returnee migrants need to be provided information about job possibilities and future employment prospects.

• Skill enhancement and entrepreneurial development of returnee migrants could help and encourage them to set up their own micro-enterprises. This has to be combined with information about markets that would help them make their enterprises viable.

• Returnee migrant associations, which are already active in Bangladesh, could be made more active to help in these schemes for return migrants.

41

THE NATIONAL REQUIREMENT FOR SOCIAL PROTECTION The Constitution of Bangladesh states (Article 15) that (through planned economic growth) ‘it shall be a fundamental responsibility of the State to secur[e] to its citizens…the provision of the basic necessities of life, including food, clothing, shelter, education and medical care; …the right to guaranteed employment at a reasonable wage having regard to the quantity and quality of work; …[and] the right to social security, that is to say to public assistance in cases of undeserved want arising from unemployment, illness or disablement, or suffered by widows or orphans or in old age, or in other such cases’. The National Strategy calls for ‘social protection to the poor against anticipated and unanticipated income/consumption shocks and vulnerabilities to disasters through targeted and other efforts’. (Chapter 5, Section 5.2) While population growth has declined and per capita GDP has risen, halving the poverty level by 2015 will be a major task, as the absolute numbers living in poverty are very large. The trend of increasing inequality of income and consumption implies greater depth in human deprivation among certain population groups. The National Strategy document indicates a broad method to enable the poor to cope better with various income ‘shocks’ and improve their capabilities to cope in crisis situations (Box 5.1). Among the most urgent needs, the document specifically notes that of addressing healthcare priorities (as in the case of health hazards due to injuries and accidents) and public health problems (such as arsenic poisoning and dengue fever) and the needs arising from job losses against the backdrop of privatization, market reforms, and globalization and the trend towards an ageing society. The document also draws attention to the consequences of severe natural disasters, including river erosion. Box 5.1: Social protection through the National Strategy The National Strategy proposes four sets of policies designed to address—directly or indirectly—the needs in the field of social protection. 1. Extension of the ‘social safety net’, focusing specifically on groups experiencing chronic

poverty and otherwise socially disadvantaged, through works and income transfer programmes, including food-assisted and cash-assisted programmes, old age pension schemes in rural areas, support for female destitutes, and traditional relief programmes

2. Policies addressing the vulnerabilities of the ‘new poor’, such as retrenched workers 3. Promotion of broader social solidarity as a vehicle for social protection interventions (The

Social Development Foundation would foster social capital formation by promoting community-based organizations and local associations in building and maintaining small-scale community infrastructure, encouraging bonding, and bridging across self-help groups.)

4. Promotion of risks insurance (Aimed at preventing and/or mitigating relevant risks; this may be linked to enhanced access to credit to the poor in times of emergency, good public health services, disaster preventing and mitigating mechanisms, and measures to reduce violence and personal insecurity faced by the poor, especially women.)

Source: Ministry of Finance, Government of Bangladesh, 2003, Bangladesh: A National Strategy for Economic Growth, Poverty Reduction and Social Development (March 2003), Chapter 5, Section E.

42

A broad concept of social protection Social protection, in the broadest sense, refers to measures relating to the labour market and characterized by collective provisions and responsibility. The ILO approach to social protection and the Decent Work Agenda provide a strong framework in which to express and pursue the specific goals indicated in the National Strategy document.

Within the ILO conceptual framework, the main pillars of protection that can generally be envisaged comprise social security, OHS, and a range of measures promoting appropriate working conditions, protection of rights for migrant workers, and efforts to remove discrimination against HIV/AIDS infected workers. In this context, the term ‘conditions of work’ refers to wages, working time, work organization, arrangements to adapt working life to the demands of life outside work, and maternity protection for expectant mothers. OHS concerns factors that influence workers’ safety, health, and well being at work, although if a worker suffers from an accident or falls ill due to his/her work, the impact also almost certainly extends to her or his family and other circumstances outside the workplace. HIV/AIDS has become a major threat to employment objectives and labour market efficiency. AIDS-related illnesses or the demands of caring can result in serious declines in productivity, loss of earnings, and attrition in skills and experience.

A right By no means does the ILO view social protection as simply the protection of vulnerable groups, but crucially as a right of workers and other members of society to a ‘minimum’ level of social protection, and a critical component of Decent Work.

To meet people’s social needs In recent years, a substantial number of commentators—notably in South Asia— have put forward the view that, in developing countries such as those of the sub-region, the concept of social protection should be interpreted broadly, particularly with reference to social security provision, giving greater prominence to the ‘social needs’ of individuals and households, which include adequacy of shelter (housing), nutrition, and (in some views) children’s education and access to decent work/employment. This viewpoint has identified sub-component forms of social protection, described as ‘preventive’ (for example, public works to reduce the risks of flooding), ‘protective’ (most of the ‘traditional’ forms of social security) and ‘promotional’ (for example, assisting individuals to improve their housing or employment prospects). This broader viewpoint—strongly reflected in the National Strategy document—helps draw attention to the needs of the increasing proportion of the poor and vulnerable who find their only employment opportunities in the unorganized/informal economy and have little or no access to conventional, employment-based, and contributions-related schemes of social security.

Contributes to poverty reduction From the standpoint of poverty reduction, particularly in the case of Bangladesh, social protection could be viewed as performing two general roles. 1. Poverty prevention, mainly through schemes of social insurance, generally for those in

formal/‘organized’ employment, self-financed from contributions (perhaps complemented by private insurance through commercial companies), and for those in the informal economy / ‘unorganised’ sector, community- or occupationally- based, schemes that are often NGO-initiated and in which direct contributions may be supplemented by foreign assistance

2. Poverty eradication through social assistance, such as schemes financed from public revenues

43

and possibly complemented by schemes financed from foreign assistance. Contributes to the management of global risks and uncertainties In the context of globalization and economic liberalization, Bangladesh is exposed to an exceptional degree to risks and uncertainties brought about by global forces (among others, the phasing out of the MFA), which the National Strategy already recognizes. Due to growing pressures of competition in international trade, there is a tendency to focus simply (and simplistically) on the costs of social protection, rather than the balance between costs and benefits. There is a need to appreciate the contribution of social protection to the maintenance and development of the human capital, to the maximization of productivity and to social stability. Box 5.2: The basic concept of social security

The ILO Convention No. 102, ‘Social Security (Minimum Standards)’, adopted in 1952, provides the broadest formulation of ILO’s approach to the subject of social security, and is based on the following definition.

‘…the protection which society provides for its members through a series of public measures: to offset the absence or substantial reduction of income from work resulting from various

contingencies (notably sickness, maternity, employment injury, unemployment, invalidity, old age, and survivors’ needs on the death of the family breadwinner);

to provide people with healthcare; and to provide benefits for families and children.’

Social Security The principal vehicles for publicly mandated provisions of social security are as follow.

Social insurance It has been shown over many years that the contingencies of sickness, accident, unemployment, and so on can be addressed with great effectiveness through the pooling of risks, and the techniques and tools of insurance. For those individuals who are (economically) able to contribute to schemes of social insurance, this is generally therefore the technique of choice for providing the relevant forms of protection. Social assistance

For those who cannot readily afford to contribute to insurance schemes, parallel schemes of tax-financed social assistance can often be designed to provide similar benefits.

Schemes of social insurance and social assistance, generally formed under a public mandate and reflecting the principle of solidarity, are adapted most naturally to the provision of benefits for workers in the ‘organized sector’ or ‘formal economy’, where workers have a defined relationship with an employer, and (generally) some capacity to contribute on their own behalf to formal schemes of social security. For such workers, provision through public social security schemes is complemented in most countries by benefits from occupational schemes providing pension and other benefits. However, the general economic, social, and demographic environment in which social security schemes must operate around the world has changed dramatically. ‘Conventional’ schemes of social insurance and social assistance on the model conceived 50 or more years ago may not be adequate or effective for large numbers of workers and citizens, especially in developing

44

countries where larger proportions of the population are in the informal economy, or work under casual and short-term arrangements. Alternative models of social security may need to be considered, in which the formal institutionalized approach is complemented by one where institutions of micro-finance and micro-insurance hold special promise, founded on an occupational, community, or area basis. However, the needs of workers and other citizens in relation to employment, housing, nutrition, and education (and, to some extent, health) need to be addressed by other tools and techniques. For this reason, it is strongly suggested that the distinctive approach to social security through social insurance of contingencies remains highly appropriate. However, in view of the increasing predominance of unorganized or informal modes of work, there is an urgent worldwide need to develop complementary and less institutionalized vehicles of social security provision. Overview of social security coverage in Bangladesh Public social assistance The primary form of social protection is social assistance; the (limited) existing provisions are located and funded in the government’s social sector programme, alongside public healthcare and education assistance, food assistance, and public works. Increases in the allocation of public resources towards the social sector, notably in education and health, have been observed in the previous decade. For example, health expenditure per capita increased two-fold, estimated in 2000 at US$ 14; total health expenditure went up from 2.8percent of the GDP in 1990 to 3.8percent of the GDP in 2000, higher than other countries of the region.32

Two public social assistance programmes for widows and the elderly poor provide small monthly pensions paid from the central budget. Beneficiaries are selected from among the poorest, but the number of old-age beneficiaries has nearly doubled in recent years, reaching approximately 1 million. This benefit system might provide a base on which a modest but improved structure could be developed in the future.

Food-for-work programmes, some being among the largest in the world, provide protection to the poor at times of natural disasters and periods of unemployment, especially farming off-seasons. Social insurance Formal social insurance coverage is relatively insignificant. Social security in this form reaches relatively few workers in Bangladesh, other than the direct employees of the government itself, and provides protection against relatively few ‘contingencies’. Some protection is mandated in establishments of 10 or more workers, mainly provided on the basis of ‘employers’ liability’. Employers may cover themselves against excessive liabilities through commercial insurance, but it seems likely that relatively few employers do so. The contingencies that are covered include employment injury (under the very old title of ‘workmen’s compensation’), and maternity, albeit providing only limited benefits. There is no social insurance coverage providing benefits on old age (or other) retirement, or in case a worker becomes unemployed.

32 No assessment is implied here as to the quality of health services nor the actual access to quality healthcare by the poor, by rural populations, and by women with specific needs.

45

Another government-level initiative has been a considerable effort, mainly through the Ministry of Health, to assess the prospects for a national system of health insurance. Box 5.3: Public institutions concerned with social assistance and social insurance Ministry of Labour and Employment Ministry of Health and Family Welfare Ministries of Women and Children’s Affairs; Youth and Sports Ministry of Social Welfare Ministry of Disaster Management and Relief Ministries of Agriculture, Environment and Forestry, Livestock and Fisheries, and Water

Resources Other agencies, such as Bangladesh Rural Development Board and local government

engineering departments A number of important NGOs, including the largest in the country, have taken initiatives to develop various forms of social protection. Many of these have focused on what is perceived as the highest immediate priority—the need for healthcare. Arrangements used include financing schemes and direct provision of health services. A rapid expansion initiatives in micro-finance—the provision of micro-credit and micro-insurance schemes—has been evident. A recent ‘inventory’ of micro-insurance schemes in Bangladesh identified over 20 institutions operating more than 36 schemes or adaptations of health insurance, although the outreach as a percentage of the total population is as yet very small.33

A recent development in Bangladesh has been the interest of commercial insurance companies in involving themselves in the provision of social protection; partnerships between such providers and public institutions may provide considerable scope for the future. Some key challenges that need to be addressed with regard to social security along the lines discussed above are as follow.

Importance of strengthening coherence and complementarities between the multiple delivery mechanisms of social protection and linkages among the various institutions involved

Need to effectively broaden social protection in Bangladesh beyond social assistance and poverty relief, and to extend social insurance coverage

Need to study and develop a strategy for providing a programme of social protection to the whole population, beginning with the least possible delay with a minimum package at a cost that the country can afford, as a basis in the longer-term perspective for a more comprehensive system.

Social budget modeling If social security systems are to develop effectively in any country, not least Bangladesh, a vital need is to understand the dynamics of the financial relationship between the schemes themselves

33 Rashid Ali, 2003, ‘Inventory of micro-insurance schemes in Bangladesh’, October 2003, a study undertaken for ILO/STEP. Grameen Kalyan and BRAC (formerly known as Bangladesh Rural Advancement Committee) provide most of the cover at present where 285,000 persons in 7 rural districts enjoy subsidized access to basic and preventive healthcare against payment of a reasonable contribution ranging between US$ 2 and US$ 6 annually and depending on family size.

46

and the national economy. Indeed, such an understanding is crucial to effective governance of social security schemes. The social budget analysis tool, developed in recent years by the ILO elucidates the dynamics of the financial relationship between the schemes themselves and the national economy, assesses the effectiveness and efficiency of social transfers, and identifies potential efficiency gains. Occupational health and safety The impact of poor conditions of OHS may reveal itself at various levels.

For the individual worker Loss of income due to the occurrence of an accident or a disease can push the worker and his/her entire household into a poverty ‘trap’ from which it becomes difficult to escape (especially in the absence of effective social security provisions).

For the enterprise A better and safer work environment clearly contributes to more harmonious labour relations, and higher productivity and efficiency, as indicated by some micro studies in Bangladesh (Box 5.4).

For the society as a whole A high incidence of occupational diseases and accidents erodes human capital, puts pressure on public health services and expenditure, and raises costs for social insurance.34

Box 5.4: Information on occupational health and safety at the enterprise level Based on interviews with a limited set of key informants and factory owners/managers (seven export-oriented firms), all the factory owners/managers claimed ‘much better working environments’ and a ‘more productive workers’ within their companies. Key informants from business, trade unions, government, research, and media were of the opinion that decent work had a positive impact on productivity. In terms of competitiveness, the interviewees received more divergent views. Source: Momtaz, et al., 2004, ‘Improving enterprise competitiveness and decent work’. paper prepared for the Decent Work Pilot Programme in Bangladesh, February 2004.

A survey on OHS (working environment, worker survey, and employer survey) and productivity, which involved three beedi industries (formal, informal, and best practice) and three tanneries (medium, large, and best practice), showed correspondence between highest ranking in terms of OHS and productivity. Given the limitation of the survey¸ especially the amount of workplaces involved, the conclusion cannot be justifiably extended to industries in general. Source: M. A Khalique Barbhuyia, 2002, ‘Strengthening the role of labour standards in selected Developing Member Countries’, Draft country report on OHS in Bangladesh (Prepared as part of the ADB/RETA project and published by the National Institute of Preventive and Social Medicine). Conditions of work and occupational health and safety in Bangladesh The objectives of the Fifth Five-Year Plan (1997–2002) included several related to conditions of work and OHS: to ensure fair wages, to ensure welfare and social protection of workers under the

34 Such costs have not, to date, been quantified in Bangladesh. It would be highly desirable to carry out such a study, but would depend on the availability of suitable data.

47

structural adjustment programmes, and to initiate steps to protect children from economic exploitation. A review of existing labour-related laws, rules, regulations, and directives and adoption of necessary modifications was one of the strategies to reach the objectives. Weaknesses must be addressed in a number of elements of the institutional framework for OHS and working conditions in the country.

• The legislative framework, wherein the relevant laws include Factories Act (1965) and Rules (1979), Shops and Establishments Act (1965), Dock Labour Act (1934) and Regulations (1948), Mines Act (1923), Tea Plantation Labourer Ordinance (1962), and the Industrial Relations Ordinance (1969). The coverage of the labour market is limited and small. For instance, the Factories Act is applicable only to manufacturing workplaces with 10 workers or more.35 Moreover, the laws are old, dating back to the pre-Independence period. It has been recognized that revision of the labour laws is long overdue; although a new Labour Code has been under discussion for many years.

• The institutional capacity for implementing, monitoring, and enforcing the provisions of

the laws, consists of the Ministry of Labour and Employment as the lead agency.36 Other ministries such as Ministry of Health are also similarly engaged to varying degrees. The inspection service is seriously under-resourced in both human and financial terms. In 1999, of the 18,500 registered enterprises, 15percent were inspected. More than 20000 violations of the legislation were detected during these 2800 inspections (approximately).

• The information base on working conditions and OHS is generally inadequate, reflecting

the lack of resources for inspection and monitoring. Data is required for setting of priorities and goals, and designing strategy. The majority of the information concerns formal sector, whereas hardly any information seems available for informal economy. Statistics related to occupational diseases are not compiled and published on an annual basis. In addition, the level of awareness on OHS, especially among workers, employers, and

enterprise managers, appears to be low with respect to both general awareness and knowledge on the possible hazards, the way and means to prevent them including low-cost ways of improving OHS, and the impact business factors such as productivity. In certain sectors, such as old industries, hazards are known but may be considered ‘to go with the job’ and ‘inevitable’.

Box 5.5: Available information on the state of occupational health and safety in Bangladesh Case studies carried out by National Institute of Preventive and Social Medicine reveal that 67percent of the workers at jute mills were exposed to jute/dust. The prevalence rate of chronic

obstructive lung disease was 12percent, with 19percent for exposed workers and 6percent for non-exposed workers.

12percent of the workers at a textile mill suffered from byssinosis. 19percent of the workers at a bidi factory had some form of respiratory problem. 40percent of workers on tannery industry suffered from occupational dermatosis. 52percent of the garment industry workers had health problems, of which eyestrain was the most

frequently reported. 35 In 1999, only 18,500 such enterprises, with a total employment of 1.5 million workers, were registered with the Department of Inspection for Factories and Establishments. 36 The Department of Labour implements labour laws regulating terms and conditions of work, and the Department of Inspection for Factories and Establishment carries out inspection on both conditions of work and occupational safety and health.

48

There is only limited capacity among workers and employers and enterprise managers to

carry out initiatives (promotion, rather than solely enforcement) to improve conditions of work and OHS at enterprise level, including low-cost methods. Alternative ways and means to reach workers and production units in the informal economy need to be explored.

Basic steps forward for social protection It is suggested that the application of social protection principles and methods is of great value in informing the development of policy with regard to the priority topics, already identified, including growth industries, competitiveness, and the promotion of appropriate opportunities for migrant workers. The following steps will be of value in strengthening the development of policy regarding social protection itself.

• A mapping of needs and capacity (both institutional and financial) for a minimum level of social protection identifying the needs of all population groups in urban and rural areas, including wage workers, workers in the informal economy, and vulnerable groups, would highlight the unmet needs, possibly differentiating between different groups and areas. This may be achieved through the application of the ILO’s social budget analysis tool.

Consideration of the feasibility of developing a phased strategy to introduce national social security (social insurance and social assistance) coverage of selected contingencies, starting at a minimum level as a basis for extension to the widest feasible coverage.

Building up of a profile of OHS risks, perhaps as a start in a few specific sub-sectors, and using this information base for awareness raising on working conditions and OHS.

Promotional activities to improve working conditions and OHS at enterprise level with participation of employers and workers, and development of low-cost methods of improving working conditions and OHS that contribute to workers’ health and well-being as well as to greater enterprise productivity.

49

RECOMMENDATIONS FOR THE DECENT WORK PILOT PROGRAMME IN BANGLADESH

Bangladesh is much more open to, and integrated into, the global economy now than in the past. It has witnessed gains in terms of growth, exports, overseas employment, and progress on several poverty indicators. Nonetheless, the global context presents many risks and uncertainties to these gains as well as to the future position of the country in global markets. At the same time, the country faces several challenges—low employment growth, slow pace of income-poverty reduction, and higher inequality. At closer examination, these challenges and risks are linked in many ways to issues of ‘decent work’. A Decent Work Agenda would enhance the capacity of Bangladesh to manage the risks, harness the benefits, and minimize social costs of globalization. Such a framework for national and international levels has been strongly endorsed in ‘A Fair Globalization: creating opportunities for all’, a report issued by the World Commission on the Social Dimension of Globalization in 2004. Incidentally, many of the goals of the Decent Work Agenda are contained or reflected in Bangladesh’s National Strategy, its Constitution, and its various commitments to national statues and international declarations. The Decent Work Agenda attempts to provide an articulation of these goals and objectives, and calls for an integrated approach that forges a close interaction between economic and social policies and institutions. The previous chapters focused on issues and challenges in four policy areas that the social partners had identified around the theme of globalization. The integrated decent work framework was used to analyse the issues. A number of recommendations have emerged from the analyses, and may be considered by the social partners for future action. Some of the recommendations may be considered for the DWPP in Bangladesh. Broad policy considerations

• A poverty reduction strategy would be sustainable if it is consistent with a well-articulated employment strategy and complemented by a social protection strategy aimed at reducing the vulnerability of the population living in poverty.

• Sustained labour demand would depend on sustained growth of output and composition of output growth.

• Macroeconomic instruments, such as a fiscal strategy, would need to be related to an appropriate financing of the development strategy. This would depend not only on markets but also on prudent public interventions.

• A gender-sensitive approach will need to be used to promote gender equality. This applies to data gathering, analysis, planning, implementation, monitoring, and follow-up. Efforts will also be made to enhance the capacity of constituents and implementing partners to mainstream gender into their organizations.

• The role of the government needs to be strengthened, especially in its direct support to building economic, physical, and social infrastructure.

• While new sources of growth must be tapped continuously, measures need to be in place to mitigate and manage the negative consequence of job loss. These measures include greater social protection of workers at risk, active labour market policies, and social dialogue that would facilitate fair compromises during economic downturns.

50

• Review of the ‘Labour Code’ to make it more consistent with the needs of the modern economy with a view to employment promotion, while recognizing the vital role of social dialogue and more effective systems of social protection.

Labour market policies • It would be beneficial to put in place an effective labour market information system,

reconcile definitional aspects of the Bangladesh Labour Force Survey, and also expand its scope to include some questions that capture decent work variables.

• Information on ‘jobs and vacancies’ could to be publicized regularly. Informal mechanisms will continue to play important roles in both formal and informal sectors, but a formal mechanism could emerge gradually.

• A Skill Development Fund could be set up through a corpus by the government with schemes involving suitable levies on wage bills similar to those implemented by the governments in Singapore and Malaysia.

• Skill Development Councils, which identify new trades and conduct training programmes, may be set up in different regions, with the participation of workers’ and employers’ groups. Suitable marketable skills would enhance employability – especially in the context of high unemployment rates for those with middle level education.

• In the short term, a strategy could be designed to upgrade ‘core competencies’ (including communication, problem analysis and solving, teamwork, computer skills) of young workers graduating from secondary schools and young workers already in the RMG and other industries and thus already with workplace experience.

Enhancing workers’ access to employment and mobility: group-specific recommendations

• Youth Create employment opportunities in wage and self-employment by imparting marketable skills, credit, and marketing information.

• Women Actively intervene to open up and diversify opportunities of employment for women

in more skilled jobs and sectors. Address the skill and educational gaps that women face to improve women’s position

in the world of work. Review legislation pertaining to night work for women and laws on equal pay for

equal work by women. Encourage women’s participation in trade unions.

• Retrenched workers

A survey on retrenched workers could be undertaken to explore some issues relating to their mobility in the labour market and their coping mechanisms. Growth and competitiveness

• Develop a strategy with public–private partnership for turning growing sub-sectors into creators of quality jobs through diversification and higher value addition.

51

• Facilitate effective social dialogue for full participation of the workers in creating and sharing the value in a growth-oriented economy.

• Build effective supply chains linked with nodal company/organization to generate quality jobs. Encouraging growth of the leather, ceramics, bicycles, and similar industries can help improve job quality and generate employment not only in the enterprises, but also in the supply chain.

• Design a strategy, methods, and tools specifically suited to Bangladesh, for raising productivity and competitiveness in enterprises both in manufacturing and service sector.

• Develop an SME policy, including a strategy that involves integrated support to RNF enterprises, especially those in semi-urban, semi-rural areas.

Child labour

• Eliminate child labour, starting with the worst forms of child labour. • Development of an enabling environment and supportive strategies for the stakeholders

to move towards a child labour free Bangladesh. Social protection

• Mapping of needs of selected groups in urban and rural areas including informal economy workers to highlight gaps in social protection needs (The social budget analysis tool of the ILO could be used for this.)

• Feasibility study on introduction of national social security coverage of selected contingencies at the minimum level.

• Building up of a profile of OHS risks, perhaps as a start in a few specific sub-sectors, and using this information base for awareness raising on working conditions and OHS

• Promotional activities to improve working conditions and OHS at the enterprise level with participation of employers and workers, and development of low-cost methods of improving working conditions and OHS that contribute to workers’ health and well-being as well as to greater enterprise productivity. Such promotional activities need to be gender sensitive.

Migrant workers

• Identify projection plans of feasible labour demand abroad. Accordingly human resources and skill enhancement could be pursued in specific sectors where migrant labour may be in demand.

• Supportive institutions could be built to improve migration management, and to disseminate information on job prospects and skill requirements for migrant workers.

• Review decision to ban migration of women workers below 35 years of age, and efforts to ensure that abusive employment situations for women do not take place.

• Review regulation of the recruitment industry. Renewal of licenses of private recruiters should be made contingent on performance. License fees of private recruiters could be raised.

• Give migrant workers the right to seek redress directly against recruiting agents for violation of the provisions of the 1982 Ordinance.

• Make available to migrant workers a pre-departure orientation training including handouts in Bangla on health services, HIV/AIDS, and OHS.

52

• The role of foreign missions in labour-receiving countries could be redefined. These foreign missions could be more proactive on migrant issues and look into harassment cases, including those involving non-payment of wages to Bangladeshi workers.

• To improve its bargaining power vis-à-vis labour-receiving countries, Bangladesh should ratify the ILO and UN conventions on migrant workers.

• Social protection measures for HIV/AIDS-infected persons, especially when such infections are contracted in the foreign country, need to be formulated.

• Trade unions may establish links with the migrant workers’ associations to enhance migrant workers voice.

• Bank officials should be regularly trained, updated, and motivated about the importance of migrant remittance and helped to become customer-friendly. Private banks may be encouraged to get involved in the remittance transfer process.

• To ensure continuous employment and earning upon return, the migrants should be informed about the need to save and invest judiciously.

• Skill enhancement for gainful employment of returnee migrants is imperative. • Return migrant associations, which are already active in Bangladesh, could be made more

active to help schemes for return migrants, such as in their skill development requirements.

53

Annex: Selected decent work indicators for Bangladesh 1980s 1995/96 1999/2000 Employment opportunities Labour force (LF) participation rate Usual LF definition Extended LF definition

33.3 (1989) 50.7 (1989)

41.7 56.0

45.0 60.3

Employment–population ratio

45.70 (1985–90) 63.20

Unemployment rate (percentage of LF) Usual LF definition Extended LF definition

0.4 (1983/84)

2.5

4.9 3.7

Underemployment (percentage of LF working < 35 hours in reference week) Usual LF definition Extended LF definition

4.0 (1983–84)

38.5

16.6 31.9

Self-employment (percentage of total employment) Usual LF definition Extended LF definition

39.6 29.4

43.9 32.4

Unpaid family worker (percentage of total employment) Usual LF definition Extended LF definition

18.8 40.2

14.0 36.7

Wage employment(percentage of total employment) Usual definition Extended definition

16.84 12.43

18.02 13.28

Unacceptable work Number of working children (5–14 years old) (based on extended definition)

6 million (1989) 6.4 million

5 million (2002/2003)*

Working children, percentage of child population Girls Boys

18.3 15.2 21.1

14.2 (2002/03)* 8.5 (2003/03)* 19.5 (2002/03)*

* data for 2002/2003 is not strictly comparable to data from earlier years because of a difference in definition.

ILO Convention No. 182 on child labour Ratified by Bangladesh in 2001 ILO Convention No. 138 on minimum age Not yet ratified ILO Convention No. 29 and 105 on forced labour Ratified by Bangladesh in 1972 Adequate earnings and productive work Real manufacturing wage index (1969/70 = 100) 102 (1985–90) 137 Stability and security at work Excessive hours of work (percentage employed

54

working average > 50 hours) Usual LF definition Extended LF definition

40.6 31.7

Temporary work (day labourers, as percentage of total employment) Usual LF definition Extended LF definition

27.1 (1983/84)

24.2 17.9

23.9 18.3

Fair treatment in employment and at work/ gender equality

Female labour force participation rate (percentage) Usual LF definition Extended LF definition

27.1(1983/84)

18.28 38.03

22.2 37.8

Female percentage share in total employment Usual LF definition Extended LF definition

17.7 38.09

21.36 37.86

Agricultural employment (women as percentage of total employment) Usual LF definition Extended LF definition

13.39 46.77

19.47 46.16

Manufacturing employment (women as percentage of total employment) Usual LF definition Extended LF definition

35.3 36.67

40.79 41.55

Ratio of female/male average wage rates (for day labourers) Rural Urban Both rural and urban

55.3 68.8 58.2

Ratio of female to male (percentage primary school net enrolment)

60.8 (1980) 88.2 (1990) 97.6 (1998)

ILO Convention No. 100 on equal remuneration Ratified by Bangladesh in 1998

ILO Convention No. 111 on discrimination (employment and occupation)

Ratified by Bangladesh in 1972

Social protection Social security benefits expenditure (percentage of GDP)

2.10

Government expenditure on health and population planning Percentage of total government expenditure

Percentage of GDP

5.4 (1980/81–84/85)

6.8 (1990/91–94/95)

7.1 (1995/96–99/2000)

55

0.66 0.90 0.97 Government expenditure on education Percentage of total government expenditure

Percentage of GDP

8.2 (1980/81–1984/85) 1.0

13.6 (1990/91–1994/95) 1.8

15.5 (1995/96–1999/2000) 2.1

Unemployment benefit (establishments under regulation)

Labour Act of 1965 provides half the average basic wage for 120 days for monthly rated (permanent) workers; for 60 days for casual workers; and for 30 days for temporary workers.

Public-funded schemes Several schemes in place mainly directed to vulnerable groups; exact coverage to be determined

Micro-credit and insurance schemes provided by NGOs

Several schemes in place, with varying coverage

Private arrangements (enterprise-level; individually funded schemes)

Coverage needs to be mapped

OHS (prevention of hazards and risks; provision of compensation)

Coverage needs to be mapped

Social dialogue and workplace relations

Union density rate 15.30 4.30 Number of trade unions 6,809 (2002) Number of trade union members 2 million

(2002) Employers’ organization BEF and member

organizations BEF and member organizations

BEF and member organizations

Members of any form of association 30 million(1999)

Collective wage bargaining coverage rate Past 10 years, increase in national, sectoral company, plant levels.

ILO Convention No. 87 and No. 98 Ratified by Bangladesh in 1972 EPZs exempted from trade union rights

Principal source Mujeri, 2004,op.cit. [Uses data from 1999/2000 Labour Force Survey and other sources of Bangladesh Bureau of Statistics.] Other sources R. Osmani et al., ‘Macroeconomics of poverty reduction: the case of Bangladesh’, Paper prepared for the UNDP Regional Project on the Macroeconomic of Poverty Reduction, 25 April 2003, for data on government expenditure on health and education and ILO, World Labour Report 1997, for data on trade union density. Note: Labour force data refers to the 10+ age group. Usual definition: includes any person who was either employed for a minimum of one hour during the reference week in self-employment, family enterprises, or outside enterprises for pay or profit. Extended definition: includes all who were employed for a minimum of one hour during the reference week irrespective of whether the work was for pay or profit. The difference between the two definitions is that those who are solely employed in household economic activities, e.g. care of poultry and livestock, threshing, processing and preserving food, are not included in labour force and employment according to the usual definition while they are included in the extended definition. Some 90percent of the difference is accounted for by female agricultural workers whose employment is largely part-time and in household-based economic work.