PhD dissertation on Readymade Garment (RMG) in Bangladesh : A study on Social Compliance with Special Focus on Ashulia Industrial Area A thesis submitted in partial fulfillment for the Degree of Doctor of Philosophy by Mohammad Hasan Registration No : 139 Session : 2012-13 Department of Public Administration University of Dhaka January 2017 Declaration I hereby declare that this dissertation entitled “Readymade Garment (RMG) in Bangladesh: A Study on Social Compliance with Special Focus on Ashulia Industrial Area” has been written by myself and the results submitted in this dissertation are entirely the author’s own investigations unless otherwise referenced or acknowledged. I also declare that document has not been accepted for any degree or other purposes at any other institution. Mohammad Hasan January 2017 Approval of Supervisor I recommended that this paper has been accepted as a thesis paper required for the fulfillment of PhD degree in the department of Public Administration, University of Dhaka, Bangladesh. Supervisor’s Signature Date Abstract Social compliance has become one of the most distinctive features of Readymade Garments (RMG) industry in Bangladesh during the last decade. Along with socioeconomic conditions of Bangladesh, different initiatives of the governments in different terms and international policy support together have helped this industry to achieve an enviable growth. The first generation entrepreneurs have earned the buyers’ satisfaction on price, quality and delivery but have repeatedly failed in “a set of standards” which marks social compliance of this business. The current research has focused on social compliance issues in RMG, focusing intensively on Ashulia industrial area to know the strategies of social compliance in RMG, and to address this issue with an in-depth analysis. The present study has applied mixed research methodology, i.e. using primary and secondary data for analysis, and other discretely devised methods for the research to find out the root causes of failure to meet those standards. The primary data was collected dividing the respondents in two different groups; one comprising the workers and the other comprising the decision makers of government, buyers and owners in this sector. Data were collected from Ashulia the main focus, while literatures from secondary sources were reviewed in details to give insights into relevant issues. The RMG sector of Bangladesh had an unplanned growth due to the diminishing jute industry which used to be the backbone of economy in the past. The push factor from that jute industry and the pull factor of the then emerging RMG sector could balance the unemployment of the workers. The major findings of the study according to the analytical framework drawn was, that among the three indicators of the social compliance business growth and customer satisfaction/ brand value was found but the most important factor worker’s satisfaction was very poor. It was found that multiple authorities govern this sector, while the social compliance issues are heavily buyer-driven. Although this sector employs millions of workers; fails to ensure workers satisfaction. This sector repeatedly fails to ensure good working environment because of a number of factors that include weak government regulations, profit-oriented mindset of the owners, and lack of proper implementation of Labour law. Implementation of Labour rights and acceptable working conditions will not be possible until and unless the country adopts specific policies with the host country’s socioeconomic perspective. For effective governance a common checklist against unified codes of conduct under a single authority is a must. The study also proposes an alternative model to postulate the effective implementation of social compliance within a legal policy framework. Till now the government has played only passive role and had an attitude of let the sector grow for profit maximization, overlooking the importance of compliance. The sector itself tried to comply with the buyers and international community in compliance issues. But day by day the situation in context of the country is becoming difficult to comply with the international rules, regulations as we have a different culture and different socio economic condition. It is not possible for the RMG sector without the help of the government authority to deal with these complexities. The government needs to take special care of this industry for a sustainable growth. ACKNOWLEDGEMENTS At first, I take this opportunity to express my heartiest gratitude to my department, Public Administration for considering me eligible for the current research. My heart-felt gratitude to my supervisor Professor Aka Firowz Ahmad who himself shares a strong passion in the field I am interested in. I thank him from the bottom of my heart for his endless support in all aspects. Without his consistent support, my venture to undertake the current research work would not see the light. My head bows down before my teacher and guide, Chairman of the department, Professor Akhter Hussain, who always encourages his students to take challenge and to lead a life with dignity and integrity. He is the person behind my success in my present profession. I am also indebted to Professor Mobasser Monem who helped me, even with his busy schedule, to prepare my research proposal with specific focus on the subject matter. I am also grateful to the board of directors, Babylon Group who allowed me to enroll for the current research work; a very special and heart-felt gratitude to Mr. S.M. Emdadul Islam who always encourages people to quench their strong thirst for knowledge. I also remember and warmly acknowledge the cordial cooperation of my colleagues from the Human Resources and Compliance department who have cooperated whole heartedly in my endeavor to make it a success. My special thanks goes to both the associations; BGMEA and BKMEA, for issuing letters in my favor to its member factories to extend their full cooperation for my research. I also thank the leaders of workers federation, factory owners, factory in-charges, compliance heads, and government officials, officials of the international agencies and the workers and employees who candidly shared their working experiences full of sorrows and happiness with a hope to see the working place they have dreamed of. Finally, I would like to dedicate this paper to my son Ishraq Hasan, daughter Samiha Tasnim and their mother Shahnaz Hasan, who inspired and supported me in every phase till the end of this journey. Mohammad Hasan January 2017 Abbreviations and Acronyms 5s - Sorting, Straightening, Systematic cleaning, Standardizing, and Sustaining ATC - Agreement on Textiles and Clothing BEPZA - Bangladesh Export Processing Zone Authority BGMEA - Bangladesh Garment Manufacturers and Exporters Association BKMEA - Bangladesh Knitwear Manufacturers and Exporters Association BSCI - Business Social Compliance Initiative BTMA - Bangladesh Textiles Manufacturing Association CAD - Computer Aided Design CAM - Computer Aided Machine CAP - Corrective Action Plan C&F - Cost & Freight CM - Cutting & Making CMT - Cutting Making Trimming CoC - Code of Conduct CSR - Corporate Social Responsibility C-TPAT - Customs-Trade Partnership against Terrorism DIFE - Department of Inspection of Factories and Establishment ERP - Enterprise Resource Planning EPB - Export Promotion Bureau EPZ - Export Processing Zone FCA - Free Carrier FCL - Full Container Load FOB - Free on Board FOC - Free of Cost GATT - General Agreement on Tariffs and Trade GSCP - Global Social Compliance Program GSP - Generalized System of Preferences GDP - Gross Domestic Product I HRD - Human Resource Department ISO - International Organization for Standardization LCL - Light Container Load LDC - Least Developed Countries MFA - Multi Fibre Agreement MFN - Most Favoured Nation MRP - Material Requirements Planning OBM - Original Brand Manufacturer ODM - Original Design Manufacturer REACH - Registration, Evaluation, Authorisation and restriction of Chemicals RMG - Readymade Garment RoO - Rules of Origin SCM - Supply Chain Management SMV - Standard Minute Value SA8000 - Social Accountability 8000 WRAP - Worldwide Responsible Accredited Production WTO - World Trade Organization II TABLE OF CONTENTS Chapter I. Introduction 1-18 1.1 Background of the Study 1 1.2 Statement of the Problem 4 1.3 Literature Review 7 1.4 Research Questions 12 1.5 Objectives of the Study 13 1.6 Rationale and Justification of the Research 14 1.6.1 To formulate an effective and realistic policy on social 15 compliance 1.6.2 To develop a comprehensive guideline on social compliance 15 1.6.3 Will initiate further researches 16 1.6.4 To find the solutions of the problem 16 1.7 Scope and Limitations of the Study 16 1.8 Organization of the Thesis 17 Chapter II. Research Methodology : A Framework of data collection and 19-26 analysis 2.1 Introduction 19 i. Qualitative Methods 19 ii. The Idealistic Approach 20 iii. Multiple Research Methods and Triangulation 20 iv. The Case Study Method 20 v. Participant Observation 21 vi. Formal Questionnaires 21 vii. In-Depth Interviews 22 viii. Ethical Issues 22 2.2 Sources of Data 23 2.3 Sampling 23 2.4 Data Processing 24 2.5 Strategies Applied for Data Collection and Validation 25 2.6 Conclusions 25 Chapter III. Theoretical Framework : Social Compliance 27-48 3.0 Introduction 27 3.1 The concepts of Compliance and Social compliance 27 3.2 Evolution of Social Compliance 29 3.2.1 The End of Feudalism