Support of Safety Retrofits and Environmental Upgrades in the Bangladeshi Ready-Made Garment (RMG) Sector

Context

The textile and garment industry is a major pillar of export growth and economic development in Bangladesh. It accounts for around 80 per cent of all exports and employs over four million people, more than 80 per cent of whom are women. However, national and international safety and environmental standards are not adequately observed in production processes. Deficient safety standards threaten the health of the workforce and fuel social conflict between employers and their employees. Noncompliance with environmental standards is causing the overexploitation and pollution of water resources, while further aggravating other environmental problems and energy scarcity in the country.

International pressure from textile buyers and the improved resources and capacities of national authorities to monitor compliance with safety and environmental standards have so far largely failed to stimulate investment by textile factories in these areas. Few of these enterprises are able to assess the medium-term commercial returns that such investments would bring. They lack information about existing standards as well as about feasible and cost-effective investments for improving safety and environmental standards. This is coupled with a low level of the business knowledge needed to analyse and weigh up the relevant risks and benefits. Additionally, many textile factories do not have access to adequate financial services. Financial institutions and textile factories do not make sufficient use of the limited training opportunities and information services already available with respect to investments in safety and environmental standards.

Objective

Financial institutions and textile factories in Bangladesh take advantage of newly created training opportunities and information services that focus on investments in safety and environmental measures.

Approach

The project primarily works in Dhaka, where the majority of textile factories in Bangladesh are located. It covers three fields of activity:

1. Financial systems development
By means of training courses and support for product development, the project enhances the capacities of financial institutions to fund investments in safety retrofits and environmental upgrades.

2. Promoting the availability of information in the textile sector
In order to improve the availability of information, the project strengthens institutional and human resources within the Ministry of Labour and Employment as well as information services on the market.

3. Expanding the range of services offered by private service providers
By developing training opportunities, the project enables service providers and technical specialists in textile factories to deal with economic issues related to investments in safety retrofits and environmental upgrades.

The project’s implementing partner is Bangladesh Bank, the country’s central bank. It also cooperates with financial institutions, consulting companies, training institutes and business associations representing the textile and garment industry in Bangladesh. The project is designed to operate in parallel with a line of credit currently being prepared by the Agence Française de Développement (AFD), KfW Development Bank and the European Union. Additionally, it promotes the use of lines of credit offered by other international organisations that refinance safety investments in textile factories, such as the Asian Development Bank (ADB), the International Finance Corporation (IFC) and the Japan International Cooperation Agency (JICA).