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Making sure the workers get paid

  • Published at 06:47 pm April 23rd, 2020
RMG factory
File Photo: A group of women working at a garment factory in Bangladesh Claudio Montesano Casillas

The PM’s Tk5,000cr initiative is wonderful, but it must not be wrecked by weak implementation

The Tk5,000 crore program of the prime minister was beautifully formulated, and focused on a key problem: Keeping the workers in the RMG sector connected with the factories and infusing large amounts of cash into the economy. 

The objective is to insure that the workers in the RMG sector were paid for three months (May, June, July 2020) as the collapse of international orders would otherwise result in garment workers jobs being lost.  

The workers are a key part of the factory, used to working in teams in production processes requiring cooperation. Productivity would drop sharply if all new orders came to the factories. 

The program called for factories to submit loan applications to cover the payroll based on the actual payrolls of three prior months. A scheme was agreed on how this base payroll was to be determined. Commercial bank boards would submit the loan applications along with a clearance by BGMEA or BKMEA, to Bangladesh Bank.  

The central bank would then approve the loan application; the commercial bank would disburse the funds to the factory; the factory would pay the workers through bank or mobile bank accounts, thus ensuring that the funds actually went to the workers.  Bangladesh Bank would deposit the amount of the loan to the account of the commercial bank.

The loans from the commercial banks to the RMG factories were guaranteed by the central bank, shifting the risk from the commercial bank onto Bangladesh Bank.

All of this had to be achieved quickly. Unfortunately, details of the program were slow in being finalized. There are two issues waiting official resolution: (1) Exactly what is to be covered? Base pay? Gross pay? Include overtime? Is 100% of the amount to be covered?

(2) Who is included in this program? Workers are clearly included.  Middle management or employees who are not covered by the minimum wage rules? 

For unknown reasons, decisions on these two essential points have been delayed. Rumour is that a final decision has been made and will be officially recorded so Bangladesh Bank can finalize the program.  

But the delay seriously threatens the successful early provision of the April pay (due early May).

One important question is the process by which Bangladesh Bank is going to review what will be thousands of loan applications.  Bangladesh Bank should approve these loan applications on the basis of the commercial bank’s submission.  

One can do a post-audit and deal with problem applications. But to review the applications at this point would lose the objective of the program.

Bangladesh Bank should automatically approve these applications and allow payments of April wages to start as soon as possible.

Actually no one knows what will happen. How many companies will apply? How many applications will be sanctioned by the commercial banks? Despite the guarantee of the central bank, should companies with non-performing loans be included?  

Finally, as payment is to be made by bank account or mobile banking, how many workers are included? For example, if 80% of the companies apply and 90% are approved by the commercial banks; these 72% of the factories may account for 80% of the workers and if 80% of the workers have bank accounts or mobile phones we end up with 64% of the workers paid for April.

The urgency is self-evident. The workers need to be paid in early May. These payments will be made through mobile banking accounts or through bank accounts so the workers will not have to report to the factories to receive their pay.  

There needs to be widespread publicity about the final program. The labour unions should be informed. Hopefully, the unions will recognize that this is a generous step for a country like Bangladesh and not encourage disturbances.  

If payment of April wages is late, this may trigger large demonstrations as workers now expect such payment. This would involve every garment factory! Demonstrations mean workers are massed together raising the risk of passing the coronavirus.  

Furthermore, such difficulties may cause problems for the opening of the factories.

This is a wonderful initiative the prime minister has launched. It must not be wrecked by weak implementation. The welfare of millions is at stake.

Forrest Cookson is an economist who has served as the first president of AmCham, and has been a consultant for Bangladesh Bureau of Statistics.

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