Remediation costs a factory Tk 4.9cr: Survey
February 26, 2017
Remediation cost a garment factory $614,000 or Tk 4.9 crore on an average, according to a new survey. Bangladesh University in collaboration with the State University of San Francisco carried out the survey and prepared a report titled “Pains and gains of the readymade garments sector: Post 2013”. The report is due to be published today.
The findings were based on the learning and remediation measures adopted since the Rana Plaza tragedy of 2013. After the industrial disaster, western buyers began inspection of local factories through two platforms – the Alliance and the Accord. They have together inspected 2,500 out of 3,660 factories in the country.
Some 33 factories of different sizes were surveyed and their total expenditure for the remediation was over $20 million. The cost however did not include other implicit costs, such as the production loss owing to factory relocation, the ongoing remediation process and migration of skilled workers.
The average factory surveyed was established in 2002 and earns between $15 million and $30 million annually. A factory, which is categorised as large in the sample, earns $50 million a year. The report found most factories faced multiple challenges in implementing the remediation recommendations.
Shortage of funds needed to implement the remediation was reported by 30 percent of the factories, followed by disruption of production by 27 percent factories, according to the report.
Interestingly, financial challenges were not limited to only small factories as a couple of large factories in terms of revenue also pointed to the same issue. However, the survey found that factories in the highest revenue category were relatively compliant already and they had to spend less on compliance.
Of the factories surveyed, 77 percent reported that they have the capacity to sustain the improvement process on their own. But these are the factories that are large and have higher turnover.
The factories that reported their inability to sustain the initiative were inspected for two years on average.
“It is evident that there is a genuine interest and a momentum to improve the safety of factories by the owners,” said the report.
Therefore, it is time to reward good practices and remediation efforts which lead to better and fair products, according to the report.
The report said factories with limited capacity and income need additional assistance to meet the basic compliance requirements and upgrade their factories.
The factories that said they are able to sustain the improvement process supply to big brands, such as H&M and VF Corporation.
Some 44 percent of the factories have reported to be a supplier to H&M, followed by 19 percent to Walmart and Primark and 16 percent VF Corporation.
Overall 52 percent factories reported to have had assurances of more orders from buyers. But only 36 percent have seen an increase in the order while 48 are optimistic that the work order will go up.
The factories inspected by the mostly European brands-led effort Accord and the North American brands-led initiative Alliance received reports known as a Corrective Action Plan. Preliminary inspection identified 85 percent of factories have problems in areas of fire detection and protection.
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