UPDATE 1-Bangladesh spurns garment industry in budget

Thu Jun 6, 2013 12:29pm EDT

* Minister pledges halt to deadly factory incidents, but no new money

* Official had suggested money would be provided to relocate buildings

* Industry had sought $40 million to improve safety standards

* Western brands split over how to improve conditions in garment factories

By Ruma Paul and Frank Jack Daniel

DHAKA, June 6 (Reuters) - Bangladesh's finance minister promised on Thursday to improve working conditions in the garment industry after a deadly factory collapse, but he spurned calls for new public money to construct safer buildings.

Abul Maal Abdul Muhith's 2013/14 budget aims to bolster faltering economic growth to 7.2 percent after political unrest and strikes for better pay and conditions in the clothing industry hit output this year.

The government will raise public spending by 16 percent to 2.22 trillion taka ($28 billion), he said.

A senior finance ministry official suggested this week that some of those funds would go towards addressing a critical shortage of building inspectors and buying land to relocate dangerous garment factories to a planned industrial park.

The industry said it had requested $40 million in the budget to improve safety standards.

But Muhith announced no new spending for factory safety, drawing strong criticism from an employers' representative.

"I am disappointed," said Mohammad Fazlul Hoque, the president of Bangladesh Employers' Federation. "Norway and Britain committed to assist the sector, but our government has no feelings."

Britain announced 18 million pounds for worker safety and training in Bangladesh on Wednesday, two days after Norway said it would donate $2.5 million.

The collapse in April of the Rana Plaza complex killed 1,129 people, making it one of the world's worst industrial accidents.

It put the government, industrialists and the global brands that use the factories under pressure to reform an industry that employs four million and generates 80 percent of Bangladesh's export earnings.

A fire in another factory last year killed 112.

"In order to prevent recurrence of such incidents in future, we pledge to take all possible measures for improvement of working conditions and safety standards in factories in conjunction with all stakeholders," Muhith told parliament.

LOWER IMPORT DUTIES

The minister did pledge a 20 percent cut in import duties on woven fabrics, a significant boost to the garment sector.

The combination of opposition-led political protests and worker strikes have hurt the garment industry, the main driver of the economy. GDP growth was about 6 percent in the current financial year which ends on June 30, the lowest since 2009/10.

Clashes between anti-government and Islamist activists and police have also claimed dozens of lives this year.

Bangladesh is to elect a new government by next January and Prime Minister Sheikh Hasina needs to keep the economy growing to offset the rising anger at poor working conditions in the garment sector.

On Wednesday, police used tear gas and fired rubber bullets to disperse former Rana Plaza workers who were protesting to demand compensation, local media reported.

The April 24 collapse of the building, constructed on swampy ground outside Dhaka with several illegal floors, has galvanised brands to look more closely at their suppliers.

Very low labour costs and, critics say, shortcuts on safety, makes the country of 160 million the cheapest place to make large quantities of clothing.

Companies are split over how to improve conditions. Big European names signed an accord that would make them legally responsible for safety. U.S. firms like Wal-Mart Stores Inc have broken ties with non-compliant factories.

Inspections of about 150 buildings housing garment factories since the disaster found many with serious faults, such as cracks and floors built without permits, said Mujibur Rahman, who leads a team of 30 civil engineers at the Bangladesh University of Engineering & Technology.

"There are buildings that have approval for six floors, but then they built one or two more, this is an overload problem," Rahman said. "We are recommending that they should immediately relocate their industries."

Plans to move factories crammed along Dhaka's teeming streets to an industrial park to the south have foundered as suitable land is scarce in low-lying and flood-prone Bangladesh.

Other initiatives include plans to raise the monthly minimum of $38, and to make it easier to form trade unions.

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