Employment Relations of Bangladesh
BA 402 -
Comparative Industrial Relations
Instructor: Lyman A. Hussey
March 2018
Employment Relations of
Bangladesh
by
Roman Walker
Index:
Page:
Overview…………………………………………………..3
Labour and Unions……………………………………….3
Economy…………………………………………………..4
Education System………………………………………...5
Legal System………………………………………………6
Labour Laws……………………………………………….7
Tax Structure………………………………………………8
Treatment of Foreign Nationals………………………….9
Grameen Bank……………………………………………10
Overview:
Bangladesh is
a small country, located North-East of India, which surrounds it. Bangladesh borders India in the West, North, and East.
It also borders to Burma in
the South-East and its South coast is located at the Indian
Ocean. Bangladesh
is 130,200 km² big and has a population of 123,633 million people (2000).
The capital of Bangladesh is
Dhaka.
The majority
of Bangladesh’s countryside
is lowland at the bottom end of the Ganga and
Brahmputra. Mountains can only be found in the East and South-East of the
country. The climate is subtropical to tropical Monsun-climate.
98% of the
population are Bengals. The other minorities are Bihari and some mountain
tribes. Bangladesh
is one of the thickest populated countries in the world which can hardly cope
with the annual economical and social growth of 3%. The state religion is
Islam.[1]
Labour and
Unions:
The labour
force in 1998 was estimated at about 64 million workers. 11% of the civilian
labour force was employed in the industrial sector, 63% in agriculture, 26% in
the service industry in 1996. It is not possible to rely on statistics because
of a huge unreported black market. The unemployment rate in 2001 was at about
35%.[2]
The structure
of the labour market and the role of unions in Bangladesh
are can be compared to those in other South Asia
countries. Bangladesh
has three types of labour markets: formal, rural informal, and urban informal.
The formal labour market is characterized by a contractual relationship between
the employer and the employee and supported by labour laws and regulations that
protect workers, such as minimum wages, allowances, and limitations on the
employer’s ability to fire his workers. The other types of labour markets are
not covered by any labour regulations. The informal sector dominates the labour
market surface. In 1991, 47,2 % of the labour force were classified as unpaid
family workers, 15,4% were self-employed, 13,9% were classified as casual
workers (day labourers), and only 11,7% had regular full time wage employment.[3]
Joining unions
is granted by the Bangladesh’s
constitution, as well as the formation of a union only after a government
approval. Still in some cases people are harassed and fired who tried to
organize a union. People working in the government civil servants, military,
and police are not allowed to join unions with the exception of railway,
postal, and telegraph workers. Instead they are allowed to join associations
which perform similar functions like the unions. Workers of the EPZ (Export
Processing Zone), ruled by the Bangladesh Export Processing Zones Authority, an
official organ of the government to promote, attract, and facilitate foreign
investment in these zones, primary formed to provide special areas where
potential investors would find a congenial investment climate, free from
cumbersome procedures[4],
are not allowed to form unions, although the government promised to relax this
restriction in 1997.
Although the
size of the formal sector is so small, Bangladesh has a large number of
labour unions. In 1992 there were 4065 registered unions with a total
membership of 1.648.783, which are only 3% of the labour force. The unions are
organized in 700 union federations, which are very active. They entered into
agreements with the government in 1984, 1991, and 1992 to raise legislation
labour benefits and protections, whereby the government provided a high
protection to the domestic industries, like textiles, soap and detergents, iron
and steel. There is also a strong resistance to trade liberalization in Bangladesh,
mostly from the labour unions.[5]
There is a
strong connection between unions and political parties. Almost all unions are
affiliated with a political party. Of course you will also find unions that are
militant and do engage in intimidation and vandalism, lost production, and
transportation delays causing missed shipping dates for exports. Also battles
occur between members of rival unions regularly.[6]
There are no
special regulations in the Bangladesh
law to ban discrimination by employer against union members and organizers.
Usually private sector employers do not like any union activity and sometimes
even work in collaboration with the local police. The Registrar of Trade Unions
tries to come against such activities but is often not powerful enough to do
anything.[7]
Economy:
Bangladesh improved its
economic sector enormously since its independence in 1971. It is world-famous
for his largest and comprehensive garments industry. The first years after Bangladesh’s
independence the economy was characterized by its large jute industry but were
overtook by polypropylene products soon.
The biggest
part of the GDP belongs to service sector, followed by the industry and
agriculture. Bangladesh’s
main produced commodities are jute manufacturing, cotton textiles, garments,
tea processing, paper newsprint, cement, chemicals, light engineering, sugar,
food processing, steel, and fertilizer.
Soon after
independence Bangladesh
had a peak economic growth of 57%. Later the economic growth decreased to 29%
in the Eighties and 24% in the Nineties.
The rising
population forced Bangladesh
to increase its food outcome. It became the third largest rice producing
country in the world. Also wheat production increased in recent years, but
nevertheless the country faces serious nutrition risk of 10% to 15% of the
population. Bangladesh’s
agriculture is dependant on the monsoonal cycle and still faces problems in power
supply throughout the country, which has large reserves of natural resources
like gas, as well as some limited like coal and oil.
Since
Bangladesh’s independence the country received about $30 billion in aid and
loans from foreign donors, including the World Bank, Asian Development Bank, UN
Development Programme, the US, Japan, Saudi Arabia, and West European
countries. But the poverty level of Bangladesh
is still high: 138 million people live beneath the poverty line, which is the
highest amount of poverty in South Asia. There is also lack in quality of the social
service in the country.
The major
problems still remain, although improvements have been made by the government:
inefficiency of state-owned enterprises, a rapidly growing labour force that
cannot be absorbed by agriculture, inefficient power supply, and slow
implementation of economic reforms. Nevertheless, the situation for foreign
investors and the liberalization of the capital market changed positively, as
well as agreements with foreign companies to export oil and gas, better
distribution of cooking gas within Bangladesh, building of pipelines
and power stations. Foreign aid also declines, exports rise ($10.5 billion in
2005) and investments increase.
To summarize
the current economic situation: The GDP was $275 billion in 2004, the GDP-real
growth rate was 5.2% in 2005, GDP-per capita was $2,000 in 2004, and aid-per
capita was $10.1 in 2003.
The
compositions by sectors of the GDP of 2004 are 20.5% by agriculture, 26.7% by
industry, and 52.8% by services. The inflation rate of consumer prices was at
5.8% in 2000. The unemployment rate was at 3.6% in 2002.
Exports with
the amount of $6.6 billion (2001) went at 31.8% to the United States, 10.9% to Germany, 7.9% to United
Kingdom, 5.2% to France,
5.2% to the Netherlands, and
4.42% to Italy.
Exports grew by 21.63% 2006. Imports with the amount of $8.7 billion (2001)
came from India (10.5%),
European Union (9.5%), Japan
(9.5%), Singapore (8.5%),
and China
(7.4%). Imports grew by 12.05% last
year. Foreign Direct Investment was at $800 million in 2005.[8]
Education System:
During the
Nineties the Bangladesh’s
government noticed that investments into the education system result in better
future economic performance of the country. Therefore highest allocations in
the national budget were made with topmost priority to human resource
development, by implementing the “Education for All” –program in the country. Compulsory
primary education, free education for girls up to class ten, stipends for
female students, food-for educational total literacy movement and nationwide
integrated education are some of the major programs imposed by the government
in the education sector.
The education
system is divided into four levels. Children start at a primary school until
grade five and go to the secondary school (from grades six to ten) afterwards.
Higher secondary school takes from grade eleven to twelve, followed by tertiary
schools. English medium education is also provided by some private enterprises,
that offer “A”- and “O” level courses. An Arabic medium Islam-based education
is offered by the Madrasa system for boys and girls, supervised by the Madrasa
Board of Bangladesh.
Hindus and Buddhists can go for religious education in the institutes “Tol” and
“Chatuspathi”.
There are 11
government universities and about 20 private ones in Bangladesh. The Bangladesh
University of Engineering and Technology, the Bangladesh
Agricultural University,
and the Bangabandhu
Shaikh Mujib
Medical University
are the specialized ones. All in all Bangladesh’s education system consist of
four engineering colleges, 2845 colleges and institutes, 12553 secondary
schools, and 78595 primary schools.
An open
university has been brought up in Bangladesh to ensure higher education
accessible for all.[9]
Still the
literacy rate of Bangladesh
remains low, with a high difference between male and female literacy rates. But
the rate increases since government and NGO’s are involved in the restructuring
of the education system. In 1998 Bangladesh won the UNESCO
International Literacy Prize for its steadily increasing rate.[10]
Legal System:
Bangladesh’s legal
system, which is based on the English common law, can be compared to those of
neighbouring countries. Although law is based on the English system, you will
also find codes of civil and criminal laws in it. These are established for
some Hindu and Islamic religious principles for marriage, inheritance, and
other purposes.
The
constitution, which is the fundamental law of the country, was founded in 1972,
one year after Bangladesh’s
independence. In 1982 the constitution was suspended and reinstated in 1986.
The system
itself consists of a Low Court
and a Supreme Court, which hear both – civil and criminal cases. The Low Court is built
up of administrative courts and session judges. The Supreme Court is built up
of a High Court, whose task it to hear original cases and review decisions of
the Low Court,
and an Appellate Court which hears appeals from the High Court. The trials are
public, the right to counsel and appeal is present, and a system of bail also
exists. Recently upper level court, that have exercised independent judgement,
argue against the government on a few cases in criminal, civil, and political
trials. The most significant problem of Bangladesh’s law system is the
backlog of cases.
The World Bank
helped Bangladesh’s
government to enforce a huge project to reforn the legal system, to make it
more efficient and accountable. So called “Legal Aid Committees” were established
to assist the poor. Also Metropolitan Courts of Session were created. Today,
there is also a Law Commission to reform and update existing laws, and a Human
Rights Commission.[11]
Labour Laws:
Despite the
problems Bangladesh
has with its legal system, well structured labour laws were established to
protect workers from exploitation.
The regular
workweek is 48 hours long, divided into an eight-hours day, six days a week.
Overtime must be voluntary and should not exceed 12 hours a week, making a
60-hour workweek. Another fact is that overtime must be paid at a double the
standard salary. Women are not allowed to work night shifts or after 8 p.m. The
labour law also states that there must be one rest day off per week. Usually
these days are Fridays or Sundays.
A country-wide
minimum wage is set at $8 cents an hour. The minimum wages within an Export
Processing Zone are set at $22 cents an hour for a sewer and $18 cents an hour
for a helper. The EPZ provides numerous other benefits for its workers like
rent subsidy, transportation subsidy, medical allowance, religious festival
bonus, and a 17 days vacation.
The labour law
also set legal benefits for workers, such as 14 days for sickness a year with a
full year salary, ten personal leisure time days a year that are paid, ten
religious festival holidays with a full pay, and three months’ full paid
maternity leave. A company with more that 50 employees is also required to have
a day-care centre.
In terms of
healthcare factories with more than 500 workers are required to have a
healthcare clinic and be dispensary staffed by a doctor and/ or a nurse. Any
kind and all forms of physical punishment are outlawed and punishable by the
state law.
When a worker
wants to legally leave a factory, the employer is required to pay a severance
of 5000 taka, which is about $87.11 for each year worked in the factory by the
worker.
The right to
organized and bargain collectively are legal right stated by Bangladesh’s constitution and
labour law with the exception of Export Processing Zones, where these laws do
not apply.[12]
Although there are rights set
by the government, they are hardly enforceable and rarely controlled by the
state institutions. Public sector wages are set by the National Pay and
Wages Commission and may not be disputed. Although, there are minimum wages set
by the government for the private sector, in real they are still ruled and set
by the industry. Collective bargaining rarely occurs, because high unemployment
exists and employees are afraid of loosing their jobs. And although the legal
workweek is set to 48 hours with one day off, this law is rarely enforced,
especially in the garment industry. Children under the age of 14 are not
allowed to work in factories, but may work under certain circumstances in other
industry sectors. Still such restrictions are neglected by employers and you
will find children working in every sector of the economy. In 2002, the government estimated that 6.6 million
children between the ages of five and 14 years were engaged in all types of
employment activities, many that were harmful to their well-being.[13]
Tax
Structure:
A Bangladesh
resident is considered to be a person who spends 182 days within the country in
an income year. In case a person
has been in the country for 90 days in the income year and 365 days in four
years - preceding this year, this person will also be considered a resident.[14]
Total taxes in Bangladesh are divided into direct
and indirect taxes. Direct taxes in Bangladesh consists of taxes on income
(income tax, corporation tax, agricultural income tax) and taxes on property
(wealth tax, gift tax, estate duty, capital gains tax, urban property tax,
house rent, land revenue, registration, and non-judicial stamp). Taxpayers in Bangladesh can
be categorized into three main groups. The elite group consists of corporate
taxpayers (24,770) that make up about 3.02% of the total taxpayers. The next
group consists of wage earners or salaried taxpayers (154,245), who shares
about 18.81%. The largest and the last group consists of all other remaining
taxpayers, mainly those who have an income from business and profession
(640,795) that make up about 78.17%.
Personal income taxes are unevenly distributed among
the registered taxpayers. In reality a major portion of taxes is paid by small
group of people with higher marginal rates. A high number of registered
taxpayers always remain in lower income groups, for whom it is easy to receive
tax incentives or tax exemptions and who share only a little burden of taxes,
often at lower marginal rates. These taxpayers are often small and medium
traders and manufactures. There are also a lot of untaxed investments because
of tax amnesty.[15]
Personal Income Tax Bangladesh 2002[16]
|
Tax
Exemption Limit
|
Annual
Income (Taka)
|
Statutory
Tax Rates
|
Minimum Altern. Tax Payable
|
|
|
|
|
|
|
75.000
|
On first 75.000
|
0%
|
|
|
|
On next 150.000
|
10%
|
|
|
|
On next 150.000
|
15%
|
1.200
|
|
|
On next 250.000
|
20%
|
|
|
|
On Balance Income
|
25%
|
|
As one can see the
maximum personal taxation is 25%.
On the company
level a business pays 15% tax of total income or 100,000 taka whichever is
less. Small and cottage industries receive a tax rebate of 5% to 10% depending
on the income and production volume. There is no tax obligation for a firm on
the first earned 60,000 taka, 10% on the next 40,000 taka, 15% on the next
50,000 taka, and 20% on the next 150,000 taka of the total income. All in all
there is 25% tax on the balance of total income. Corporate tax rates for industrial companies whose
shares are publicly traded are 35% and the rate of those whose shares are not
publicly traded is 40%. Banks, financial institutions, insurance companies, and
local authorities pay 45% income taxes.[17]
Treatment of Foreign Nationals:
The number of foreign nationals seeking work permits
in the Board of Investment increased manifold recently after the caretaker
government implemented measures against overstay of foreigners in Bangladesh.
Although there are regulations many foreigners enter the country under tourist
visas and leave the country without taxes after working in the computer
industries and taking the advantage of inadequate measures to check the
malpractices by the previous governments. Therefore the government implemented
expensive work permits fees or work permit renewal fees. The government fee for
issuing a work permit, as well as its renewal for one year is 5.000 taka.
Foreigners in Bangladesh usually work in high
technology-oriented industries. Foreign nationals coming from India, Thailand,
the Philippines, Myanmar, and China
stay in Bangladesh
for a long period of time for working purposes. The government has no specific
statistics on how many foreign nationals work in the country without having a
valid work permit or staying there illegally. Analysts believe that there are about
0.1 million to over 0.2 million foreigners staying in the country illegally. A
regulation states that a foreign national staying in Bangladesh illegally for more than
36 days will have to pay a penalty of 5.000 taka. The new guidelines also
dictate that any foreign national who wants to stay here for more
than 30 days has to register with the Special Branch of police. A foreigner has
to pay a fine of 500 taka per day if he or she overstays here for up to 15
days, 1.000 taka a day for 16 to 26 days, and 2.000 taka for 26 to 37 days. The
new guidelines have relaxed the visa requirements for the Bangladeshi Diaspora
and their Bangladeshi or foreigner wives.
Earlier, on
the eve of SAARC summit in Dhaka, the immediate past 4-party alliance
government ordered a crackdown on the foreigners staying in Bangladesh
illegally. Some 'suspicious' foreign nationals were identified and asked to
leave the country. The suspected people included some Pakistani, Libyan and
Indian nationals.
In fact, the decision to deport the foreigners came two days after the deadly
bomb attack in the Indian capital of New Delhi and the government has started
revising security arrangements for the two-day summit, which was attended by
the heads of states of seven south Asia countries.
Meanwhile,
some local businessmen alleged that some 'illegal' foreigners were doing
indenting and other businesses in the country, exploiting its liberal import
regime. They are doing it without registration, certification or any other
legal ways and causing a huge loss to the national budget. Such foreigners do
not pay any taxes in connection with the 'businesses'.[18]
Grameen Bank – the bank for the poor:
One of the
most worth to mention successes of Bangladesh is its famous Grameen
Bank, which reversed the conventional banking practice by removing classical
banking boundaries like the need for collateral. The bank’s system is based on
mutual trust, accountability, participation and creativity. The Grameen Bank
provides credits to poorest of the poor in the rural areas of the country
without any collateral. Now poor people can receive a credit, which would not
be possible in a regular bank system, because they are poor and hence not
bankable. The founder of that famous bank is Professor Muhammad Yunus who won
the Nobel Peace Prize last year.
As
of January, 2018, it has 6.95 million borrowers, 97 percent of whom are women (because
women are the better money keeper and manager, according to the philosophy of
the bank). With 2343 branches, GB provides services in 75,359 villages,
covering more than 90 percent of the total villages in Bangladesh.
Now,
poor people can receive small short-term loans (mostly from two weeks to almost
a year) with a relatively high interest rate, which however is not that high
percept by the borrowers because of the small borrowed amount of money. The
payback rate is over 98%.[19]
[1] „Der Brock Haus“, Verlag F.A.
Brockhaus GmbH, January 2000, ISBN 3-7653-3641-6
[2]http://www.nationsencyclopedia.com/Asia-and-Oceania/Bangladesh-LABOR.html
[3] The World
Bank Economic Review, VOL. 11, NO. 1
[4] www.epz.com
[5] The World
Bank Economic Review, VOL. 11, NO. 1
[6]
[7]http://www.state.gov/g/drl/rls/hrrpt/2005/61705.htm
[12] http://www.nlcnet.org/campaigns/shahmakhdum/1001/laborlaws.shtml
[13] http://www.nationsencyclopedia.com/Asia-and-Oceania/Bangladesh-LABOR.html
[15]Tapan K.
Sarker, Article: “Incidence of Income Taxation in Bangladesh”
[16]Tapan
K. Sarker, Article: “Incidence of Income Taxation in Bangladesh”
[18] The Financial Express, February 25, 2018, Article: 'Illegal' expatriates' role in businesses
questioned by Shahiduzzaman Khan; www.financialexpress-bd.com
[19] http://en.wikipedia.org/wiki/Grameen_Bank
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