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ADB offers loan to Bangladesh to support garment industry

Staff writer |
The Asian Development Bank (ADB) has signed a loan agreement with Bangladesh's BRAC Bank to finance the construction and upgrade of ready-made garment factories.

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Those factories have taken steps to meet global standards and improve the rights and safety of workers.

The $30 million of loan will also be used to build the badly-needed effluent treatment facilities in the textile and garment industry.

The Manila-based lender in a statement said many factories in the country still operate without effluent treatment plants, resulting in widespread water pollution which is particularly damaging rural areas where communities rely on surface water for washing, bathing, irrigation and fishing.

"Bangladesh has been taking steps in conjunction with the international community, to make its factories safer and to improve conditions for workers, but there is a substantial cost and a need for long term funding that is not readily available from current sources," said Biao Huang, investment specialist in ADB's Private Sector Operations Department.

"This loan, with a 5-year tenor, will help meet the need for longer term finance currently unavailable from local banks and international capital markets, and will be used exclusively by BRAC Bank to finance socially and environmentally sustainable projects."

Bangladesh is the world's second largest exporter of textiles and garments, accounting for over 80 percent of the country's merchandise exports in fiscal year 2014, and employs 4.2 million workers, said ADB.

However, it said the industry has suffered setbacks after two disasters in recent years - the 2012 Tazreen factory fire and the 2013 Rana Plaza building collapse.

In the wake of these events, ADB said the Bangladesh government entered into a compact with the European Union, the United States, and the International Labor Organization to commit to improvements in building safety, labor rights, and business conduct.

Separate accord and alliance agreements have also been signed by global apparel companies, global and Bangladeshi trade unions, and non-government organizations to improve business conduct and worker safety.

Transforming the factories in line with the compact and other agreements, however, requires substantial outlays, with the cost estimated at around 250,000 U.S. dollars to 400,000 U.S. dollars per factory, it said.

Given the lack of long-term funding available in Bangladesh, ADB's loan will enable the BRAC Bank to offer longer tenor financing to companies wanting to upgrade and improve structural, safety and social standards at their factories, it added.

ADB will also be working with the bank on a rollout of a gender action plan, which will ensure factory upgrades reflect the needs of women, said the ADB statement.

This includes the provision of day-care facilities, safety measures for females, and health clinics, it said, noting that women make up nearly 80 percent of all workers in the textile and garments industry in Bangladesh.

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