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In Bangladesh: Garment Sector Soars

March 12, 2008

The last several decades have seen Bangladesh’s dependence on the garment sector grow significantly. In 1983, there were about 50 garment factories in the country. By 2004, this number had jumped to 4,000. Exports have increased from a meager $68 thousand in 1968 to $5.7 billion in 2004. It was around the early 1990′s when consumers in the U.S. and the E.U. began noticing that almost any T-shirt they picked up at their local Walmart, Target or JC Penney was made in Bangladesh. Currently, this sector employs approximately 2.2 million workers, of whom almost 80% are women. It is not an understatement to say that this sector has created enormous economic opportunities for the country’s women, who until the late 1970′s were almost non-existent in the labor force.

Bangladesh owes much of its success in the global garments and textiles market to the system of quotas that were in place for several decades under the Multi-Fiber Arrangement (MFA). After guaranteeing market share to countries for more than thirty years, the MFA was phased out in 2005. All the pundits predicted that once the quotas were lifted and all WTO members would have unfettered access to the developed countries’ markets, many of the “smaller” and less competitive Asian countries, like Bangladesh, would drastically lose market share especially to China. To the contrary, however, the data over the last three years shows that many of these “smaller” countries including Bangladesh, Cambodia, and Pakistan have in fact increased their garments exports to the U.S. and E.U.

On a recent visit to Dhaka, we were pleasantly surprised to find a sense of optimism among factory owners and workers in this post-quota era. Sure, China is a key competitor, they said, almost dismissing it as obvious. But among those we spoke with, there was a fierce determination that in the global textiles and garments race, Bangladesh would capture second place. “Bangladesh is looking to be in the permanent number two spot ” one owner said proudly.

Experts have recently begun to worry about how countries like Bangladesh will fare in 2008 after the WTO safeguards against China are lifted, but those that we spoke with in Dhaka did not seem worried at all. “China is not a factor they are a big market, but they are not competitive in T-shirts what is left, we (Bangladesh) will take ” another factory owner said confidently.

Those in this sector clearly recognized Bangladesh’s shortcomings, but also most touted the country’s strengths, such as the quality of basic products, lower costs, and strong relationships with buyers. There was also a universal sense from government officials, factory owners, and employees that China is ahead in productivity, and this is the main area where Bangladesh needs to improve on. Even young women working in the garment factories who said that they had never been out of Bangladesh, used words like productivity and efficiency to describe their Chinese competitors.

Gaining the permanent Number Two spot will not be a piece of cake for Bangladesh, however. Other countries like Vietnam — and to some extent Cambodia and Sri Lanka — are fiercely battling for this coveted second place. There is also some evidence that Bangladesh’s exports, not in terms of volume, but in terms of profit, have recently begun a decline.

So, what does this mean in practical terms? Most agreed that little help can be expected from the government, but it was encouraging to see the private sector building coalitions with local and international NGOs, developing strong relationships with buyers, and trying to recognize the rights of workers. One factory owner described a project underway designed to increase efficiency and productivity of factories by simply reorganizing the various functions within the factory. Without spending any money, factories can improve the quality of their products, offer cheaper prices to buyers, and higher wages to employees.

So while the country continues to be plagued by natural disasters, endemic corruption, and persistent poverty, we hope this positive attitude we saw will translate into actionable results designed to improve productivity in the garment sector, as well to the overall business environment which will offer a boost to the economy. In the case of the garments and textiles industry in Bangladesh, striving for Number Two is a desirable goal to achieve.

Sanchita Saxena is the Vice Chair of the Center for South Asia Studies at UC Berkeley and Veronique Salze-Lozac’h is The Asia Foundation’s Regional Director for Economic Programs.

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