Can Bangladesh’s Ready-Made Garment Industry Lead in Green Growth?
April 20, 2016
Bangladesh’s economy grew 7.05 percent in the first three quarters of the financial year, averaging over 6 percent a year for the past decade. A major driver of the country’s impressive economic growth is its vibrant ready-made garment (RMG) sector, earning a reputation as a global leader in low-cost, high-quality manufacturing.
Valued at $25.5 billion in 2014-15, RMG exports accounted for over 83 percent of total exports during the October-December 2015 period, placing Bangladesh as the second-largest exporter of RMG after China. The sector employs over 4 million people, about 80 percent of whom are women from rural communities. Due to high labor cost and capacity constraints facing the major competitors – China, Vietnam, Cambodia, and Myanmar – Bangladesh’s RMG sector is well positioned to attain the $50 billion mark by 2021.
Given the scale, there’s no doubt that strategic planning for the sector’s growth is critical to the country’s ambitions to secure middle-income country status. While the growth figures are encouraging, Bangladesh has the potential to claim an even higher share of the global apparel market, which will cross the $2 trillion mark by 2025 from the current value of $1.1 trillion. However, experts warn that in addition to addressing worker safety issues, the industry should prepare itself to address the environmental consequences of a rapidly expanding industry. Without reconciling the country’s economic ambitions with environmental concerns, economic growth will not be sustainable. While the government acknowledges the importance of this, there has not been much discussion about how to take this forward.
A number of private sector actors in the RMG sector are slowly but steadily moving toward “going green” by promoting environmentally friendly innovations and motivating entrepreneurs to adopt energy and resource efficient production technology. Such efforts are being led by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), who in partnership with GIZ Bangladesh, began in 2014 a new program, Towards Resource Efficient and Environmental Sustainability (TREES). The program uses a cluster-based approach to improve environmental performance of the non-wet processing members of BGMEA, and will later extend the program to wet processing industries.
Following a trail blazed by ABA Group, Viyellatex, and Envoy Textiles, a total of 28 factories have so far obtained LEED certifications, of which 10 have received platinum-level certification. Some 100 have been registered to go green. The system is credit-based, allowing projects to earn points for environmentally friendly actions taken during construction of factories and during operations.
The major motivation for factories to adopt more environmentally friendly practices and policies has been the emergence of a global market niche that values factories that go beyond just meeting standard compliances to adhering to higher environmental standards. Going green has competitive advantage in cases where buyers seeking to appeal to this niche are willing to offer some form of incentive to factories that promise lower emission products. The fact that the sector is proactively embracing the opportunities under green growth, even before environmental compliance has become binding, demonstrates the resilience and maturity of the sector.
Advocates claim that the short-term costs for adopting green growth initiatives such as reducing emissions pays off in the long-term, thanks to more efficient usage of resources. The major challenge is that companies tend to view this approach as simply incurring extra costs as the longer-term benefits are not immediately visible. The result so far is only the factories on top of the capability pyramid have started thinking of going green as they can afford to invest in leveraging negotiations with the elite buyers.
Realizing the possible value of green growth initiatives and the necessity of a policy framework, The Asia Foundation laid the groundwork for an upcoming green industrial policy workshop in Dhaka, in collaboration with Center for Budget and Policy, Dhaka University, and MCCI. We’re currently conducting research in partnership with BGMEA on the potential incentives for Bangladeshi RMG sector to invest in more environmentally friendly operations. The study will include the perspectives of all stakeholders, including international buyers, manufacturers, local and international suppliers of green technologies, and policymakers. The Asia Foundation will work with the Ministry of Industries, think tanks, and business chambers to develop a strategy paper on green industrial policy in Bangladesh to be presented at the workshop in July 2016.
The BGMEA is well positioned to engage with policymakers to inspire the industry to adopt green initiatives. Some might argue that this focus is premature when issues surrounding workers’ safety and rights are still the major focus among international buyer coalitions. However, this serves as an opportunity for industry leaders to get ahead of the curve and take advantage of Bangladesh’s ability to attract higher shares of the global RMG market. It’s the right time for the RMG industry to take the lead in further investing in greening measures, which can be a catalyst to the industry’s growth ambitions and can also lift Bangladesh’s contribution to lowering carbon emission.
Syed A. Al-Muti is The Asia Foundation’s acting director for Economic Development Programs based in Bangladesh. He can be reached at email@example.com. The views and opinions expressed here are those of the author and not those of The Asia Foundation or its funders.
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