The Bangladesh Garment Industry: Challenges Of The 21st Century

The Bangladesh Garment Industry: Challenges of the 21st century

Introduction

Readymade Garment (RMG) Industry occupies a dominant position in the export-manufacturing sector of Bangladesh. The advent of the RMG sector happened during the early 80s in Bangladesh. Since then, due to supportive policies of the Government of Bangladesh (GoB), this industry has experienced a significant growth. In 1988, the export-oriented RMG sector overtook the traditionally dominant jute sector in terms of gross export accruals. And since then this sector has continued to consolidate it predominant position in the export basket of Bangladesh. According to data of 2003-2004 financial year, the export earnings of the RMG sector was 5686.09 million US dollars, which constituted 74.79 percent of total export earnings. The industry, which started with only a few factory units during 1980s, now boasts 4094 factory units employing around 1.5 million workers.

Composition of Production

The garments products of Bangladesh include both knit and woven wear. Share of knitwear in the total production of garment in Bangladesh is steadily increasing over time. At present, knit wear accounts for about 33 percent of the total production. Of the woven wears, high-value products are shirts, jackets, coats, blouses, sportswear and many more casual and fashion apparels. Recent data shows that production of these high value items either decreased over the years or increased at a very nominal rate compared to other basic low value-added items such as trousers or shorts. Thus, product diversification in the Bangladesh garment industry has been rather slow and products are mainly low value-added or low-fashion items. Of all the produced items in 2001-2, around 40 per cent were exported to USA markets and 53 per cent were exported to the EU markets, with Germany being the highest imported or Bangladeshi garments. However, data of 2003-4 shows that exports to EU has increased to 65 per cent, while exports to USA have decreased to 28 per cent. This drop can be attributed to the abolition of Multi-Fibre Agreement, which will be discussed more in detail later in the paper.

Growth and Challenges of the RMG sector

Two of the main reasons for the growth of this industry can be attributed to (a) comparative advantage of cheap labor and (b) tax-free entrance of Bangladeshi garments to the American and European markets. However, at present, the RMG sector in Bangladesh is facing a debacle due to various national and international reasons. Among them, the phasing out of Multi-Fibre Agreement (MFA), which ensured tax-free entrance of Bangladeshi apparels to the US markets, is one of the main ones. Also, due to high inflation and cost of living increasing in Bangladesh, the workers are demanding higher salaries, which in turn are ruining the comparative advantage of cheap labor of Bangladesh over other countries.

The scenario of international trade has changed to a large extent after the phasing out of MFA. Under the trade agreement, Bangladesh got a tax-free quota facility, which created an ensured market for Bangladeshi garments in the world market. But after the phasing out of the MFA, Bangladesh has been thrown into the open market where there is an acute competition among the exporting countries for global market share. However, it also opened up market opportunities leading to export expansion. The realization of the gains from the expanding market opportunities depends on the capabilities of countries to successfully address the needs arising from acute competition among the exporting countries. Thus Bangladesh, whose comparative advantage is its cheap labor, has to turn this comparative advantage into competitive advantage to compete with other countries.

Recommendations to increase competitiveness of the Industry

Increasing the productivity of the labor remains at the core of increasing competitiveness, which in turn depends on level of technological capability, wage incentives, working conditions and skill up gradation. However, even now Bangladesh could not achieve all these elements to improve labor productivity. As a result, productivity of Bangladeshi garment workers is less than that of fellow competing countries.

Thus my primary recommendation is to improve the productivity of the garment workers. To increase the productivity, implementation of all the existing labor laws is necessary. Also, new labor laws should be formulated according to the needs of country's labor market. The workers have to be made aware of their rights and should be given some support services by the garment factory owners.

Along with increasing the productivity of the workers, the industry as a whole has to be supported by the government by increasing and developing the present infrastructure, i.e. development of backward linkage, improve port facility, improve communication facilities, reduction of custom delays, setting up of export processing zones, etc. to improve the competitiveness of the Bangladesh garment industry.

Increasing Productivity of Workers:

(a) Implementation of Existing laws and formulation of new laws according to the needs of country's labor market:

Most of the adverse consequences of women's employment in the export-oriented industries arose from the large-scale labor lawlessness. Therefore, there is a general recommendation to the GoB to devote resources to enforce existing labor laws. Resources should also be devoted to modify existing laws where necessary, and formulation of new laws as necessary. A lot of the workers in the garment industry are of temporary nature. So the existing labor laws don't encompass them. So new laws should be formulated which takes the migrant workers under its purview. Productivity greatly depends on the occupational safety of garment workers. Measures should be undertaken to improve the implementation of the labor laws regarding occupational safety. Laws regarding working hours, minimum wage, weekly holiday, work environment i.e. ventilation, cleanliness, fire prevention should be strictly implemented by the government.

(b) Raise Awareness among the workers

Laws cannot be enforced if there is no high demand for the same. Most surveys done so far shows that the workers are barely aware of their rights. Most female workers were unaware of maternity leave and most of all the workers did not know about their rights to a weekly holiday. Thus the factory owners could take full advantage of this lack of knowledge. Hence,