The economy of Bangladesh is dependent on agriculture

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The economy of Bangladesh is dependent on agriculture

1.1 Introduction

Since independence, the economy of Bangladesh is dependent on agriculture as most of the people live in rural areas. The goal of the government policy is to reduce poverty by receiving the maximum output from agriculture and attains self-sufficiency in food production. Beside agriculture, the development of export sector is under greater consideration. Exports from Bangladesh have both grown and changed substantially as time goes on. After the birth of Bangladesh, jute and tea were the most export-oriented sectors. But with the constant threat of flooding, declining jute fiber prices and a significant decrease in world demand, the contribution of the jute sector to the country’s economy has deteriorated (spinanger, 1986). After that attention has turned to the role of manufacturing sector, especially in Garment Industry.

The garment industry of Bangladesh has been the key export division and a main source of foreign exchange for the last 25 years. At present, the country generates about $5 billion worth of products each year by exporting garment. The industry provides employment to about 3 million workers of whom 90% are women. Two non-market elements have performed a vital function in confirming the garment industry’s continual success; these elements are (a) quotas under Multi- Fiber Arrangement (MFA) in the North American market and (b) special market entry to European markets. The whole procedure is strongly related with the trend of relocation of production.

1.2 Development of Garments Industry in Bangladesh

In the field of industrialization, role of textile industry is found very prominent in both developed and developing countries. Economic history of Britain reveals that in the 18th Century the cotton mills of Lancashire in Britain ushered in the first industrial revolution of the world. Moreover, during the last 200 years or more many countries of the world have used textile and clothing industry as an engine for growth and a basis for attaining economic development (Ahmed, 1991). Over the past few years garment industry is found to have played such an important role in the process of industrialization and economic growth. This industry is infect trying to put the wheel of her declining economic back to the track by giving essential life blood to it (Chowdhury, 1991). The growth of garment industry in Bangladesh is a comparatively recent one. In the British period there was no garment industry in this part of the Indo-Pak-Sub-Continent. In 1960 the first garment industry in Bangladesh (Then East Pakistan) was established at Dhaka and till 1971 the number rose to give (Islam, 1984). But these garments were of different type intended to serve home market only. From 1976 and 1977 some entrepreneurs came forward to setup 100% export oriented garment industry. Both domestic and international environment favored the rapid growth of this industry in Bangladesh. By mid seventies the established developed suppliers of garments in the world markets i.e. Hong Kong, South Korea, Singapore, Taiwan, Thailand, Malaysia, Indonesia, Srilanka and India were severely constrained by the quota restrictions imposed by their major buyers like USA, Canada and European Union. To maintain their business and competitive edge in the world markets, they followed a strategy of relocation of garment factories in those countries, which were free from quota restrictions and at least same time had enough trainable cheap labour. They found Bangladesh as one of the most suitable countries. Available records show that the first consignment of garments was exported from the country in 1977 by Reaz and Jewel Garment. Desh Garment was the first biggest factory that started functioning at Chittagong in 1977. In fact that was the humble beginning of new joint venture garment factory in Bangladesh. Thereafter many entrepreneurs became interested and started to setup garment factories following the Desh garment and realizing the future prospects globally as well. Available records also show that one of the reasons of the growth of garment industry in Bangladesh is the collaboration of a local private garment industry, Desh garment with a Korean company, Daewoo. As part of its global strategies, the Daewoo Corporation of South Korea became interested in Bangladesh when the Chairman, Kim Woo-Choong, proposed an ambitions joint venture to the Government of Bangladesh which involved the development and operation of tyre, leather goods, cement and garment factories (Rock, 2001). South Korean Company, Daewoo, a major exporter of garments, was looking for opportunities in countries for using their quotas subsequent to the signing of MFA in 1974. Because of the quota limitation for

Korea after MFA, the export of Daewoo became restricted. Bangladesh as a LDC got the opportunity to export without any restriction and for this reason Daewoo interested to use Bangladesh for their market. The reason behind this desire was that Bangladesh will depend on Daewoo for importing raw materials and at the same time Daewoo will get the market in Bangladesh. For this desire Daewoo signed a five years collaboration agreement with Desh Garment. It included collaboration in the areas of technical training, purchase of machinery and fabric, plant setup and marketing in return for a specific marketing commission on all exports by Desh (Rock, 2001). The outcome of the collaboration of Desh-Daewoo was significant. In the first six years of its operation, Desh export value grew at an annual average rate of 90 percent reaching more than $ 5 million in 1986-87 (Mahmood, 2002). Rahman (2004) argued that the Desh-Daewoo collaboration is an important factor to the expansion and success of Bangladesh’s entire garments export sector. In such a context, following Table-01 shows the trend of growth and development of garment industry in Bangladesh.

Table 1.1: Growth of Garments factories in Bangladesh

Year No. of Factory Compound Growth Rate in %





























Source: Various articles and Annual Report of BGMEA

The Table-01 shows that the growth was very slow till 1977 and got momentum from 1977 to 2005-06 in terms of number of industry. But the compound growth rate was highest till 1981 and the rate was very good during 1989-90 to 1994-95 and thereafter i.e. 1994-95 to 2004-05, the industrial growth has been declined though the numbers of industries have been increased. The capacity as well as number of equipments is very good indicator to examine the actual position of the garment industry as well as size of the industry. In such a context, the following Table deals in this regard.

Table 1.2: Garments Industries with number of Machine

Year Garment Industry having No of Machine Total
Upto 100 101 – 200 201 and over 3510 (100) 3668 (100)
2004 2005 2253 (64) 2275 (62) 726 (21)

773 (21)

531 (15)

620 (17)

Source: Annual Report of BGMEA. Figures in parentheses indicate percentage

From the Table 02 it is found that more than half of the total garment industries in Bangladesh have the number of machines upto 100 or less than 100 and very few industries have the machine more than 200. It indicates that the small scale industries have been dominated in the garment sector.

1.3 Contribution of Garments Industry to the Economy

Garments Industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during last two decades. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a key role in employment generation and in the provision of income to the poor. Nearly two million workers one directly and more than ten million inhabitants are indirectly associated with the industry (Ahmed and Hossain, 2006). The sector has also played a significant role in the socio-economic development of the country. In such a context, the trend and growth of garments export and its contribution to total exports and GDP has been examined the following table shows the position.

Table 1.3: Growth and Trend of Garments Exports, and contribution to GDP

(Amounts in Million USD)

Year Garment Export (Min USD) Total Export (Min USD) Share to Total Export in % Share to GDP in %
1984-85 1989-90 1994-95 1999-00 2004-05 2005-06 116 ­

624 (40)

2228 (29)

4349 (14)

6418 (8)

7901 (23)

934 ­

1924 (16)

3473 (13)

5752 (11)

8655 (9)

10526 (22)

12.42 ­

32.43 (21)

64.15 (15)

75.61 (3)

74.15 (-1)

75.06 (1)

5.87 ­

9.23 (9)

10.63 (3) 12.64 (2)

Source: Economic Review of Bangladesh, BGMEA and Computation made by author. Figures in parentheses indicate compound growth rates (CGR) for the respective periods.

It is revealed from the Table 03 that the value of garment exports, share of garments export to total exports and contribution to GDP have been increased significantly during the period from 1984-85 to 2005-06. The total garments export in 2005-06 is more than 68 times compared to garments exports in 1984-85 whereas total country’s export for the same period has increased by 11 times. In terms of GDP, contribution of garments export is significant; it reaches 12.64 percent of GDP in 2005-06 which was only 5.87 percent in 1989-90. It is a clear indication of the contribution to the overall economy. It also plays a pivotal role to promote the development of linkage small scale industries. For instance, manufacturing of intermediate product such as dyeing, printing, zippers, labels has began to take a foothold on limited scale and is expected to grow significantly. Moreover it has helped the business of basing, insurance, shipping, hotel, tourism and transportation. The sector also has created jobs for about two million people of which 70 percent are women who mostly come from rural areas. The sector opened up employment opportunities for many more individuals through direct and indirect economic activities, which eventually helps the country’s social development, woman empowerment and poverty alleviation. In such a way the economy of Bangladesh is getting favorably contribution from this industry.

1.4 Garments Product Portfolio and its Diversification

The specific character of products and level o f industrial development indeed determines its variance of product diversification. In such a context, the product mix, product line as well as product diversification are very important strategies for any industry to develop its market by meeting the present market requirements. For the garments industry it is also very important because product diversification will call for developing capability for product development and product design specially in response to fast changes in fashion. The growth pattern of garments export can be categorized into two distinct phases. During the initial phase it was the woven category. Second phase is the emergence of knitwear products. On the other hand, an analysis of the product mix of the garments industry revealed that so far Bangladesh has been able to export very limited categories of products. In such a context, an attempt has been made to examine the growth and trend of product portfolio or categories of products exported from Bangladesh. The following Tables deal with the value and quantity of different garment products export including their growth pattern from 1992-93 to 2005-06.

Table 1.4: Pattern of Woven and Knitwear Garments Export (Figures in Million)

Year Export in Million USD Export in Million Dozen
Woven Knit Total Woven Knit Total





CGR (%)

1240 (86)

1835 (82)

3081 (71)

3598 (56)

4084 (52)


205 (14)

393 (18)

1268 (29)

2820 (44)

3817 (48)








36 (77)

47 (75)

67 (60)

92 (43)

109 (40)


11 (23)

16 (25)

45 (40)

120 (57)

165 (60)








Source: Garments Export Data, BGMEA and Export Promotion Bureau-EPB. Figures in parentheses indicate the share in percentage. CGR stands for compound Growth Rate.

From the Table 04 it is evident that the compound growth rate of knit garment export is more than woven garment export both in terms of value and quantity for the period of 1992-93 to 2005-06. The share of knit garments in total export has been increased significantly both in terms of value and quantity. The share of woven garment in total garments export has been decreased from 86 percent in 1992-93 to 52 percent in 2005-06. It is observed that the demand for knit garment is increasing in the export market. It is also observed that the export quantity of knit garments has been exceeded the export quantity of woven garments in 2005-06. The position can be better explained if we look into the more details of the product mix in the above categories of garments. The garment sector has been able to diversify the product base ranging from ordinary shirts, T-shirts, trousers, shorts, pajama, ladies and children’s wear to sophisticated high value items like quality shirts, branded jeans, jackets, sweater, embroidered wear etc. In such a context, an attempt has been made to classify the garments export into different products in order to understand product diversification strategy and its relative importance and performance as well. The following Table shows the picture in this regard.

Table 1.5: Pattern of Export Performance of Different Garments Products

(Amount in Million USD)

Year Shirts Trousers Jackets T-Shirts Sweaters Others
1994-95 791 (36) 101 (5) 147 (7) 232 (10) N/A N/A
1999-00 1021 (23) 484 (11) 440 (10) 564 (13) 325 (8) 1515 (35)
2004-05 1053 (16) 1668 (26) 430 (7) 1350 (21) 893 (14) 1024 (16)
2005-06 1057 (13) 2165 (27) 390 (5) 1782 (23) 1044 (13) 1463 (19)
CGR(%) 2.67 32.13 9.28 20.36 21.47

Source: Garments Export Data, BGMEA and Export Promotion Bureau-EPB. Figures in parentheses indicate the share in percentage. CGR stands for compound Growth Rate.

From the Table 05, it is evident that the highest compound growth rate has been found in Trousers 32.13 percent, followed by T-shirts 20.36 percent, Jackets 9.28 percent, and T-Shirt 2.67 percent respectively during the period of 1994-95 to 2005-06. The rate of Sweater is also significant during the period of 1999-2000 to 2005-06. It is observed that the share of Trousers and T-Shirt in the total garment export is increasing. On the other hand, the share of shirts and Jackets is declining trend. The Figures indicate that Bangladesh has concentrated in the production and export of Trousers, T-Shirts and Sweater. This mean’s that there is a scope and actually need for structural change in product mix.

1.5 Garments Market Diversification

The international textile and garment industry has undergone several shifts in production and marketing since the 1950s. The first shift occurred in the 1950x and early 1960s when production moved from North America and Western Europe to Japan. The second supply shift was from Japan to the Asian newly industrialized economics (NIEs)-Hong Kong, Taiwan, South Korea and Singapore- and this permitted the latter group to dominate global textile and garment exports in the 1970s and 1980s. Over the past 10 to 15 years, there has been a third shift as production within Asia has moved from the NIEs to China and South East and South Asian exporters and as exports from non-Asian countries, in particular control America, the Caribbean, Eastern Europe and North Africa, have increased substantially. These production shifts have been influenced by a range of factors, including the distortions to international trade arising from MFA quota system and labour cost differentials. In this scenario, Bangladesh garment industry is well placed to withstand the increase in competition in its export markets. Our export market for garments products is spread over a vast space of more than 20 countries with USA, UK, France, Canada, Germany, Belgium and Middle Eastern countries being the major and notable ones. Initially, Bangladesh has concentrated only in a few markets. It has concentrated in USA, Canada and Europe. The competitors of Bangladesh, for example, India has continued to expand its trade, diversify its markets and change product mix of its exports. As the recent performances indicate, the production and marketing capabilities of Bangladesh have increased substantially. But still it lacks the core competence necessary to stay in a highly competitive market which one can anticipate in present post MFA period. If it wants to increase its world market share and competitive edge, it needs to diversity its products and markets. In this context, it is imperative to analyse the major export market for Bangladeshi garments product. The following Table shows the major share of export market in USA, EU and other countries in this regard.

Table 1.6: Selected Region-wise share of Garment Export in percentage

Year USA European Countries USA & EU Other Countries
2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 42.67 38.02 28.64 30.64 33.67 55.43





98.10 95.14 94.06 94.88 83.43 1.90





Source: Bangladesh Bank Quarterly; Publication of Bangladesh Bank

From the Table 06 it is observed that Bangladesh garment export market has concentrated in USA and EU till 2004-05 which indicates Bangladesh has successfully established a remarkable presence in the world markets, particularly in the US and EU markets. In the year 2005-06 a successful turnaround was observed in exports to third countries which is about 16.57 percent of total export market and it was only 1.90 percent in 2001-2002. It is expected that the trend of market diversification will continue and this will help to maintain growth momentum of export earnings.

1.6 Post MFA Scenario in Bangladesh

The textile and apparel industries have led industrialization n at the early stage of development in many countries of the world. Most developed countries which have lost competitiveness have imposed quantitative restrictions on the trade in textiles and clothing since the 1950s, although there has been progress in trade liberalization as a whole. Over the last thirty years, international trade and investment in the global textile and garment (T&G) sectors has been influenced by Multi-Fiber Agreement (MFA) quantitative restrictions (quotas) applied by the major developed country importers (the United States, the European Union, Canada and Norway) on T&G exports from (predominantly) developing countries. MFA quotas were negotiated bilaterally and applied on a discriminatory basis to some exporting countries but not to others, thus differing from country to country in both product coverage and the degree of restrictiveness. In such a context, the Multi-Fiber Arrangement governed the trade in textiles and clothing from 1974 to 1994. This arrangement was superseded in 1995 by the Agreement on Textiles and Clothing (ATC) under the administration of the World Trade Organization (WTO). From 1 January 2005 all such quantitative restrictions on the trade in textiles and clothing were phased out, and finally abolished. Historically speaking that as per requirement of The ATC, all MFA quotas on T&G products be removed over a ten-year transition period split into three phases and ending on 1 January 2005, thus finally incorporating international T&G trade into general GATT rules that prohibit discriminatory measures and call for the reduction and elimination of quantitative restrictions. The quota system under the MFA has distorted international T&G trade and has resulted in global welfare losses since quota limits on the exports of selective producers have prevented an allocation of resources to the most efficient T&G producers and prevented prices in quota protected developed country markets from falling. Competitive exporting countries with comparative advantages in T&G production have been restrained from expanding under the MFA quota system, while relatively uncompetitive producers have enjoyed guaranteed market access (up to the quota limit) to developed country markets (Spinanger, 1999). In such a context, there was serious concern that low income countries, such as Bangladesh, Cambodia and the like, which relied heavily on the garment industry, would suffer from the keen competition expected to be triggered by the complete liberalization of trade in textiles and clothing from the beginning of 2005. From the many corners it was predicted that China would expand its exports and India would follow, and that the other relatively small exporters would suffered seriously from the competition of these two giants. However, it turned out that some garment-exporting Least Developed Countries (LDCs), such as Bangladesh, Cambodia and Haiti, faired very well throughout the year 2005. In this context, an attempt has been made to examine the export data of selected countries during MFA and post MFA to US and EU markets in order to assess the indicative impact of post MFA scenario in Bangladesh as well as other largest garments exporters. The following Tables show the picture in this regard.

Table 1.7: Exports of Knit and Woven Garments to the United States

Rank Origin Amount (Million US$) Rate of Change (%)
2003 2004 2005 2003-04 2004-05
1 China 8,690



































2 Mexico
3 Hong Kong
4 India
5 Indonesia
6 Bangladesh
13 Cambodia

Source: U.S. Department of Commerce, Bureau of Census cited in Yamagata, 2006

Table 1.8: Exports of Knit and Woven Garments to the EU

Rank Origin Amount (Million US$) Rate of Change (%)
2003 2004 2005 2003-04 2004-05
All Countries 56,918



































1 China
2 Turkey
3 Bangladesh
4 Romania
5 India
19 Cambodia

Source: Eurostat cited in Yamagata, 2006.

Tables 7 and 8 show the trends in garment exports to t he United States and EU from the five largest garment exporters and the two leading exporters among the LDCs, Bangladesh and Cambodia. It was revealed that China and India expanded garment exports to the US and EU, the world’s two largest markets. Along with China and India, Bangladesh and Cambodia have also increased their exports to the United States during 2005 by more than 20 percent. Though their garment exports to the EU declined between 2004 and 2005, the drops were not significant; and the growth in the same figures by more than 30 percent between 2003 and 2004 surpassed the decline in 2005 (Table 8). As a whole, the sum of garment exports to the two largest markets grew by 2.54 percent for Bangladesh and by 11.06 percent for Cambodia in 2005. Since the US and EU are going to be imposing new restrictions on textile and garment imports from China for at least a couple of years, exports from that country will slow down, making room for the remaining garment exporters to increase growth. Thus, the prospects for Bangladesh to continue expanding its garment exports are encouraging.

1.7 Displacement of Production in the Garment Industry

The global economy is now controlled by the transfer of production where firms of developed countries swing their attention to developing countries. The new representation is centre on a core-periphery system of production, with a comparatively small centre of permanent employees dealing with finance, research and development, technological institution and modernization and a periphery containing dependent elements of production procedure. Reducing costs and increasing output are the main causes for this disposition. They have discovered that the simplest way to undercharge is to move production to a country where labor charge and production costs are lower. Since developing nations provide areas that do not impose costs like environmental degeneration, this practice protects the developed countries against the issues of environment and law. The transfer of production to Third World has helped the expansion of economy of these nations and also speeds up the economy of the developed nations.

Garment industry is controlled by the transfer of production. The globalization of garment production started earlier and has expanded more than that of any other factory. The companies have transferred their blue-collar production activities from high-wage areas to low-cost manufacturing regions in industrializing countries. The enhancement of communication system and networking has played a key role in this development. Export-oriented manufacturing has brought some good returns to the industrializing nations of Asia and Latin America since the 1960s. The first relocation of garment manufacturing took place from North America and Western Europe to Japan in the 1950s and the early 1960s. But during 1965 and 1983, Japan changed its attention to more lucrative products like cars, stereos and computers and therefore, 400,000 workers were dismissed by Japanese textile and clothing industry. In impact, the second stock transfer of garment manufacturing was from Japan to the Asian Tigers – South Korea, Taiwan, Hong Kong and Singapore in 1970s. But the tendency of transfer of manufacturing did not remain there. The rise in labor charge and activeness of trade unions were in proportion to the enhancement in economies of the Asian Tigers. The industry witnessed a third transfer of manufacturing from 1980s to 1990s; from the Asian Tigers to other developing countries – Philippines, Malaysia, Thailand, Indonesia and China in particular. The 1990s have been led by the final group of exporters including Bangladesh, Srilanka, Pakistan and Vietnam. But China was leader in the current of the relocation as in less than ten years (after 1980s) China emerged from nowhere to become the world’s major manufacturer and exporter of clothing.

1.8 Bangladesh Garment Sector and Global Chain
The cause of this transfer can be clarified by the salary structure in the garment industry, all over the world. Apparel labor charge per hour (wages and fringe benefits, US$) in USA is 10.12 but it is only 0.30 in Bangladesh. This difference accelerated the world apparel exports from $3 billion in 1965, with developing nations making up just 14 percent of the total, to $119 billion in 1991, with developing nations contributing 59 percent. In 1991 the number of workers in the ready-made garment industry of Bangladesh was 582,000 and it grew up to 1,404,000 in 1998. In USA, however, 1991-figure showed 1,106.0 thousand workers in the apparel sector and in 1998 it turned down to 765.8 thousand.

The presented information reveals that the tendency of low labor charges is the key reason for the transfer of garment manufacturing in Bangladesh. The practice initiated in late 1970s when the Asian Tiger nations were in quest of tactics to avoid the export quotas of Western countries. The garment units of Bangladesh are mainly relying on the ‘tiger’ nations for raw materials. Mediators in Asian Tiger nations build an intermediary between the textile units in their home countries, where the spinning and weaving go on, and the Bangladeshi units where the cloth is cut, sewn, ironed and packed into cartons for export. The same representatives of tiger nations discover the market for Bangladesh in several nations of the North. Large retail trading companies placed in the United States and Western Europe give most orders for Bangladeshi garment products. Companies like Marks and Spencers (UK) and C&A (the Netherlands) control capital funds, in proportion to which the capital of Bangladeshi owners is patience. Shirts manufactured in Bangladesh are sold in developed nations for five to ten times their imported price.

Collaboration of a native private garment industry, Desh Company, with a Korean company, Daewoo is an important instance of international garment chain that works as one of the grounds of the expansion of garment industry in Bangladesh. Daewoo Corporation of South Korea, as part of its global policies, took interest in Bangladesh when the Chairman, Kim Woo-Choong, offered an aspiring joint venture to the Government of Bangladesh, which included the growth and process of tyre, leather goods, and cement and garment factories. The Desh-Daewoo alliance was decisive in terms of getting into the global apparel markets at significant juncture, when import reforming was going on in this market following the signing of MFA in 1974. Daewoo, a South Korean leading exporter of garments, was in search of opportunities in nations, which had hardly used their quotas. Due to the quota restriction for Korea after MFA, the export of Daewoo became limited. Bangladesh as an LDC got the chance to export without any constraint and for this cause Daewoo was concerned with the use of Bangladesh for their market. The purpose behind this need was that Bangladesh would rely on Daewoo for importing raw materials and at the same time Daewoo would get the market in Bangladesh. When the Chairman of Daewoo displayed interest in Bangladesh, the country’s President put him in touch with chairman of Desh Company, an ex-civil servant who was seeking more entrepreneurial pursuits.

To fulfill this wish, Daewoo signed a collaboration contract with Desh Garment for five years. The contract also incorporated the fields of technical training, purchase of machinery and fabric, plant establishment and marketing in return for a specific marketing commission on all exports by Desh during the contract phase. Daewoo also imparted an exhaustive practical training of Desh employees in the working atmosphere of a multinational company. Daewoo keenly helped Desh in buying machinery and fabrics. Some technicians of Daewoo arrived Bangladesh to establish the plant for Desh. The end result of the association of Desh-Daewoo was important. In the first six years of its business, i.e. 1980/81-86/87, Desh export value increased at an annual average rate of 90%, reaching more than $5 million in 1986/87.

It is claimed that the Desh-Daewoo alliance is a significant element for the growth and achievement of Bangladesh’s entire garment export industry. After getting linked with Daewoo’s brand names and marketing network, overseas buyers went on with buying garments from the corporation heedless of their origin. Out of the opening trainees most left Desh Company at several times to erect their own competing garment companies, worked as a way of moving knowledge all through the whole garment sector.

It is essential to identify the outcomes of the process of moving production from high pay to low pay nations for both developing and developed nations. It is a bare fact that most of the Third World nations are now on the way to industrialization. In this procedure, workers are working under unfavorable working environment – minimal wages, unhealthy place of work, lack of security, no job guarantee, forced labour etc.

The route of globalization is full of ups and downs for the developing nations. Relocations of comparatively mobile, blue-collar production from industrialized to developing nations, in some circumstances, can have troublesome effects on social life if – in the absence of efficient planning and talks between international organizations and the government and/or organizations of the host nation – the transferred action encourages urban-bound relocation and its span of stay is short. Another negative result is that the rise in employment and/or income is not expected to be satisfactorily large and extensive to lessen inequality. In connection with the negative results of relocation of manufacturing on employment in developed countries, we realize that in comparatively blue-collar industries, the growing imports from developing nations lead to unavoidable losses in employment. It is held that development of trade with the South was a significant reason of the deindustrialization of employment in the North over past few decades.

After all employees who are constantly working under unfavorable circumstances have to bear the brunt. Work is under-control across the Bangladesh garment sector. Appalling working atmosphere has been brought to light in the Bangladesh garment industry. A research reveals that 90 percent of the garment employees went through illness or disease during the month before the interviews. Headache, anemia, fever, chest, stomach, eye and ear pain, cough and cold, diarrhea, dysentery, urinary tract infection and reproductive health problems were more common diseases. The garment factories gave bonus of different diseases to the employees for working. With a view to finding out a link between these diseases and industrial threats, health status of employees has been examined before and after coming in the garment work. At the end of examination, it was come out that about 75 percent of the garment workforce had sound health before they entered the garment factory. The reasons of health declines were industrial threats, unfavorable working environment, and want of staff facilities, inflexible terms and conditions of garment employment, workplace pressure, and low wages. Different work-related threats and their influence on health forced employees to leave the job after few months of joining the factory; the average length of service was only 4 years.

The garment sector is disreputable for fires, which are said to have claimed over 200 lives in the past two years, though exact figures are tough to find. A shocking instance of absence of workplace safety was the fire in November 2000, in which almost 50 workers lost their lives in Narsingdi as exist doors were closed. From the above analysis of working atmosphere of garment sector, we can state that the working environment of most of the Third World nations, particularly Bangladesh remind us of earlier development of garment industries in the First World nations. The state of employment in many (not necessarily) textiles and clothing units in the developing nations take us back to those set up in the nineteenth century in Europe and North America. The mistreatment of garment employees in the birth period of the development of US garment factories reviewed above is more or less same as it seen now in the Bangladesh garment industry. Can we state that garment employees of the Third World nations living in the 21st century? Is it a return of the Sweatshop?

In a way, the Western companies are guilty of pitiable working atmosphere in the garment sector. The developed nations want to make more profit and therefore, force the developing nations to cut down the manufacturing cost. In order to survive in the competition, most of the developing nations select immoral practices. By introducing inflexible terms and conditions in the business, the global economy has left few alternatives for the developing nations.

1.9 Right Time to Make a Decision

There are two alternatives to tackle the challenge of the competitive world initiated by the continuous pressure of global garment chain. One can continue to exist in the competition by adopting time-honored work systems or immoral practices. But it is uncertain how long they can continue to exist. In connection with the garment industry of Bangladesh, we can say that this is the right time to follow a competitive policy, which improves quality. If the MFA opportunities are eliminated, will it be feasible to keep the competitiveness through low-wage-female labor or through further drop in female wages? Possibly not. Since the labor charges are so minimal that with such wage, a worker is not able to maintain even a family of two members. Enhancing the efficiency of female workers is the only solution to increased competition. Proper education and thorough training can help achieve these positive results. To rule the global market, Bangladesh has to come out of low wage and low output complex in the garment industry. Bangladesh can enhance labor output through constant training, use of upgraded technology and better working environment. Bangladesh should plan a strategy intended for promoting skill development, speeding up technology transfer and improving productivity height of the workers.

Another method is to adopt best system or ethical course. Those companies, which react to heightened competition by stressing quality, speedy answer of the customers, fair practices for laborers should have the most innovative practices. We think that we are now living in the age of competition in producing improved quality over cost-reduction policy. The objective of change efforts at the workplace has been modified over the time – from making the job humane in the 1960s, to job satisfaction and output in 1970s, to quality and competitiveness in the 1980s. It is necessary for a company to pursue a competitive policy that improves quality, flexibility, innovation and customer care. If they rely on low costs by dropping laborers’ wages and other services, they will be bereaved of laborers’ dedication to work.


  • Considerable Qualified/keen to learn workforce available at low labor charges. The recommended minimum average wages (which include Traveling Allowance, House Rent, Medical Allowance, Maternity Benefit, Festival Bonus and Overtime Benefit) in the units within the Bangladesh Export Processing Zones (BEPZ) are given as below; on the other hand, outside the BEPZ the wages are about 40% lower.
  • Energy at low price
  • Easily accessible infrastructure like sea road, railroad, river and air communication
  • Accessibility of fundamental infrastructure, which is about 3 decade old, mainly established by the Korean, Taiwanese and Hong Kong Chinese industrialists.
  • FDI is legally permitted
  • Moderately open Economy, particularly in the Export Promotion Zones
  • GSP under EBA (Everything But Arms) for Least Developed Country applicable (Duty free to EU)
  • Improved GSP advantages under Regional Cumulative
  • Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful track
  • Investment assured under Foreign Private Investment (Promotion and Protection) Act, 1980 which secures all foreign investments in Bangladesh
  • OPIC’s (Overseas Private Investment Corporation, USA) insurance and finance agendas operable
  • Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under which protection and safety measures are available
  • Adjudication service of the International Centre for the Settlement of Investment Dispute (ICSID) offered
  • Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD & Cellular services
  • Weakness of currency against dollar and the condition will persist to help exporters
  • Bank interest@ 7% for financing exports
  • Convenience of duty free custom bonded w/house

¨ Readiness of new units to enhance systems and create infrastructure accordant with product growth and fast reactions to circumstances


¨ Lack of marketing tactics

¨ The country is deficient in creativity

¨ Absence of easily on-hand middle management

¨ A small number of manufacturing methods

¨ Low acquiescence: there is an international pressure group to compel the local producers and the government to implement social acquiescence. The US GSP may be cancelled and purchasing from US & EU may decrease significantly

¨ M/c advancement is necessary. The machinery required to assess add on a garment or increase competence are missing in most industries.

¨ Lack of training organizations for industrial workers, supervisors and managers.

¨ Autocratic approach of nearly all the investors

¨ Fewer process units for textiles and garments

¨ Sluggish backward or forward blending procedure

¨ Incompetent ports, entry/exit complicated and loading/unloading takes much time

¨ Speed money culture

¨ Time-consuming custom clearance

¨ Unreliable dependability regarding Delivery/QA/Product knowledge

¨ Communication gap created by incomplete knowledge of English

¨ Subject to natural calamities


¨ EU is willing to establish industry in a big way as an option to china particularly for knits, including sweaters

¨ Bangladesh is included in the Least Developed Countries with which US is committed to enhance export trade

¨ Sweaters are very economical even with china and is the prospect for Bangladesh

¨ If skilled technicians are available to instruct, prearranged garment is an option because labor and energy cost are inexpensive.

¨ Foundation garments for Ladies for the FDI promise is significant because both, the technicians and highly developed machinery are essential for better competence and output

¨ Japan to be observed, as conventionally they purchase handloom textiles, home furniture and garments. This section can be encouraged and expanded with continued progress in quality


¨ The exporters have to prepare themselves to harvest the advantages offered by the opportunities.

1.10 Labor Unrest in Garments Sector

Labor is an important input in industrial production. This is truer in garment industry of Bangladesh. Mechanization and automation have not diminished the role of human element in industrial establishments. In fact, the role of the workforce has become highly critical in garment industry. Nor have the economic reforms belittled the significance of labor. Liberalization of economy has brought labor to centre stage. Human resource is taken to be an important factor to increase productivity, improve quality and reduce costs all necessary to survive in the competitive world. There are several issue related to labor. They are trade union movement, wage policy and industrial relation. Industrial labor in the garment sector has undergone important changes over the two decades. Most important changes are commitment to industry, protective legislation, status of the worker, employment pattern, growth of trade unionism, industrial disputes, political interference and in some cases unfair labor practices. Despite the prevailing positive labor management relationship, the spiraling labor unrest in the Bangladesh RMG industry started on May 2005 after a knitwear factory owner rejected an 11-point charter of demands. The factory was completely gutted in the blaze. Protesting workers forced their way into an exclusive industrial zone for foreign investors and damaged machinery. These workers demanding unpaid wages and a weekly holiday smashed scores of vehicles and burn down factories in Savar, an industrial town near Dhaka. Among the 250 damaged units, at least 30 were owned by foreign investors in the Savar Export Processing Zone. According to Bangladesh Garment Manufacturers and Exporters’ Association (BGMEA) nearly 300 factories, including 21 factories in the Savar Export Processing Zone (EPZ), were damaged during the three-day crisis. The total loss of the garment industry is around four billion taka (nearly $70 million). Many vehicles were also set on fire during the unrest, which left three workers dead and hundreds others wounded. This is reportedly the worst industrial rioting in Bangladesh in the ready-made garment industry which is the country’s biggest export earner. The violence also dealt a serious blow to the industry’s image apart from causing huge losses. Some trade union leaders blamed the outbreak on accumulated anger of workers, who even do not have any weekend. They alleged that some garment owners do not pay the worker their salaries in time and overtime regularly. The violent outburst of the workers crippled the industry for many days. Several quarters seen it sabotage behind this development. On the other hand, another quarters seen it is an explosion of anger that remains unresolved for long. Protests over low wages and other exploitative conditions continued in the month of June 2005 too. The garment workers continued to hold rallies and clashed with law enforcers, leaving many people injured and few dead. Defying a ‘red alert’ imposed by law enforcers at the Dhaka Export Processing Zone (DEPZ) and its adjoining industrial areas, workers were involved in clashes in the Savar, Ashulia and Gazipur areas. The deepening unrest in the garment industry forced the foreign investors to announce on June 2005 that they have shut their units as fresh violence flared up in the Export Processing Zone (EPZ). Investors of 92 units in the EPZ said that they will not reopen the units until the government gives guarantee of law and order in the area. They also requested the EPZ authority to declare the EPZ closed indefinitely to cool off the situation. Leaders of the garment factory owners’ also urged the government to form an industrial police force to ensure a secure working environment for the apparel industry. They felt that the overall security situations in different industrial hubs were not risk free despite the government’s deployment of huge security forces. It was true that in the year 2005 the political instability has been made worse by the simultaneous labor unrest in the economic lifeline of Bangladesh that is its garment industry. Initially the government and the industry leaders underestimated the magnitude of the problem and tried to brush it aside by floating various conspiracy theories.

Trade Union in Existence

2.1 Overview

Trade unions aim to represent the interests of people at work and negotiate with employers for better terms and conditions for their members.

A trade union is an organized group of workers. Its main goal is to protect and advance the interests of its members.

A union often negotiates agreements with employers on pay and conditions. It may also provide legal and financial advice, sickness benefits and education facilities to its members.

The International Labor Organization this week again rapped Bangladesh for its continuing failure to provide full trade union freedoms in the country and for permitting serious violations of ILO Conventions both in law and in practice. In particular, it deplored the obstacles to the establishment of unions in Export Processing Zones and the arrest and harassment of union leaders and activists in the garment sector.

And the ILO’s Committee on the Application of Standards singled out Bangladesh for special attention expressing concern over the escalation of industrial violence stressing that freedom of association could only be exercised in a climate that was free from violence, pressure or threats of any kind against trade union leaders and members.

Exclusions from union membership

The Committee demanded that the Bangladesh Government take measures for the amendment of the Labor Act and the EPZ Workers Associations and Industrial Relations Act so as to bring them into full conformity with the provisions of ILO Convention 87 which Bangladesh has ratified and is duty-bound to observe.

The ILO called upon the Bangladesh Government to ensure that all workers were fully guaranteed the protection of the Convention and demanded that the necessary concrete steps to ensure this be taken without delay. The Government of Bangladesh was asked to provide full particulars to the ILO in respect of all arrests, harassment and detention of trade unionists and trade union leaders and urged to give adequate instructions to the law enforcement bodies so as to ensure that no person was arrested, detained or injured for having carried out legitimate trade union activities.

Population: 149,700,000 / Capital: Dhaka / ILO Core Conventions Ratified:

29 – 87 – 98 – 100 – 105 – 111 – 182

Legal limitations on union recognition, the right to strike and collective bargaining remain in place. Many workers in the public sector and all teachers are still denied union membership. Legislation was passed allowing unions in Export Processing Zones, but not until 2006, and with restrictions. Garment workers were fired for trying to form a union while 350 women trade unionists were arrested while celebrating international women’s day. The harassment of the nurses’ union BDNA continued.

2.2 Trade Union Rights in Law .

2.2.1 Many Restrictions .

The Constitution provides for the right to form or join unions. There are many restrictions, however. Before a union can be registered, 30 per cent of workers in an enterprise have to be members and the union can be dissolved if its membership falls below this level. Unions must have government approval to be registered, and no trade union action can be taken prior to registration .

Candidates for union office have to be current or former employees of an establishment or group of establishments. The Registrar of Trade Unions has wide powers to interfere in internal union affairs. He can enter union premises and inspect documents. The Registrar may also cancel the registration of a union, with Labor Court approval.

Under the Industrial Relations Ordinance, workers in the public sector and state enterprises may not belong to a trade union, with the exception of railway, postal and telecommunications workers. No teachers may form trade unions, in either the public or private sector. Managerial and administrative employees can form welfare associations, but they are denied the right to join a union. .

2.2.2 Right To Strike Not Recognized .

The right to strike is not specifically recognized in law. Three quarters of a union’s members must agree to a strike before it can go ahead. The government can ban any strike if it continues beyond 30 days (in which case it is referred to the Labor Court for adjudication), if it involves a public service covered by the Essential Services Ordinance or if it is considered a threat to national interest. In this last case, the 1974 Special Powers Act can be used to detain trade unionists without charge. The government may ban strikes for renewable periods of three months.

Sentences of up to 14 years’ forced labor can be passed for offences such as “obstruction of transport”. .

2.2.3 Collective Bargaining Limited .

Only registered unions can engage in collective bargaining, and each union must nominate representatives to a Collective Bargaining Authority (CBA) committee, which is subject to approval by the Registrar of Trade Unions. The National Pay and Wages Commission, whose recommendations are binding, set public sector workers’ pay levels and other benefits. .


2.2.4 EPZ’s – New Law on Union Recognition .

The EPZ Trade Union and Industrial Relations Bill 2004 was passed on 12 July. It provides for the formation of trade unions in EPZs from 1 November 2006. In the meantime, workers are allowed to set up “Welfare Committees”, provided over 30 per cent of the workforce take part, with elected representatives who have the power to negotiate and sign collective agreements. However, they are not allowed to strike or organize demonstrations. The trade unions will be subject to the same 30 per cent threshold, as for all unions in the country, and will also have to hold a referendum, in which over 50 per cent of the total workforce must participate.

Trade unions have effectively been outlawed in Bangladesh’s six export processing zones (EPZs) since their launch in 1980, as the zones have so far been exempt from the major laws establishing freedom of association and the right to bargain collectively. Faced with the threat of losing trade preferences for its exports to the US and Canadian markets, however, the government was to allow trade unions into the zones as from 1 January 2004. It then caved in to pressure from Korean and Japanese companies based in the EPZ’s, delaying its decision until it found this compromise solution.

There are still some limitations on the freedom of association in the new law, in addition to the 30 per cent rule. While trade unions in a particular EPZ will be allowed to form a federation, there can only be one federation in the area. Federations will not be allowed to form a single body or join any national trade union.

2.3 Trade Union Rights in Practice .

The trade union movement is relatively weak in Bangladesh. This is partly owing to the multiplicity of trade unions – there were 5,450 unions affiliated with 25 officially registered national trade union centres – and partly owing to the considerable intimidation imposed in practice, especially workers’ fear of losing their jobs should they show any sign of union activity. Even though the government has ratified ILO Convention nos. 87 and 98, the right to freedom of association and to collective bargaining at the workplace is not respected in the garment sector or on the tea estates.

2.3.1 Strike Bans .

The government makes use of the Essential Services Ordinance, hereby it can ban strikes. It continues to apply it to the Power Development Board, the Dhaka Electric Supply Authority and the Chittagong Port Authority. In May 2003, it also imposed the Ordinance on the Bangladesh Petroleum Corporation. .

2.3.2 Restrictions on Bargaining and Union Meetings .

The government does not allow any collective bargaining authority in jute mills during production time. .

Only pro-government supporters are allowed to hold meetings during work time and unions not affiliated with the government’s labor grouping are not allowed to hold protests even on their day off. .

2.3.3 Employers Take Advantage of Legal Loopholes .

Private sector workers are discouraged from undertaking any union activity. The Industrial Relations Ordinance gives considerable leeway for discrimination against union members and organizers by employers. .

Workers who try to create a trade union are not protected before registration and are therefore often persecuted by their employers, sometimes by violent means or with the help of the police. The names of workers who apply for union registration are frequently passed on to employers who promptly transfer or dismiss them, particularly in the textile sector. Even after registration, workers suspected of carrying out trade union activities are regularly harassed. One popular ploy is to dismiss a worker for misconduct, as they are then no longer entitled to become a trade union officer. A complaint to the Labor Court is of little use given the underlying corruption and serious backlog of cases, which, in some instances, can stretch back more than several years.

2.3.4 Export Processing Zones .

Employers in the EPZs have been consistently hostile towards trade unions, claiming that many of the companies would be ruined and jobs would be lost if they had to have unions. Some employers in the zones take advantage of the absence of trade unions to commit violations of international labor standards, such as sexual harassment, physical violence, unpaid overtime, child labor, non-compliance with minimum wage regulations and deplorable safety conditions. .

2.3.5 Garment Industry Anti-Union .

Textile workers outside the zones fare no better. An estimated two million women workers, working for 3,300 employers, make clothes for export in Bangladesh. Unions are registered in only 127 factories and fewer than a dozen employers actually negotiate with them. Workers are regularly sacked, beaten up or subjected to false charges by the police for being active in unions. The General Secretary of the United Federation of Garment Workers (UGFW) has been arrested 12 times. Meanwhile, the country’s garment workers are among the lowest paid in the world. They work long hours with very little leave, and face