Rise of Bangladeshi Textile Trade

Introduction

Bangladesh may not be a developed country, but is one of the latest emerging economies that mainly benefit from workers’ remittance as its main source of foreign exchange earnings. While the country’s trade remittance since it gained its independence from Pakistan in 26 March 1971, the country has experienced an unprecedented economic growth with worker’s remittance accounting for 12% of GDP in 2010, while export accounts for close to 45% of the GDP (Chowdhury, 2011- look at the abstract first sentence). Additionally, the main exports from Bangladesh include jute a jute products, readymade garments (RMG), and frozen food (Yongzheng, & Mlachila, 2007, p. 677– last paragraph- please see figure two and study the graph there[1]).

The rise of the Tiger

According to Cheng, (2001, pp. 317–323), Bangladesh is one of the country’s that have benefited heavily from the textile industry growth. For example, while the country’s exports of Garments rose from $8.9 billion in 2006 to over $10.7 billion in 2008, the country’s gross national income (GNI) is still low at $470 per year. The country also has the lowest wage rates in the region making it one of the poorest cities. The textile industry is one of the largest industries in the country as it employs close to 30 million Bangladeshis. According to Yongzheng, & Mlachila (2007, p. 684), Bangladesh’s main source of competitiveness is the low wages despite the fact that the unit labors casts are actually higher than that of China. The level of underemployment is relatively high at 40% of the population.

According to Kapp-Klote, (2013) retailers like Walmart are constantly shifting production to factories with lower costs[2]. Bangladesh is much more preferred to the other Asian countries because of low demand, little conditionality in additional to conducive environment made up of a number of complimentary industries. On the other hand, Begum, (2001, pp. 208–226), argues that there are many industries that supply inputs including trained labor, minerals and other raw materials required by the textile industries. It is clear that despite the economic and political conditionality, the country’s textile industry has nearly doubled by over

Impact on Chinese textile industry and other neighboring countries

Historical, textile production in Bangladesh hit an all high level when it registered a 25% increase in production and this has an externality on the Chinese textile industry as it eroded china’s textile industry reducing the country’s production by close to 5%.

Factors that contributed to the development of the Bangladeshi textile industry

Yongzheng, & Mlachila, (2007, pp. 675–699) argues that one of the main reason that lead to the development if the Bangladesh textile industry is the country’s increasing population, unemployment, and economic disruption in china that lead to the disruption of china’s supply chain. As an alternative, many of the FDI turned to Bangladesh as a cheaper alternative to china.

The Shift in international trade policies such as free trade was a god sends opportunity to Bangladesh as the country experienced an influx of both good and services, skills and knowledge, as well as new ideas and investors. The country has continued growth can be attributed to free trade because many investors came to Bangladesh to invest thereby creating more jobs and improving the living standards of the Bangladeshis. The free trade regime in Bangladesh textile industry is therefore one of the main drivers of economic growth hence the effort and liberation of the trade (Chowdhury, 2011, pp. 2600–2608).

When retailers from developed countries such as the United States, and UK sources products such as textiles from country’s with low wage standards such as Bangladesh, the government, benefit from tax, and better balance of trade. The people benefits from reduced unemployment and so better living standards, while the companies benefit from profits which are again invested in the country limiting the country’s imports and depended on donors (Islam, 2002, p. 268)

However, Rahman, (2004, pp. 75–91), argues that it is important to note that despite all these benefits, the free trade has had negative impact in a number of infant industries. For example, there are native companies whose growths have been hampered by the invasion of the textile industry by international players. The country could have prevented exploitation of the nascent industries using economic policies such as protectionism and quotas. The gains of free trade outweigh the loss causes by free trade especially in the textile industry. Bangladeshi textile industry is likely to develop more than other countries because the country still enjoys the low cost factors, while countries such as china, Korea and India are still face d with increasing cost and increasingly difficult trade policies (Yongzheng, & Mlachila, 2007, pp. 675–699).

Conclusion

Despite the country’s economic growth and positive outlook, the country’s future is faced with stiff competition from African countries that offer cheaper alternatives for the US customers. For example, the US Africa Growth and Opportunity Act (AGOA) considering Africa as a potential source of cheap labor for its garments. If the country is still to rely on the EU and US for its RMG exports, Bangladesh should develop more conducive terms of trade and trade policies without allowing the EU, and the US to exploit the Bangladeshi.

References

Yongzheng Y, & Mlachila M, (2007). The End of Textiles Quotas: A Case Study of the Impact on Bangladesh. Journal of Development Studies, Vol. 43, No. 4, 675–699,

Chowdhury M, (2011). Remittances flow and financial development in Bangladesh. Economic Modelling 28, pp. 2600–2608

Rahman, S (2004). "Global Shift: Bangladesh Garment Industry in Perspective". Asian Affairs 26 (1): 75–91.

Begum, N (2001). "Enforcement of Safety Regulations in Garment sector in Bangladesh". Proc. Growth of Garment Industry in Bangladesh: Economic and Social dimension. pp. 208– 226.

Islam, Roumeen (2002). The right to tell: the role of mass media in economic development. World Bank Publications. p. 268

Cheng, Leonard K. (2001). Leonard K. Cheng, Henryk Kierzkowski, ed. Li & Fung, Ltd.: An agent of global production in Global Production and Trade in East Asia. Springer. pp. 317–323.

[1] Figure 2. Bangladesh: export performance, 1990–2003 (in millions of US dollars). Sources:

Bangladeshi authorities and authors’ estimates

[2] Bangladesh is the world’s second-largest clothing exporter, drawing the business of multinational retail chains with its extremely low labor costs (the minimum wage is only $37 a month). Most retail chains use private monitors to make sure that the factories they buy from are meeting labor standards. Garment production in Bangladesh is also quite competitive; many labor-rights activists contend that when

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s