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Bangladesh textile industry
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The textile and clothing (T&C) industries provide the single source of economic growth in Bangladesh's rapidly developing economy.[1] Exports of textiles and garments are the principal source of foreign exchange earnings. Agriculture for domestic consumption is Bangladesh’s largest employment sector. By 2002 exports of textiles, clothing, and ready-made garments (RMG) accounted for 77% of Bangladesh’s total merchandise exports.[2] By 2013, about 4 million people, mostly women, worked in Bangladesh's $19 billion-a-year industry, export-oriented ready-made garment (RMG) industry. Bangladesh is second only to China, the world's second-largest apparel exporter of western brands. Sixty percent of the export contracts of western brands are with European buyers and about forty percent with American buyers.[3] Only 5% of textile factories are owned by foreign investors, with most of the production being controlled by local investors.[4]
Bangladesh's textile industry has been part of the trade versus aid debate. The encouragement of the garment industry of Bangladesh as an open trade regime is argued to be a much more effective form of assistance than foreign aid. Tools such as quotas through the WTO Agreement on Textiles and Clothing (ATC) and Everything but Arms (EBA) and the US 2009 Tariff Relief Assistance in the global clothing market have benefited entrepreneurs in Bangladesh's ready-made garments (RMG) industry. Bangladesh with a population of about 156 million, has the highest population density in the world. In 2012 the textile industry accounted for 45% of all industrial employment in the country yet only contributed 5% of the Bangladesh's total national income.[5] [6]
Contents
[hide]
· 1 History of textile production in Bangladesh
o 1.2 The export-oriented readymade garment (RMG) industry
§ 1.2.1 1974 the Multi-Fibre Arrangement (MFA) and the Daewoo of South Korea
· 3 Bangladesh Garment Manufacturers and Exporters Association (BGMEA)
· 4 Effect of Trade Agreements on Textiles and Clothing Industry in Bangladesh
· 5 McKinsey report (2011): Bangladesh as next hot spot, next China
· 6 Li & Fung Ltd in the Bangladesh RMG sector
· 7 Education in textile sector
· 11 Notes
History of textile production in Bangladesh[edit]
Post 1971[edit]
From 1947 to 1971 the textile industry, like most industries in East Pakistan, were largely owned by West Pakistanis. During that period, in the 1960s, local Bengali entrepreneurs had set up their own large textile and jute factories. Following its separation from East Pakistan the newly formed Bangladesh lost access to both capital and technical expertise.[7]
Until the liberation of Bangladesh in 1971, the textile sector was primarily part of the process of import substitution industrialization (ISI) to replace imports. After the liberation, Bangladesh adopted export-oriented industrialization(EOI) by focusing on the textile and clothing industry, particularly the readymade garment (RMG) sector. Immediately after the founding of Bangladesh (1971)[8]), tea and jute 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 deteriorated.[9]
In 1972 the newly formed government of Sheikh Mujibur Rahman who was also the head of the Awami League, enacted the Bangladesh Industrial Enterprises (Nationalization) Order, taking over privately owned textile factories and creating a state-owned enterprise (SOE) called Bangladesh Textile Mills Corporation (BTMC). President Rahman promoted democracy and a socialist form of capitalism. The BTMC never managed to match the pre-1971 output and in every year after the 1975–1976 fiscal year, lost money. Until the early 1980s the state owned almost all spinning mills in Bangladesh and 85 percent the textile industry's assets (not including small businesses).[7] Under the 1982 New Industrial Policy (NPI) a large number of these assets including jute mills and textile mills were privatized and returned to their original owners.[10]
In the devastating famine in 1974, one million people died, mainly of starvation caused in part by the flooding of the Brahmaputra river in 1974, and a steep rise in the price of rice. Partly in response to the economic and political repercussions of the famine, the Bangladesh government shifted public policy away from its concentration on a socialist economy, and began to denationalize, disinvest and reduce the role of the public sector in the textile industry while encouraging private sector participation. The 1974 New Investment Policy restored the rights to both private and foreign investors.[10] Bangladesh's development model switched from a state-sponsored capitalist mode of industrial development with mainly state-owned enterprises (SOE) to private sector-led industrial growth.[10]
The export-oriented readymade garment (RMG) industry[edit]
1974 the Multi-Fibre Arrangement (MFA) and the Daewoo of South Korea[edit]
Starting in 1974 the Multi-Fibre Arrangement (MFA) in the North American market ensured that trade in textiles and garments remained the most regulated in the world.[11][12] Among other things the MFA set quotas on garments exports from thenewly industrialising countries of Asia. Entrepreneurs from quota-restricted countries like South Korea began "quota hopping" seeking quota-free countries that could become quota-free manufacturing sites. The export-oriented readymade garment (RMG) industry emerged at this time. Daewoo of South Korea was an early entrant in Bangladesh, when it established a joint venture in December 27, 1977 with Desh Garments Ltd. making it the first export oriented ready-made garment industry in Bangladesh.[13] After only one year in which 130 Desh supervisors and managers received free training from Daiwoo in production and marketing at Daiwoo's state-of-the-art ready-made garment (RMG) plant in Korea, 115 of the 130 left Desh Garments Ltd. and set up separate private garment export firms or began working for other newly formed export-oriented RMG companies with new garment factories in Bangladesh for much higher salaries than Desh Garments Ltd offered.[12][14][15]
Global restructuring processes, including two non-market factors, such as quotas under Multi Fibre Arrangement (MFA) (1974–2005) in the North American market and preferential market access to European markets,[11] led to the "emergence of an export-oriented garment industry in Bangladesh in the late 1970s"[12] and ensured the garment sector’s continual success.
The garment industry in Bangladesh became the main export sector and a major source of foreign exchange starting in 1980, and exported about $5 billion USD in 2002.[16] In 1980 an export processing zone was officially established in at the port of Chittagong.
By 1981, 300 textile companies, many small ones had been denationalized often returned to their original owners.[7] In 1982, shortly after coming to power following a bloodless coup, President Hussain Muhammad Ershad introduced the New Industrial Policy (NPI), most significant move in the privatization process,[10] which denationalized much of the textile industry, created export processing zones (EPZs) and encouraged direct foreign investment. Under the New Industrial Policy (NPI) 33 jute mills and 27 textile mills were returned to their original owners.
The export of ready-made garments (RMG) increased from $USD 3.5 million in 1981 to $USD 10.7 billion in 2007. Apparel exports grew, but initially, the ready-made garments RMG industry was not adequately supported by the growth up and down the domestic supply chain (e.g., spinning, weaving, knitting, fabric processing, and the accessories industries).[citation needed]
From 1995 to 2005 the WTO Agreement on Textiles and Clothing (ATC) was in effect, wherein more industrialized countries consented to export fewer textiles while less industrialized countries enjoyed increased quotas for exporting their textiles.[2] Throughout the 10-year agreement, Bangladesh’s economy benefited from quota-free access to European markets and desirable quotas for the American and Canadian markets.[4]
|
export market |
USA (textile) |
USA (clothing) |
EU (textile) |
EU (clothing) |
|
market share in 1995 |
<3% |
4% |
<3% |
3% |
|
market share in 2004 |
3% |
2% |
3% |
4% |
As the above table shows, the market shares for Bangladeshi textiles in the USA and both textiles and clothing in the European Union have changed during the time period of the ATC.[17]
Until FY 1994, Bangladesh's ready-made garments (RMG) industry was mostly dependent on imported fabrics-the Primary Textile Sector (PTS) was not producing the necessary fabrics and yarn.[citation needed]
Since the early 1990s, the knit section expanded mainly producing and exporting shirts, T-shirts, trousers, sweaters and jackets. In 2006 90 percent of Bangladesh's total earnings from garment exports came from its exports to the United States and Europe.[18]
Although there was concern, noted in an IMF report, that the WTO's Multi Fibre Arrangement, the Agreement on Textiles and Clothing (ATC), phase-out would shut down the textile and clothing (T&C) industry,[19] the Bangladesh textile sector actually grew tremendously after 2004 and reached an export turnover of US$10.7 billion in FY 2007. Bangladesh was expected to suffer the most from the ending of the MFA, as it was expected to face more competition, particularly fromChina. However, this was not the case. It turns out that even in the face of other economic giants, Bangladesh’s labor is “cheaper than anywhere else in the world.” While some smaller factories were documented making pay cuts and layoffs, most downsizing was essentially speculative – the orders for goods kept coming even after the MFA expired. In fact, Bangladesh's exports increased in value by about $500 million in 2006.[20]
By 2005 the ready-made garments (RMG) industry was the only multi-billion-dollar manufacturing and export industry in Bangladesh, accounting for 75 per cent of the country's earnings in that year.[18]
Bangladesh's export trade is dominated by the ready-made garments (RMG) industry.[citation needed] Bangladesh’s garment exports – mainly to the US and Europe – make up nearly 80% of the country’s export income.[21] Exports of textiles, clothing, and ready-made garments (RMG) accounted for 77% of Bangladesh’s total merchandise exports in 2002.[2]
Textile exports from Bangladesh to the United States did increase by 10% in 2009.[22]
Currently, the textile mills provide 70% of national exports. This proportion is even higher in Bangladesh. In Bangladesh, the number of employed workers in the textile industry increased by 400 000 in 1990 to 2 million in 2004, and the number of enterprises – from 800 to 4000. Nine out of ten people employed in the industry – are women. In general, the state of the textile industry depends on well-being of 10-12 million people in Bangladesh. By IMF estimates, as a result of the abolition of quota exports of Bangladesh will be reduced by 25%.[citation needed]
Employment[edit]
Of the millions of wage earning children in Bangladesh in 1990, almost all of them worked in the ready-made garment (RMG) industry. Based on the Bangladesh Bureau of Statistics Labor Force Survey estimated there were about 5.7 million 10 to 14 years-old children engaged in child labor. This number may have been as high as 15 million children.[23] In 1993 employers in Bangladesh' ready-made garment (RMG) industry dismissed 50,000 children (c. 75 percent of child workers in the textile industry) out of fear of economic reprisals of the imminent passage of the Child Labor Deterrence Act (the Harkin Bill after Senator Tom Harkin, one of the US Senators who proposed the bill).[23] The act which banned "importation to the United States of products which are manufactured or mined in whole or in part by children" would have resulted in the loss of lucrative American contracts. Its impact on Bangladesh's economy would have been significant as the export-oriented ready-made garment industry represents most of the country's exports.[23]
The results of surveys varied on the demographics and size of the ready-made garments industry at the time of the Harkin Bill. One study estimated that there were 600,000 workers in the industry.,[23][24] BGMEA estimate was c. 800,000.[25]The Asian-American Free Labor Institute (AAFLI) reported that in 1994 females constituted about "90 percent of all adult workers, and roughly 60 percent of all child workers."[23][26]
By 2001 the textile industry employed about 3 million workers of whom 90% are women.[27] By 2013, there were approximately 5,000 garment factories, employing about 4 million people, mostly women, part of Bangladesh's $19 billion-a-year industry, export-oriented ready-made garment (RMG) industry. Bangladesh is second only to China, the world's second-largest apparel exporter of western brands. Sixty percent of the export contracts of western brands are with European buyers and about forty percent with the American buyers.[3] It has been a major source of employment for rural migrant women in a country that has increasingly limited rural livelihood options, and where women migrants have been largely excluded from formal work in the cities.[12]
The structure of gender participation underwent a major shift with the rise of the ready-made garment industry in Bangladesh. Traditionally the participation of women in Bangladesh's formal economy was minimal. Bangladesh's flagship export-oriented ready-made garment industry, however, with female labor accounting for 90 percent of the work force, was "built to a large extent, on the supply of cheap and flexible female labor in the country."[28]
According to a New York Times journalist by August 2012 the garment or textile industry which exports worth $18 billion a year, accounted for "80 percent of manufacturing exports and more than three million jobs" with predictions by McKinsey & Company of the industry tripling in size by 2020 (McKinsey 2001:10).[21][29]
Compliance[edit]
Five deadly incidents from November 2012 through May 2013 brought worker safety and labor violations in Bangladesh to world attention putting pressure on big global clothing brands such as Primark, Loblaw, Joe Fresh, Gap, Walmart, Nike, Tchibo, Calvin Klein and Tommy Hilfiger, and retailers to respond by using their economic weight to enact change.[30] No factory owner has ever been prosecuted over the deaths of workers.[3] Other major fires 1990 and 2012, resulting in hundreds of accidental deaths, include those at That's It Sportswear Limited and the fire at Tazreen Fashions Ltd. Spectrum Sweater Industries, Phoenix Garments, Smart Export Garments, Garib and Garib, Matrix Sweater, KTS Composite Textile Mills and Sun Knitting. major foreign buyers looking for outsourcing demand compliance-related norms and standards regarding a safe and healthy work environment which includes fire-fighting equipment, evacuation protocols and mechanisms and appropriate installation of machines in the whole supply-chain. RMG insiders in Bangladesh complain about the pressure to comply and argue that RMG factory owners are hampered by a shortage of space in their rental units. In spite of this the industry exports totaled $19 billion in 2011-2012. They expected export earnings to increase to $23 billion in 2012-2013.[31]
Two dozen factory owners are also Members of Parliament in Bangladesh.[30]
Scott Nova of the Worker Rights Consortium, a rights advocacy group, claimed that auditors, some of whom were paid by the factories they inspect, sometimes investigated workers right issues such as hours or child labor but did not properly inspect factories’ structural soundness or fire safety violations. Nova argued that the cost of compliance to safety standards in all 5,000 clothing factories in Bangladesh is about $3 billion (2013).[30]
In 2000 garment entrepreneurs had a reputation for shirking custom duties, evading corporate taxes, remaining absent in capital markets, avoiding social projects such as education, healthcare, and disaster relief but, argued authors Quddus and Salim, these entrepreneurs took the risks needed to build the industry.[32] Bangladesh successfully competes in the manufacturing industry by maintaining "lowest labor costs in the world." Garment workers' minimum wage was set at roughly $37 a month in 2012 but since 2010 Bangladesh's double-digit inflation with no corresponding rise in minimum wage and labor rights, has led to protests.[21]
A fire broke out on 24 November 2012, in the Tazreen Fashion factory in Dhaka[33] killing 117 people and injuring 200.[34] It was the deadliest factory fire in the history of Bangladesh.[35] According to the New York Times, Walmart played a significant role in blocking reforms to have retailers pay more for apparel in order to help Bangladesh factories improve safety standards. Walmart director of ethical sourcing, Sridevi Kalavakolanu, asserted that the company would not agree to pay the higher cost, as such improvements in electrical and fire safety in the 4,500 factories would be a "very extensive and costly modification" and that "it is not financially feasible for the brands to make such investments."[36]
On April 24, 2013 over 1045 textile workers factories making clothes for Western brands, were killed when a garment factory collapsed. The Savar building collapse was in the Rana Plaza complex, in Savar, an industrial corner 20 miles northwest of Dhaka, the capital of Bangladesh. It was the "world's deadliest industrial accident since the Bhopal disaster in India in 1984.[37] While some 2,500 were rescued from the rubble including many who were injured, the total number of those missing remained unknown weeks later.[37] The eight-story building, owned by Sohel Rana, associated with the ruling Awami League, was constructed on a "pond filled with sand". It only had planning approval for five floors.[38]Owners used "shoddy building materials, including substandard rods, bricks and cement, and did not obtaining the necessary clearances."[37] An engineer raised safety concerns after noticing cracks in the Rana Plaza complex the day before its collapse. In spite of this factories stayed open to fill overdue orders. When generators were restarted after a power blackout the building caved in.[3][39] Six garment factories also in Rana Plaza were cleared to re-open on May 9, 2013 after inspectors allegedly issued safety certificates. Nine people were arrested including four factory owners, the owner of the complex and the engineer who warned of the crack in the building.[3]
Immediately following the April 24 deadly industrial accident, Mahbub Ahmed, the top civil servant in Bangladesh's Commerce Ministry, fearing the loss of contracts that represent 60 per cent of their textile industry exports, pleaded with the EU to not take tough, punitive measures or "impose any harsh trade conditions" on Bangladesh to "improve worker safety standards" that would hurt the "economically crucial textile industry" and lead to the loss of millions of jobs.[3]
On May 9, 2013 eight people were killed when a fire broke out at a textile factory in an eleven-story building in the Mirpur industrial district owned by Tung Hai Group, a large garment exporter. hasina chodna, president of the politically powerful textile industry lobby group, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Reuters that "the Bangladeshi managing director of the company and a senior police officer were among the dead."[37]
Wage Non-Compliance[edit]
Living wage non-compliance is prevalent in Bangladesh textile industry[40] On September 23, 2013 textile workers in Bangladesh clashed with police, looted firearms and vandalized factories, demanding nearly a three-fold hike in their salaries .[41]
[42]==GDP==
The textile/garment industry is an important one for the country, accounting for 17% of its gross domestic product (GDP) and more than three-quarters of total exports - most of which head to Europe and the US.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA)[edit]
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is a "powerful lobby" group[39] with 4,000 members who "account for four of every five dollars earned from exports."[39] Twenty-five MPs have investments in the textile industry.[39] The BGMEA inspects non-complying textile factories. Following the fatal fire in November 2012 at a Dhaka garment factory where 112 workers were killed, "BGMEA sent inspectors to some of its members’ factories. Four buildings had structural flaws or violated construction or labor laws."[39] The factories, owned by Atiqul Islam, BGMEA president, Atiqul Islam among others. There were no prosecutions.[39] who had warned the owner of building was unsafe but he ignored them and the factories stayed open. Workers said they had been pressed to show up because orders were overdue. 846 garment traders were also registered with BGMEA in 2009 although legally they are not obligated to do so.[43]
Effect of Trade Agreements on Textiles and Clothing Industry in Bangladesh[edit]
The United States introduced the Tariff Relief Assistance for Developing Economies Act of 2009[44] designated Bangladesh as one of the 14 least developed countries (LDC), as defined by the United Nations and the US State Department, eligible for "duty-free access for apparel assembled in those countries and exported to the U.S." from 2009 through 2019. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA), an industry lobby group, claimed that in 2008 alone Bangladesh paid "$USD 576 million as duty against its export of nearly $3 billion' mainly consisting of woven and knitwear.
McKinsey report (2011): Bangladesh as next hot spot, next China[edit]
Currently Bangladesh is now second largest ready-made garments (RMG) manufacturer after China, by the next five years Bangladesh will become the largest ready-made garments (RMG) manufacturer.[29] Bangladesh was the sixth largest exporter of apparel in the world after China, the EU, Hong Kong, Turkey and India in 2006.[citation needed] In 2006 Bangladesh's share in the world apparel exports was 2.8%. The US was the largest single market with US$3.23 billion in exports, a 30% share in 2007. Today, the US remains the largest market for Bangladesh's woven garments taking US$2.42 billion, a 47% share of Bangladesh's total woven exports. The European Union remains the largest regional destination - Bangladesh exported US$5.36 billion in apparel; 50% of their total apparel exports. The EU took a 61% share of Bangladeshi knitwear with US$3.36 billion exports.
According to a 2011 report by international consulting firm McKinsey & Company, 80 percent of American and European clothing companies planned to move their outsourcing from China, where wages had risen, and were considering Bangladesh as the "next hot spot" making it the "next China"[29][45] offering 'the lowest price possible' known as the China Price, the hallmark of China’s incredibly cheap, ubiquitous manufacturers, much "dreaded by competitors."[46]
Li & Fung Ltd in the Bangladesh RMG sector[edit]
Bangladesh is second only to China in the supply chain of billionaire brothers Victor and William Fung's global sourcing giant Li & Fung Ltd,[47] a Hong Kong-based company. Bangladesh has been part of the producing network of Li & Fung Ltd since 1995, following Li & Fung Ltd's acquisition and subsequent expansion of an established British trading company, Inchcape Buying Services.[48] Li & Fung supplies dozens of major retailers, including Wal-Mart Stores, Inc., branded asWalmart.
In his chapter entitled Li & Fung, Ltd.: An agent of global production (2001), Cheng used Li & Fung Ltd as a case study in the international production fragmentation trade theory through which producers in different countries are allocated a specialized slice or segment of the value chain of the global production. Allocations are determined based on "technical feasibility" and the ability to keep the lowest final price possible for each product.[48]
Major Western brands and retailers met in Germany in April for talks regarding Bangladesh building and fire safety setting a May 15, 2013 deadline for a joint agreement. By May 14, 2013 European companies which Europe account for about 60 percent of Bangladesh's clothing exports: United Colors of Benetton, Britain's Marks & Spencer, Sweden's H & M Hennes, Mauritz AB, Inditex SA, and one American company, PVH, which owns brands including Calvin Klein, had endorsed an accord.[47] but Wal-Mart Stores Inc and other companies affiliated with Li & Fung did not sign the endorsement. Following the April 2013 tragedy, Walmart's Rajan Kamalanathan, vice president of ethical sourcing for Walmart spoke with the press. Walmart hired "Bureau Veritas to inspect factories for structural, fire and electrical safety, including checking building designs and permits as part of an expanded inspection process" and is pressuring Bangladesh to close factories.[47]
Bruce Rockowitz, Li & Fung's group president and chief executive spoke to Li & Fung's group shareholders in Hong Kong on May 13, 2013 arguing Li & Fung Ltd should stay in Bangladesh, and "invest more and try to make safety better and work with the government on doing a better job on monitoring buildings.'[47]
In January 2010 Li & Fung (Trading) Limited formed a new subsidiary company called WSG group, a dedicated sourcing stream servicing Wal-Mart globally, selling up to $2 billion worth of goods including WSG, home furnishings, apparel and other items, during the first year of the partnership. Li & Fung President Bruce Rockowitz, explained that direct sourcing is a huge, volume-driven, lower-margin business resulting in the lowest prices which is an advantage to Walmart. Li & Fung Ltd, a Hong Kong-based company, funnels clothes, toys and sporting goods to brand-name retailers including Kohl's, Target, Marks and Spencer and Talbots. Since 2006 Li & Fung control extended deeper into the supply chain to include logistics, production and product design effectively replacing and consolidated the role of middlemen.[49]
Education in textile sector[edit]
'Bangladesh University of Textiles (BUTex)' is the only public university specializing in textile engineering in Bangladesh .It was graduated from college in full flagged university on 22 December 2010 by an ordinance of Education Ministry and has a glorious history starting as a weaving school under British colonial rule in 1921. Now the University offers graduation courses in Textile Engineering, Textile Management & Fashion design. 'Khulna University of Engineering and Technology (KUET)' is also going to start B.Sc in Textile Engineering for session 2012–2013.
There are Government and private Textile Engineering College under different universities which offers B.Sc. in Textile Engineering course including specialization in Yarn Manufacturing, Fabric Manufacturing, Wet Processing, Garments Manufacturing and Fashion Design. The colleges are as below:
1. Bangladesh University of Textiles, http://www.butex.edu.bd
2. Mawlana Bhashani Science & Technology University, Tangail-1902
3. Bangabandhu Textile Engineering College, Tangail
4. Begumgonj Textile Engineering College, Noakhali
5. Pabna Textile Engineering College
6. Textile Engineering College, Chittagong, Chittagong
7. Abdur Rab Seriniabad Textile Engineering College, Barisal
8. Southeast university, Dhaka
9. Daffodil International University, Dhanmondi, Dhaka
10. Ahsanullah University of Science & Technology, Tejgaon, Dhaka
11. City University,[50] Banani, Dhaka
12. Primeasia University, Banani, Dhaka
13. NORTHERN UNIVERSITY BANGLADESH, BANANI, DHAKA
14. Apparel Export Group, Mirpur, DHAKA
15. University of South Asia, banani, dhaka.
16. Uttara University ,Uttara.
There is another Institute named Public Private Partnership (PPP), National Institute of Textile Engineering and Research, Savar-Dhaka, Niterbd
BGMEA University of Fashion and Technology
is another university, started functioning in 2000 and was affiliated to the National University, Bangladesh in 2001. BUFT is conducting 2 years MBA course in Apparel Merchandising and 4 years B.Sc. (Hons) course in Apparel Manufacture & Technology (AMT), B.Sc. (Hons) in Knitwear Manufacture & Technology (KMT) and B.Sc (Hons) in Fashion Design & Technology (FDT). It also has some Diploma courses.
Shanto-Mariam University of Creative Technology or (SMUCT)
Dhaka is also another university providing education on Apparel and Fashion designing. In fact it is the best in Fashion Designing education in Bangladesh and one of the leading Universities in South-East Asia. The National Institute of Fashion Technology (NIFT)is another institute in Bangladesh.
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