ISSN 1817-5090

The Cost and Management

Vol. 35 No. 1
January-February, 2007 pp. 59-70

Garments Industry: A Prime Mover of the Socio

Economic Development of Bangladesh
Md. Salim Uddin
Mohammed Abu Jahed
Abstract: The garments industry has been leading the Bangladesh economy since
the early 1990s. Garments are the country’s biggest export making up about three-
quarters of total exports, and the industry is a symbol of the country’s dynamism
in the world economy. The industry is also the main non-farm formal sector creating
employment opportunities for the poor. The greater part of the workforce is female,
less educated, and has migrated from rural areas. Thus, the garment industry is
seen as contributing to poverty reduction in Bangladesh by providing employment
opportunities with higher wages for the poor who would otherwise be engaged
in low-wage economic activities in rural areas. There was much discussion about
the survival of Bangladesh’s garment industry prior to the final phase out of the
Multi-Fiber Agreement (MFA) from 1 January 2005 which was expected to greatly
intensify competition in the international garment market. One of the most
influential forecasts was that only China and India would gain from the MFA
phase out and that Bangladesh and other smaller suppliers of garments would
lose out. Fortunately, there was no immediate major adverse effect in Bangladesh.
Garment exports to the United States grew over the whole of 2005, while those
to EU declined only slightly. However, the prospects for the industry in Bangladesh
are not certain and the future trend in garment exports needs to be watched.
Keywords: Garments industry, Product and market diversification, Multi-Fiber
Agreement, Labor unrest.

Prologue
Bangladesh experienced disequilibrium in both the internal and external sectors throughout
the seventies. The situation was critical in the first three years after independence due to the
bloody war in 1971. But during the three decades, the socio-economic condition of Bangladesh
has not been improved much as expected. Domestic resource mobilisation was highly
inadequate compared to investment requirements. The government resorted to deficit financing,
money supply increased rapidly, and inflation rates were high. The balance of payment position
was precarious. The situation was aggravated through rapidly rising import prices and
deterioration in the terms of trade. For these reasons, Bangladesh has been dependent on
foreign aid for financing development programs and for filling up large fiscal and external

Mr. Md. Salim Uddin, MBA, FCA, FCMA is an Associate Professor, Department of Accounting & Information Systems, University of Chittagong and
Mr. Mohammed Abu Jahed, MSIS (USA), MBA is an Assistant Professor, Department of Management Studies, University of Chittagong, Chittagong.

59
Uddin & Jahed

deficits. Faced with a situation of burgeoning population, limited land and poor resource base
and declining growth in agriculture severely constrained by a host of socio-economic factors,
Bangladesh is hard pressed to rapidly expand employment opportunities outside agriculture.
Against this backdrop, the urgent need to adopt and implement an export oriented, and
employment intensive industrialisation strategy. The outcome of the post-war industrialization
efforts have reaffirmed one conventional wisdom-the key to the possibilities of rapid
industrialisation and sustained growth lies in the pursuance of a globally competitive
industrialisation strategy dictated by the dynamic comparative advantage of the economy (Bakht,
1993). In such a context, a least developed, resource poor, labour surplus country like
Bangladesh, garment industry has been playing a vital role for the emancipation of socio-
economic condition through employment and foreign earnings and acting as driving force in
the economic development. The garment industry also particularly has played a pioneering
role in the development of industrial sector of Bangladesh. Though it took a rather late start i.e.
in 1976 but it soon established its reputation in the world market within a short span of time.
Resultantly, garment is now one of the main export items of the country. Besides, enriching
the country’s economy it has played a very crucial role in alleviating unemployment.
In the above background, an attempt has been made in the paper to overview the garment
industry in Bangladesh in order to assess its role in the socio economic development of Bangladesh.

Objectives of the Study

The present study on garment industry as a driving force for the socio economic development
of Bangladesh demands examination and evaluation of multidimensional aspect of garment
sector and its impact on the socio-economic condition of Bangladesh. In such a context, the
main objective of the study is to examine, evaluate and analyze the some important aspect of
garment industry in Bangladesh. In order to materialize the main objective, the following
specific aspects of garment industry in Bangladesh have been studied, evaluated, examined
and analyzed:
(i) To study and evaluate the growth and development of garment industry in Bangladesh;
(ii) To examine the contribution of garment industry to the national economy of Bangladesh;
(iii) To study the trend of garment product development and its composition in order to analyze
the product portfolio and its diversification;
(iv) To study the present market composition for the Bangladeshi garment product vis-à-vis
market diversification;
(v) Too evaluate the impact of post Multi-Fiber Agreement–MFA scenario in Bangladesh; and
(vi) To analyze the recent labor unrest in the garment industry of Bangladesh.

Methodology of the Study

In light of the objectives of the study, the paper has been designed to examine some important
aspects of garment industry in Bangladesh. An extensive literature survey has been conducted in
order to review the historical perspective, growth, development of garment industry as well as
impact of MFA period and post MFA scenario. The paper is based mainly on secondary data

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 Garments Industry: A Prime Mover of the Socio Economic Development of Bangladesh

sources. Data and information from secondary sources were collected by consulting various
relevant journals, studies conducted by various donor and development agencies, Bangladesh
export statistics published by Export Promotion Bureau and Bangladesh Bank, Economic review
of Bangladesh, annual reports of BGMEA and the publication of WTO. The information published
in the different newspapers and websites in recent times have been consulted in order to present
the recent labor unrest situation in garment sector. The collected data and information were
then processed, tabulated and analyzed to present the findings in a logical and objective manner.

Development of Garments Industry in Bangladesh

In the field of industrialisation, 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 infact 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 realising 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

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Uddin & Jahed

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: Growth of Garments factories in Bangladesh

Year No. of Factory Compound Growth Rate in %
1971 5 -
1977 7 5.77
1981 78 82.70
1983 141 34.45
1984-85 384 65.03
1989-90 759 14.60
1994-95 2182 23.52
1999-00 3200 7.96
2004-05 4107 5.12
2005-06 4250 3.48
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-2: Garments Industries with number of Machine

Year Garment Industry having No of Machine Total
Upto 100 101 – 200 201 and over
2004 2253 (64) 726 (21) 531 (15) 3510 (100)
2005 2275 (62) 773 (21) 620 (17) 3668 (100)
Source: Annual Report of BGMEA. Figures in parentheses indicate percentage

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 Garments Industry: A Prime Mover of the Socio Economic Development of Bangladesh

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.

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 Fibre
Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings,
exports, industrialisation 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-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 %
1984-85 116 - 934 - 12.42 - -
1989-90 624 (40) 1924 (16) 32.43 (21) -
1994-95 2228 (29) 3473 (13) 64.15 (15) 5.87 -
1999-00 4349 (14) 5752 (11) 75.61 (3) 9.23 (9)
2004-05 6418 (8) 8655 (9) 74.15 (-1) 10.63 (3)
2005-06 7901 (23) 10526 (22) 75.06 (1) 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 basling, 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.

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Uddin & Jahed

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-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
1992-93 1240 (86) 205 (14) 1445 36 (77) 11 (23) 47
1994-95 1835 (82) 393 (18) 2228 47 (75) 16 (25) 63
1999-00 3081 (71) 1268 (29) 4349 67 (60) 45 (40) 112
2004-05 3598 (56) 2820 (44) 6418 92 (43) 120 (57) 212
2005-06 4084 (52) 3817 (48) 7901 109 (40) 165 (60) 274
CGR (%) 9.60 25.22 13.96 8.90 23.16 14.52
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.

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 Garments Industry: A Prime Mover of the Socio Economic Development of Bangladesh

Table-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.

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 industrialised 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

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Uddin & Jahed

product. The following Table shows the major share of export market in USA, EU and other
countries in this regard.
Table-6: Selected Region-wise share of Garment Export in percentage
Year USA European Countries USA & EU Other Countries
2001-2002 42.67 55.43 98.10 1.90
2002-2003 38.02 57.12 95.14 4.86
2003-2004 28.64 65.42 94.06 5.94
2004-2005 30.64 64.24 94.88 5.12
2005-2006 33.67 49.77 83.43 16.57
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.

Post MFA Scenario in Bangladesh

The textile and apparel industries have led industrializatio 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
66 The Cost and Management, January-February, 2007
 Garments Industry: A Prime Mover of the Socio Economic Development of Bangladesh

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-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 10,723 16,808 23.39 56.75
2 Mexico 7,098 6,845 6,230 -3.56 -8.98
3 Hong Kong 3,732 3,878 3,523 3.93 -9.16
4 India 2,056 2,277 3,058 10.74 34.29
5 Indonesia 2,155 2,402 2,882 11.47 19.99
6 Bangladesh 1,759 1,872 2,268 6.45 21.15
13 Cambodia 1,229 1,418 1,702 15.42 20.06
Source: U.S. Department of Commerce, Bureau of Census cited in Yamagata, 2006

Table-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 65,552 69,642 15.17 6.24
1 China 10,913 13,714 20,334 25.66 48.27
2 Turkey 8,112 9,348 9,790 15.24 4.72
3 Bangladesh 3,471 4,578 4,346 31.90 -5.08
4 Romania 4,124 4,572 4,285 10.87 -6.28
5 India 2,599 3,020 3,988 16.23 32.02
19 Cambodia 475 643 587 35.27 -8.77
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;

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Uddin & Jahed

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.

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

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 Garments Industry: A Prime Mover of the Socio Economic Development of Bangladesh

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.

Conclusion
Bangladesh has earned nearly $8 billion in 2005-06 by exporting garment products, mainly to
Europe and the United States. This is about 75 percent of total export earnings of the country.
The RMG industry has around 4,250 units across the country. It employs more than 2 million
workers, most of whom are poor women. Whenever the country is criticized for its high level
of corruption and confrontational politics, its garment industry is held up as a success story.
After the end of the Multi-Fiber Agreement at the beginning of 2005 and the changeover to the
new World Trade Organization regime, it was feared that the Bangladesh’s booming textile
industry would suffer as it would loose business to countries like China and India. But fortunately
for Bangladesh, so far this prediction has been proved wrong. In fact, the industry has continued
to grow at a healthy rate of 20 percent. However, this does not indicate that the Bangladesh
garment industry has become more competitive. The reality is that this increase has been
largely due to restrictions imposed on China by the Western nations. As the quotas under MFA
had led to an artificial trade structure, the international RMG market faces a restructuring
process. Bangladesh’s exports are heavily concentrated in the RMG sector, which has been a
main driver of growth and poverty reduction. With more than three-quarters of exports RMG
related, the country is vulnerable to the MFA shock, in particular since it is confronted with
other problems that affect its competitiveness. These problems are not limited to the RMG
sector, but will be exposed more fully there in the post-MFA world. The challenge is therefore
to improve competitiveness, both in the RMG sector and economy wide, and diversify exports.
Garment industry in Bangladesh has been facing multidimensional problems since its
establishment. Acute power crisis followed by non tariff restriction, chronic labor unrest, lack
of infrastructural facilities, inadequate supply of material and accessories, inability or lack of
efforts to diversify the products and markets, irregularities relating to customs, bond, and

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Uddin & Jahed

shipping, financing and the like are the major problems hampering the production and increasing
the cost of production significantly. Due to power shortage shipments are sent through air,
thereby increasing its cost. Unfortunately the government has not taken any step to improve
the situation. On the other hand, people have been shot dead for demanding regular supply of
electricity. In this context, it is still right time to devote all out efforts by the relevant agencies
and authority as to expansion and solutions of numerous problems that it faces now. In fact a
well designed plan with diversified product manufacture still provides opportunities to use
this sector for socio economic development of Bangladesh. In such a context, it is suggested
that appropriate and relevant government and nongovernmental authorities/agencies can take
some strategic and effective measures which includes liberal bank loan facilities for reviving
sick garment units and BMRE; development of primary textile subsectors for fulfilling the raw
materials needs; arrangement for captive power supply for utilization of production and its
continuation; adequate fiscal incentive for growing the sector; strategic arrangement or
mechanism for quick resolution of labor dispute; creation of separate ministry for garment
industry, establishment of cost reduction strategy and labor productivity cell to conduct various
study in this field and other supportive policies relevant for the growth, development and
survival of garment industry in Bangladesh. These may be helpful to overcome the problems
and the contribution of garment industry towards socio economic development of Bangladesh
will be improved and sustained through value addition. r

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70 The Cost and Management, January-February, 2007