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Topics: Industry, Wage, International trade Pages: 37 (10847 words) Published: December 18, 2012
Fukunishi ed., Dynamics of the Garment Industry in Low-Income Countries: Experience of Asia and Africa (Interim Report). Chousakenkyu Houkokusho, IDE-JETRO, 2012.

Chapter 6
The Garment Industry in Bangladesh
Mohammad Yunus and Tatsufumi Yamagata

The garment industry in Bangladesh has been expanded almost uninterruptedly since the late 1970s. It survived Multi-Fiber Arrangement (MFA) phase out at the end of 2004, and remains internationally competitive to date. In this chapter, sources of competitiveness of the industry were discussed. There are three potential strengths, i.e. market force, government policy and dynamism inside the industry. Market force, which is represented by low wage of labor, is surely fundamental to the competitiveness. The roles of the government, industrial associations and technology transfer are still contentious issues to be discussed in the final report. Keywords: Garment industry, Bangladesh

1 Introduction
Everywhere, the industrial sector has been the driver of growth as countries have moved from low- to middle-income status. Bangladesh as a country with a poor land-person ratio is unlikely to prosper through agricultural growth alone. The average productivity of industry is higher than in agriculture. As people move out of agriculture into industry, the sector can provide high-wage employment for large numbers of workers and can raise social productivity by producing high-value goods on a mass scale. Besides, poor countries can also earn valuable foreign exchange by exporting manufactured products and the ensuing foreign exchange can be used to invest in new vintage of machines and technologies so that a rapid move up the technology ladder becomes possible. The 1

importance of industrial development as an engine of Bangladesh's economic growth is also reinforced by a growing realization that the development of agriculture sector, one of the mainstays of the country's economy, critically hinges on its backward and forward linkage with the industrial sector.

During the post-independence period, Industrial development of Bangladesh has been directed by several Industrial policies: Industrial Policy of 1973, the New Industrial Policy of 1982, the Revised Industrial Policy of 1986, Industrial Policy of 1999 followed by a number of other policies, with the latest being the Industrial Policy of 2010. All these policies have attempted to revamp the sector with a view to creating a strong manufacturing base in the economy. 1 As a result, according to the latest BBS data (FY09-10), the contribution of the manufacturing sector to GDP is 17.86 percent, which was recorded 17.9 percent in FY08-09. The BBS recorded the growth rate of the manufacturing sector at 5.73 percent in FY 09-10. The Industrial Policy, 2010, announced recently, proposes an integrated strategy of economic growth through rapid industrialization. It envisages an increase in the industry sector’s share in GDP to 40 percent by 2021, with the proportion of the workforce employed in the sector concurrently rising to 25 percent of the country’s total labor force. Data available from Bangladesh Bureau of Statistics (BBS) show that the quantum of industrial production, representing medium to large-scale industries, rose to 413.40 in FY08-09 from 254.45 in FY02-03. In FY 2009-10 averages QIP stood at 431.51. This implies that the large industry has come to play an increasingly important role within the industrial sector in recent years. The rise in the share of large industry in the industrial GDP, however, conceals the fact that the industrial base has continued to remain rather narrow. Accordingly, the top five industries contributed to sectoral growth excepting ready-made garment (RMG), the other four such industries belong to importsubstituting category: pharmaceuticals, bidi (a sort of tobacco), publication and printing and re-rolling mills. However, excepting cement industry, which was supported by large FDI...
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