Made in Bangladesh: challenges to the ready-made garment industry

• DOI: https://doi.org/10.1108/JITLP-06-2013-0019
• Date: 11 March 2014
• Pages: 80-96
• Published date: 11 March 2014
• Author: Meenakshi Ramesh Kurpad
• Subject Matter: Strategy,International business,International business law

Made in Bangladesh: challenges to

the ready-made garment industry

Meenakshi Ramesh Kurpad

West Bengal National University of Juridical Sciences, Kolkata, India

Abstract

Purpose – The primary aim of this paper is to evaluate the challenges before the growth of the

ready-made garment (RMG) industry in Bangladesh, the economy’s backbone, and suggest

appropriate reform.

Design/methodology/approach – The paper begins by tracing the growth and evolution of the

RMG industry before identifying the challenges. It then proceeds to suggest appropriate reform for the

same.

Findings – The paper argues for more effective models of collective bargaining and unionism as a

solution to the problems that the industry faces.

Originality/value – The paper is the f‌irst of its kind in the sense that it is a comprehensive account

of the challenges to the RMG industry in Bangladesh.

Keywords Bangladesh,Trade, Code of conduct, Collectivebargaining, Ready-madegarment, Unionism

Paper type Research paper

This note seeks to address the trade-off between low wages and competitive advantage

in the ready-made garment (hereinafter“RMG”) sector in Bangladesh and to address the

problem of unsafe working conditions. It begins with the historical and economical

background of the Bangladeshi economy and the RMG industry, in particular. It is

followed by identif‌ication of the challenges in the garment industry and in specif‌ic, the

need for wage increase for workers and ensuring safe conditions of work. The fourth

section, looksat why and how collective bargainingcan serve as an effective mechanism

to address the trade-off. It is followed by an examination of the collective bargaining

mechanismas followed in Bangladesh and a scrutinyof the reasons for its failureto work

as effectual mechanism in the RMG industry, with a focus on the prevailing regulatory

framework. Itthen argues why, despite the failures,collective bargaining is stillthe most

ideal mechanism to address the trade-off in the garment industry. This note proposes a

more eff‌icaciousmodel of collective bargainingto address the trade-offin the Bangladesh

RMG industryin the wake of the government easingtrade union regulations. In addition,

it also looks at corporatecodes of conduct as an alternative solution.This note concludes

by calling for a “fairer globalisation” to Bangladeshi workers.

I. Growth of the Bangladesh economy

A. Early years – 1971-1975

Prior to Independence, the economy of East Pakistan (as it was then known) grew at a

dismal annual average rate of 4 per cent. About a f‌ifth of that economy was destroyed

during the Liberation War of 1971 (Rahman and Yusuf, 2009). Since independence,

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1477-0024.htm

The author would like to thank Nandan Nawn, Assistant Professor of Economics at the

West Bengal National University of Juridical Sciences for his valuable comments and inputs.

Received 30 June 2013

Revised 19 October 2013

Accepted 5 December 2013

Journal of International Trade Law

and Policy

Vol. 13 No. 1, 2014

pp. 80-96

qEmerald Group Publishing Limited

1477-0024

DOI 10.1108/JITLP-06-2013-0019

JITLP

13,1

80

the Bangladeshi economy has seen many transformations. These phases of economic

transformation have been broadly categorised into three phases by Ahmed and Sattar

(2004a) namely:

(1) early years;

(2) de-nationalisation and de-regulation; and

(3) economic reform; which is the present stage.

From 1971 to late 1975, Bangladesh followed a development strategy of state

intervention and control (Ahmed and Sattar, 2004a). This f‌irst phase of economic

transformation was characterised by excessive nationalisation of industries. In the

initial years of its statehood, strict trade controls were placed on exports and imports in

the country. There was massive nationalisation of major industrial enterprises,

excessive price controls and control on agricultural inputs and marketing were placed

(Ahmed and Sattar, 2004b). The RMG industry at this stage was practically non-existent

as Bangladesh experimented with a socialist framework (Ahmed and Sattar, 2004a).

B. De-nationalisation and de-regulation – 1976-1990

From 1976, there began a phase characterised by de-nationalisation, economi c

de-regulation and limited trade liberalisation (Ahmed and Sattar, 2004a). In this phase,

there were initial trade reforms, when the government began to relax trade barriers and

promote a “free-trade” environment for the garment sector (Ahmed and Sattar, 2004b).

De-regulation and relaxation of price controls were introduced during this period.

There was also encouragement of private sector services such as banking. This second

phase lasted till 1990 when major trade policy reforms were introduced.

C. Economic reform – 1990 onwards

Economic reforms in 1990 led to substantial scaling down and rationalisation of tariffs,

removal of trade-related quantitative restrictions (QRs) and elimination of import

licensing, unif‌ication of exchange rates and the move to a more f‌lexible exchange

rate system (this coincided with the Indian reforms of 1990s temporally as well as

content-wise) (Ahmed and Sattar, 2004a). These reforms have brought in much needed

economic growth and development to the Bangladeshi economy. For example, GDP

per capita has increased substantially post-1997. “In 2009, Bangladesh’s GDP was

21,000 taka. If there had been no reforms, the GDP would have been at an abysmal

7100 taka or worse off” (Rahman and Yusuf, 2011, p. 2). These reforms also brought in

substantial reduction and rationalisation of tariffs, removal of QRs, and a move from

multiple to a unif‌ied exchange rate system, convertible current account and an overall

outward orientation of trade policy regime (The World Bank, 2012). There was

large-scale liberalisation in trade and investment, as well as market orientation in this

period. The economy shifted from a f‌ixed to a moderately f‌lexible exchange rate system

(Ahmed and Sattar, 2004b).

Over the last f‌ive decades, the Bangladesh economy has undergone changes in the

sectorial composition as well. Bangladesh’s GDP grew from 4.30 US$4 billion in 1960

to US$115.61 in 2012 (Trading Economics, 2012). Industries contribute to about

28.6 per cent of the GDP (Global Finance, 2013), which has nearly doubled from

15.7 per cent in 1960 (Roberts and Fagerna

¨s, 2004). The contribution of industries to the

economy is much larger than agriculture (Rahman and Yusuf, 2009). One of the major

Ready-made

garment

industry

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