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Philippine Textile Research Institute

Institute Address:General Santos Avenue, Bicutan

City:Taguig Postal Code:1631

Tel:+63 (02)837-1325

Fax:+63 (02)837-1325

WWW: Philippine Textile Research Institute

University of Santo Tomas

Manila, Metro Manila, Philippines

address: España Street1008 ManilaPhilippines

telephone: +63 (2) 731 3101

website URL: http://www.ust.edu.ph/

staff: acad director: Tamerlane Lana

public relations: Yolanda D. Reyes

subjects include:Fabric & Textile

Fashion & Apparel

Central Luzon State University 

MuñuzNueva Ecija, Central LuzonPhilippines

url:http://www2.mozcom.com

acad director: Fortunato Battad

chief librarian: Celia de la Cruz

subjects:Garment Technology: Eden Agcaoili

Central Mindanao University

University Town, Musuan8710 BukidnonPhilippines

email: geneharvey_grey@yahoo.com

acad director: Jaime Gellor

chief librarian: Esther Dinampo

public relations: Gene Harvey

subjects:Clothing & Applied Arts: Norma Culas

Fashion Institute of the Philippines 

Fashion Institute of the Philippines was established in July 2003 and has since then produced quality graduates who are now big names in fashion, operating their won shops and boutiques or working here and abroad for various fashion and design companies.

Fashion Institute of the Philippines Fashion Institute of the Philippines, Unit 2407, One San Miguel Avenue, Ortigas Center Corner Shaw Boulevard, Pasig 1600 Pasig ,Philippines.

Contact Person : Shanon Pamaong (Director)

Phone : 63-2-6355383 0917-8302108

Fax : 63-2-6355383

Email : shanonpamaong@yahoo.com

URL : http://www.fashioninstitutephil.com

The External Threats of Textile Sector in Bangladesh

Bangladesh has successfully established a remarkable presence in the world markets, particularly in the US and EU markets. If one analyses its external threats and opportunity profile, one finds that its powerful competitors will try to influence the trading environment in such a way as will create hurdles for Bangladesh to retain or improve its competitive edge. This hurdle can take numerous forms. Broadly, these are discussed in two categories: 

(1) Phasing out of MFA and 

(2) Other non-tariff barriers.

(1) Phasing Out of MFA

It seems that the phenomenal growth of RMG exports from Bangladesh has become a threat to its powerful competitors. Naturally, they (the competitors) are preparing to snatch away the markets from Bangladesh with aggressive business strategies. They will certainly take advantages of the new provisions included in the final Acts of Uruguay Round. One such provisions is the phasing out of the MFA.

Before we can answer the question whether the phasing out of MFA will be a threat to Bangladesh, we need to understand the origin and meaning of MFA (Multifibre Agreement). The GATT did not originally include textile and apparel industries in its principles of MFN (Most Favoured Nation). The Uruguay Round (UR) decided to integrate textile and RMG industries into GATT system. As is well known, GATT/WTO prohibits not only unjustified tariff barriers but all forms of non-tariff barriers including imposition. In sixties, while GATT principles prohibited discrimination between the trading partners, it allowed certain exceptions to GATT principles on the ground. Such an exception is MFA. The United States and several other developed countries argued that if the developing countries which enjoy comparative advantages in terms of labour costs are allowed to export RMG without any restrictions to the cost-disadvantaged developed countries, the textile and apparel industries in the latter countries will be injured. They strongly felt that the interest of the domestic textile and apparel industries of the USA and other developed countries where labour cost is very high must be protected in way which is recognised by the GATT. To achieve this goal, a special provision known as MFA was instituted. Under the MFA provisions, GATT allowed the USA and other importers of RMG to impose quota restrictions (use of trade restrictive quota is not permitted by GATT except in this case). The MFA has been in place since 1974. Later on when trade liberalisation policy started riding high, the arguments for phasing out the MFA were put foreword by those countries which were hurt by it (Siddiqi : 1995, Raffaeli : 1994). After gruelling debate, the final Uruguay Round negotiations envisaged the phasing out of MFA by the year 2005, within 10 years beginning July 1, 1995 (Goto : 1990).

The phasing out of MFA is a global issue. It has important implications for both developed (importers of RMG) and developing (exporters of RMG) countries. We should remember that the MFA has been providing a country like Bangladesh special and indirect through quota system in its export markets. One must recollect that it was the operation of MFA or quota restrictions which prompted countries like South Korea, Hong Kong, Singapore, India, Sri Lanka etc. to come to Bangladesh to taker the advantage of its non-quota status and cheap labour, and they for their own interest provided initial motivation and help to Bangladeshi entrepreneurs to acquire the position of a powerful supplier in the world market. With the phasing out of MFA the position of Bangladesh in the world markets will change.

After the year 2005, if MFA is really phased out, these countries, to be more specific, companies from these countries who have collaboration with our entrepreneurs, may not be our partners - in - progress due to the changed circumstances. Under the changed circumstances, all countries including those which are now under quota restrictions, will be on quota-free status. In fact they will probably emerge as our stronger competitors. This means that Bangladesh will have to compete with a larger number of established and powerful suppliers of ready-made garments, namely, China, Hong Kong, Singapore, Indonesia, Malaysia, India, Pakistan, Sri Lanka, Egypt, etc. in the world markets on the equal terms and of its own. In addition, Vietnam, Poland, Brazil, and small countries of Caribbean region are likely to emerge as new competitors (Quddus : 1996).

Some people fear that the RMG exports of Bangladesh may be driven out from the world market. But we believe that if Bangladesh can take certain measures, it should continue to do as well as it is now doing. To retain its competitive edge, it needs to:

i) make substantial development to labour productivity and managerial efficiency through the effective training efforts.

ii) look for new product development and diversification along with new venues of markets.

iii) make structural development to textile and RMG industries with appropriate backward and forward linkage.

(2) Other Non-Tariff Barriers

The final Acts of the Uruguay round (UR) negotiations expanded, integrated and strengthened the GATT principles of reducing / eliminating all forms of trade barriers with a view to increase world trade. It is easier to identify and remove trade restrictive tariff barriers because they take so many and such subtle forms that multilateral negotiators face more disagreement than agreement on their definitions. For example, customs evaluation procedures suitable in a particular country may be interpreted as deliberately created non-tariff barriers by its trading partners. Similarly, there is a scope for ad misinterpretations of subsidies given to exporters by the respective government. The child labour, environmental and human right issues are also susceptible to similar “misinterpretations(Jonokontho : 1995).

Quota System

The quota system imposed by importing country is a great threat for garment industry. A garment exporting country cannot export more than quota in an importing country for the introduction of quota system. In 1983-84, only USA was the buyer of 70% exported garments out of the total export of garment and the growth of garment industry in that year was 300%. But after imposing quota system by USA in 1985, the garment industry faced a great difficulty. Many small garment manufacturing units were closed down and about 55000 garment workers lost their job. Many garment manufacturing units reduced their production and sold their licences to others. Now Britain, Germany, EC countries and Scandinavian countries have imposed quota for importing garments.

Competitor

Competition has become intense in the garment industry at present. Garment industry is emerging rapidly in Taiwan, Hong Kong, Singapore and Korea in Asia. Thailand, Malaysia, Indonesia, Philippines and Sri Lanka have found the garment industry more attractive to develop their economy from 70 decade. Vietnam has become a potential entrant in garment industry throughout the world.

Herkin Bill

Herkin Bill is a bill placed in the Congress by a Congressman named Herkin for imposing restriction on importing garment in the USA. The bill states that the garments are prohibited in USA market which are using child labour. This bill is a great threat to the garment industry in Bangladesh. Because the garment industry in Bangladesh is mainly based on low-cost child labour. If this low-cost child labour cannot be used in the garment industry of Bangladesh, the production cost of garment will increase. So, it will be very difficult for Bangladesh to compete in the international garments market.

Threat from Various Regional Organisation (Such as NAFTA, EEC, EFTA, etc.)

The trend of the modern world is regionalism to strengthen the economy of the member countries through co-operation. North American Free Trade Association has been signed recently and the main initiator of NAFTA is the USA, who is the main buyer of garment from Bangladesh. According to the treaty of NAFTA, USA will invest its domestic resources to develop their economy by using 60% of their own raw materials through utilising the low cost labour of Mexico. So, it is a potential threat to the garment industry of Bangladesh. On the other hand, EC countries have already declared a single currency for European Common Market called ECU (European Currency Unit) to protect the interest of the member countries through co-operation. This sort of protectionism is great threat to the garment industry of Bangladesh, because Germany, Britain, Denmark, Norway, Belgium, Italy, etc. are buyers of the garment of Bangladesh.

Scarcity of Raw Materials

There is no alternative of ample supply of raw materials in order to become self-sufficient in any industry. The raw materials of the garment industry of Bangladesh is foreign dependent. Bangladesh has to import raw materials of garments from abroad in order to process it in Bangladesh. About 70% of garment export income has to be spent for the raw materials. Moreover , the export and import policy of Bangladesh is very weak. So, the scarcity of raw materials for the garment industry in Bangladesh is a great threat.

Political Instability

Bangladesh is not a stable country politically. Political instability is a great threat for any industry of our country. Frequent strikes and hartals are great obstacles for the growth of any industry. The production cost increases and productivity decreases because of frequent hartals and strikes. Garment producers cannot keep their contract with buyers because of hartals and strikes. Hartals and strikes have become a common phenomenon of Bangladesh. There is a positive relationship between law and order situation of any country and export. If the law and order situation improves, the volume of export increases. Unfortunately, the political stability and law and order situation is not in favour of the export of our country and becoming a threat to our export trade day by day.

The Child Labour Issue

It is quite likely that by restructuring the industry and improving the productivity and managerial efficiency, Bangladesh will be able to compete in the international markets. But problem will arise if the importers apply subtle non-tariff barriers under the disguise of humanitarian and environmental arguments. For Bangladesh, the problem is not how to cope with the technical and cost reduction problems; the real problem is how to tackle the problem of such non-tariff barriers. As an example, one can cite the child labour issue. The much-talk about the “Child Labour” issue can be an effective non-tariff barrier. The Harkin’s Bill designed to prevent the abuse of child labour is a prima-facie based on humanitarian ground. But many people will contest the basic logic. The child labour issue should be looked at from three perspectives:

a. Human Rights

Abuse of child labour violates human rights. Therefore, we should not allow exploitation or abuse of child labour. But the problem is how to justify a general definition of child labour use. What is child abuse in rich industrialised countries like USA or Germany, may not be the same in Bangladesh, an economically and socially poor country. Some would argue that in the absence of alternative arrangements, barring 13 year olds from employment which is not equivalent to forced or bonded labour, may create social problems. The ECONOMIST in its October 1-7, 1994 issue published some evidence in support of the latter argument. To quote,Studies by ILO show that when third world governments banned child labour, children have usually been made worse-off. Earnings from labour may have been the only legal source of family income; a child stopped from working could be forced into begging or prostitution, or starvation. And if imports from these countries are banned, this will keep these countries poor longer; hardly a good way to advance worker. The massage disseminated by the ECONOMIST cannot be ignored.

b. Business Consideration

Replacement of some 12000 child labour now working in Bangladesh RMG factories by older and more experienced workers will increase the production cost. But given the wage structures in Bangladesh, it will not be an amount to be concerned about. Another cost is to be added. The stipend-support and schooling of the terminated children will cost the industry some money. If the total cost is shared by the industry, it is not likely to increase FOB price to a level which will make RMG less competitive in the world market.

c. Non-tariff Outlook

The possibility of using the child labour issue as an effective non-tariff barrier is the most serious concern for me. Those who oppose using child labour do so perhaps with very pious intention. With all their good intentions, they insist that none should buy apparel manufactured by child labour. But unfortunately, good intentional cannot be measured scientifically. Therefore, the argument that the developing countries exploit child labour, therefore, they should be denied access to rich countries markets may be constructed as a form of non-tariff barrier and in disguise a protectionist tool. In fact, a number of exporters who argue that the child labour issue is simply a play of the powerful competitors in disguise to create non-tariff barrier to the booming RMG exports from Bangladesh. Since they cannot beat Bangladesh cost-wise, they are misusing the humanitarian argument which prima facie cannot be challenged. It is interesting to note that they (those who are against child labour) do not talk about child labour in other industries. Is it because no other industry posses any threat to their industries? This question gives rise to misunderstanding.

But unfortunately, Bangladesh has been warned by its major buyers particularly USA to the effect that they have definite proof that many RMG factories in Bangladesh employ (exploit?) underaged children, therefore violet human rights. If this situation continues, they will stop buying from Bangladesh and Bangladesh is not in a position to say.We will do as we think right. If Bangladesh insists on saying this, it will demonstrate an inarticulate business diplomacy which will result in huge loss of RMG markets. This will bring sufferings to some one million workers of the RMG industry and at least 4 million members of their families. This sufferings will be caused due to the employment of some 10-12 thousand underaged children. We can tackle this problem in an amicable way if we use better diplomatic acumen. I personally believe that the Government of Bangladesh and BGMEA have shown this high quality diplomatic acumen by signing the MOU between ILO, UNICEF and BGMEA on July 4, 1995. Under this MOU some 2200 member factories of BGMEA were supposed to terminate all the underaged (younger than 14 years) workers by October 31, 1995 so that they are not blamed for child labour issue. As a result the USA and other importers will continue to buy from Bangladesh. But under the MOU, the BGMEA has to implement a pre-planned compensatory educational program for the terminated children. These terminated children will be educated and trained in schools jointly supported by the BGMEA, ILO, and UNICEF, for such time until they are 14 years old. This is a good move, provided it is implemented as planned. But I must point out BGMEA has perhaps promised more that it can deliver. According to MOU, all the underaged children were needed to be identified and then terminated by October 31, 1995. Understandably, termination is not a problem. But identification of underaged children in more than 2200 factories will take more time than available (two months). Another thorny problem is how to resolve the disagreement on the real age of a girl/boy if that arises between the BGMEA and ILO representatives who will jointly visit the factories. There is already disagreement on the estimated total number of child labour. BGMEA estimates it is about 10,000 whereas ILO estimates it to be at least 14,000! Twenty five teams started their survey on August 28, 1995.

Additional Barriers

Is the child labour issue the last problem of RMG of Bangladesh will face? Or the powerful competitors of Bangladesh will raise other issues, for example, environmental issues or minimum wages issues, apparently on humanitarian ground, but in reality with the hidden agenda of increasing the cost of production in Bangladesh to make its products less competitive? We are afraid, these issues may be raised in future (Sanaullah : 1996, Siddiqi : 1995, Ahmed, Abu : 1994).

There are many crude as well as subtle non-tariff barriers which retard free trade. It is to be noted that it is not Bangladesh itself which is the target, it is the relatively cheaper apparel which Bangladesh and other developing countries can produce and export. For example, Indian cotton skirts were banned from US markets on the ground that these skirts were inflammable which most Indian exporters thought was a form of non-tariff barrier. Many of these non-tariff barriers are concerned with environment as well. While environment can cover many aspects, let us take up the case of labour situation, their working conditions, wages, right to organise, etc.

The final act of the Uruguay Round (UR) does not specify any well defined provision which conditions international transactions on the environmental standards. The Uruguay Round barely touches on the environment. However, a committee on trade and environment has been set up and will be part of World Trade Organisation. There is a demand that the developing countries should improve environmental standards in return for access to rich-country markets. It is envisaged that not only workplace standards such as minimum wages, and safety standards, but also broad political rights such as freedom for association and the right to collective bargaining will have to be improved to an acceptable level. The UR recognises the need for standardised labour conditions on the ground of human rights. If the rich industrialised countries insist that wages, working conditions, health and safety standards, etc. in a country like Bangladesh are so poor, Bangladesh will certainly be in a disadvantaged position.

It is true that people in the rich industrialised world are naturally appalled by the “deplorable” working environment in the third world. While their sentiment is well-taken, it is difficult to find a solution acceptable to all.

A question looms large about the comparability of the environment. The rich countries’ perception of environmental concerns is different from that of the poor countries. Can we sensibly compare the environmental conditions which include the working conditions in factories in Bangladesh with that incomparable? We are not only economically poorer, we are different socially, culturally and politically. Therefore, our priorities, even on moral grounds, will be different from those of the rich countries.

Cheap labour is a natural factor endowment in Bangladesh. It would be nice and ideal to be able to pay handsome wages to the girls/women working in RMG factories of Bangladesh. But what is handsome wage in Bangladesh, may not seem handsome in Germany or in the USA. Given the price levels, per capita income and average living standard in Bangladesh, it is neither necessary nor economically / socially tenable to pay an hourly wage, say @ $5.00 in Bangladesh. If we pay these high wages to RMG workers, this will create social imbalance. Most of the domestically oriented industries will not be able to pay that high wages. 

In accordance with 

            -BGMEA Annual Report

Competitiveness of the Ready-Made Garment Industry in Bangladesh

The United States was the main export destination for Bangladeshi RMG products in the early 1990s followed by the European Union, but the European Union has surpassed the United States over time. These two destinations generate more than 90 per cent of the total RMG export earnings of Bangladesh (BGMEA and the Export Promotion Bureau websites; and Quddus and Rashid, 2000).

The shares of other importers, such as Australia, Canada, China, Japan and the Russian Federation as well as countries in the Middle East, in the total RMG export earnings of Bangladesh are minimal. This section of the paper focuses on surface-level competitive performance of the Bangladesh RMG industry in the United States and the European Union markets only. In addition, the performance of China and India along with Bangladesh as RMG suppliers to international markets is also considered for comparative analysis.

(a) Export Competitiveness in the United States Market
Bangladesh has experienced some product diversification in its export of garments to the United States market in recent years compared with the early 1990s.6 However, the country’s performance in upgrading its products is not significant with regard to the United States market (Haider, 2006). The country experienced a sharp increase in the export of garment products to the United States market in the 1990s, but faced declines in export earnings from that country in 2002 and 2003, followed by slow increases since 2004. The exports of India also increased rapidly in the 1990s, although that country experienced comparatively slow progress in the last few years. However, the RMG exports of China to the United States have increased at a startling rate over the years. For example, the textile and garment export earnings of China, India and Bangladesh from the United States were $3.6 billion, $0.8 billion and $0.4 billion respectively in 1990, and increased to $22.4 billion, $4.6 billion and $2.5 billion respectively in 2005. Such rapid expansion in the exports of China represents a major challenge to other exporters. Bangladesh exported a total of 99 types of products in the textile and garment category to the United States in 2005, but most of the category’s contribution was minimal. For India and China, the number of textile and garment product categories exported in the
same year to the United States was 161 and 167 respectively.

Category 340 (cotton non-knit shirts, man and boy) was the highest contributor to the export earnings of Bangladesh from the United States, amounting to $332 million in 2005. The export earnings of only eight categories8 crossed the $100 million export benchmark in the same year for the country. A total of 16 categories of exports crossed the $50 million benchmark and 31 categories crossed the $10 million export benchmark .

For India, the highest contributor was category 369 (miscellaneous cotton manufactures), accounting for $439 million in export earnings from the United States in 2005. Also in the same year, a total of 12, 20 and 56 categories crossed the $100 million, $50 million and $10 million export benchmarks respectively.

However, the scenario differed significantly for China. The highest contributor for China in the United States market was category 670 (man-made fibre flat goods/ handbags/luggage), which amounted to $2,066 million in 2005. In the same year, 9, 62, 78 and 124 categories crossed the $500 million, $100 million, $50 million and $10 million export benchmarks respectively.

The market of India seems to be more diversified compared with that of Bangladesh, and the market of China is significantly more diversified compared with that of Bangladesh or India. Figures 1 to 3 also indicate that the exports of Bangladesh are concentrated mainly in cotton or man-made fibre-related products. In contrast, the trade of China and India is diversified in all the fibre groups.

(b) Export Competitiveness in the European Union Market
Bangladesh has experienced both quantitative and qualitative changes in exporting garment products to the European Union market during the period 1996-2005. The textile and garment export earnings of Bangladesh from the European Union increased from 1.2 billion euros in 1996 to 3.7 billion euros in 2005. For India and China, the corresponding earnings increased from 3 billion and 5.3 billion euros in 1996 to 5.3 billion and 21.1 billion euros in 2005 respectively. Garment products generate the major share of Bangladesh’s export earnings from the European Union. However, both textile and garment products in China and India contribute to the export earnings from the European Union. For example, garment products on average generated more than a 95 per cent share of the total textile and garment exports to the European Union from Bangladesh during the period 1996-2005. The corresponding shares for India and China stand at below 75 per cent and 80-90 per cent respectively.

The top five product groups contributed 76 per cent of the total garment export earnings of Bangladesh from the European Union in 1996, and that share increased to 82 per cent in 2005. The corresponding changes for India and China were from shares of 62 per cent and 34 per cent in 1996 to 54 per cent and 45 per cent in 2005 respectively. This trend demonstrates that product diversification in Bangladesh is lower than that of
India and China in exporting garment products to the European Union market. Knit garments from Bangladesh have gained remarkable access to the European Union market during the period 1996-2005. Duty- and quota-free access of garment products manufactured under “two-stage local transformation” (yarn to fabrics, and fabrics to garment) have accelerated the exports of knit garment products from Bangladesh to the European Union. As the knit textile subsector is relatively less capital intensive and requires relatively simple technologies, it managed to undergo rapid expansion, benefiting from the European Union Generalized
System of Preferences. The woven part of the category has failed to utilize that facility owing to a lack of sufficient backward linkages. In contrast to the European Union, both knit and non-knit products have entered the United States market simultaneously, as no special tariff or tax reduction incentive was available there for the import of garment products from Bangladesh.

The product-mix of garment products exported from Bangladesh to the European Union has changed significantly during the period 1996-2005. The share of shirts in total garment exports from Bangladesh to the European Union has decreased, whereas the shares for overcoats, jackets, sweaters, suits and some other garment products have increased in recent years. These changes demonstrate that Bangladesh is achieving some level of product diversification in exporting garment products to the European Union. In addition, a gender analysis indicates that Bangladesh has achieved some upgrading of its products recently in terms of exporting garment products to the European Union. Garments for females are treated as upgraded products compared with garments for males, since they add more value on average. The earnings of Bangladesh from the export of garments for females to the European Union has increased during the period 1996-2005 (Haider, 2006).

(c) Price Competitiveness
China and some other competitors of Bangladesh have implemented sharp price-cutting policies in exporting garment products over the last few years, but Bangladesh has failed to respond effectively to such policies. China was able to drop the export price of 29 garment categories10 by 46 per cent11 on average in the United States within a year, from $6.23 per sq metre in December 2001 to $3.37 per sq metre in December 2002. However, all other suppliers were able to drop the price by only 2 per cent, from $3.50 per

sq metre to $3.41 per sq metre during the same period. By the end of 2002, China had underpriced all other exporters to the United States in 22 out of 29 garment categories and it had underpriced others in 26 out of 29 categories by March 2003 (American Textile Manufacturers Institute, 2003). Moreover, China rapidly managed to be price competitive in the European Union and other major international markets. For example, the average unit export price of garment products integrated in the third stage of the Multifibre

Arrangement phase-out decreased from 11,600 euros per ton in 2001 to 9,500 euros per ton in 2002 for Bangladesh in the European Union, whereas the corresponding decrease for China in that market was from 13,500 euros to 8,800 euros per ton (European Commission, 2003). Bangladesh needs to respond to such price-cutting policies of its rivals in order to remain competitive in the quota-free global market.

(d) Lead Time
Lead time refers to the time required for supplying the ordered garment products after the export order has been received. In the 1980s, the usual lead time in the garment industry was 120-150 days for the main garment supplier countries of the world; it has been reduced to 30-40 days in the current decade.12 However, in this regard the Bangladesh RMG industry has improved little; for example, the average lead time is 90-120 days for woven garment firms and 60-80 days for knit garment firms. In China, the average lead time is 40-60 days and 50-60 days for woven and knit products respectively; in India, it is 50-70 days and 60-70 days for the same products respectively.13 Shortening the lead time is the most urgent priority task for Bangladesh. The best way is to develop domestic backward linkages with the aim of reducing “production and distribution” time.14 Such a strategy would contribute to enhancing the deep-level performance of the industry and would have a positive impact on surface-level performance. An alternative solution would be to establish a central or common bonded warehouse in the private sector for storing raw materials usable in the export-oriented garment industry, with special incentives such as duty-free import. While such a solution is
the fastest way to improve surface-level competitiveness by reducing lead time, it carries the risk of delaying deep-level competitive performance-enhancing initiatives and the long-term development of the industry.

 

 

 

An Overview of the Bangladesh Ready-Made Garment Industry

The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. Whereas the industry contributed only 0.001 per cent to the country’s total export earnings in 1976, its share increased to about 75 per cent of those earnings in 2005. Bangladesh exported garments worth the equivalent of $6.9 billion in 2005, which was about 2.5 per cent of the global total value ($276 billion)

of garment exports. The country’s RMG industry grew by more than 15 per cent per annum on average during the last 15 years. The foreign exchange earnings and employment generation of the RMG sector have been increasing at double-digit rates from year to year.Some important issues related to the RMG industry of Bangladesh are noted in table 1.

Table 1. Important issues related to the Bangladesh ready-made garment industry

Year(s)                                   Issue

1977-1980                           Early period of growth

1982-1985                           Boom days

1985                                     Imposition of quota restrictions

1990s                                   Knitwear sector developed significantly

1993-1995                           Child labour issue and its solution

2003                                   Withdrawal of Canadian quota restriction

2005                                   Phase-out of export-quota system

Source: Compiled by the author from Quddus and Rashid (2000), Mainuddin (2000) and databases of the Bangladesh Garment Manufacturers and Exporters Association, and the Export Promotion Bureau, Bangladesh.

Currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 per cent of those firms are locally owned with the exception of a few foreign firms located in export processing zones (Gonzales, 2002). The RMG firms are located mainly in three main cities: the capital city Dhaka, the port city Chittagong and the industrial city Narayangonj. Bangladesh RMG firms vary in size. Based on Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data, Mainuddin (2000) found that in 1997 more than 75 per cent of the firms employed a maximum of 400 employees each. Garment companies in Bangladesh form formal or informal groups. The grouping helps to share manufacturing activities, to diversify risks; horizontal as well as vertical coordination can be easily found in such group activities.

Ready-made garments manufactured in Bangladesh are divided mainly into two broad categories: woven and knit products. Shirts, T-shirts and trousers are the main woven products and undergarments, socks, stockings, T-shirts, sweaters and other casual and soft garments are the main knit products. Woven garment products still dominate the garment export earnings of the country. The share of knit garment products has been increasing since the early 1990s; such products currently account for more than 40 per cent of the country’s total RMG export earnings (BGMEA website). Although various types of garments are manufactured in the country, only a few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the major production-share (BGMEA website; and Nath, 2001). Economies of scale for large-scale production and export-quota holdings in the corresponding categories are the principal reasons for such a narrow product
concentration.

The Future of the Textile Industry in Bangladesh

Future of the Textile Industry in Bangladesh:

The textile industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning, weaving, knitting, and dyeing, printing, and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices.

Garment Industry in Bangladesh

The possibility of increased yarn production in Bangladesh is an issue that has been looked into extensively by many researchers. These investigations have revealed the country actually has a comparative advantage over all competitors in terms of the expense of yarn production. However, in regards to the total yarn cost, Bangladesh’s advantage over India and Pakistan disappears, even though it remains competitive with other producers. This is essentially a result of the higher cost of raw materials in Bangladesh, as most need to be imported.

As can be seen in chart 2, Bangladesh has a lower waste percentage than all its competitors. Power along with Korea is the cheapest in Bangladesh amongst all the yarn producers. The country also has a very low depreciation rate and a fairly low interest rate as well, aided by a low conversion cost as well. However, the price of auxiliary materials in Bangladesh is the highest among all the yarn producers, as is the price of raw materials. Due to these two factors Bangladesh loses its comparative advantage over India and Pakistan.

Most of the raw cotton imported by Bangladesh comes from overseas. The country is not only handicapped by the import tariffs and shipping expenses, but India and Pakistan subsidize the raw cotton, which is sold locally, resulting in countries like Bangladesh paying more for the same cotton.

The outcome for the Bangladeshi spinning mills of such price differentials is that they obtain raw cotton of the same quality at prices, which are approximately 30% higher than the Indian mills, and Pakistani mills. In addition, Bangladesh’s spinning mills have to pay another 6 to 7% for handling, freight, and commission charges which put them in a disadvantageous situation. The new infrastructure development surcharge, or IDS, on all imports, which was stipulated in the 1997/98 fiscal year, added another 2.5% to the price of imported raw cotton.

The weaving and knitting sub-sectors will also need to expand at a rapid rate, as there is a large demand-supply gap in the country. With increased investment in the sub-sectors and modernized machinery, Bangladesh could profit greatly from larger and more competitive weaving and knitting sectors.

As the current dyeing facilities are mostly dependent on imported fabrics, they are expanding at a rate which is not dependent on any of the other sectors. However, as local grey becomes more competitive, and its production is increased, the dyeing, printing, and finishing sub-sector will also need to expand to accommodate for the increased supply.

The leakage from bonded warehouse facilities and smuggling of materials across borders also need to be monitored closely in order to assure the competitiveness of the local industry. The reduction of such problems will automatically improve the market position resulting in improved opportunities for the expansion of the Bangladeshi textile industry.

Conclusions
The importance of the textile industry in the economy of Bangladesh is very high. Furthermore, the industry is expected to be the catalyst in the industrialization of Bangladesh, and has been declared as a thrust sector by the government. However, the largest sub-sector of the industry, spinning, faces numerous problems, coupled with faulty government policies and a lack of fairness in competition from neighboring countries.

The explosive growth of the RMG industry in the country, however, has not been supported by the growth of backward linkage facilities. Because of the inferior quality and supply of local fabrics, which are also non-competitively priced, the RMG industry is almost completely dependent on imported fabric. As a result, the foreign exchange earning from the RMG industry is extremely low. This value addition could obviously be boosted if appropriate backward linkages were established in the textile industry.

Therefore, it is extremely important that some remedial measures are taken for the effective development of the industry and to achieve the targets set by the government for 2005 to meet the post-MFA challenges. When I began my research I was quite negative about the future of the industry seeing little opportunity for it being competitive in the post GATT period. However, over the course of my Senior Project investigations, I have realized that Bangladesh’s low labor cost, skill development potential, a presently expanding market, and favorable conversion cost can be used to turn the challenges of the quota-free market into a window of opportunity. In addition, most developed countries are turning away from industries like the textile industry and investing in other sectors, thus creating a vacuum in the market.

If the appropriate steps are taken to prepare the country for 2005, Bangladesh will not only maintain the current market, but also expand her global market share, increase the value added to its exports, and widen the range of products it produces. The main steps that must be taken to realize these goals are as follows:

1. To attain self-sufficiency in fabrics by ensuring that the RMG industry’s fabric needs can be met locally.
2. Ensure that the sub-sectors of the industry are better articulated resulting in a more synchronized development in the industry.
3. To modify governmental policies to benefit the textile industry, for example-to reduced the import duty on raw cotton and dyes and chemicals.
4. To create better facilities for training the workforce in the industry.

I have also developed some idea of the types of solutions necessary to overcome the problems faced by Bangladesh’s textile industry. In fact, many of these problems would be minimized if some of the government policies regarding textiles were modified. The bank charges and interests interest rates for loans are extremely high; as a result it is very difficult to gather the capital to set up and maintain any type of factory especially textile units which require much expensive equipment. A reduction of the interest rate would not only encourage entrepreneurs to expand their current facilities but should also attract new investors. The handling charges for shipping are also extremely high, which adds to the cost of the materials that are imported and exported.

There is currently a serious lack of coordination among the various government agencies that are connected in some way with the textile industry. As a result of this lack of specialization, duplication of work, and waste of time and resources, policies are often found to work against each other. Industries, which require immediate attention, are not given the necessary regard and fail to obtain speedy solutions to their problems.

In my opinion, the governmental institutions dealing with the textile industry is becoming increasingly disorganized as the industry in expanding. It is therefore necessary to enhance the institutional capabilities and the skills of these officers through proper training and more permanent office positions, as well as greater accountability.

The Bangladesh Tariff Commission, or BTC should place greater emphasis on textiles and should develop more of its policies around the industry. In order to do so, the BTC would benefit by making the following changes:

1. Hire more professionals to conduct extensive research on Bangladesh’s trade requirements
2. Impose stricter controls on import incentives such as bonded warehouse facilities to protect the market from leakage
3. Enhance the government’s representation with major trade organizations such as the WTO
4. Formulate policies and programs to enable local industries to become more efficient and competitive in the international market

Another area that needs to be examined is that of the government’s incentives. Currently, the numerous incentives provided by the government are modified on a yearly basis. As a result, a number of industrialists do not feel secure about them and at times are hesitant to expand their businesses in fear of policy changes exposing them to greater financial risks. Any required modifications should be made to these incentives after a careful study then they should then be made permanent or at least guaranteed for a longer and specified period. This would provide investors with a sense of security and encourage expansion.

The Current Position of the Textile Industry in Bangladesh

Today, the textile industry of Bangladesh can be divided into the three main categories: the public sector, handloom sector, and the organized private sector. Each of these sectors has its advantages and disadvantages. Currently, the organized private sector dominates, and is also expanding at the fastest rate.

RMG Industry in Bangladesh

Public Sector
The public sector is that portion of the industry controlled by organizations that are part of the government. The factories in the public sector enjoy certain privileges such as government funding.

However, in Bangladesh, factories in the public sector are not well supervised. There are frequent changes in officers, and many of these officials do not have a personal interest in the factory for which they are responsible. In addition, the equipment in this sector is not well maintained, as much of the money allocated for this purpose is not spent as planned, but is wasted through corruption and poor accounting.

Handloom Sector
The rural group of textile producers includes operators of handlooms and a number of organizations which employ rural women, such as BRAC, or the Bangladesh Rural Advancement Committee. The Handloom industry provides employment for a large segment of the population of Bangladesh. The industry also supplies a large portion of the fabric required by the local market. Factories in this sector are usually well looked after by the owners and are quite productive, considering the equipment available. However, the inferiority of their machinery, mostly due to their narrow width, means that the fabric production is slow, and usually falls short of the quality needed for export.

Private Sector
The most productive of the three categories is the private sector. This, as the term suggests, is made up of those factories owned by companies or entrepreneurs. Since the owners of such factories are directly affected by their performance, they take an active part in planning, decision making, and management. Most of these factories also have machinery that is superior to those in the two other sectors because the owners are well aware of the connection between their equipment and their profits.

Demand Supply Gap
The phenomenal expansion of the RMG industry in Bangladesh and the dramatic increase in the population in addition to an increased standard of living in the country has led to a large demand-supply gap as shown by the following table. Only 21% of the total demand for yarn is met locally in Bangladesh. The figures for grey are not much better as only 28% of the total demand is met locally. The finishing sub-sector currently is able to process all of the locally produced grey, but will need to expand at as with the weaving and knitting sub-sectors.

All sectors of the textile industry face many of the same challenges. These problems include lack of power, obsolete technology, low capacity utilization, lack of machinery maintenance, a workforce that is not adequately trained, problems with labor unrest and militancy, political unrest causing disruption such as hartals, and a lack of working capital. The problems with electricity was evident to me on my visit to the Rahim Textile Mills; I was told that it is more efficient to power the factory continuously by a generator, instead of letting production be hampered by power failures. In addition, each of the sub-sectors face various other problems.

The Spinning Sub-Sector
Problems related to spinning have an extremely negative impact on the textile industry. The production capacity of the spinning sub-sector is estimated at approximately 183 million kg per year. However, only 125.16 kg, or 67.3% was produced in 1997-98.

One of the main causes of this under production in the spinning sub-sector is the fact that approximately 38% of the spinning mills in the country are more than twenty-five years old and therefore are not able to produce as much yarn as their initial capacity. The principal reason behind the machinery being so outdated and poorly maintained is the high import duty on textile machinery and their spare parts. Many have not been maintained or repaired as they should have been because in addition to the high cost of the spare parts, there is a shortage of technicians in this field, resulting in both very expensive and sub-standard repairs. Other reasons for the low production figures include frequent power failures, a shortage of raw materials, a high import duty on raw materials used for local consumption, and a high percentage of wastage.

The labor productivity in the spinning sub-sector is also lower than that in competing countries. The output of labor in the industry is about 0.65 kg per man-hour. A recent World Bank survey indicated that the number of spindles installed in Bangladeshi spinning mills could produce twice as much yarn while using only 10% of the labor force. Obviously, obsolete machinery is having an extremely negative impact on Bangladesh’s textile industry.

The Weaving Sub-Sector
The shortage in supply from the spinning sub-sector also has a negative impact on the amount of grey produced. The unmet demand for yarn is filled by importing 3.15 billion meters of grey annually. In order to import grey, the subsequent sectors have to invest more in transportation, import taxes, etc., resulting in a more expensive end product.

The weaving sub-sector is plagued by a lack of organization and coordination. There are many small-scale manufacturers dispersed all over the country, which results in replication and a lack of specialization. Instead of working in organized groups, many of the small producers try to do everything on their own, leading to an end product of inferior quality.

The Handloom Sub-Sector
The handloom industry, traditionally an important part of the textile industry in Bangladesh, is still responsible for a very high percentage of the nation’s economy. It is the second largest source of rural employment after agriculture. Even without being dependent on electricity, there are numerous problems faced by the handloom industry.

Many of the weavers cannot work steadily due to the irregular supply of the yarn, dyes, and chemicals they require. The primary reason for this is that many of these producers are located in places with poor access to transportation. Most of these weavers obtain their raw materials from brokers at their local levels. These brokers gather money from many small scale manufacturers and travel to the urban centers to purchase the required materials, which they then take back to the weavers. Unfortunately, not all of these brokers are very experienced and some are dishonest. Those in the handloom industry are very vulnerable; even a minor problem such as a heavy rainfall might prevent them from obtaining their raw materials or selling their finished product.

Most export oriented garment factories reject a large quantity of the grey produced by the rural handlooms in Bangladesh. When I examined fabrics of similar type and patterns, one of which was produced using handlooms, and the other on powerlooms, the superiority in uniformity and quality of the cloth produced using the powerlooms was obvious. In addition, handlooms also have a narrower width than powerlooms, and usually cannot produce fast enough to meet the deadlines set by export oriented customers.

Knitting/Hosiery
The hosiery industry produces different types of products such as undergarments, socks, stockings, and other soft apparel. These factories were originally designed for the local market, but recent improvements in quality have propelled them to enter the export market and knitting has become another rapidly growing textile sub-sector. The Knitting and Hosiery sub-sector is faced with the lack of modern facilities needed for producing quality fabric. There is also a shortage of raw materials in the sub-sector. However, the factor that has the most negative impact on the industry is the lack of working capital.

Even though the sub-sector has to overcome some obstacles, it has been extremely successful recently. Currently the demand for knit grey can be met locally. The quality of the local knit grey is also competitive as most of the knitting units have been installed recently and the machinery is not obsolete.

Dyeing, Printing, and Finishing
Dyeing, printing, and finishing, the final steps in the textile industry, are also the most complicated processes. It is the quality of this work that determines the appearance of the fabric and thus its marketability. In order to be competitive in the future, this sub-sector of the textile industry will need to expand at the same rate as the weaving sub-sector, in order to make the country self-sufficient in grey production.

The dyeing, printing, and finishing sub-sector has improved dramatically over the last five years. However, due to a lack of modern equipment and facilities, the majority of dyeing, printing, and finishing units are still unable to meet the standard of quality demanded by the export-oriented RMG industries, or the export market. Those that are producing fabric suitable for export are heavily dependent on imported grey. As is the case with most imported goods, they face a number of restrictions, such as import taxes, transportation, and various others. However, the successful expansion of the knitting sub-sector has made the country self-sufficient in all knit grey.

The 2005 Challenge
In the year 2005, some of the international policies regarding the export of textiles and garments will change, which may present the Bangladeshi textile industry the greatest challenges it has had to face so far. There is much speculation at present about the situation of the RMG exporters in the post-MFA period, when the World Trade Organization, or WTO, instead of GATT will control the sector. Under the WTO all quotas will be removed, resulting in a free market worldwide. 

Bangladesh’s garment and textile manufacturers will have to face steep competition from countries such as India, Pakistan, China, and Thailand, from whom the country now imports fabric to meet the demands of its RMG sector. When the WTO free market is established, all these countries will be able to expand their RMG exports, now limited by quotas. As a result, these countries will be able to utilize more of their locally produced yarn and fabrics internally, resulting in the rise of prices for these in the export market, putting pressure on the industries of countries such as Bangladesh.

The Government
To aid the expansion of the textile industry in Bangladesh, the government is currently providing numerous incentives.

1) Bonded warehouse facilities
These facilities allow export-oriented factories to import their raw materials duty free. However, the bonded warehouses privileges have not been monitored closely enough, which has resulted in them being abused. The materials imported duty free to be used for producing garments intended for export are sometimes released into the local market. The leakage of these inexpensive items into the local market cause unfair competition for local producers.

2) Duty Exemption Drawback Organization, or DEDO
Factories which do not take advantage of the bonded warehouse facilities and import their raw materials independently can claim the duty they paid under the Duty Exemption Drawback Organization, or DEDO. Provided that the finished goods are being exported. This system is mostly applicable for the dyeing sub-sector of the textile industry.

3) 25% export cash incentive
For producers who do not use their DEDO or the bonded warehouse privilege, and utilize local materials. These producers obtain a 25% cash compensation from the government for the items they export.

4) Tax holiday - Five to nine years of tax exemption for new factories.

5) Duty free importation of raw materials of export in the RMG.

6) Avoidance of double taxation for joint venture projects.

7) Income tax exemption for up to three years for foreign technicians.

8) Duty free import of capital machinery.

Other steps are also being taken. The Government of Bangladesh has devised a Textile Policy designed to make the country competitive in the WTO free market by 2005. Its main objective is for the country to achieve self-sufficiency in yarn and fabrics to meet the needs of the RMG industry through backward linkages and by encouraging investments by private investors.

The Textile Policy makes some of the following suggestions in order to develop the sub-sectors of the industry in a harmonious manner.

• Closer monitoring of leakage in the market
• Appoint an advisory committee to represent the industry to the government
• Zmprovement of research and computer technology
• All sectors of the industry will be Modernized
• Rehabilitated as much as possible
• Tariffs will be rationalized
• Spinning
• 116 new spinning mills each having the capacity of 25,000 spindles will be established immediately
• Weaving
• 223 modern weaving units each with an annual capacity of producing ten million meters will be set up
• Handloom
• Supervised credit system for long term loans will be established
• Necessary training will be provided
• Various means of encouragement and exposure will be established such as exhibitions and competitions
• Dyeing, Printing, and Finishing - new units will be set up with appropriate technology
• Bonded warehouse will be provided until local grey production can meet the quality and quantity required by the sub-sector
• Duty on dyes and chemicals will be withdrawn 

However, from my analysis of the Textile Policy, it appeared to be very theoretical and failed to address a number of issues.

1. The policy calls for the establishment of many new factories and projects, but does not provide a scheme for financing them. 

2. The lack of training and technology is mentioned, but no steps are suggested for enhancing the skills of the workforce and engineers.

3. No suggestions are made for setting up institutions to conduct the technical and marketing research needed to upgrade the quality of Bangladeshi products to make them more appealing in the international market.

4. The need for the expansion of the Bangladesh’s infrastructure such as ­ road, port, and railway capacities to accommodate increased imports and exports is not mentioned.

5. The great problems arising from the shortage of land on which to build the necessary factories is also not considered.

6. The policy states that environmental pollution is negligible, but does not go further into the matter. However, it was very obvious to me on one of my factory visits that affluent treatment and disposal in the industry is a very serious problem.

7. The need for more power is mentioned, but no plans have been devised on how the expansion will be undertaken.

Historical Background of Readymade Garments Industry ( RMG ) and its Growth

The RMG industry can then cut and stitch the finished product into apparel, which is then marketed. In 1978 the RMG industry was established in Bangladesh with nine enterprises and has grown at a blistering pace since. This phenomenal growth is due largely to the simple level of technology required in the industry. The machinery is relatively inexpensive and easily available. In addition, garment producers can operate in smaller premises than those required by most of the processes in the textile industry. On top of this, Bangladesh has an abundant supply of cheap labor consisting mostly of women for whom this is one of the most suitable forms of employment.

These factors, as well as incentives such as liberal trade policies, low tariffs on imported machinery, and bonded warehouse facilities, which allow the importation of raw materials to be processed for export have done much to facilitate the growth of the garment industry. However, probably the most important factor in this growth is the benefit of reserved markets that Bangladesh enjoys under the Multi Fiber Arrangements, or MFA.

The Textile exporting nations in the world fall under the trading conditions determined by the MFA, which is included in the General Agreement for Tariff and Taxation, or GATT.

According to the MFA, developed nations are required to guarantee the import of a certain amount of their textile needs from developing nations. For example, the United States may have assigned the production of a certain amount of textiles to Bangladesh. This would mean that countries such as Bangladesh are assured a market for a specified number of yards of textiles each year. This agreement served to limit the dominance of the textile industries in the more developed world by limiting their share of the global market.

In addition, Bangladesh’s garment exporters enjoy the privilege of quota-free entry into the European Union, or EU, whereas their major competitors, such as China, India, Indonesia, Pakistan, Sri Lanka, and Thailand, are subjected to the restrictions of an assigned quota. As a result Bangladesh is able to export everything that it produces, while its more developed competitors are limited to specific amounts assigned through quotas. 

 

 

History of the Textiles Industry in Bangladesh

In Bangladesh, the Textile Industry has a long history of many centuries and has been seen as the part of an economy of undivided India and later on of Pakistan.

Traditionally, artisans working in small groups, in what are often referred to as cottage industries, produced most of the textile in the sub-continent. There were many such artisans in the area that was to become Bangladesh. In fact, from prehistoric times until the Industrial Revolution in the eighteenth century, East Bengal was self-sufficient in textiles. Its people produced Muslin, Jamdani, and various cotton and silk fabrics. These were all well regarded even beyond the region as they were manufactured by very skilled craftsmen.

The material produced by the artisans of Bengal started facing vigorous competition beginning in the eighteenth century after the growth of mechanized textile mills in the English Midlands. This eventually led to a great decline in the number of Bengali workers skilled enough to produce such high quality fabrics. According to popularly held beliefs, as the region’s spinners and weavers meant competition for their emerging textile industry, the British imperialists responded by trying to force the artisans to stop production. They were said to have sometimes used methods as harsh as cutting off the thumbs of the craftsmen so they would never be able to spin or weave again.

Not only were huge amounts of fabric produced in Bengal, the area was also a prime producer of the indigo plant, from which the indigo dye was extracted. This natural dye was widely used before the advent of chemical dyes in the nineteenth century. In fact, the rich blue color provided by the dye is still sometimes used for dyeing denim. Bengali dye masters had special recipes for producing the desired colors, just as chefs have recipes for achieving desired flavors. However, as was the case with the traditional handloom fabrics, indigo dye production also gradually declined.

The problems of the indigo industry were principally a result of two factors. First, because indigo was a cash crop, the British administrators in this part of the empire forced farmers to grow the indigo plant in order to increase the administrators’ profits. Unfortunately, the indigo plant is nitrogen depleting and thus exhausted the soil very quickly. The farmers received little real income from the crop since the British kept most of the profits, and in times of economic hardship, such as when the indigo price fell, they were unable to survive by eating their produce, unlike farmers who grew staples such as rice or wheat.

Another reason for indigo’s gradual disappearance as a dye stuff was the unpredictable nature of the plant. Sometimes one farmer would have a good harvest, while his neighbor would not be able to produce anything. The combination of poor yields and the unpredictability of the crop gradually led farmers to cease growing the plant and moving on to other, more profitable crops.

The fabric produced and dyed in British factories flooded the Indian markets. In time, its importation became one of the points of contention in the growing Independence Movement of the Sub-Continent. As separation from Great Britain was becoming a foreseeable reality and local production again profitable, the textile industry was reorganized as new methods of production were adopted. Water, a necessity for the chemical processes involved in processing the modern dyes now used, was abundant in East Bengal. This contributed to the establishment of mechanized textile factories in the area.

However, after 1947 and the partition of East and West Pakistan from India, most of the capital and resources of Pakistan came under the control of West Pakistanis. The textile industry thus stagnated in East Pakistan as momentum for development shifted from the eastern part of the country to the west. The west also grew more cotton than the east, which was used as a plea for developing the industry in the west instead of in the east. The majority of all industries in the east were also owned by West Pakistani industrialists.

When Bangladesh gained its independence from Pakistan in 1971, the new government nationalized the textile industry, as it did with many other businesses in which West Pakistanis had been the principal owners. Although there were some Bangladeshi industrialists, they did not form a large or politically powerful group and thus had to surrender control of their factories to the government as well. All of the country’s textile factories were then nationalized and organized under the Bangladesh Textile Mills Corporation, or BTMC.

The industry remained under the control of the BTMC until 1982-83. Bureaucratic obstacles combined with other problems such as low productivity in the labor force, lack of planning, indiscipline, lack of accountability, and poor machine maintenance and operation resulted in a lack of profits.

The government thus gradually denationalized the production of textiles. Factories were privatized, beginning with the dyeing and weaving units. Since that time, much of the industry has been privatized through auctions and other means.

The textile industry has been the catalyst for industrialization in numerous countries. For example, in England, the Industrial Revolution with the new development in coal and steel led to the establishment of a mass textile industry, which catalyzed the industrialization process in the eighteenth century. Similarly textiles played a major role in the industrialization of Japan, South Korea, Taiwan, Hong Kong, and Indonesia. The same has been true to a certain degree in this country. After privatization, the quality of the fabrics produced improved significantly, leading to a great increase in the demand for Bangladeshi textiles in both the international market, as well as the export oriented garment industry of Bangladesh. This launched the industry into a period of rapid growth that is continuing at present.