Bangladesh Apparel Industry: An Update

Note: The following update can be used as additional reference material for our case study 1 on the Bangladesh fire accident.

The export-oriented apparel sector has been the main source of growth in exports and formal employment for the past three decades in Bangladesh. The industry directly employs 3.1 million people, comprising 40 percent of manufacturing employment; indirectly more than 10 million people are dependent on the apparel sector.

According to the World Trade Organization (WTO, 2013), in 2012, Bangladesh’s apparel exports to the world reached $19.9 billion (4.7%), among which $10.6 billion (or 53.3%) went to the European Union (27) and $4.6 billion (or 22.4%) went to the United States. Cotton trousers, cotton shirts, cotton sweaters and cotton T-shirt [HS 620342, HS620462, HS620520, HS611010 and HS610910]account for around 75% of Bangladesh’s total apparel exports in 2009 (World Bank, 2012).

The unit prices of Bangladesh’s main apparel exports are much lower than the world average and even lower than the unit values of apparel exports from China, India and Sri Lanka. From 2004 to 2007, the average price of Bangladesh’s apparel exports to the world fell from $2.60 to $2.31 per unit, representing a decline of 11 percent over three years. More specifically, average unit prices for woven  apparel fell from $3.26 to $2.92 (10% drop in price) and for knit apparel from $1.95 to $1.90 (3% drop in price) over the same period.

Bangladesh’s Local sources are able to meet about 80 percent of the domestic apparel industry’s demand for apparel accessories such as thread, buttons, labels, bags, tapes, shirt board, and cartons. But Bangladesh’s apparel sector relies on imported fabric and yarn inputs because the local textile industry is unable to supply its requirement in terms of quality, quantity, and variety.

Bangladesh’s main competitive advantage is low labor costs, one of the lowest among main apparel exporter countries in the world. Average apparel labor costs per hour in 2008 were $0.22; in comparison, rates in India were more than twice as high and four times higher in China. However, low wages are accompanied by relatively low levels of labor productivity. Average annual value addition per worker in Bangladesh was estimated at $2,500 compared to nearly $7,000 for a group of similar Chinese factories in 2005, according to a World Bank study.







Reference: Sewing Success? Employment, Wages and Poverty following the End of the Multi-Fiber Arrangement (World Bank, 2012). International Trade Statistics (World Trade Organization, 2013).

Patterns of World Textile Trade:2000-2010

The following findings are from:

Lu, S. (2013). Impacts of quota elimination on world textile trade: A reality check from 2000 to 2010, Journal of the Textile Institut, 104(3), 239–250.

         “Findings of this study challenge the practices of previous studies that evaluated the impacts of quota elimination mostly by focusing on the performances of developing countries in the U.S. and EU markets (Nordas, 2004; Curran, 2008). Although such strategy may work for clothing trade, its appropriateness for scrutinizing world textile trade is evidenced to be questionable. Particularly, to manufacture textiles, it places higher requirements on a country’s technology advancement level and capital abundance than clothing production which is more labor intensive in nature and with lower business entry threshold (Dickerson, 1999). Therefore, as shown in the study, it was the developed countries rather than the developing countries that remain dominant and competitive textile exporters in the world today (WTO, 2011).  On the other hand, the developed countries are no longer leading textile importers either because of their dramatic shrinkage of domestic clothing manufacturing capacity (Dicken, 2003). To certain extent, missing such distinct patterns of textile trade may be one reason why findings of many previous studies turned out to be inconsistent with the reality (Ahmad & Diaz, 2008).

       Second, findings of this study call for attention to the new round of structural change of world textile trade that may have unfolded since the outbreak of the world financial crisis in 2008. This is particularly the case for the high-income countries which suddenly saw sharper decline of their textile export from 2008 through 2010 compared with earlier years in the post-quota era. It is unclear whether such phenomenon is a temporary market fluctuation in nature or reflects a more permanent adjustment of economic structure that is undergoing in the developed countries. Whether and how the financial crisis has structurally affected the world textile trade can be further explored in future studies.

       Third, findings of this study reflect the difficulty of achieving upgrading of the textile and clothing sector in the less-developed countries.  Although the development theory proposed by Toyne (1984) and Dickerson (1999) optimistically predicted the gradual evolution of a country’s textile and clothing sector over time, results of this study indicated that this upgrading process turned out to be very slow in progress for the developing world. Particularly, in today’s globalized economy, the division of labor between the developed countries and the less-developed ones is largely value-chain based and different from the case of inter-industry division of labor when the development theory was introduced (Toyne, 1984; Gereffi, 1999).  It seems there lacks a clear mechanism for the less-developed countries to gradually move up their position in the clothing value chain and have the chance to build on capacity of manufacturing and exporting textiles.  However, chances may occur if the high-income countries proactively “give up” textile manufacturing and instead prioritize the development of other emerging sectors regarded as more strategically important in the post-crisis recovery. “