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The Rise of Bangladesh's Textile Trade

By: Tasrin J. Shani & Rohini Putcha
by

Rohini Putcha

on 14 July 2014

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Transcript of The Rise of Bangladesh's Textile Trade

By: Tasrin J. Shani & Rohini Putcha
The Rise of Bangladesh's
Textile Trade
Question #1
Free Trade Regime
Question #2
Question 3
Question 4
Industry Today
Population of approximately 164 million people
Background
Economy has grown an average 6% a year over the last 2 decades
78% of total exports, second only to China as the world's largest apparel exporter
60% of the export contracts are with European buyers
40% with American buyers
Only 5% of textile factories are owned by foreign investors
17% of its gross domestic product (GDP) and more than three-quarters of total exports- most of which head to Europe and the US
Textile Industries' Background
Can specialize in the manufacture and export of products and services that it can produce
Import products and services that can be produced more efficiently in other countries
Why was the shift to a free trade regime in the textile industry good for Bangladesh?
Employment and economic growth depends upon exports of textile products
Shift to a free trade regime appeared with the competition with countries such as China and Indonesia the quick collapse of Bangladesh's textile industry has been predicted
Reasons for shift:
Low labor costs
Strong network of supporting industries
Western importers want to diversify their supply sources
Who benefits when retailers in the United States source textiles from low-wage countries such as Bangladesh? Who might lose? Do the gains outweigh the losses?
Gains do outweigh losses!

Low income countries are developing and their standard of living is improving
Developed countries are unable to provide products at low prices
What international trade theory, or theories, best explain the rise of Bangladesh as a textile exporting powerhouse?
Theory 1~ International Trade Theory

Textile industry production at low labor costs
Theory 2~ Porter's Diamonds of Competitive Advantage
Competitive advantage is the strong network of supporting industries
How secure is Bangladesh's textile industry from foreign competition? What factors could ultimately lead to decline?
Bangladesh is safe toward foreign competition
5,000 factories, compared with 2,500 in Indonesia and 2,000 in Vietnam
Low cost of labor = Low cost of garments
Opportunity for Western importers to diversify their supply sources
Investments by textile manufacturers in productivity-boosting
Relationship with Buyers (24/7)
Factors which could lead ultimately to a decline
Constant disruptions in electricity
Inferior roads and ports to those found in China
Political Disruption
Infrastructure
Workers
Young workers usually females
Long history of health and safety tragedies
Garment factory fires and collapses
Killed at least 1800 workers since 2005
Tazreen Fashions fire (Nov. 24, 2012)
Collapse of the Rana Plaza factory (April 24, 2013)
Industry is still growing
Have earned at least $500 million (US Dollar) in export World Cup jerseys of the 16 participating teams, including Argentina, Brazil, Italy, France, England, Switzerland, Belgium, Chili, and Germany
The Brazilian Football Confederation (CBF) decided that "Made in Bangladesh" would be written in the jersey to pay tribute to the victims of 2013 Rana Plaza Collapse and Tazreen Garments fire
Full transcript