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THE RISE OF BANGLADESH'S TEXTILE TRADE

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Riccardo Stiglich

on 11 December 2013

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Transcript of THE RISE OF BANGLADESH'S TEXTILE TRADE

THE RISE OF BANGLADESH'S TEXTILE TRADE
2005 - SHIFT TO FREE TRADE
until January 2005 Bangladesh opportunities were governed by a quota system
quota system: EU allowed Bangladesh to export a quota of textile tax-free
introduction of free trade policies enabled Bangladesh to:
a)increase its exports
b) have competitive advantage in production of textile due to low costs labour force and strong network of supporting industries

ADVANTAGES
Stimulated economy
Economies of scale/specialization: all things being produced as efficiently and cheaply as possible
Made employment for 2.5 mln people, especially women
Increased educational opportunities due to the need for skilled labour
BANGLADESH
Laid in South Asia, bordered by India, Burma.
The Population: 154,7 million.
The Surface area: 144000 km2
Density: 1074,46 people/km2

DISADVANTAGES
COMPARATIVE ADVANTAGE
ability of given economy to manifacture a commodity more efficiently than other countries

Balassa Revealed Comparative Advantage
BRCAij= (Eij/Ej) / (Ei/E)
EFFECTS OF FREE TRADE
FREE TRADE: ADVANTAGES - DISADVANTAGES
SOCIAL
lack of protection for individuals
poor working conditions
slavery and low wages
child labour
ECONOMICAL
dependence upon other nation
local products sent overseas
non-cooperation between countries
establishment of multinational control over national politics
DRIVER 1: working force
the lowest wages: 34$ monthly
unskilled labour force
young work force: <30 years
DRIVER 2: not being China
Chinese higher wages
diversification of investments
comparative advantage
DRIVER 3: productive network
near-shore suppliers
positive externalities
increasing self sufficiency ratio:
SSR = P/(P+IM-X)
FUTURE TRENDS
THE SITUATION BEFORE 2005
THEORIC EXPLANATION
*RCA indices of the countries selected in the world market in terms of (a) textile and (b) clothing (calculated based on UN Comtrade and WTO statistic)
*RCA indices of the countries selected in the US market in terms of (a) textiles and (b) clothing (calculated based on UN comtrade and WTO statistics)
*The NRCA indices of textile, clothing and footwear

*Reference: Ullah, M. Shariat and Inaba, Kazuo (2010), ‘Impact of RTA and PTA on Bangladesh’s Export’
FUTURE CHALLENGES
1) "A peaceful, democratic and prosperous future for Bangladesh. As the past has proven, the challenges are no match for the resilient, ambitious, hardworking people of Bangladesh” (Olling, the Danish Ambassador)
2) Bangladesh: the new ‘silk road’, a hub of economic activities in south-east Asia (US assistant secretary of state for South and Central Asia Robert O Blake)
3) Bangladesh economy is going to be dependent on labor intensive industries at least for the next ten years. In other words, Bangladesh is going to ride on its unskilled and cheap labor
STRATEGIES FOR A BETTER FUTURE
Investments for the information technology sector
Expansion of the industrial sector through foreign currency
Diversifications of exports
Higher FDI inflows
Improvements in governance
Creation of a web of Small and Medium Enterprices (SMEs)

HOPE YOU ENJOYED!
Research journal of Engineering Science, February 2013
Exports to World
Exports to USA
Full transcript