Bangladesh can create millions of jobs in its garment sector by raising productivity of people and improving social and environmental compliance, the World Bank said in a study yesterday.
Currently, the country’s garment sector employs 4.4 million workers, 80 percent of whom are women.
A 1 percent increase in Chinese apparel prices could hike firms’ demand for female labour by 0.44 percent in Bangladesh, and a 1 percent increase in output could raise firms’ labour demand by about 0.3 percent, according to the study.
It also said a 1 percent increase in Chinese apparel prices could boost the demand for Bangladeshi apparel items in the US by 1.36 percent.
China is the largest apparel supplier having a 41 percent global market share; Bangladesh is the second largest with a 6.4 percent share. Bangladesh is likely to be benefitted from the shift of work orders from China, as the economic giant is losing its market share due to higher costs of production.
The WB said a 1 percent increase in apparel output is associated with a 0.3 to 0.4 percent hike in employment for both men and women in Bangladesh, Pakistan and Sri Lanka.
These results suggest the sector has greater potential for job generation in South Asia in response to an increase in exports than other industries, especially for women.
The study findings also suggest a significant employment generation potential for both males and females in all four South Asian countries -- Bangladesh, India, Pakistan and Sri Lanka -- for export to the US markets. However, Sri Lanka is the big winner in respect to the EU market.
The study also found that, for the US market, a 10 percent increase in Chinese apparel prices would raise apparel employment in Pakistan for males by about 8.93 percent, followed by Bangladesh with 4.22 percent, India 3.32 percent and Sri Lanka less than 1 percent.
For the EU market, a 10 percent raise in Chinese apparel prices would increase apparel employment in Sri Lanka for males by 8.55 percent, followed by India with 4.30 percent, with Bangladesh and Pakistan experiencing small decrease.
The study -- Stitches to Riches? Apparel employment, trade, and economic development in South Asia -- was conducted with data from 2012.
The WB Bangladesh office shared the findings of the study at a seminar at the Bangladesh Institute of Development Studies (BIDS) office in Dhaka.
The WB report highlights that Bangladesh needs to improve performance on non-cost factors important to global buyers.
Successfully implementing reforms will help Bangladesh increase exports and capture more jobs from China’s gradual exit from the clothing market and compete with Vietnam, Cambodia and Indonesia.
For the US market, a 10 percent increase in Chinese apparel prices would raise apparel employment in Bangladesh by 4.22 percent.
Mustafizur Rahman, executive director of the Centre for Policy Dialogue, said: “We have to take into account the productivity factor of workers, if we want to export more.”
Moreover, Bangladesh's preferential market access to the US will decrease further once the Trans-Pacific Partnership Agreement comes into effect as Vietnam will get duty-free market access to the American market under the treaty, he said.
In the entire value chain in garment trade, Bangladesh's local value addition is 40 percent while it is 100 percent in India.
So it is difficult to evaluate in gross export value as Bangladesh's value addition is lower than other competing countries, he said.
Skill upgradation, efficiency and increasing productivity of the workers are the major challenges for Bangladesh in the garments business, he said. Rahman suggested the garment factory management should promote women workers to upper levels.
Zaid Bakht, an economist and chairman of Agrani Bank, said Bangladesh's garment sector is at a crossroads for two reasons -- social and environmental compliance and technology upgradation.
Nazneen Ahmed, senior research fellow at BIDS, said a lot of foreign technical experts are employed in the garment sector due to a lack of skilled workers in the country.
“This is one of the major reasons for higher costs of production in Bangladesh. We should produce skilled workforce for the sector,” she said.
“The apparel sector in Bangladesh tells a remarkable story of women's empowerment by significantly increasing female participation in the labour force,” said Qimiao Fan, the WB Country Director for Bangladesh, Bhutan and Nepal.
“The apparel industry is extremely important to Bangladesh's economy, accounting for 83 percent of total exports. The potential decrease in Chinese exports presents a huge opportunity for Bangladesh, if it can meet global buyers' requirements for cost, quality, lead time, reliability and compliance with safety standards and other policies.”
In Bangladesh, the industry is dominated by local firms, but foreign direct investment played a central role in launching the industry, providing linkages to foreign buyers, technology, and knowledge transfer, the study said.
“Its apparel firms produce large quantities of clothing at low costs, largely due to its low wage rates. Firms mostly specialise in low-value and mid-market price segment apparels -- trousers, knit and woven shirts, sweaters/sweatshirts -- and have not penetrated the high-end clothing markets so far,” according to the study.
Competition is increasing in the global apparel market with buyers moving towards greater consolidation in sourcing decisions and the impending approval of the Trans-Pacific Partnership, said Gladys Lopez-Acevedo, co-author of the report and a lead economist for the World Bank.
“Bangladesh should capitalise on its position as a regional leader and implement policies to improve the quality of its products. Bangladesh should focus on sustaining the creation and expansion of good jobs, bringing more women into the workforce and diversifying its products and end markets to increase skills and value,” said Acevedo, who presented the findings at the seminar.
The WB study said Bangladesh has many policy options to increase exports. For improved product quality and diversity, reducing import barriers to manmade fibres is essential.
Bonded warehouses, duty drawback, cash subsidy, and export processing zones could also help. To improve compliance and better safety standards, one potential option could be to encourage the relocation of firms into export processing zones, the study said.