from Asia Unbound

Bangladesh: Behemoth Garment Industry Weathers the Storm

Employees work in a factory of Babylon Garments in Dhaka January 3, 2014 (Andrew Biraj/Courtesy: Reuters)

June 20, 2014

Employees work in a factory of Babylon Garments in Dhaka January 3, 2014 (Andrew Biraj/Courtesy: Reuters)
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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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Over the weekend I had the opportunity to participate in an excellent conference focused on Bangladesh, its development, and its garment industry hosted by Harvard University. The organizers did a tremendous job convening the many diverse stakeholders on this issue—the Bangladeshi garment exporters associations, representatives from the Bangladeshi and U.S. governments, representatives from major buyers and retailers, fashion industry associations, labor rights advocates, the International Labor Organization (ILO), and scholars examining developments in global retail and labor. The background to the gathering, obviously, was last year’s tragic collapse of the Rana Plaza building in Dhaka on April 24, 2013, which killed more than 1,100 and left more than 2,500 injured.

In the aftermath of Rana Plaza, many feared that global brands and retailers—primarily in the European Union and the United States—would shift their orders away from Bangladesh, thus potentially disrupting the source of livelihood for some four million workers, primarily women. In the year since, there has been intensive negotiation and consultation among governments, international organizations, and the private sector in the United States, European Union, and Bangladesh, resulting in agreements that provide better oversight, governance, and compliance on workplace safety and labor matters. Between the Accord on Fire and Building Safety in Bangladesh, the Alliance for Bangladesh Worker Safety, and the EU-ILO-Bangladesh Global Sustainability Compact (which the United States endorsed in July 2013), there is now more significant focus on factory safety conditions, including structural integrity and fire safety protections, than ever in the past.

Bangladesh’s garment industry is huge, the world’s second-largest garment exporter after only China, and as the Economist Intelligence Unit report, “Garment shift,” commented recently, Bangladesh’s scale is “nearly on par with total combined capacity of its main competitors in Southeast Asia.” It has nearly 5,000 factories producing exports valued around $20 billion (2013). Fixing its problems with factory and labor conditions thus has represented an effort of historic scale.

And over the past year, there has been positive change. Bangladesh has made progress with a new labor law, higher minimum wage, and one hundred fifty-plus new labor unions registered. The ILO and International Finance Corporation have launched the largest Better Work program in history. Inspections of factories supplying members of the Accord and the Alliance are well underway, with remediation taking place to get buildings up to international standards. Factories found to have irremediably unsafe conditions have been shut down. Still, with such a large industry, much work remains. As the U.S. ambassador to Bangladesh noted in his remarks at the conference, Bangladesh still needs to complete hiring and training the two hundred building inspectors they committed to employ; all the buildings housing factories need to be inspected and brought to safe standards; reports of those inspections should be made public per the Compact; and harassment and intimidation of labor unions and activists should stop. Bangladesh can get this done, but it needs to keep pushing ahead.

From my perspective, the surprise has been how well Bangladesh has weathered this difficult storm so far. No one knew how the global garment industry would respond after Rana Plaza—perhaps by diversifying their sourcing slightly, or greatly? Would Bangladesh’s workplace conditions present just too much risk until fully remediated? Back in January, admittedly on the heels of a violent political season that saw road traffic shut down for days on end, it seemed that Bangladeshi garment exporters were facing tougher times. Press reports detailed exports “losing steam,” with growth at 7.1 percent in January, “less than a quarter of the year-on-year growth recorded in November.” People worried that the hartals (street strikes), higher wages, and company interest in hedging supply chains was causing a turning away from Bangladesh.

The latest data show that has not transpired. Looking at the latest export statistics shows only a slight drop, with textile and apparel exports to the United States falling only 0.56 percent to $1.77 billion (US Commerce data, year over year). The latest data from Bangladesh show 14 percent growth for the industry overall in the July 2013-May 2014 period. The Bangladesh Garment Buying House Association has reported that orders from “compliant” factories are rising 15-20 percent. And the U.S. Fashion Industry Association just released a survey of brands and retailers detailing that 76.9 percent of those surveyed currently source from Bangladesh, with 60 percent anticipating that they will “somewhat increase” from Bangladesh in the “next two years.”

With the Accord, Alliance, Compact, Better Work program, and such focused attention to needed improvements in Bangladesh’s workplace, the systems are in place to preserve the gains the country has made over the years through the garment industry. It now depends on all parties seeing this through at the scale needed to transform the industry.

Follow me on Twitter: @AyresAlyssa

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