A STUDY ON COMPETITIVENESS OF READY-MADE GARMENTS FOR EXPORT-LED ECONOMIC GROWTH IN BANGLADESH: ISSUES AND CHALLENGES
Abstract: Bangladesh achieved remarkable economic development in the last few decades, and the ready-made garment (RMG) industry played a vital role in this regard. The future economic development of the country depends on the success and continuation of such industrial sectors for export-led growth of the country. Considering the importance of the export-led economic growth strategy, this study assessed the global competitiveness of this industry. Michael Porter’s Diamond model of national competitiveness is used as the main analytical framework to assess the sources of competitiveness. A SWOT analysis is also conducted to identify future challenges and critical success factor for the continuing contribution of the industry. The study followed a mixed method approach to investigate the research questions. Secondary literature, consisting mainly of reports and documents from government and the private sector, were collected to comprehend the contemporary industry. A survey of 199 respondents from 150 RMG factories was conducted to assess effects and relative weights of different factors included in the National Diamond model and to understand the basis of the competitiveness of the RMG industry of Bangladesh. A further 30 face-to-face interviews with representatives from five different stakeholder groups including international buyers were conducted to get further explanations and insights of different factors of importance for achieving and maintaining the competitiveness of the RMG industry of Bangladesh. The findings of the study reveal that not all the dimensions of Porter’s National Diamond model contributed to the competitiveness of the RMG industry. Among the four main National Diamond dimensions, the RMG industry of Bangladesh appeared to enjoy competitiveness without having a favorable demand condition in the domestic market. The other three main dimensions—i.e., the factor conditions, related and support industries, and industry strategy, structure and rivalry—mostly played conducive roles in the development of the RMG industry in Bangladesh and provided the impetus to achieve competitive advantage in the global market. However, within factor conditions, the availability of a large unskilled workforce, strategic locations and reasonable infrastructure acted as sources of competitive advantage despite some limitations including a lack of highly skilled mid-level RMG professionals, limited access to adequate financing, and deficiencies in R&D activities. Similarly, regarding related and support industries, a large number of backward-linkage knitwear industries positively contributed towards competitiveness, though industry respondents indicated an absence of well-developed clusters as a limitation compared to other countries. In the case of industry strategy, structure and rivalry, collaborative actions by the industry association regarding compliance issues, as well as collective responses to buyers’ needs, were identified as sources of competitive advantage, while sub-contracting to non-compliant factories and a lack of systematic R&D (e.g., an absence of a common e-platform) were considered as limitations. The findings indicate that the positive impact of favorable factors of those three dimensions (factor conditions, related and support industries, and industry strategy, structure and rivalry) were relatively stronger than the negative impacts, and contribute to the achievement of competitive advantage of the industry. Other than the four main factors, the study also found that government support has played a significant role in the development of the RMG industry in Bangladesh. The government provided these supports through various policy initiatives, financial incentives, and the negotiation of favorable trade agreements including tariff and import-quota free access to the European Union under the Generalized System of Preference (GSP) scheme. The study also recognized that three chance events greatly influenced the development of the RMG industry of Bangladesh and positively affected growth in the sector: a quota system levied against traditional RMG exporters (e.g. South Korea, Hong Kong) in the 1970s; the Multi-Fibre Arrangement (MFA) that governed world trade in textiles and garments from 1974 to 1994 and provided beneficial access for Bangladeshi exporters; and compliance issues raised after the 2013 Rana Plaza garment factory catastrophe. The findings further highlight the importance of Porter’s double, multiple and rough diamond propositions in maintaining the continuous growth and development of the RMG industry in Bangladesh. It also briefly points out the potential impact of current COVID -19 pandemic on the RMG industry of Bangladesh. Finally, it proposes further research avenues to advance knowledge on competitiveness from different perspectives along with policy implications for the RMG sector of Bangladesh.
Bangladesh, Ready-made Garment, Export led Growth, Competitiveness
Doctor of Philosophy (Ph.D.)
Johnson-Shoyama Graduate School of Public Policy