Textile Trade In Bangladesh Case Study

994 Words 4 Pages
In recent years, Bangladesh has risen from one of the poorest countries to the second largest supplier of textile goods in the world. The question still remains however, is it sustainable? Despite efforts by the Bangladeshi government, the industry still faces many problems with infrastructure, corruption, and capital inputs that could jeopardize their position in the international market.
Background of Bangladesh’s Textile Trade In the late 1970’s, Bangladesh entered into the ready made garment (RMG) industry backed mostly by Chinese and Korean investors who wished to take advantage of its access to restricted markets and cheap labour. The Multi-Fibre Agreement (MFA) , a short-term measure which imposed quotas on the exports of textiles
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This along with the latter factor have been especially important in light of the recent recession in developed nations which has driven the need for lower production costs.
Market Access: As a result of the ATC, a more free trade inclined policy, Bangladesh has the advantage of duty free, quota free market access which is favoured by the international consumers for the lack of regulation and lower costs. As well, as a labour intensive nation, they have a comparative advantage over their competitors (See factor 2). This, as a result of the returned importance of “buyer preference”, gave them security in the industry once the MFA was phased out as their prices and labour resources were ideal for American consumers.
Support Measures: The Bangladeshi government has initiated several support measures for this industry such as bonded warehouse facilities and duty drawback incentives that have allowed them to flourish in the international
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This corruption causes American companies less willing to invest in, buy from, or partner with Bangladeshi manufacturers as they do not hold the same ethical standards as investors do. This arises particularly with situations similar to what occurred in Rana Plaza in 2013. The poor publicity caused many problems both for American companies–whose reputation was attacked– and manufacturers. Many American retailers were not willing to aid factory workers who were affected simply because they fear it would be an admission of misaction which could both incriminate them and cause public outroar. Companies like Walmart and Sears refused to contribute to compensation funds because they claim unauthorized contractors had produced with the factories in question (Burke, 2013). This poses a threat to manufacturers as a result of two reasons. One: they lose out on necessary capital resources provided by US retailers and two: the fear that they could be implicated in future situations causes retailers to look elsewhere for cheap labour. For this reason, it is recommended that Bangladesh partake in high-standard contracts and uphold those standards to the best of their

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