Originally posted in The Daily Star on 18 January 2024
Dr Khondaker Golam Moazzem, research director at Centre for Policy Dialogue (CPD), discusses the challenges that Bangladesh has to overcome on its journey to becoming a middle-income country, in an exclusive interview with Naimul Alam Alvi of The Daily Star.
Bangladesh is on its way to becoming a middle-income country, and one important element during that journey will be the manufacturing and export-based industries. Where do you think we stand in that regard?
In Bangladesh, there are two contrasting narratives that make up our labour sector and export sector progress: one for the ready-made garment industry and the other for the non-garment sectors.
In the RMG sector, we are making some strides in technological and product growth, diversification, buyer networking, and delivering products at globally competitive prices. We hope this trajectory continues. The working environment also shows some improvement compared to the past, thanks to collaborations with the Accord Alliance and ratifications of International Labour Organization conventions and compliance with minimum age requirements. Workplace harassment ratification is also underway.
However, progress is stagnant in the RMG sector in terms of the socio-economic well-being of workers. Wages, unionisation rights, participation in social dialogue, and even the standard of working conditions remain insufficient. This contradiction undermines our ability to fully leverage the potential of our skilled workforce.
The non-garment sectors lag even further behind. The potentially major export-oriented industries, such as textiles, leather footwear, ceramics, and agro-processing grapple with technical deficiencies, skill gaps, low productivity, market share struggles, child labour issues, abysmal working conditions, weak union representation, and wage non-compliance.
Recent reactions of the government, entrepreneurs, and brand buyers towards US and EU policies and reports reveal a lack of long-term improvement in areas critical for export sustainability—namely social issues, labour rights, and labour-owner relations. This raises concerns about potential crises occurring under international pressure. We must remember that importing countries’ scrutiny extends beyond the garment sector, encompassing overall labour rights. Therefore, we have enough reasons to take immediate action to remedy these issues across all sectors.
How do you evaluate the growth of our export-oriented industries? Are we on the right trajectory?
Internally, Bangladesh’s garment export landscape has undergone a subtle shift. While a single product once held the major share, there are five goods now which collectively account for around 75 percent of exports. However, we have yet to become a producer of premium RMG products. Although it’s said that garment sectors rarely flourish beyond 30 years, at 40 years and counting, Bangladesh’s dependence on its RMG sector continues. This stagnant progress threatens to confine us to a low-end manufacturing niche.
While other sectors are showing some promising signs of emergence, our economic foundation remains heavily reliant on the “three Rs”: rice, remittance, and RMG. This concentration impedes both job creation and worker productivity. No alternative sector offers comparable employment opportunities, trapping workers in a low-wage cycle. Overdependence naturally prioritises labour-intensive, low-skilled, and low-paying jobs.
Instead of a graduation from the garment sector, our specialisation has narrowed to cotton-based basics and bulk products, and a plateau of low-value items. Imagine if there were five additional billion-dollar export titans, such as food processing, agro-processing, leather footwear, jute, and textiles. These would foster healthy competition and elevate wage ceilings.
We lack a robust SME sector producing high-value, high-margin products—a crucial element for honing labour skills and propelling us upward. Furthermore, transitioning to such items demands unwavering adherence to ensuring workers’ rights, good factory conditions, and addressing environmental concerns. These unaddressed challenges discourage buyers and customers of high-value products from coming to Bangladesh.
What are the challenges hindering this transition to high-paying, high-valued industries?
I believe that challenges, to varying degrees, permeate nearly every aspect of our graduation trajectory. While the government deserves credit for setting a long-term vision of attaining high-income status, a critical gap has emerged between this aspiration and the policies enacted to achieve it. The immense size of the RMG sector, coupled with its considerable political influence, presents a unique challenge.
Any faltering within this sector, whether through unemployment or disruptions in employment, could swiftly translate into substantial political pressure upon the government. Furthermore, the extensive involvement of RMG entrepreneurs in the government’s policy-making process has inadvertently restricted the government’s flexibility and narrowed its focus, hindering the advancement of other sectors. There persists a hesitation to enact policies that would champion diversification (such as targeted fiscal incentives and, in some instances, the strategic withdrawal of existing support from the RMG sector).
The issue of workers’ wages reveals yet another constraint: political will. While logical justifications, capabilities, and needs exist for more frequent and coordinated wage increases, such progress has remained elusive.
RMG-centric policy framework acts as a significant impediment. Kudos to entrepreneurs in non-garment sectors for bootstrapping their way forward despite minimal support. Yet, imagine the potential that can be unlocked with targeted long-term policy support, sector-specific frameworks, and a level playing field. The current situation, with the garment sector absorbing nearly 65 percent of government incentives, stifles growth in other areas. Capital gravitates towards this established sector, leaving others starving for resources.
This persistent lack of alignment between political intention and policy implementation underscores the urgent need for a renewed commitment to the structural reforms necessary to propel Bangladesh forward on its graduation journey.
Similar challenges plague supply chains across industries. Underinvestment in non-garment infrastructure makes it vulnerable to established players. Additionally, the rise of conglomerates, while offering potential benefits, can suffocate competition and market dynamism. New businesses struggle to enter such an environment, leading to SME stagnation and big businesses being free to produce high-priced, substandard products for consumers. The vicious cycle continues: entry barriers remain high, promising ventures falter, and the export dream remains distant.
Furthermore, entrepreneurs themselves are often reluctant to embrace formal structures, delegation, and transparent governance. This continues to hinder growth.
Building robust corporate frameworks and shedding informal practices are crucial steps. Furthermore, our next generation’s potential remains untapped due to the lack of global-standard, industry-oriented training. While they excel in service sectors, manufacturing unfortunately appears a closed door.
Finally, upskilling both current and future workforces is imperative. Our graduates, both domestic and foreign, often lack a competitive edge. We often resort to imported workers or officers for high-skilled positions. But relying solely on imported talent is unsustainable. Investing in our people and building a pipeline of skilled workers is the cornerstone of achieving sustainable economic progress.
What do you recommend for improving this situation?
Our goal is to achieve economic diversification, reducing dependence on only a few sectors and fostering a multi-centric model with diverse employment opportunities for all genders and skill levels. However, within the current political framework, I observe shortcomings in operationalising and implementing such initiatives. Associations often lack a driving role, and opportunities for worker growth are limited. These factors hinder our progress towards achieving the desired growth targets.
Moving forward, the Bangladesh government should prioritise the development and implementation of sector-specific policy frameworks. These frameworks should be meticulously implemented, regularly reviewed, and equipped with clear targets for effective operationalisation. Through coordinated efforts of stakeholders across various sectors—entrepreneurs, workers, middlemen, government representatives, private sector players, buyers, and development partners—we can move towards a long-term, sector-based development plan.