Can the Bangladeshi Textile Industry Elevate the Country Out of Poverty?

Bangladesh, a South Asian country that can be found bordering India and Myanmar, has caused a circulation of debate around the successes and failures of utilizing globalization as the primary form of modern development. The country had been born into poverty upon its separation from Pakistan but slowly became more financially independent as years went on. The Bangladeshi economy has steadily rose 6% per year since 1996 through its highly important service and agricultural sectors, even though the country has struggled with “political instability, poor infrastructure, corruption, insufficient power supplies, slow implementation of economic reforms, and the 2008-09 global financial crisis and recession”. Much of this economic growth can be attributed to the nation’s export of garments, which has accounted for more than 80% of total exports and exceeded $25 billion in 2015 (CIA).

The origin of the Bangladeshi textile industry can be traced back to as early as the official independence of Bangladesh in 1971 when the nation’s newly formed government took control of the textile factories and organized them under the Bangladesh Textile Mills Corporation (Islam et al., 32). Aside from the organizational struggles that resulted from the national takeover of the textile production, there were “problems such as low productivity in the labor force, lack of planning, indiscipline, lack of accountability, and poor machine maintenance and operation resulted in a lack of profit”. This led to the privatization of textile manufacturing, strengthening the quality of fabric being used by factories, and ultimately increasing the global demand for Bangladeshi garments. Rapid growth followed as Bangladesh led an export-oriented garment industry that had originated during the early 1980’s (Islam et al., 33).

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In a policy paper written by the Danish International Development Agency in 2013, the problems of the Bangladeshi economy were examined, even in the midst of what seemed to be economic success from its booming service and manufacturing sectors. The agency notes that, although the country was successfully able to reduce poverty levels from 57% in 1991-92 to 31.5% in 2010, the country is still considered one of the poorest countries in the world, ranking 146 out of 186 on the 2011 United Nations Human Development Index. Along with the economic growth that has gradually occurred, there has also been an increase in inequality, as well as disparity in wealth between the majority and the minority ethnic groups. Roughly 25%, around 40 million people, are in such poverty that they spend almost all of their income on food and are still unable to fulfill their own basic nutritional requirements. This leads to the next startling statistic that about 40% of children and 30% of women are malnourished, which becomes especially troublesome for households that are led by a female or have no parental care at all (DANIDA, 6).

As we can see, the increase in garment exports has decreased the poverty levels in Bangladesh by a significant amount over the last couple of decades, but what about the humanitarian side of this movement? Recently, there have been major concerns regarding the safety and wages of factory workers, considering that only 5% of the workforce partake in trade unions. This is especially startling due to the lack of organization and power of these unions in contrast to the rigid structure of the factories’ management. Widespread corruption has allowed for unsafe buildings to be considered safely regulated due to the lack of staff and equipment by the government (DANIDA, 8).

The Spectrum and Rana Plaza factory collapses are the result of the unsafe working conditions for factory workers in Bangladesh. In 2005, the Spectrum sweater factory had caved in and killed 64 workers, yet there had been no upheaval in regulations after that incident. Then, in 2013, a fire at the Tazreen Fashions factory and a collapse of the Rana Plaza factory killed 112 and 1,129 workers respectively. The two main responses from the retailers that have factories in Bangladesh have been to call for more stringent safety codes for these buildings and to work closely with labor unions and workers to receive firsthand account of how to deal with these problems. The Bangladesh Accord for Fire and Building Safety and the Alliance for Bangladesh Worker Safety, each made up of Western private retailers, have begun to inspect the violations against labor in Bangladesh. These two organizations have been trying to institute better measures for worker safety in Bangladeshi factories and plan to ultimately inspect 2,000 of Bangladesh’s 5,000+ workshops. On the surface, this looks like a very altruistic plan of action, but the 3,000+ buildings not being inspected generally have worse conditions and there are many secret projects being done in those factories by Western brands (Greenhouse and Harris).

Even with these prevalent problems of worker safety in Bangladesh, the garment industry continues to dominate the country’s exports. In 2014, the textile and garment sectors accounted for $24 billion of the $25 billion total goods exported, but the leaders of the industry continue to want to expand its production and increase output. Tapan Chowdhury, President of Bangladesh Textile Mills Association, wants to raise Bangladesh’s ready-made garments and textile exports to $50 billion by 2021 (Ittefaq).

As we had done with South Korea last week, we should analyze whether globalization, specifically from the garment and textile industry, has ultimately benefitted the developing nation of Bangladesh. The economic growth is undeniable when looking at the substantial annual increase in GDP due to the dominance of the Bangladeshi textile and garment sectors. Another result of the boom of these exports is that poverty and unemployment rates have fallen. However, despite these benefits of globalization, there has also been an increase in inequality, especially when looking at the economic instability of minority groups which leads to social tension. There has been continuous need to revitalize the labor regulations in Bangladeshi factories, as was seen in the thousands of deaths from disasters that occurred to their workers. This leaves the question of whether the private companies should be the ones left to monitor the upheaval of these newly enforced codes.

Personally, I can’t denote whether Bangladesh can be deemed a development success or not due to all of the complications that surrounds its garment industry. Surely, there are many areas for improvement from a humanitarian and labor point of view, but the country has made strides in improving poverty even if there has been increase in inequality. We also will see over the next decade what impact these private retailing companies and development agencies will have on the economy and welfare of Bangladeshi workers. How do you think Bangladesh is going to progress over the next decade? Should it change its current plan to dominate as a garment-exporter?

Sources:

Denmark. DANIDA. Ministry of Foreign Affairs of Denmark. DANIDA. Sept. 2013. Web.

Greenhouse, Steven, and Elizabeth A. Harris. “Battling for a Safer Bangladesh.” NY Times. 21 Apr. 2014. Web.

Islam, Mazedul, Md., Monirul Islam, Md., and Adnan Maroof Khan. “Textile Industries in Bangladesh and Challenges of Growth.” Research Journal of Engineering Sciences 2.3 (2013): 31-37. ICSA. 15 Feb. 2013. Web.

“Bangladesh Plans to Raise Textile Export to $50b by 2021.” Ittefaq [Dhaka] 23 Mar. 2015. Web.

“South Asia :: Bangladesh.” The World Factbook. Central Intelligence Agency, 25 Feb. 2016. Web.

 

 

 

South Korea: An Economic Development Success Story?

As a development scholar, my primary interest resides within the influence of international trade on developing economies from a financial and humanitarian standpoint. The following blog posts will attempt to analyze examples of this dynamic by taking a closer look at case studies of developing economies that rely heavily upon exports, imports, or both. First, we will examine a success story of the rapidly developing country of South Korea throughout the past several decades and how it was able to successfully utilize its export-centered economy in a global setting.

Originally South Korea did not have the capability to compete in a global economy until the 1960s when it transitioned from a market focused on domestic products to an export-reliant economy. Prior to this change, the Korean economic system was heavily characterized by its agriculture and mining industries, while manufacturing only consisted of primary products that amounted to 3% of the country’s GNP. However, by expanding its manufacturing sector to simple products like textiles, and eventually sophisticated goods like automobiles and computers, total exports represented over 40 percent of Korean GNP. A result of this was that “the compound annual growth of per capita income was well in excess of 7 percent, making it one of the fastest growing economies in the world during this period” (Westphal 43).Screen Shot 2016-03-17 at 9.07.37 PM

South Korea has earned its rank as the eleventh largest global trading nation, exploding in trade value from $134.9 billion in 1990 to beyond $857.3 billion in 2008. Trading partners of the country originally included Japan, Europe, and the United States, but eventually a large percentage of total Korean exports ended up in China. By 2008, Korea had trade agreements with over 220 countries. The sophistication of the manufactured exports of Korea has increased over time, resulting in a current primary export market of chemicals, automobiles, computers, and other forms of high-level technology (Bark 24-36).

With the rise of corporate manufacturing in South Korea, many family-controlled conglomerates have risen with the aid of government policies that allowed them to benefit from tax advantages, exceptional loans, anti-labor policies, and various government contributions. A prime example of this consists of the dominant presence of Samsung in Korean economic activity and daily life. Aside from the penetration of Samsung in Korean education, electronics, amusement parks, life insurance, medicine, and housing, the company accounts for twenty percent of Korean exports and roughly seventeen percent of the annual GNP (Estrin).

When examining the success of Samsung in Korea, it is also important to assess the level of corruption that may be occurring within the realms of labor and management. In 2013, it was found that the Samsung Electronics factories had been contributing to various diseases of former employees. The corporation provided compensation to the workers who protested about this very issue, but Samsung refused to acknowledge any blame (Estrin).

Samsung demonstrates the power that multinational corporations have on an export-based economy like South Korea. “The former chairman of Samsung, Lee Kun-hee, was convicted of tax evasion and breach of trust in 2009, but he received a presidential pardon and returned to the chairmanship” (Estrin). The essentiality of Samsung to Korean economics can actually be deemed as frightening. It can be difficult for one to say that it is moral that the needs of the corporation outweigh the governmental law considering how fundamental Samsung is to Korean wealth.

Another problem that has emerged through the rapid development of South Korea is the massively increasing problem of income inequality. According to the IMF, forty-five percent of total income was being shared by the top ten percent of Korean earners. This percentage was the highest among its Asian-Pacific counterparts, with Singapore coming close at forty-two percent and Japan at forty-one percent (The Korea Economic Daily). This shouldn’t come as too much of a surprise considering most of the labor in South Korea is being focused in manufacturing while the top earners reside in the conglomerates that have been aided by government policies for decades.

This leaves the question then whether South Korea can be presented a successful model for export-driven developing economies. The empirical data demonstrates immense prosperity over the last three decades, especially when looking at the country’s change in GNP and global trade relations. However, when looking from a humanitarian lens, can we look past the increasing income gap, poor labor conditions, and the crippling power of large multinational corporations? It is important to assess all sides of the situation and weigh the pros and cons to international trade and its impact on developing economies. The blogs that follow will hopefully allow readers to examine the many outcomes, both expected and unexpected, of utilizing international trade as a method of participating in modern development.

Sources Cited:
Bark, Taeho. Ed. Byongwon Bahk and Gi-Wook Shin. Shorenstein APARC Working Papers. Stanford University, Feb. 2012. Web.

Estrin, James. “Samsung and the South Korean Success Story.” Web log post. NY Times Lens Blogs. NY Times, 13 Nov. 2015. Web.

“Korea’s Income Inequality Largest among Asian Nations…IMF Report.” The Korea Economic Daily. 16 Mar. 2016. Web.

Westphal, Larry E. “Industrial Policy in an Export-Propelled Economy: Lessons from South Korea’s Experience.” Journal of Economic Perspectives 4.3 (1990): 41-59. JSTOR. Web.