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Textiles and Garments: Forum on the

Future
Roadmap to an Internationally Competitive Textile & Garment
Industry in Bangladesh

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Preparatory Assistance (PA) Project
on
Sustainable Employment Policy Options in the
Post-MFA Era
June 2004 to June 2005

UNDP BGD/03/006

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
UNDP’s Interest in RMG

• Development Context is Impressive


• Largest Industrial Women Worker Employing Sector
• Positive Contribution to Poverty Alleviation
• MFA Regime End may be a Threat to Employment
• The Regime Change may depress Wages Further
• Need Poor Workers’ Crisis Coping Mechanism
• Need Collective Intervention

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Preparatory Phase Activities
2004 2005
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
COMPONENT “A”: EMPLOYMENT IMPACT ASSESSMENT AND EXPORT SECTOR EXPANSION

QUANTITATIVE IMPACT ASSESSMENT

QUALITATIVE IMPACT ASSESSMENT

SUSTAINING RMG w/ REF TO HUM DEV

EXPORT SECTOR IDENTIFICATION ACTION RESEARCH

COMPONENT “B”: POLICY OPTIONS MODALITY DEVELOPMENT

TRAINING/RETRAINING

SME EFFICIENCY STUDY

SOCIAL SAFETY SCHEME

CONSULTATION WITH STAKEHOLDERS/ STRATEGY

PROJECT DOCUMENT

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
TAPP
The Central Message

Although trade-growth and trade-human development nexus


is not well-established, the RMG-led export growth of
Bangladesh establishes a direct link between trade and
human development.

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Major Findings I

• Despite the growth over the past two decades


concerns about continued export success
remain.

• In sharp contrast to academic studies, there are


however positive signs

• Export Shock May Gradually Unfold with the


US market may turn out to be critical

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Major Findings II

• Notwithstanding a better performance in the EU


market, Bangladesh may experience serious price
competition in the EU market as well

• Provide maximum policy support to RMG now –


export diversification can be meaningful strategy only
over the medium to long-term

• Provide Maximum Possible WTO-Consistent Supports

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Choices and Options …..

• Cost Efficiency will add to Bangladesh’s relative


competitiveness
• Need for Reducing the Lead Time
• Need for quicker and better options for input sourcing
• Strategize ‘Value Addition’ as an alternative to
‘process criterion’ principle of ROO
• Need for Performance Monitoring of RMG firms in the
Post-MFA Period

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Choices and Options ……

• Need for developing skilled labour force for the


industry
• Need for attracting FDI
• Need for developing a national compliance standard
• Need for a prudent policy measures for containing
inflation
• Need for getting duty-free access to the US market

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Choices and Options

• Capitalize on the Breathing Space


– Despite lot of apprehension, the RMG export
prospect for the first 12 months appears to be good
– Bangladesh has some competitive strengths and
there are opportunities to improve it further

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
RMG Strengths and Weaknesses

Strengths
Acquired know-how and experience in the industry,
including among the semi-skilled labor force

Buyers’ interest to continue sourcing, at least , in


short run

• Current preferential regimes in terms of duty-free


access – to the EU and Canada

• Large pool of unskilled cost-effective labor


available to support expansion of the industry, if
required
• Large levels of exports and experience in the
export markets
• Reasonable positive market image, especially in
the area of labor utilization and compliance

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Weaknesses
•· Industry heavily focused on CMT, with all major
decisions across the board taken off-shore
• Policy impediments to backward linkage
development
• Low level of human resource development

•Low skill base resulting in low productivity and


higher than necessary costs
•· Shortage of skilled middle-management/ shop
floor supervision/skilled workers
•· Low level of local value added, and low level of
technology
•· Longer lead times than competitors
•· High levels of official and unofficial transactions
costs, especially in the import/export processes
•· High costs of power and other utilities

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
RMG Opportunities and Threats

Opportunities

• Potential to enhance the productivity of the labor


force through training and better human resource
practices
• Potential of the EU market as former Eastern
European members of the EU become less
competitive
• Potential in the US market, especially if duty free
preferential access is gained
• Investments in backward linkages

• Benefits of WTO membership

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Challenges

• Performance of competitor countries, such as China,


India, Pakistan and Vietnam.

• Phasing out of preferential market access


agreements
• Regional and bilateral trade agreements

•The possible instability resulting from labour disputes


and political unrest
•Continuing high transaction cost

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M
Thank You for
Your Attention.

Syed Azim

azim@pradeshta.net and syed.azim@undp.org


Syed Azim, Project Manager, Sustainable Employment Policy Options in the Post-M