Textiles in Bangladesh

Team Leader: Claire Okrainetz
Analysts: Sigma Khan, Hannah Mazzuca, Hayley Binks

Political Situation and Stability

Bangladesh is a relatively new country in the grand scheme of international sovereignty. After a nine-month long war and genocide, it gained independence from Pakistan in 1971, achieving Republic status, but adopting a constantly-instable form of democracy. The two main political parties are identified as BNP (Bangladesh National Party) and Awami League. Since independence, the political situation of the state had been unsteady with civilians experiencing several military regimes, protests, domestic terrorism, repercussions of climate change, political corruption, caste and religious discontent as well as extreme poverty. The current Prime Minister, Sheikh Hasina, is one of two rival women who have dominated Bangladesh’s political arena since democratic rule was introduced. After almost three decades of competition between the Prime Minister and the opposition leader, Khaleda Zia, Hasina has been moving toward authoritarian rule by dismantling several pillars of Bangladesh’s democracy. However, the country hopes for political stability in the coming years with the 11th parliamentary election held in a fair and participatory manner, and with political stability, Bangladesh hopes to become a middle income country by 2021.

Due to this political instability throughout 2000s, opposing political parties regularly called strikes and other violent movements to change the regime. As a result, foreign investments were at an all-time low. As of 2015, the domestic political situation began to settle, grabbing the attention of foreign investors, especially from China, India and Saudi Arabia. Although Bangladesh has experienced some turbulence in recent years with the collapse of the Rana Plaza, mass flooding as a consequence of climate change, and domestic terrorism attacks by radical Islamic militants, the country is heading towards significant development in comparison to its past. This stability over time can be seen by the chart below displaying the political stability index (-2 weak, 2 strong) as ranked by the World Bank. As one can see Bangladesh is becoming increasingly stable since their lowest point in 2005, the country aims to increase in stability as the 2018 election draws nearer.

Bangladesh Political Stability Index, Weak (-2) to Strong (2)



Economic Size-Up

Bangladesh continues to score as a low-income country in 2017, with a GDP of 221.4 billion USD. The fragile rule of law undermines economic development and 78% of the country’s population depends on rural agriculture rather than urban development or global growth industries like tech. Corruption and marginal enforcements of property rights drive people into the informal economy and repeated political crisis have led to poor economic management. Despite some streamlining of business regulations, the growth of entrepreneurship is still unpredictable due to a weak regulatory environment and the lack of adequate institutional support for private-sector development. The unstable government is unable to provide sufficient public goods further limiting opportunities for business development and job growth. The top income tax rate is 25% and the top corporate tax rate is 45%. The overall tax burden equals 8.6% of total domestic income. Bangladesh’s economy is stagnant in the urban realm seeing budget deficits that average 3.4% of GDP with public debt as high as 34% of the overall GDP. In terms of foreign investments, China has made a 38BN investment in the state with 24BN as a loan assistant and the rest being joint investment by Chinese corporations. Bangladesh’s neighbouring state India has promised an investment of 10 million dollars earlier in 2015. As foreign investing goes, these numbers are small in relativity, however, it is important to keep in mind Bangladesh’s political climate, poor economic management and the extremely high populations in poverty with little proof of development in the past. For future references, the risk in investing in Bangladesh is high, however, economists are hoping that recent political stability may result in an upwards trend for the country’s economy as well.

Textile Industry Overview

Bangladesh’s textile industry has grown over the past 50 years to become one of the main exporters of textiles and ready-made garments in the world. Bangladesh is the fifth largest exporter of clothing and the second largest exporter of cheap, ready-made garments in the world. The textile industry is a major export for Bangladesh's economy, garments account for 80% of the country's total exports. The industry also plays a key role in the employment of 1.8 million people, 40% of all manufacturing employees. The textile export value did decline briefly in 2002 after 20 years of steady growth, however they recovered by the end of 2003. The exportation of cheap, ready-made garments has driven the manufacturing industry to grow at an accelerated rate since the 1980's, contributing 17.9% of the country's GDP in 2015/16. In 2016, foreign direct investments of textiles brought in a gross inflow of $584.95 million USD. This has risen from 44.77 million USD in 1996/97. The main foreign investors by country were the U.S.A and the U.K. with a gross inflow of 456.1 million USD and 321,77 million USD. There are many problems in Bangladesh regarding the labour standards in the industry, as is the case in most developing countries. However, when it comes to social issues such as the gender bias against women in Bangladesh textiles does offer women better working opportunities than are offered in rural areas. Conclusively, the textile industry in Bangladesh is an important and growing industry with a global impact.

Overall it is clear that Bangladesh has had a somewhat turbulent past. However, with their political upturn and the positive effect this should have on their economy, I would say that now is the perfect time to be looking at textiles in Bangladesh.