No matter the future, Bangladesh needs to diversify its economy
The garment sector in Bangladesh has undoubtedly been the backbone of the country’s export earnings. With 84% of the total export earnings contributed only through the RMG sector, Bangladesh’s balance of payment is outright reliant on this mega-industry.
But what if this backbone plunges into the dust and renders the country vulnerable on international grounds?
Beyond a shadow of a doubt, the growth of the garment-manufacturing sector in Bangladesh has escalated rapidly. This is mainly because of competitive labour wages which function as an attractive investment haven for western clothing brands, markedly as China’s labour cost rises in the garments export centre.
However, there are significant threats to our sole treasured industry.
Educational equity and women empowerment
The country is evolving both economically and socially, and through this, literacy rates have elevated to 73% in 2019 according to UNESCO. As studies have concluded a positive correlation between education and earnings, the educational rise in the country will also lead to a demand for higher wages.
This will certainly make the garment labour costs rise and will eventually revamp Bangladesh’s image of supplying cheap labour. This will likely cut down investments in Bangladesh and contribute to the fall of the industry.
Moreover, as women empowerment rises, Bangladeshi women will become more aware of their rights and engage in protests to counter the common exploitation they face by their employers. Hence, labour unrest might come into action and further destabilize the industry.
Till now, we have been observing the industry dependent on human capital; now, bring in the inevitable epoch ahead of us where automation, robotics, and artificial intelligence will revolutionize the global industries.
Emerging automation and augmentation of artificial intelligence will beget a paradigm shift in the traditional labour-intensive production model. Sewing is the costliest and most labour intensive process in the business, and it accounts for more than half of the total labour input per attire.
However, sewing yet remains the most intricate function for a machine to operate given dynamic changes in fashion that require frequent changes in the algorithm of the machinery.
However, with the current advancement of automation, the Wall Street Journal reported sewing may make an entry in places with more-expensive labour, including the US. They also reported Yuho Sewing Machine and Co is automating the long-winded and convoluted sewing task.
Though the perceptible effect may take more than a decade to emerge in the country, it still holds a potential threat to the existing firms who are planning to be dependent on labour.
Besides, new technologies like gluing as a substitute for stitching fabrics are also progressing quickly; once the technology is finessed, automotive manufacturing of garments will leap forward.
If someday automation reduces production costs, nearshoring will be the most likely resolution of the global clothing brands. This might gradually divert the whole industry to the homeland of the respective brands.
Local entrepreneurs should take the break-neck speed of innovation more seriously to thrive in the global market.
Strategic incompetence and low labour productivity
With China losing market share, Bangladesh had a scope to expand its share in the international market. However, countries like Vietnam, Cambodia, Myanmar, and Indonesia have grabbed the stakes.
This is mainly due to Bangladesh concentrating only on a few items that China used to produce. Bangladesh produces mainly cotton-based products with low-diversity whereas China dominated on manmade fibres.
Secondly, Bangladesh has a strong currency against the US dollar, which is another reason for its low international price competitiveness. To add further, Bangladesh lags behind all garments-producing countries in terms of labour productivity per hour except for Cambodia, according to the APO database 2018.
The likely consequences of the downfall of the industry
With Bangladesh fully dependent on RMG for its export earnings, the GDP of the country is also dependent to a great extent on our country’s RMG. Hence, the downfall of the RMG sector will directly affect the country’s economic growth.
This might result in a cut down in FDI in the country and foreign investors taking back their investments. However, the most striking sequel would be the large rate of structural unemployment that would take place in the country.
Either way, even if the RMG sector doesn’t fall, the structural unemployment of nearly 45% of domestic industrial workers is still a matter of great concern due to rising automation in this globalized world.
If Bangladesh cannot find plausible alternatives to reallocate the new unemployed, the country might have to go through huge geopolitical and economic repercussions.
Syed Nazif Ishrak is a freelance contributor.