The Bangladesh export garment industry
Bangladesh has enclave-style export processing zones which have generated significant numbers of jobs, and more are planned. In addition, the export garment industry, using a system of letters of credit and bonded warehouses, has proved particularly dynamic. The Bangladesh export garment industry has grown from nothing in the 1970s to become the country's principal export earner in the 1990s. The first exports took place in the mid-1970s and they have grown by 20 per cent per annum to earn US$3.4 billion from sales to 45 countries in the 1996-97 financial year. This accounts for almost 70 per cent of Bangladesh's total exports. The United States is the main market with 50 per cent of exports by value, followed by the European Union with 40 per cent. This dramatic growth is largely due to the quota-based trading system known as the Multifibre Arrangement which obliged quota-poor East Asian exporters such as the Republic of Korea to find quota-rich production platforms from which to supply the United States and European markets. To cater for this need the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) administers a bonded warehouse system whereby cloth is sent in duty-free by customers for cutting and sewing before being exported direct to the distributor. Other incentives granted to the industry include duty-free import of capital goods and a tax at source of only 0.25 per cent.
Bangladeshi entrepreneurs found it relatively easy to enter the export garment sector since the technology was cheap, labour-intensive and easy to operate. At the start of 1998 there were more than 2,600 garment factories employing 1.3 million people, 90 per cent of whom were young women. This represents over 70 per cent of female formal sector employment in Bangladesh.
There are signs that the garment industry is upgrading from the simple assembly of shirts and the value-added component is now estimated by the BGMEA at 37-40 per cent. There has also been an increase in local sourcing, and some 80 per cent of the accessories used are now sourced locally.