Note: The following update can be used as additional reference material for our case study 1 on the Bangladesh fire accident.
The export-oriented apparel sector has been the main source of growth in exports and formal employment for the past three decades in Bangladesh. The industry directly employs 3.1 million people, comprising 40 percent of manufacturing employment; indirectly more than 10 million people are dependent on the apparel sector.
According to the World Trade Organization (WTO, 2013), in 2012, Bangladesh’s apparel exports to the world reached $19.9 billion (4.7%), among which $10.6 billion (or 53.3%) went to the European Union (27) and $4.6 billion (or 22.4%) went to the United States. Cotton trousers, cotton shirts, cotton sweaters and cotton T-shirt [HS 620342, HS620462, HS620520, HS611010 and HS610910]account for around 75% of Bangladesh’s total apparel exports in 2009 (World Bank, 2012).
The unit prices of Bangladesh’s main apparel exports are much lower than the world average and even lower than the unit values of apparel exports from China, India and Sri Lanka. From 2004 to 2007, the average price of Bangladesh’s apparel exports to the world fell from $2.60 to $2.31 per unit, representing a decline of 11 percent over three years. More specifically, average unit prices for woven apparel fell from $3.26 to $2.92 (10% drop in price) and for knit apparel from $1.95 to $1.90 (3% drop in price) over the same period.
Bangladesh’s Local sources are able to meet about 80 percent of the domestic apparel industry’s demand for apparel accessories such as thread, buttons, labels, bags, tapes, shirt board, and cartons. But Bangladesh’s apparel sector relies on imported fabric and yarn inputs because the local textile industry is unable to supply its requirement in terms of quality, quantity, and variety.
Bangladesh’s main competitive advantage is low labor costs, one of the lowest among main apparel exporter countries in the world. Average apparel labor costs per hour in 2008 were $0.22; in comparison, rates in India were more than twice as high and four times higher in China. However, low wages are accompanied by relatively low levels of labor productivity. Average annual value addition per worker in Bangladesh was estimated at $2,500 compared to nearly $7,000 for a group of similar Chinese factories in 2005, according to a World Bank study.
Reference: Sewing Success? Employment, Wages and Poverty following the End of the Multi-Fiber Arrangement (World Bank, 2012). International Trade Statistics (World Trade Organization, 2013).