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End of Garment Quota System Could Hit Bangladesh Hard - 2004-10-10

Bangladesh's thriving garment industry is likely to be hit hard when an international quota system in textiles is phased out by the end of the year. The industry accounts for most of the impoverished country's foreign exchange reserves. At hundreds of small garment factories around the Bangladeshi capital of Dhaka, women bend over sewing machines, stitching garments for exports to Western stores. In a poor nation, the approximately $50 a month they earn helps them support their families. But in the coming years, many of them might lose even this meager income.

In recent decades, an international quota system has helped nurture the garment sector in small nations like Bangladesh, by giving them guaranteed access to markets in Europe and the United States.

But the quota system is due to be abolished by the end of this year. Economists say this will lower prices for retailers and consumers in the importing countries, but will also lead to the loss of jobs in many nations.

The Bangladesh garment industry is ill-prepared to face competition from more cost-effective suppliers, such as China and India. Both are cotton-growing countries, and their bigger garment industries benefit from economies of scale. They are expected to grab a significant share of the market from the small countries, once the quotas are gone.

Wages in Bangladesh are low, but so is productivity, because the factories have not modernized in the same way as in China and India.

Anisul Haque, president of the Bangladesh Garment Manufacturers Association, says his country is at a disadvantage for another reason.

"Bangladesh is not a cotton-growing country. And the textile base in China, India and Pakistan are stronger, because they are cotton-based countries, and their textile factories are much older than ours," he said.

According to industry estimates, as many as one-quarter of Bangladesh's garment units could shut down. They say the smaller manufacturers will likely be the worst hit, and that could throw up to half-a-million people, mostly women, out of work.

International agencies, such as the United Nations Development Program, are calling it a potential blow to the nation, one of the world's poorest, with a per-capita income of only $440.

Bangladesh's economy improved significantly in the last decade, driven primarily by the garment sector. The country earns nearly three-quarters of its foreign exchange from garment exports.