Determinants of the Bangladesh garment exports in the post-MFA environment

ABSTRACT

The garment industry is considered as one of the driving forces of socio-economic development of Bangladesh due to its significant contribution to the country's exports, employment generation, and poverty alleviation. This study investigates the determinants of the Bangladesh garment exports in the post Multi-Fibre Arrangement (MFA) environment. Using data from World Bank Enterprise Surveys and other information from secondary sources, this study finds that labour cost, labour productivity, firm size, availability of domestic input materials, and firm location in a port city are the major determinants of Bangladesh garment exports. In addition, the analysis finds that cheap labour, firm size, product and market diversification, preferential market access, and proactive policies by the Bangladesh government have also helped the Bangladesh garment industry to become successful during the post-MFA period.

KEYWORDS:

• Garment industry
• cheap labour
• preferential market access
• infrastructure

JEL Classification:

• F63
• C21
• O14

Acknowledgements

The authors would like to thank the referee and the editor of this journal for their constructive comments on an earlier version of the paper, which has led to significant improvements in the paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The Multi-Fibre Arrangement (MFA) is an international arrangement under which the world textile and garment industries were governed and operated during the period 1974-2004. The purpose of this arrangement was to provide protection for developed countries’ textile and garment industries against the competition from developing nations. Developing countries naturally enjoy comparative advantages in garment and textile production because these industries are highly labour-intensive.

2. 16% of quotas under MFA were eliminated in 1995, another 17% in 1998, a further 18% in 2002 and the remaining 49% in 2004.

3. The CVD, a duty which is charged instead of excise duty, is payable by the Indian importers. The purpose of imposing CVD is to create a level playing field for imported goods on par with locally manufactured products.

4. A living wage, calculated by the Asia Floor Wage Alliance, is the minimum income necessary for a worker to be able to meet basic needs, such as housing, clothing and food (CCC 2014).

5. The accord has been informed that the hazard has been corrected but the accord is yet to verify and confirm whether the hazard has been corrected properly.

Additional information

Notes on contributors

Md Samsul Alam

Md. Samsul Alam is a PhD candidate at the Department of Accounting, Finance and Economics in Griffith University, Australia. He completed his MSc from Ritsumeikan Asia Pacific University, Japan. His main research area is international trade, business economics and development studies.

E. A. Selvanathan

Eliyathamby A (Selva) Selvanathan is the head of the economics and business statistics discipline and professor of econometrics at Griffith University. His research interests include applied econometrics, time series modelling, consumer demand models and stochastic index numbers. He has published over 60 journal articles and 7 research monographs.

Saroja Selvanathan

Saroja Selvanathan is a professor of econometrics in the Economics and Business Statistics Discipline at Griffith University. Her research interests include time series analysis, econometric modelling and consumer demand. She has published in the broad area of applied econometrics and her publications have appeared in journals such as Review of Economics and Statistics, Economics Letters, Economic Record and World Economy.