Economic Upgrading in Bangladesh’s Apparel Value Chain during the Post-MFA Period

Abstract

Bangladesh’s success in the global apparel value chain following the expiration of the Multi-Fibre Arrangement in 2005 deserves study to understand how a least developed country can become a major source of apparels within a short period of time. This article shows that even under a quasi-hierarchical governance structure, suppliers in Bangladesh have made significant progress in economic upgrading, particularly process and product upgrading. Competitive pressure linked to the ‘open sourcing’ of apparels has caused leading firms to ease conditionalities on the production process. Preferential access to major markets, timely responses to buyers’ changing demands, favourable policies related to the import of raw materials, production and export of apparels and new labour-related policies have facilitated economic upgrading. Suppliers have accordingly benefited from substantial investment in productive capacity, technological know-how and workers’ skills. Further upgrading would require more investment in firm-level productivity and improvement in physical and social compliance.

Analysis of the Structural Decomposition of the Textile-Clothing Industry in Bangladesh

“…That is why the investment was stagnant until 2005, and as a result, technological change was negative. However, phase-out of Multi-Fibre Agreement (MFA) and full implementation of WTO's multilateral trading system brought boon for the TCI of Bangladesh (Majmudar, 1996;Khan, 2004;Razzaque, 2005;Kelegama, 2005;Rahman, 2005;Chowdhury et al, 2006;Joarder et al, 2010;Alam, 2012;Rahman et al, 2012;Ahmed, 2013;Moazzem & Sehrin, 2016). Because of the increasing success of TCI after quota abolition, investors' confidence was increased manifold.…”

State policies and upgrading in global value chains: A systematic literature review

“…Such initiatives have been developed by countries as diverse as China, Colombia, and Costa Rica, with the aim of attracting and retaining FDI in high-technology sectors, and to encourage global lead firms to establish R&D activities in-country (Gao et al, 2019;Kergroach, 2019). Several cases also report specific incentives to support the opening of higher value-added markets (e.g., Alam & Natsuda, 2016;Moazzem & Sehrin, 2016). Interestingly, we also observed examples of leveraging tax liabilities and incentives to support better social conditions (e.g., Behuria, 2019;Pedersen et al, 2019).…”

“…It is important for national policymakers to be aware that, even within the same countries, actors at different nodes of the GVC can have diverse interests, for example regarding trade facilitation interventions. The other side of this coin is the fact that GVC-oriented policies will impact firms differently, depending on their position and integration in GVCs (e.g., Butollo & Ten Brink, 2018;Dannenberg et al, 2018;Kergroach, 2019;Moazzem & Sehrin, 2016).…”

Global value chains – a ladder for development?

“…Captive governance structures dominate the sector. Productivity increased substantially, but, similar to Vietnam, functional upgrading could only be achieved by a very limited number of bigger companies (Moazzem and Sehrin 2016;Curran and Nadvi 2015).…”