Correlation Between Social Compliance and Export Competitiveness in the RMG Industry of Bangladesh

doi:10.7176/jesd/11-9-04

Abstract

Having survived one disaster after another, the Readymade Garments (RMG) industry of Bangladesh progressed swiftly, becoming the second-largest exporter of textiles and clothing. Prior to remediation programs launched by Accord-Alliance in the aftermath of the Rana Plaza incident, RMG companies have not been as keen about social compliance as they are now. Therefore, this research seeks to investigate the correlation between social and export competitiveness. Sales data of fifty-two RMG companies over the last five years were collected and analysed to determine the sales trend. The results of the analysis show there is an upward trend in the sales data. This means social compliance has not affected sales revenue. On the contrary, the results confirm what the literature states – social compliance attracts more export orders. A thorough literature review led to the development of a hypothesis stating social compliance and export competitiveness have a positive correlation. There are, however, other factors to consider when discussing export competitiveness such as lead time management, supply chain management, government’s fiscal policies, trade pacts, port efficiencies, energy supplies, cotton imports, backward and forward linkages, tariff and currency depreciation affect competitiveness of cotton exports. Shortening the lead time can boost export competitiveness of Bangladeshi textiles and clothing in the long run. Implementing supply chain management systems will help to optimize lead time and developing the local backward linkage industry will curb exporters’ dependence on imported raw materials and thereby shorten lead time further. However, further research along with primary data will provide the accuracy and relevance required for a research of this scope. Keywords: Readymade Garments, Social Compliance, Export Competitiveness, Bangladesh. DOI: 10.7176/JESD/11-9-04 Publication date: May 31 st 2020

Highlights

Disproving Henry Kissinger’s pessimistic observations on Bangladesh’s economic prospects, the Readymade Garments (RMG) industry helped the politically fragile nation recover from its post-independence economic hardships
From more than 100 countries across the globe that buy apparels made in Bangladesh, USA and EU are the biggest importers of Bangladeshi readymade garments (Hossain et al, 2019)
MATERIALS AND METHODS Of the fifty journal articles reviewed for this research, only one has attempted to investigate the relationship between social compliance and export competitiveness of RMG manufacturers in Bangladesh

Summary

Introduction

Disproving Henry Kissinger’s pessimistic observations on Bangladesh’s economic prospects, the RMG industry helped the politically fragile nation recover from its post-independence economic hardships. The little known South Asian country capitalized on a local supply of cheap labour. Without this advantage, it would have been difficult to compete with rivals like China and Vietnam. The RMG include both knitwear and woven products such as, socks, undergarments, sweaters, cardigans, and stockings are part of the knitwear portfolio; whereas shirts, T-shirts, skirts, blouses, and trousers are some of the woven products manufactured by RMG factories in Bangladesh (Haider, 2007). The bulk of this output is exported. From more than 100 countries across the globe that buy apparels made in Bangladesh, USA and EU are the biggest importers of Bangladeshi readymade garments (Hossain et al, 2019)

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