The RMG sector has been a major driver of economic growth in Bangladesh since the early nineties. The sector accounts for more than 80 percent of Bangladesh’s export earnings and employs nearly four million workers, relying on low-cost labor as a competitive advantage in the global market. However, the sector faces some structural problems that endanger its competitiveness in the long term. In order to draw basic conclusions, these issues need to be examined in depth in the context of rival countries and recent socio-political developments.

According to various studies, the development of the RMG sector has been facilitated by a “political agreement” between the government and business elites that aligns economic benefits for business owners with political stability through job creation. This agreement promoted keeping wages low to maintain Bangladesh’s competitive advantage, but reinforced a cycle of labor unrest as workers’ demands were persistently sidelined and minimum wage adjustments rarely matched inflation or costs of living. International interest in Bangladesh’s RMG sector only peaks during tragic events such as the Rana Plaza collapse in 2013, but systemic problems remain in day-to-day operations. Workers protested low wages, unsafe working conditions and the suppression of their rights, which led to factory closures and disruptions in production. This unrest is exacerbated by a backdrop of political instability, and the interim government is now tasked with restoring order and addressing the root causes of discontent among workers.

Forty years later, long working hours, low wages, lack of regular contracts and systemically dangerous conditions remain in the industry. The absence of contracts allows owners to avoid providing appropriate compensation when terminating workers or when work-related injuries or deaths occur. Moreover, arbitrary situations in times of protest hinder the path to peaceful and cooperative solutions. Unions face serious pressures; Union organizers are often subjected to intimidation and violence. This pressure prevents workers from obtaining better wages or improved working conditions, leading to a fragile industrial relations environment. The inability of unions to advocate effectively leaves workers vulnerable and strengthens the employer’s position, as reflected by minimal improvements in wage structures over the years. Moreover, politically motivated interest groups, taking advantage of the absence of strong unions, are manipulating conflicts.

Another major issue facing the industry is the low productivity of employees, which the industry has alleviated through longer working hours. This low productivity indicates low skill levels due to low levels of education among workers and low levels of automation in the production process. Currently, less 15 percent of operations Mechanization in Bangladesh’s RMG sector is significantly lower than that of competitors such as Vietnam. Bangladesh’s investment in research and development (R&D) within the RMG sector is also low; factories only approx. two percent of their spending Participating in research and development activities. Moreover, most middle and senior management personnel in this industry do not have the necessary skills to increase efficiency in critical production areas such as sewing. Such skills gaps prevent the workforce from reaching optimal productivity levels. In contrast, Vietnam’s workforce is generally considered to be more skilled due to better education and training systems; this contributes to Bangladesh’s ability to produce higher value clothing compared to its focus on basic clothing.

Another competitor, Cambodia’s garment sector, faces similar challenges to Bangladesh in terms of wages, but has made progress with a structured, tripartite minimum wage adjustment system. Regular pay reviews involving government, employers and unions help create a more balanced environment. Although there are still challenges, the existence of structured negotiations has enabled more stable industrial relations compared to Bangladesh. Vietnam offers relatively higher wages and has better productivity, partly due to a strong focus on efficiency during long working hours. This shift attracts a more stable workforce, minimizing extreme unrest and positioning Vietnam as a key competitor.

Going forward, first of all, the sector needs to establish stronger, more autonomous unions; This will be necessary to create balance and peaceful cooperative solutions in wage negotiations. This shift could include creating wage-setting boards with real worker representation to encourage more regular wage adjustments in line with living costs. Second, emulating the Indonesian model, where wage adjustments are in line with GDP and inflation, could make wage changes more transparent and prevent demands for sudden wage increases due to inflationary pressures. Third, developing a robust regulatory framework and investing in compliance mechanisms can protect workers and minimize reputational risks related to poor working conditions. This may include strengthening the Bangladesh Department of Factories and Establishments Inspection (DIFE) to enforce safety standards more effectively.

Addressing the underlying causes of unrest and mitigating structural problems is vital to rebuilding confidence among international buyers and ensuring the long-term sustainability of the sector. Without significant reforms and commitment to stability, Bangladesh risks losing its competitive advantage in the global garment market.

Eshrat Sharmin He is a senior research fellow at the South Asian Network for Economic Modeling (SANEM). He can be reached at (email protected).

The views expressed in this article belong to the author.

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