Sunday, December 9, 2012

Agglomeration in Dhaka: How does Read Made Garment (RMG) industry make Dhaka the fastest growing city of the world?


Agglomeration in Dhaka: How does Read Made Garment (RMG) industry make Dhaka the fastest growing city of the world?

by Md Masud Karim

In a sunny day of last summer, I was shopping with my German friend in one outlet of H&M in Budapest and suddenly she shouted “Oh My God! This T-shirt is too cheap! Masud, you see it is from your country”.  There is no doubt that the magical role of Ready Made Garment (RMG) industry in the agglomeration of Dhaka, the capital of Bangladesh, is more surprising.

Between 1990 to 2005, Dhaka, the fastest growing city on the earth, doubled in number- from 6 million to 12 million. According to United Nations, Dhaka which is the residence of 17 million people by 2011 will be the home of more than 20 million by 2025. It is well known that massive migration, high birth rate and new experience of free international trade are swelling cities in developing world; however, these factors are perhaps more strongly intense in Dhaka than anyplace in the world. Thanks to the concentrations of export oriented textile industry in Dhaka, which starts in 1980s and flourished in last thirty years, and thus created this massive agglomeration.

The RMG sector of Bangladesh has experienced a dramatic growth in last three decades. At present, Bangladesh ranks the third largest garment exporter after China and Turkey in the world. Before 1980, the country’s RMG industry’s role was mainly import substitution; hence, was not subject to export limit under the Multi-Fiber Arrangement (MFA). This opportunity did not escape the attention of Daewoo Corporations of South Korea, one of the largest RMG manufacturers losing from quota system. Without making delay, Daewoo teamed up with a Dhaka based new enterprise Desh Ltd. in 1979.

Knowledge and technological spillovers seems to be the first cause of RMG industry development in Dhaka. In 1979, Desh sent 130 new employees to Daewoo’s factory in South Korea, where they took part in an eight-month intensive training course on garments industry. Within few years, like employees of Silicon Valley companies who started their own business, most of these employees had left Desh and started their independent RMG business in Gazipur and Mirpur area of Dhaka. In retrospect, even though it was a great blow to Desh and Daweoo, it was boon for Bangladesh. In 1980, number of RMG factory was 47 which increased to 804 by 1990 and 5000 by 2011.

The contribution of government in the sustainable development of this sector is beyond question. In 1985, special benefit under MFA was withdrawn; however, the growth of RMG was thriving. At present, this sector accounts for 75% of countryexport and 25% of GDP

Figure: Number of garments factories in Bangladesh                        

Figure:     Employment (million workers)
Source: Bangladesh Garments Manufacturers and Exporters Association

Perhaps no other industry in the world contributed in agglomeration of a city like RMG has done to Dhaka city. As majority of RMG factories are set up in Dhaka city, it attracted unskilled and semi skilled labor from the whole country. At present this sector employs 3.6 million people of which 85% are woman.

This sector has created job opportunity not only for unskilled and semi-skilled but also for university graduates. Nowadays many universities in Dhaka city offer degree on textile. This makes it easier for the industry to recruit employees and at the same time employees have choice whom to work for.  

The concentration of the RMG industry in Dhaka has also induced the growth of other related business with close proximity to the RMG factories. Importers of raw materials and agent offices of foreign buyers find it advantageous to be close to production units. Consequently, it increases efficiency of this industry.

In comparison to other cities in Bangladesh, Dhaka has the largest high and middle income consumer base. Moreover, people in Bangladesh have a tendency to travel to the capital for shopping which also makes Dhaka more important local market. Even if foreign buyers cancel orders, garments owners still can have sound sleep as they know these garments can be sold in clothing markets of Dhaka like hot cake.
In the long run, garments industry in Dhaka likely to be hurt by high labor cost pushed by high living expenses, labor unrest which has become a common phenomenon; however, the wave of agglomeration this industry has created seems to be long-lasting. At present, out of 87 universities in the country, Dhaka city, which is one of 64 cities in Bangladesh, is the home of 52 universities. Moreover, the presence of all the urban amenities such as healthcare, theaters, and stadiums are also biased toward Dhaka.  These factors will continue to attract rich, educated people of the country, who are willing to pay extra living expenses to enjoy urban amenities.



3 comments:

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