What is it about?

This paper estimates the effect of integration with global apparel value chain on performance of Bangladesh apparel firms. The study does it by estimating an augmented Cobb-Douglas production function. The findings show that both backward linkage with foreign suppliers of intermediate inputs and forward linkage with global retailers of apparels positively affect firms’ output and labor productivity. By contrast, backward linkages with local suppliers have adverse effects on firm performances. The findings imply that it is a firm’s integration with the global apparel value chain, not the conventional backward linkage with domestic suppliers, that defines success of Bangladesh apparel industry in a globalizing world.

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Why is it important?

The apparel manufacturing sector is the key manufacturing and exporting sector in Bangladesh. Apparel production is considered one key driver of Bangladesh’s accelerating economic growth since 1991. The sector is employing nearly 4 million workers, 80 percent of them being women. Despite the remarkable growth of this sector, a common perception is that apparel firms in Bangladesh have flourished largely because of low-wage and abundant unskilled labor. It is also believed that the apparel industry is characterized by the simple market linkage in the sense that price is the key variable and it involves little exchange of tacit knowledge. This misperception was further reinforced after the April 24, 2013 collapse of Rana Plaza, which killed at least 1,135 workers and injured an estimated 2,500.


Textile and apparel industry is the flagship export-oriented manufacturing in Bangladesh. I conducted the first survey of this industry in 2004 and since then I kept following up firm-level performances of a cross-section of textile and apparel firms in the country. It has been a wonderful journey to follow the evolution of exporting firms in the global apparel value chain. The biggest change happened in the industry after the Rana Plaza accident and the subsequent intervention of Accord and Alliance, the two initiatives of the global buyers, for improving civil engineering & fire safety and labour standards across apparel factories in Bangladesh.

Dr Mizanur Rahman
Dhaka University

Read the Original

This page is a summary of: The Effect of Integration with Global Apparel Value Chain, South Asia Economic Journal, July 2016, SAGE Publications,
DOI: 10.1177/1391561416650587.
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