This week, our assistant Maria has analyzed the production sector of Bangladesh: its strengths, labor costs, major trends, and infrastructure.

One of the world’s busiest clothing export hubs, Bangladesh sits next to China as Asia’s primary manufacturing center. In fact, in the past fiscal year, the country recorded earnings of 24 billion USD on garments production alone.

Low wages, more factories, keys to the thriving industry

In 2013, Bangladesh already recorded 5,000 factories, and this is twice of Indonesia’s 2,500. Its export products also enjoy duty-free access to European Union member countries.

Labor cost in the country is lowest in the region with its minimum wage costs around 5,300 taka or 68 USD. The increase was implemented on December 1, 2013, following protests from different sectors to raise the salary of factory workers.

Despite this law, however, 95% of Chittagong factories pay their production operators below the minimum wage. This is in contrast to Bangladeshi capital, Dhaka, where at least 62% of its factories are able to pay the new minimum wage.

Chittagong serves as the primary port of the country. Established in 1888, the port serves the most essential role in ferrying goods in and out of the country. It handles 92% of Bangladesh’s import-export trade. Utilizing both old and new technologies in monitoring and handling products – mostly export garments – Chittagong ranked first in the most efficient ports in the whole of Asia in 2011, followed by Philippines’ Zamboanga and General Santos, in second and third places respectively.

Behind the growing industry, though, production has long been facing one huge problem – funding. The lack of cash on hand by the factories, particularly small importers, forces them to sell products first before they can buy fabric and start manufacturing. This process is the cause of long delays in the shipment of goods. But with constantly changing fashion trends, delay in shipment is a big no-no.

Safety hazards remain a huge concern for investors

While Bangladesh is popular with the world through its contribution to fashion and clothing, there have been several moments of labor unrest. Occupational hazards have riddled the headlines in the past three years. For instance in 2012, a total of 117 died and 200 others were injured in what is thought to be one of the deadliest factory fires to be recorded in history. Inspectors are still uncertain as to the real cause of the big fire that brought down Tazreen Fashion factory, in the Ashulia district, but two angles are looked at – short circuit and sabotage. Thirteen were charged for the incident, including the two owners.

Meanwhile, in 2013, a garments factory collapsed in Savar in the Greater Dhaka area, killing more than a thousand workers.

In July 2013, retailers that are mostly Europe-based vowed to inspect the occupational situation of their suppliers and to finance the upgrades of fire and safety equipment. However, US retailers Gap and Walmart revealed they would implement their own measures by conducting audits and laying out safety plans for factories.

Child laborers in the manufacturing industry

Although the Bangladeshi government already implemented a wage hike before the end of 2013, employee abuse is still rampant. Child laborers are the common recipients of this, as most of these juvenile workers face the worst kinds of job. They are oftentimes exposed to chemicals and heavy equipment, and are prone to injuries and other occupational hazards. Other than that, girls receive the most emotional, physical and sexual abuse from employers. Notwithstanding this situation, these workers still get below minimum wage, or none at all.

Bangladesh has set guidelines in employing children as workers. One rule is to only allow those below the age of 18 to work five hours, but many factories force minors to clock in eleven hours.

The Bangladesh economy today

Even as the country experiences economic growth, the profitability of Bangladeshi products have gone down in the past years. Factory owners’ return of investment suffered a drop, from 50% to 20% on average. This may not make an impact to their businesses, but but it may well encourage them to cut down on wages and safety-related improvements.