Bangladesh is at the core of the global fast fashion industry, with its factories supplying major retailers like H&M, Gap, and Zara. Over the past three decades, this sector has helped lift the nation from extreme poverty to lower-middle-income status. However, the $55 billion garment industry, which represents 80% of the country’s export earnings, now faces uncertainty following weeks of protests that led to the ousting of Sheikh Hasina's government in August, during which hundreds of people lost their lives.
Kyaw Sein Thai, who operates sourcing offices in both Bangladesh and the US, warns that the recent political turmoil could lead to a "10-20% decline in exports this year.Amid widespread protests and deadly violence, factories were torched, internet blackouts halted operations, and numerous international brands have started rethinking their dependence on Bangladesh
Even before the political unrest, Bangladesh's garment industry was facing challenges. Issues like child labor scandals, fatal factory accidents, and the fallout from the COVID-19 pandemic had already tarnished its image. Additionally, rising inflation increased manufacturing costs, while global demand weakened, squeezing profit margins and draining foreign currency reserves.
Mahaburbur Rahman, whose family established the clothing manufacturing company Sonia Group two decades ago, highlights that the country's dwindling foreign currency reserves alone are shaking confidence. "There’s concern about how we will finance imports of yarn from India and China without sufficient dollars. Many buyers can’t even visit Bangladesh to place new orders because they’re unable to secure travel insurance," Rahman explains.
The protests that led to Sheikh Hasina's ousting were fueled by widespread frustration, particularly among young Bangladeshis who faced limited job prospects in a stagnant economy. Although the garment industry has provided millions of jobs, wages have failed to keep pace with the rising cost of living. Many workers report earning less than half of the national minimum wage, forcing them to take out loans just to feed their families.“We won’t accept anything less than a doubling,” said Maria, a union leader representing garment workers.
Bangladesh's dependence on its garment industry has hit a ceiling, says Dr. Fahmida Khatun of the Centre for Policy Dialogue. "No country can sustain long-term growth by relying on a single sector," she emphasized. "Diversification is essential to meet the aspirations of the educated youth."
An abandoned technology park outside Dhaka, inaugurated in 2015 as part of a plan to create higher-paying jobs, now stands as a symbol of the previous government’s economic shortcomings. "Bangladesh has focused on building physical infrastructure but neglected investment in human capital," remarked Russel T Ahmed, a software entrepreneur.
As Bangladesh grapples with a complex set of challenges – from declining global demand and deteriorating relations with India, where Ms. Hasina has taken refuge, to the escalating impact of climate change – the stakes are high, and while Yunus has promised reforms, delivering on them will require not just time, but a national effort to rebuild the country's institutions and restore confidence in its future.