The Rise of Bangladesh’s Garment Industry from Poverty to Prosperity Through Knowledge Spillovers

The fantastic journey of Bangladesh’s garment industry

  In 1980, Bangladeshi businessman Noor Qadir founded a clothing company to produce shirts. Prior to this, Bangladesh did not have a single large garment company. In 1979, the total number of workers in Bangladesh’s garment industry was less than 40. Qadir once worked in a government department and had extensive social connections. In order to start a clothing company, he found a foreign partner-South Korea’s Daewoo Company. Daewoo Company was one of the largest clothing companies in the world at that time. The person in charge of Daewoo Company and Kadir hit it off immediately because South Korea’s clothing exports are restricted by Europe and the United States and must have import quotas. In order to circumvent trade barriers in Europe and the United States, Daewoo is also looking for overseas production bases. There are no quota restrictions in Bangladesh, and shirts produced in Bangladesh can be exported to European and American markets.
  Daewoo and Kadir’s company signed a cooperation agreement. Kadir sent 130 employees to South Korea for training. In return, Kadir’s company will hand over 8% of the total sales revenue to Daewoo, which is regarded as payment of royalties and sales commissions. Kadir’s company grew rapidly. In the first year of business, they produced 40,000 shirts. More successfully, Bangladeshi workers quickly mastered Korean technology. Just one year after it was put into production, Kadir’s company terminated the cooperation agreement with Daewoo. They can make their own shirts. In 1987, the company’s annual output reached 2.3 million pieces.
  When Daewoo first signed the cooperation agreement, it did not expect that Bangladeshi workers would learn the technology so quickly. Qadir also did not expect what happened next. Among the 130 Bangladeshi workers he sent to South Korea for training, 115 of them left his company and started their own factories and became bosses. Ten years later, Bangladesh’s garment exports have reached US$2 billion.
  Later, Bangladesh’s garment exports also encountered trade barriers in Europe and the United States, and their development was not smooth. Bangladesh has not yet achieved economic take-off and is still an underdeveloped country. However, Qadir’s story tells us that economic development is difficult and easy. The most critical thing is not from 1 to 100, but the “thrilling leap” from 0 to 1.
Poverty is a kind of balance, wealth is also a kind of balance

  Suppose you live in a poor community and you want to open a small workshop to produce something to sell. What should you produce? Is it better to produce toys or socks? you do not know. Even if you hear that there is a toy that sells very well, such as a model airplane that children like, and you want to produce it, how should you produce it? You haven’t learned. Even if you study under teachers everywhere, learn how to produce, and draw the drawings, where can you buy materials? Why is it so hard to get rich? Because you fell into the “poverty trap”.
  Have you played “Age of Empires”? Age of Empires is a video game produced by Microsoft. At the beginning of the game, you are standing next to a bush, surrounded by darkness. You have to explore bit by bit and the world around you will reveal itself. In a poor society, the world around you is so dark and helpless to you. Economists always feel that as long as there is a market economic system, people will immediately find opportunities to create wealth. It really doesn’t hurt to stand and talk. You want them to try it themselves?
  Suppose you live in an affluent community. Some of the neighbors around me run businesses, some make investments, and some are professors. You hold a family gathering at home, and elites from all walks of life will come over to share their experiences. They are well-informed and have rich entrepreneurial experiences. You accidentally mentioned that you have a good idea to change the elevators at the airport into automatic security checks. Immediately a venture capitalist said, OK, I will give you 10 million first, and you can try it out.
  You really made it, and a friend immediately said, I know the manager of the airport and can recommend it to you. Your strength is having good ideas. The young man next door is an engineering genius. You also have a friend who is good at marketing. You quickly formed a “dream team”.
  According to economic explanation, this is because knowledge has a spillover effect. The more knowledge a society accumulates, the easier it is for new knowledge to emerge. The greater the stock of knowledge, the greater the benefit from each new piece of knowledge. The greater the benefits of new knowledge, the stronger the incentive to invest in knowledge.

error: Content is protected !!