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The Changing Political Economy of the RMG Sector

Although its importance now makes its growth seem inevitable, the sector's relatively early start (Bhattacharya and Borgatti 2012) and rapid expansion warrant a political economy explanation. Rather than the inevitable result of Bangladesh's comparative advantage in cheap, unregulated labour and free- market policies, Khan observes that the sector got its start because of specific conditions in the foundations of the political settlement: a) powerful political pressure to liberalize, including from the new proto-capitalists with hot cash; b) global trade rules, in this instance the MFA, as we saw previously; c) the 'accidental' transfer of technology that started with the 1979 Daewoo-Desh Garments venture; and d) strong but informal elite political protection, from the highest levels (Khan 2008).

For Khan, the critical factor is the emergence of a new vernacular capitalist class in the post-Independence period. This part of Bengal had never had important modern manufacturing or an industrial elite class (Kochanek 1994; Sobhan and Sen 1988). Despite the energetic presence of the left throughout the formative years of the nationalist struggle from the 1960s on, the balance of power that emerged in the mid-1970s depended on the state creating and protecting space for business investment. A new Bengali Muslim business class had emerged almost overnight, benefiting from good connections in the newly independent state to engage in a rapid process of primitive accumulation, including from sales of public assets, grabbing 'enemy property', and smuggling (Khan 2008). By the mid-1980s, the trade regime began to be liberalized under pressure from the small old industrial elite and the emerging new class of 'at least hundreds of individuals who could if called upon raise $100,000 or more of capital in the form of land, liquid capital or collateralized bank loans for investment' (Khan 2008, 88).

A 'lucky accident' in 1979 sped matters up, establishing a partnership where, under the leadership of the ex-civil servant Nurul Quader Khan, Desh Garments provided capital and reassuring political protection, while the Korean firm Daewoo transferred the technology and trained staff (many of whom later went on to establish their own firms) (Khan 2008, 89). Then-president Ziaur Rahman personally backed the initiative, and his and his successor Ershad's personal support for RMG entrepreneurs pushed through import credit and bonded warehouse facilities that overcame some of the tougher barriers to entry or growth (Ahmed etal. 2014). The National Industrial Policy in 1982 set up incentives and support for foreign direct investment, including through export processing zones (EPZs) (Kabeer and Mahmud 2004; Kochanek 1994). The 1990s saw more incentives, encouraging the growth of locally owned firms (Bhattacharya and Rahman 1999).

No important interests opposed this growth, and the sector did not even face real opposition to the dependence on female labour when the state took on a more Islamic appearance in the 1980s (although see Shehabuddin 2008). The Khan analysis (2008; also 2011) is of a piece with his wider thesis on the origins and the nature of the political settlement that underpinned Bangladesh's sustained economic growth. It reminds us of the foundational areas of consensus and shared interest within the elite, cohering around the need for openness to the global market and to labour-intensive exports. Political protection 'heavily nurtured' garments entrepreneurs, ensuring policies that eased trade processes as well as insulation against unpredictable and unstable forms of corruption (Ahmed et al. 2014, 266). The business classes have had an on-off agreement to protect the sector from the hartal (strike) politics that devastate just-in-time production schedules (Hassan 2013).

 
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