Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.11, No.9, 2020 17 Correlation Between Social Compliance and Export Competitiveness in the RMG Industry of Bangladesh Mukit Ahmed 1 Shishank Shishank 1 Md. Faruque Hossain 2,* 1.Department of Management, Birmingham City University, UK 2.OSCM, Faculty of Business Administration, American International University-Bangladesh Abstract Having survived one disaster after another, the Readymade Garments (RMG) industry of Bangladesh progressed swiftly, becoming the second-largest exporter of textiles and clothing. Prior to remediation programs launched by Accord-Alliance in the aftermath of the Rana Plaza incident, RMG companies have not been as keen about social compliance as they are now. Therefore, this research seeks to investigate the correlation between social and export competitiveness. Sales data of fifty-two RMG companies over the last five years were collected and analysed to determine the sales trend. The results of the analysis show there is an upward trend in the sales data. This means social compliance has not affected sales revenue. On the contrary, the results confirm what the literature states – social compliance attracts more export orders. A thorough literature review led to the development of a hypothesis stating social compliance and export competitiveness have a positive correlation. There are, however, other factors to consider when discussing export competitiveness such as lead time management, supply chain management, government’s fiscal policies, trade pacts, port efficiencies, energy supplies, cotton imports, backward and forward linkages, tariff and currency depreciation affect competitiveness of cotton exports. Shortening the lead time can boost export competitiveness of Bangladeshi textiles and clothing in the long run. Implementing supply chain management systems will help to optimize lead time and developing the local backward linkage industry will curb exporters’ dependence on imported raw materials and thereby shorten lead time further. However, further research along with primary data will provide the accuracy and relevance required for a research of this scope. Keywords: Readymade Garments, Social Compliance, Export Competitiveness, Bangladesh. DOI: 10.7176/JESD/11-9-04 Publication date:May 31 st 2020 INTRODUCTION Disproving Henry Kissinger’s pessimistic observations on Bangladesh’s economic prospects, the RMG industry helped the politically fragile nation recover from its post-independence economic hardships. Replacing jute producers as the top foreign exchange earner, textile companies were welcomed by a conservative and impoverished population who switched from farm work to factory jobs overnight. The apparel sector’s steady growth led to job creation and poverty alleviation for unskilled (and previously unemployed) blue collar workers. The export quota systems like the Generalised System of Preferences (GSP) and Multi-Fibre Arrangement (MFA) enabled Bangladesh to build a global customer base for its exports of readymade garments. The little known South Asian country also capitalized on a local supply of cheap labour. Without this advantage, it would have been difficult to compete with rivals like China and Vietnam. China dominates the RMG export market to this date despite declining exports and Vietnam’s rising exports have made it a close contender to Bangladesh (Hossain et al., 2019). The RMG include both knitwear and woven products such as, socks, undergarments, sweaters, cardigans, and stockings are part of the knitwear portfolio; whereas shirts, T-shirts, skirts, blouses, and trousers are some of the woven products manufactured by RMG factories in Bangladesh (Haider, 2007). The bulk of this output is exported. From more than 100 countries across the globe that buy apparels made in Bangladesh, USA and EU are the biggest importers of Bangladeshi readymade garments (Hossain et al., 2019). In recent years, however, there are growing concerns about Bangladesh’s dependence on these two countries for its textile exports. As Chinese and Indian readymade garments command an increasing share of the export market in North America and West Europe, there is a greater need for market diversification to sustain Bangladesh’s top export earning industry (Haider, 2007). A group of researcher argue that the Netherlands, Japan, and Poland are potential export markets for apparels in the coming years (Hossain et al, 2019). Bangladeshi textile companies should tap into these promising geographic segments to boost its market share. They also claim product diversification has given China and India a competitive edge in the international apparels market. Therefore, Bangladesh’s RMG manufacturers should study market trends and respond to changes in demand for different categories of readymade garments. With the end of export quotas and the emergence of new competition, apparel manufacturers in Bangladesh are becoming desperate to meet profit targets. The RMG exporters have resorted to cost cutting strategies at the expense of ethical labour practices. Recent incidents which claimed the lives of factory workers and injured many more are the culmination of years of neglect by factory owners (Nasreen, 2019). Eager to continue production and maintain profitability at the same time, factory owners have paid little or no attention to factory safety and brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by International Institute for Science, Technology and Education (IISTE): E-Journals