Garment Industry in Bangladesh: Global Competitiveness Drives Need for Alternatives

By Amy Chang

The ready-made garment (RMG) industry has been the main contributor to transformative growth in Bangladesh in the last four decades, but in more recent years it has drawn international attention for its poor working conditions. In 2013, collapse of the Rana Plaza building in the capital city of Dhaka killed 1,130 people, putting Bangladesh in the international spotlight for labor reform. The response to this incident, however, has been largely PR-based and failed to create long-term change. In many ways this is unsurprising, as unfortunately international retailers are faced with increasing global competitiveness, creating difficulty in pushing for higher standards and regulation.

As exploitative as the current situation can be, the industry has created jobs for millions and produced extraordinary economic activity in a once poverty-ridden country. Since the arrival of RMGs in the 1970s, the poverty rate in Bangladesh has fallen from 70 percent to 40 percent. Clothing manufacturing accounts for almost 80 percent of exports and generates more than $20 billion in revenue annually. Apart from creating employment for more than four million people, the RMG industry has also made great strides in empowering women financially. In the industry, 90 percent of workers are female; unlike many developing countries where women can still obtain a role in the agricultural sector, women in Bangladesh typically do not work outside the home. The arrival of RMGs has changed this and spurred an exodus of poor rural women into cities to become crucial financial providers for their families, and prevented many young Bangladeshi women from marrying underage.

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A worker spins yarn onto bobbins in the Wooltex Sweaters Limited factory in Shewrapara, Dhaka. In 2008, the Asian Development Bank loaned $50 million to the Bangladesh Ministry of Education to improve the skills of millions of workers in the ready-made garments and textiles, light engineering, and construction industries. Photo courtesy of the Asian Development Bank.

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Maturing Microfinance Institutions: Gauging Results

By Erin Nealer

Microfinance was the trendiest new player in economic development for the first decade of the 2000s. In 2004 Vinod Khosla, founder and CEO of Sun Microsystems, called microfinance “one of the most important economic phenomena since the advent of capitalism.” In 2006 Muhammad Yunus, founder of the Bangladesh-based Grameen Bank, was awarded the Nobel Peace Prize for his work in establishing micro-loans for entrepreneurs struggling to rise out of poverty. Microlending programs such as  Kiva, World Vision Micro, and Zidisha have sprung up to take advantage of the internet, creating peer-to-peer lending programs where individuals can supply small loans or pool funds for larger loans for entrepreneurs all over the world. The ability of microfinance institutions (MFIs) to reach those experiencing the greatest need and to provide long-term solutions for extreme poverty, however, remains uncertain.

The term “microfinance” refers to a broad umbrella of economic opportunities with one common objective: increasing access to financial services for those who are unable to access traditional banks. The theory is that small loans, savings accounts, insurance programs, and other basic financial services will provide the structure necessary for low-income individuals to lift themselves out of poverty, begin businesses, and provide for their families. MFIs that focus on underserved populations – particularly women, those living with HIV/AIDS, and populations in inaccessible rural areas – have the potential to enact great change in the lives of individuals, enabling them to participate in the local and global economy.

Loan Applications - Rachel Strohm in Ghana

Women submit applications for microloans in Ghana. While microfinance is a popular and relatively new vehicle for increasing access to financial services, the lasting impact of microloans on business profits and overall income is negligible. Photo by Rachel Strohm via Flickr.

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The Bedrock Institution for Development: Property Rights in Latin America

By Moises Rendon

In 1763 immigrants to the North American colonies had more secure property rights than a native-born Venezuelan does in the twenty-first century. Property rights in the U.S. were “constituted, secure, and out of reach of oppression from the most powerful” even before America’s independence. The concept of property rights runs in the blood of North America, fueling its market system, and helping the country to prosper. While the importance of having well-defined and strongly protected property rights is now widely recognized among policymakers, Latin America lags behind on securing the property of its people.

Property rights are the laws that allow individuals to manage, benefit from, and transfer property. Government enforcement of strong property rights is generally linked with more prosperous and developed countries. As the 2015 International Property Rights Index (IPRI) shows, the five best performing countries have an average GDP per capita of $72,000, whereas the five worst performing countries have an extremely low average of $3,900. The Latin America and the Caribbean region ranks just ahead of Africa, and countries with ongoing-armed conflicts like Nigeria or Chad have better protection of land rights than Argentina, Haiti, and Venezuela. Countries that flourish economically understand the difference between prosperity and poverty: property.

In Latin America, Venezuela and Argentina stand out for the consistent and institutional undermining of property rights. Venezuela, a country that the International Monetary Fund (IMF) identified with inflation of 720 percent this year, is ranked second to last on the protection of property rights in the region. In fact, more than 1,200 private companies were expropriated during Hugo Chavez’ administration from 1999 to 2013. Similarly, Argentina has a poor track record of respecting property rights. In 2012 Repsol, a Spanish oil group, underwent the traumatic experience of seeing its subsidiary unit in Argentina stripped from it by the government of President Cristina Kirchner. The expropriation of private property is the perfect recipe to frighten off investors. With few exceptions like Colombia and Peru, Latin America has seen major capital flows trying to reach other, more investor-friendly regions.

 

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Brazil has a significant slum population and weak property rights, leading to a large informal economy.

 

On the other hand, Peru’s success in reforming and improving its property rights has helped to transform the country into one of the best-performing economies in the region. In the 1980s, the Institute for Liberty and Democracy (ILD) helped to move Peru’s street vendors, transport drivers, poor farmers in remote areas of the Andes, and millions of other participants in Peru’s huge informal sector (or the “extralegal economy”), into the legalized economy. Policy reforms like simplifying administrative processes, improving access to public information, unifying business registries, and democratizing rulemaking have helped make Peru the second highest ranked country in Latin American and the Caribbean in the World Bank’s 2016 Doing Business report. Hernando de Soto, ILD’s founder, affirmed that they have received more than 44 requests from reform-minded governments from all over the world seeking to learn from Peru’s positive experience on protecting property rights. As a matter of fact, this kind of policy reform put Peru ahead of countries including Canada, the UK, and Japan on the Registering Property Indicator of the 2016 Doing Business report. Continue reading

Empowering Female IDPs in Nagorno-Karabakh

By Julie Snyder

The current Syrian refugee crisis has caused alarm across the globe, leading to political, economic, and security challenges. While the international community decides how to handle this problem, it is important to consider the next stages of the Syrian crisis, particularly for women. The case of Nagorno-Karabakh presents a grim vision of what could lie ahead if Syria lapses into a frozen conflict- a situation where violence has ceased, ending the “hot” conflict, but there has not been success in reaching a satisfying peace agreement.

Nagorno-Karabakh is a small strip of land internationally recognized as part of Azerbaijan though governed as a de facto yet unrecognized state plagued by violence since the 1990s. Due to its geostrategic position and rich natural resources, Nagorno-Karabakh has been home to conflict for hundreds of years; most recently, violence erupted in the late 1980s when Armenia claimed the land from Azerbaijan, leaving over 120,000 casualties and hundreds of thousands of internally displaced persons (IDPs) in its wake. Failed negotiations over the past few decades have left claims on Nagorno-Karabakh hotly contested, leaving hundreds of thousands forbidden from returning to their homes and producing no permanent peace agreements.

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Despite intervention from a variety of development agencies and implementers, including USAID, the Armenian government, and NGOs, the people of Nagorno-Karabakh face the obstacles of frozen conflict daily with little possibility of improved livelihoods in their future. Currently, there are over 597,000 IDPs in Nagorno-Karabakh residing in camps only miles from their homes. These IDPs face a number of issues despite significant government and international assistance, and the aid of NGOs. Their primary concerns include “inadequate housing, precarious livelihoods, gender-based violence, segregated education… and IDP’s limited participation in decisions that affect them.” Continue reading

The Afghan Refugee Crisis: Multiple Origins, Few Solutions

By Michael Jacobs

Starting in the spring of 2015, the number of refugees and migrants arriving in Europe skyrocketed, catching many observers by surprise. Most readers who are aware of this issue know that the primary country of origin for these refugees is Syria, a country in the midst of a brutal civil war. What most people wouldn’t guess, however, is the refugees’ second most popular country of origin: Afghanistan.

According to the United Nations High Commissioner for Refugees (UNHCR), Syrians make up 52 percent of all Mediterranean Sea refugee arrivals in 2015, followed by Afghans at 19 percent and Iraqis at 9 percent – less than half the number coming from more distant Afghanistan. Furthermore, this doesn’t take into account refugees arriving via the Arctic Route, where over the last 3 weeks Afghans outnumbered Syrians seeking refuge in Norway.

Migrants of unspecified ethnicity cross underneath unfinished border fence from Serbia into Hungary, August 2015.

Migrants of unspecified ethnicity cross underneath unfinished border fence from Serbia into Hungary, August 2015. 

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