Bangladesh's garment sector reforms driven by global supply chain pressure: Debapriya

Reforms in South Asian countries like Bangladesh, particularly in its garment industry, have largely been driven by pressure from the global supply chain, according to macro-economist and public policy analyst Debapriya Bhattacharya.

All the reforms that have taken place in the garment industry – in the post-quota phase, in addressing child labour and in ensuring workplace safety after the Rana Plaza tragedy – have been the result of supply chain pressure, he said.

Debapriya, a distinguished fellow of the Centre for Policy Dialogue (CPD), made the remarks speaking at the 8th Sanem Annual Economists' Conference (SAEC) 2025 virtually today.

Debapriya emphasised that Bangladesh's response to global market incentives has also shaped reforms in remittances.

However, he stressed that reforms should be balanced and tailored to sectoral needs, ensuring the development of supply-side capacity. He further said if liberalisation results in Bangladesh merely becoming an import-dependent country, then it has failed to achieve its purpose.

The economist stressed that sustainable reforms should lead to economic diversification, productivity growth, poverty alleviation, and reduced inequality.

"The paper stated that if the South Asian countries do not make the reforms or open up the economy, they will miss the new advantage that will come in the future. 

"I am not against reforms, however, if we look into other studies that have been done, under no circumstances countries like Bangladesh or other lower middle income countries will be able to take advantage of so-called new opportunities," the economist added.

Mentioning that some countries are doing good in some cases, Debapriya said, "Even if we do many of the things that have been suggested, are we really ready to do that in a situation when there is such fluidity and flux in the system? The paper talked about economic fragmentation in the global scale, but totally ignored the global frame.

"Sub-regional cooperation could be a solution for low trade problems. This form has been practiced in Bangladesh and elsewhere in the recent past. This is also in line with political alignment. We have gone to Nepal, Bhutan, India and established some form of connectivity."

The keynote session was presented by Dr Franziska Ohnsorge, chief economist for South Asia, World Bank, and delivered a presentation on "Implications of Geoeconomic Fragmentation for South Asia".

While presenting, she said, "Geopolitical differences reduce bilateral trade and investment – but, for now, [there is] mixed evidence on the degree of fragmentation. Geopolitical vulnerability and connectedness is higher for emerging markets and developing economies (EMDEs), lower for trade than finance."

Ohnsorge stated that geopolitical differences are reducing global trade and investment, with emerging markets and developing economies (EMDEs) being the most vulnerable. 

However, evidence on the degree of fragmentation remains mixed. EMDEs have responded to fragmentation through diversification and de-risking, she explained.

While South Asia has diverse export and foreign direct investment (FDI) sources, Ohnsorge noted that aggregate inflows remain too low for the region to benefit significantly from shifts in global supply chains.

As a discussant, Dr Shanta Devarajan, professor of International Development at Georgetown University, said the paper's policy conclusions reinforced long standing calls for South Asian countries to be more open.

"We have got one more justification to the idea that South Asian countries should be more open. They should remove the barriers of the cross border transactions.

"The geopolitics within South Asia is a reason why the trade between them is so small. Especially the politics between two large countries of this region, India and pakistan. The trade could be even 10 times more if the tension could be reduced. The reasons for low trade volume are not economy but politics," he said.

Dr Deepak Mishra, director and chief executive, Indian Council for Research on International Economic Relations (ICRIER), said most of the east asian countries have geopolitical issues with China, however this couldn't be the obstacle to see trade growth with this country. In the same kind of situation, the trade among South Asian countries is opposite. 

Selim Raihan, professor of Economics at University of Dhaka and executive director of Sanem, moderated the keynote session.