Publication: China Brief Volume: 5 Issue: 5

Robina Ahktar, in her 20s, says she earns the equivalent of 13 cents an hour, about one dollar a day, sewing flaps at the rate of one per 30 seconds on the rear pockets of Wal-Mart Faded Glory jeans in a Dhaka-area garment factory in Bangladesh. She says she doesn’t like the pay or the job but what she would dislike more is losing both.

Although Robina Ahktar, with a few years in grade school, has no idea of China’s impact on the Bangladeshi economy, she is one of perhaps hundreds of thousands of young women garment workers who may discover unhappily just how China affects them. Bangladesh itself is a model for smaller Asian states grappling with the dangers, challenges, competition and opportunities stemming from China’s rise as a regional power. Bangladeshis’ view of China is further complicated by the fact that this densely populated Ganges delta state (some 130 million people packed into an area the size of Arkansas) buys most of its military supplies at cheap prices from China. For example, M. Khairuzzaman, the Bangladeshi additional foreign secretary responsible for China, complains that his government doesn’t pay enough attention to its powerful neighbor. But a former Bangladeshi ambassador to China, who prefers anonymity, differs, noting that the military holds its major weapons supplier in high regard.

In turn, Bangladeshi Prime Minister Khaleda Zia, widow of the country’s murdered military ruler, Zia Rehman, regards her military, in the words of the former ambassador, as “priority number one, priority number two and priority number three.” This came to the fore in 2004, when the commerce ministry permitted the opening of a Taiwanese office in Dhaka that the ministry claimed was a private sector agency devoted only to encouraging trade; in Taiwan, the office was loudly proclaimed as an official representative office able to issue visas and carry out other consular functions. China angrily protested that the move compromised Bangladesh’s one-China policy and the countries’ diplomatic relations in general, briefly recalling its ambassador for consultations.

Though it is common knowledge among diplomatic circles in Dhaka that the Army is not happy with the quality of Chinese arms, it is equally well known that it cannot find other goods as cheap. According to the former Chinese ambassador, following a visit to the Prime Minister by the Army high command to point out the error of Khaleda Zia’s commerce ministry’s ways, the Taiwanese office was promptly downgraded. Bangladesh reiterated its belief in one China, and the commerce ministry was given a new minister.

But tensions between Bangladesh and China remain. The most recent difficulties started on January 1, with the expiration of the decades-old Multifiber Arrangement, which gives Bangladesh and other developing states guaranteed export quotas by dividing the world’s $360 billion garment export market among approximately 150 countries. The fact that Bangladesh had no significant garment industry, but nevertheless received a quota in the 1980s, attracted Korean and Hong Kong investors, who set up factories with Bangladeshis as fronts so they could trade on the country’s otherwise-unfilled quota. Starting with virtually no exports in the 1980s, Bangladesh has developed a garment exporting business that IMF says accounted for 77% of the country’s total merchandise exports in 2002, nearly $4.6 billion. And since the 1980s, the number of garment factories has grown from 180 to 3,600.

Without garments, Bangladesh would depend on earnings principally from the export of shrimp and jute, once its principal export but now a fiber growing steadily obsolete. Producers from Bangladesh to North Carolina believe the Chinese, with cheap labor and an increasingly efficient domestic industry, will dominate the garment business without quotas. China has already tripled its share of the $90 billion American garment market alone to more than 50% from the current 16%. Thus, the removal of quotas now threatens to increase competition in the global garment industry and limit Bangladesh’s growth, says Wahiduddin Mahmud, a Dhaka University economics professor and former minister of finance.

It seems then that Chinese competition threatens the garment-making jobs of an estimated 1.8 million Bangladeshis, 90% of whom are young women from poor, rural areas whose remittances to their families have promoted unexpected growth that would be hard to duplicate if the industry collapsed. Remarkably, however, many Bangladeshi entrepreneurs, such as Manzur Murshed, do not agree. Murshed, a retired civil servant and former ambassador to Yugoslavia, closed two garment factories exporting to Italy and Britain during a recession in 1999. Despite the quota expiration, he has opened a new 350-machine garment factory that he believes will not only get him back into the European market but will offer him a crack at the U.S. market. Low wages of the sort that Robina Akthar earns, and the efficiency of his new plant will allow him to maintain an advantage in price and quality, he believes. His optimism is supported by Wal-Mart, the U.S. retailing giant that is Bangladesh’s best customer for garments and that promises to buy more from the country this year than it did last year. As Andrew Tsuei, Wal-Mart’s vice president for global purchasing, told The New York Times: “Bangladesh is very competitive because the labor cost in Bangladesh is only half of what China is, and maybe less than that.”

The wage level is such that Chinese producers may consider moving operations to Bangladesh. Salahuddin Quader Chowdhury, a member of parliament and a political advisor to Prime Minister Zia, claims that the Chinese are seeking a 400-acre site in the country to set up an industrial park including garment factories. Chinese investors already have announced the establishment on 14 acres in the Dhaka suburbs of a “China Town” wholesale market with nearly 500 shops of electronics, handicrafts and cosmetics that they say will aim for annual sales of $100 million and be the largest in South Asia. At the announcement in November 2004, the new commerce minister, Altaf Hussain Chowdhury, termed China a trusted friend of Bangladesh.

But still, tensions exist. Bangladesh exports to China in the first six months of the fiscal year 2003-04 were worth $18.43 million against China’s exports to Bangladesh worth $574.33 million, an imbalance second only to Bangladesh’s even greater imbalance from India. However, China is almost never criticized, as is India, for the trade imbalance. “We have nothing to sell to the Chinese,” explains Additional Foreign Secretary M. Khairuzzaman. “We could sell a great deal more to the Indians if they allowed us.”

The Bangladeshi press, quick to criticize its own government, rarely attacks China (although the United States, India and Pakistan are fair game). Bangladeshi intellectuals, including those who were politically active as Maoists in the early days of the country’s independence, regard China in a nostalgic haze – despite the fact that China, supporting Pakistan in its civil war with East Pakistan, did not recognize Bangladesh until 1975. Meanwhile, it was India’s armed intervention in 1971 which brought independence to Bangladesh. The two countries since have developed a love-hate relationship, complicated by disputes over borders, smuggling and illegal Bangladeshi immigration into India, as well as Indian fears that Bangladesh is a conduit for weapons smuggled into its secessionist northeast territories. (The United States shares the latter concern because of its fear that al-Qaeda takes advantage of increasingly-visible fundamentalist Muslim organizations to train militants and smuggle weapons through Bangladesh.)

While Bangladesh is bitterly opposed to supplying India with natural gas, it has encouraged the energy-hungry Chinese to explore what the Financial Express in Dhaka called “one of the world’s largest reserves of best quality bituminous coal,” which laboratory tests have shown to be ash-free and with negligible sulphur content. China and Bangladesh are also discussing air and highway links (through Burma) between Kunming and the Bangladeshi principal port of Chittagong. Apparently, Bangladesh has quietly entered the security ring that Beijing has drawn around India, from its monitoring station in Burma, across its still-unmapped border with northern India to its close alliance on India’s western flank with Pakistan. Such suspicions seemed to be confirmed after Prime Minister Zia visited Beijing in December 2002 and announced with fanfare the signing of a Bangladesh-China Defense Co-operation Agreement. After protestations that the agreement was aimed at no third party, the agreement turned out to be simply an extension of the deal under which China supplied military equipment. This is just one more example of the way in which Bangladesh has maintained a close, but still ambivalent, relationship with its massive Chinese partner.

Arnold Zeitlin is the Managing Director at Editorial Research & Reporting Associates (ERRA) and Visiting Professor for the Department of Journalism at Guangdong University of Foreign Studies.