Informal Institutions, the RMG Sector, and the Present Challenge of Export Diversification in Bangladesh

This chapter explores the institutional challenges of export diversification in Bangladesh in the context of the dominant RMG sector. It evaluates the features of the ‘RMG model’ of export success, explores the dynamics of the institutional space around the RMG sector in Bangladesh, and analyses the sustainability of the ‘RMG-centric’ export model. The evidence suggests that the very same institutional features which enabled the growth of the RMG sector are missing in other sectors – that there is not the same organisational capacity for industry leaders to participate in collective bargaining with the state, whilst key policy instruments are biased in favour of RMG and against other sectors, which has not been used to help industrial diversification. However, as the RMG sector has been, and to a large extent still is, the strength of Bangladeshs development, it might become the country’s ‘Achilles hell’ in the future, if it weakens and prevents other manufacturing exports from developing. Therefore, there is a need for a well-designed and effective industrial policy targeting the emerging dynamic export sectors.