Finding cheaper labor, but lower productivity as well.


GAZIPUR, Bangladesh - The eight-lane highway leading from the Bangladeshi capital, Dhaka, narrows repeatedly as it approaches this town about 48 kilometers north, eventually depositing cars onto a muddy, potholed lane bordered by mangroves and small shops.

But this is no mere rural enclave. It is the sort of place to which foreign manufacturers may increasingly turn, if the rising wage demands of factory workers in China prompt companies to seek new pools of cheap labor elsewhere.

Already, in factories behind steel gates and tall concrete walls, tens of thousands of workers, most of them women, spend their days stitching T-shirts, pants and sweaters for Wal- Mart, H, Zara and other Western retailers and brands.

One of the Bangladeshi companies here, the DBL Group, employs 9,000 people making T-shirts and other knitwear. Business has been so good that the company is finishing a new 10-story building with open floors the size of soccer fields, planted with row after row of sewing machines.

“Our family needed the money, so we came here,” said Maasuda Akthar, a 21-year-old sewing machine operator for DBL.

As costs have risen in China, long the world’s shop floor, it is slowly losing work to countries like Bangladesh, Vietnam and Cambodia.

Li & Fung, a Hong Kong company that handles sourcing and apparel manufacturing for companies like Wal-Mart and Liz Claiborne, reported that its production in Bangladesh jumped 20 percent last year, while China, its biggest supplier, slid 5 percent.

“Bangladesh is getting very competitive,” William Fung, Li & Fung’s group managing director, told analysts in March.

The flow of jobs started even before recent labor unrest in China led to big pay raises for many factory workers there - and before changes in Beijing’s currency policy that could also raise the costs of Chinese exports. Economists expect the migration of China’s low-paying jobs to accelerate.

Bangladesh has the lowest garment wages in the world, according to labor rights advocates. Ms. Akthar, who is relatively well paid by local standards, earns about $64 a month. That compares to minimum wages in China’s coastal industrial provinces ranging from $117 to $147 a month.

But China has a vast population of migrant workers, modern roads and power grids in industrial provinces. Most of Bangladesh suffers blackouts six to seven hours a day because it has not invested enough in power plants and natural gas fields - deficiencies that the government is working on but that will not be eliminated quickly.

The country has a literacy rate of only 55 percent ? compared with more than 92 percent in China. As a result, workers in this country are only one-fourth as productive as the Chinese in making shirts, jackets and other woven clothes, according to a report by the Center for Policy Dialogue, an independent research organization based in Dhaka.

Despite its handicaps, Bangladesh nearly doubled garment exports from 2004 to 2009. And the industry now employs about three million people, more than any other industrial segment in this largely agrarian country of 160 million. From June through November last year, garment exports accounted for more than 80 percent of the country’s total exports of $7.1 billion.

Among developing countries, Bangladesh is the third-biggest exporter of clothing after mainland China, which exported $120 billion in 2008, and Turkey, a distant No. 2, according to the World Trade Organization.

And as in China, workers in Bangladesh have started demanding higher pay. Garment workers are demanding a 200 percent increase in the minimum wage, to 5,000 taka (about $71) a month - which is how much workers with several years of experience now earn. The government, which plans to announce a new minimum wage soon, last increased it in 2006, to 1,662.50 taka (about $24). Since then, inflation has been as high as 9.9 percent a year.

“Most garment workers live in slum areas where one room costs 2,000 to 3,000 taka,” said Mushrefa Mishu, president of the Garment Workers’ Unity Forum, an association that claims to represent more than 60,000 members.

Factory owners here argue that a big increase in wages would make them uncompetitive against Vietnam and other big producers.

“If it’s 5,000 taka, I would close all my factories,” said Anisul Huq, a former head of the Bangladeshi garment industry’s trade group and a factory owner whose customers include H and Wal-Mart. “Even if it’s 3,000 taka, lots of factories will close within three or four months.”


By VIKAS BAJAJ


PHOTOGRAPHS BY VIKAS BAJAJ/THE NEW YORK TIMES


Workers in Bangladesh, who earn up to $64 a month, the lowest wages in the world, are demanding pay increases.