CHAPTER 2
The Thin End of the Wedge: Unlocking Comparative Advantage through EPZs in Bangladesh Mustafizul Hye Shakir and Thomas Farole
Introduction Bangladesh is an extremely densely populated country (150 million people living on less than 150,000 square kilometers). Despite this density, the country relies mainly on agriculture to support the majority of its population. Although Bangladesh has a historical reputation for producing the finest quality textiles and jute products, and long has been a hub for trade, the country has a low industrial and manufacturing base. Jute was the main export of Bangladesh for decades: during the 1950s to the 1960s, almost 80 percent of the world’s jute was produced in Bangladesh. However, from the 1970s onward, the global jute industry faced a long period of decline as a result of the development of synthetic substitutes.1 The gap in exports was filled by the textile and garment sectors, which gained a quick foothold in international markets, taking advantage of Bangladesh’s low labor costs to attract investors from other Asian economies (particularly the Republic of Korea;
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