ISHWARDI, Bangladesh >> The air thickened with tear gas as police and paramilitary officers jogged into the Ishwardi Export Processing Zone firing rubber bullets and swinging cane poles. Panicked factory workers tried to flee. A seamstress crumpled to the ground, knocked unconscious by a shot in the head.

Dozens of people were bloodied and hospitalized. The officers were cracking down on protests at two garment factories inside this industrial area in western Bangladesh. But they were also protecting two ingredients of a manufacturing formula that has quietly made Bangladesh a leading apparel exporter to the U.S. and Europe: cheap labor and foreign investment.

Both were at stake on that March morning. Workers earning as little as $50 a month, less than the cost of one of the knit sweaters they stitched for European stores, were furious over a cut in wages. Their anger was directed at the Hong Kong and Chinese bosses of the two factories, turning a labor dispute into something potentially much larger.

“If any foreigner got injured or killed, it would damage the country’s image around the globe,” said a police supervisor, Akbar Hossein, who participated in the assault. “We all know the importance of these factories and this industry for Bangladesh.”

Bangladesh, once poor and irrelevant to the global economy, is now an export powerhouse, second only to China in global apparel exports, as factories churn out clothing for brands like Tommy Hilfiger, Gap, Calvin Klein and H&M. Global retailers like Target and Wal-Mart now operate sourcing offices in Dhaka, the capital. Garments are critical to Bangladesh’s economy, accounting for 80 percent of manufacturing exports and more than 3 million jobs.

But with “Made in Bangladesh” labels now commonplace in U.S. stores, Bangladesh’s manufacturing formula depends on its having the lowest labor costs in the world, with the minimum wage for garment workers set at roughly $37 a month. During the past two years, as workers have seen their meager earnings eroded by double-digit inflation, protests and violent clashes with the police have become increasingly common.

In response, Bangladeshi leaders have deployed the security tools of the state to keep factories humming. A high-level government committee monitors the garment sector and includes ranking officers from the military, the police and intelligence agencies. A new special police force patrols many industrial areas. Domestic intelligence agencies keep an eye on some labor organizers. One organizer who had been closely watched, Aminul Islam, was found tortured and killed in April in a case that is unsolved.

“The garment industry is No. 1 for exports and dollars for the country,” said Alonzo Suson, who runs the Solidarity Center in Dhaka, an AFL-CIO-affiliated labor rights group. “Any slowdown of that development is a national security issue.”

For the Obama administration, which has cultivated Bangladesh as a regional ally in southern Asia, labor unrest has become a matter of growing concern. In a May visit to Dhaka, Secretary of State Hillary Rodham Clinton raised labor issues and the Islam murder case. In June, Ambassador Dan W. Mozena warned Bangladeshi garment factory owners that any perception of a rollback on labor rights could scare off multinational brands and damage the garment industry. “These developments could coalesce into a perfect storm that could threaten the Bangladesh brand in America,” he said.

For global brands, which are forever chasing the cheapest labor costs from country to country, Bangladesh has been a hot spot, especially as wages have risen in China. McKinsey, the consulting giant, has called Bangladesh the “next China” and predicted that Bangladeshi garment exports, now about $18 billion a year, could triple by 2020.

But in late July, representatives from 12 major brands and retailers, alarmed by the rising labor unrest, prodded the Bangladeshi government to address wage demands, a suggestion rejected by the labor minister. “No reason to be worried,” Khandker Mosharraf Hossain, the minister, told reporters, noting that brands were not canceling orders.

Bangladesh was born in bloodshed during a 1971 war of independence from Pakistan and has since gyrated between military rule and fragile democracy. It has about 150 million people and is one of the most densely populated countries in the world. Derided by Henry A. Kissinger as the world’s “basket case,” Bangladesh has since made considerable progress on fronts like women’s literacy, juvenile and maternal mortality, per capita income, and life expectancy.

This upward arc is often credited to Bangladesh’s vibrant civil society, but the garment sector, in which about 80 percent of the workers are women, has also played a critical role, providing socially acceptable jobs to women in a conservative Muslim country. Prime Minister Sheikh Hasina, in lobbying the U.S. for favorable trade preferences, has argued that such policies would improve the lives of millions of poor women.

Bangladesh’s Home Ministry, in a written response to questions, said the government does not favor factory owners over workers but acts as a “referee/umpire” while maintaining an “investment friendly” environment for foreign and domestic investors.

Yet Hasina’s government has resisted expanding labor rights in a country where the owners of about 5,000 garment factories wield enormous influence. Factory owners are major political donors and have moved into news media, buying newspapers and television stations. In Parliament, roughly two-thirds of the members belong to the country’s three biggest business associations. At least 30 factory owners hold seats in Parliament, about 10 percent of the total.

“Politics and business is so enmeshed that one is kin to the other,” said Iftekharuzzaman, director of Transparency International Bangladesh. “There is a coalition between the sector and people in positions of power. The negotiating position of the workers is very, very limited.”

A COUNTRY WITHIN A COUNTRY

Mohammad Helal Uddin joined Rosita Knitwear in May 2010 and was thrilled to have the job. Rosita was inside the new Ishwardi Export Processing Zone, not far from his home village, meaning he could live with his wife and two young daughters and not have to toil in the fields. “I feel I have a kind of dignity in this job,” he said.

Uddin, 28, worked in the knitting department and after six months was promoted, with a base salary of $55 a month. He soon began to notice irregularities. Workers were not getting promised annual raises, monthly attendance bonuses or the 17 paid holidays a year, beyond their usual one day off a week. Employees also said they worked four hours of overtime a day but were paid for only two.

Three decades ago, Bangladesh created a network of export zones to attract foreign investment with tax incentives and other benefits. Today, a large majority of Bangladesh’s garment factories lie outside these zones, but they are favored by foreign investors. Rosita and its sister factory, Megatex, both owned by the Hong Kong conglomerate South Ocean, were the first plants in the Ishwardi zone. Zones like Ishwardi operate like countries within a country. They are governed by a separate agency, the Bangladesh Export Processing Zones Authority, and by separate laws. By tradition, the authority has been run by a military officer, active duty or retired, and many factories have hired retired soldiers to oversee security.

For workers, wages were higher in the zones and conditions were better. But unions were initially banned, and workers had no right to organize until 2004 when Parliament, facing international pressure, approved the creation of worker associations at individual factories.

At the Rosita factory, workers elected a 15-member association last December, with Uddin as president. In January, a female employee complained that a Bangladeshi middle manager was pressuring her to have sex with one of the Chinese bosses. Enraged, workers demanded that the management address her complaint as well as the discrepancies over annual raises and earned leave. Six weeks of confrontation and chaos followed. In February, equipment in the Rosita factory was damaged during a rampage. Nearly 300 workers were accused of vandalism and fired, with their names posted on a blacklist at the gate of the Ishwardi zone. Uddin, who denied any wrongdoing, was fired and temporarily jailed.

When he tried to return to work on Feb. 20, Uddin said two black-clad officers hustled him into the tiny guardhouse. The officers were members of the Rapid Action Battalion, a government paramilitary force infamous for vigilante attacks known as “crossfire” killings. He said one of the officers ordered him to sign a resignation letter.

“I didn’t do anything wrong,” Uddin said he told them.

He said one of the officers pushed a gun against his shoulder. “If you don’t sign,” the officer told him, according to Uddin, “we will take you in the car and you will have to face the crossfire.”

Uddin signed. Inside the factories, according to several workers, police and paramilitary officers walked through the workrooms, holding termination letters. The message was clear: work or leave.

By March, a U.S. labor rights group, the Institute for Global Labor and Human Rights, was advocating for the workers. A South Ocean executive arrived at Ishwardi and promised to address worker complaints over wages and unpaid leave. Then on March 20, workers discovered that managers had cut the piece rate, a type of production bonus, meaning a loss of wages. Another standoff ensued as managers closed the factories. But when workers returned March 25, the wage cut had not been fully restored.

Hundreds of workers gathered outside the front door of the factory in an impromptu sit-down strike. Eight workers, interviewed in June, said all the managers had left the factories. A small contingent of police officers soon arrived and ordered everyone back to work. A seamstress said a police officer knocked her to the ground, beating her unconscious with a stick and shredding her clothes. “I kept asking them to stop,” said the seamstress, who asked not to be identified, fearing reprisals. “But even after I fell to the ground, they kept beating me and pulled my hair.”

Workers began throwing stones and chanting slogans against the police, who fled. Hours later, after officials in Dhaka were notified, officers from the Rapid Action Battalion as well as surrounding police stations arrived. Hossein, the police supervisor, denied that the police were aggressors, saying officers were told that foreign managers were trapped inside the factories and that angry workers were vandalizing equipment. “They attacked the police,” Hossein said. “They started the violence.”

Cellphone videos and photographs show police officers firing rubber bullets and pummeling workers with long cane poles. “They treated workers as if they were not human beings,” one worker said.

THE POWER EQUATION

Bangladesh’s two major political parties, the governing Awami League and the opposition Bangladesh Nationalist Party, often seem engaged in a blood feud. Yet, many analysts say, the two parties agree on one thing: safeguarding the garment industry.

Three months after the clash at Ishwardi, tens of thousands of angry workers protested near Dhaka, demanding higher wages and crippling one of the country’s most important industrial zones for more than a week. Riot police officers dispersed the protesters with tear gas and rubber bullets, as scores of people were injured.

Following huge protests in 2010, Hasina raised the minimum wage for garment workers to $37 a month from about $20. But her government has resisted the renewed worker demands, even as executives at some leading brands have voiced support for adjusting wages and expressed concerns about labor unrest.

In June, top executives at the Swedish retailer H&M fretted that recurring labor protests were disrupting production and called on Bangladeshi factories to rectify the situation.

Major brands have been stung by bad publicity. This year, War on Want, a nonprofit group, found that workers in five factories making products for Nike, Puma and Adidas were paid less than the minimum wage and complained of workplace abuse and sexual harassment. In March, the parent company of the Tommy Hilfiger brand, PVH Corp., hurriedly donated $1 million toward a factory safety initiative as ABC News was preparing to broadcast a report on a fire that killed 29 workers in Bangladeshi factory making clothes for Tommy Hilfiger.

“They want to see better standards and conditions in factories in Bangladesh,” said Julia K. Hughes, president of the U.S. Association of Importers of Textiles and Apparel, a trade group in Washington. “No company is arguing that wages should not rise in Bangladesh. They are not saying what the wage should be, but absolutely wages should go up.”

But many factory owners are skeptical that buyers are truly willing to pay higher prices. One owner, Shawkat Ali Bhuiyan, said he had stopped working with companies like Walmart and Target because his profit margin was almost nonexistent, while some Bangladeshi labor leaders blame the foreign brands for exploiting workers.

“We need to clean up the whole supply chain,” said Roy Ramesh Chandra, a powerful public sector union leader. “The brands need to fulfill their responsibility. The manufacturers need to fulfill their responsibility. And the government should comply with international obligations and respect international labor standards.”

Bangladesh has responded to international pressure in the past, sharply curtailing child labor and improving safety conditions in the 1990s. Now, though, the pressure points are the rights of workers to organize and collectively bargain for wages, issues that require action by a political system dominated by business interests, including the garment sector.

A.K. Azad, president of the Federation of Bangladesh Chambers of Commerce and Industry, played down the garment sector’s political clout. “We are not powerful,” he said, adding: “Power lies with the politicians. Power lies with the media.”

But many apparel tycoons have also gone into politics or begun media careers, purchasing newspapers or starting independent news channels. Azad, who owns one of the country’s biggest garment factories, also owns a Bengali-language newspaper and a television station. Several Western diplomats privately noted that news coverage often emphasizes the disruptions caused by protests above the concerns of workers.

At the Rosita and Megatex factories, South Ocean management hired a labor oversight firm, Verite, which detailed a host of problems, including humiliation of workers, summary firings and deliberate interference with the ability of workers to organize. New management teams are now running the factories, and Verite is helping put in place changes to increase wages and protect worker rights. “South Ocean have taken labor issues at the two factories extremely seriously and have taken swift actions to address those issues,” the company’s law firm, Winston & Strawn of Hong Kong, said in a statement.

Many of the workers involved in the March 25 clash are back on the job, despite their anger over how they have been treated. The seamstress who was knocked unconscious, her clothes shredded, said she had little choice, since she was the family’s sole breadwinner. “I am helpless,” she said. “We have to get food.”

South Ocean dropped charges against Uddin but the police are still pursuing separate charges. Meanwhile, officials at the export zone authority have blacklisted him from being hired at factories inside the zones. “We spoke up,” he said. “And we became criminals in the eyes of all authorities.”

© 2012 The New York Times Company