In recent years, Bangladesh has become the second-largest garment-exporting country in the world. This article examines the competitive factors of the Bangladeshi garment industry based on a survey of 70 firms in 2012. Although this industry has many impediments, three factors have significantly contributed to the increased export competitiveness of the industry: labour costs, technological developments and the country’s market access policy. This study also reveals that, while the Bangladeshi garment industry has successfully achieved industrial (functional) upgrading, it faces great challenges in the social upgrading of the industry.