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Executive Summery
Bangladesh has emerged as a key player in RMG (Ready Made garment) sector since 1978.
Textiles & Clothing account for about 85% of total export earnings of Bangladesh. Out of which
76% comes from the apparel sector which covers the major products of knit & woven shirts,
blouses, trousers, skirts, shorts, sweaters, sportswear‟s & many more casual & fashion items. The
sector currently employs approximately 1.5 million workers, mostly females from
underprivileged social classes.
The pivotal factor in apparel industry is the workforce i.e. the operators, helpers, cutting masters,
finishers etc. Bangladesh is endowed with abundant & cheap workforce that is easily trainable &
convertible into semi-skilled & skilled workforce. Existence of such category is one of the
advantages that Bangladesh will be enjoying over a considerable period in the context of
international trade on clothing.
To cope up with global challenge we must adopt with factors of technological advancement with
proper working environment in textile & apparel sector of the country. In my report i tried to
illustrate about the prospect & future of RMG sector in Bangladesh.
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Chapter-1
Introduction
1.1 Background
This rapidly growing sector of the Bangladeshi economy offers a unique competitive edge
that supports profitable expansion into new strategic markets. From spinning to weaving,
from knitwear to leisurewear and high street fashions, the textiles and clothing industry is
Bangladesh‟s biggest export earning sector.The Ready-Made Garments (RMG) industry
occupies a unique position in the Bangladesh economy. It is the largest exporting industry in
Bangladesh, which experienced phenomenal growth during the last 25 years. By taking
advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of
GATT, it attained a high profile in terms of foreign exchange earnings, exports,
industrialization and contribution to GDP within a short span of time. The industry plays a
key role in employment generation and in the provision of income to the poor. Nearly four
million workers are directly and more than twelve million inhabitants are indirectly
associated with the industry. Over the past twenty five years, the number of manufacturing
units has grown from 180 to over 4000. The sector has also played a significant role in the
socio-economic development of the country.
The quota came to an end at 2005 but it continued to show robust performance, competitive
strength and, of no less importance, social commitment. RMG‟s contribution to Bangladesh
economy is well-known, well-appreciated and well-respected.
Garments industry is the largest export industry for our country and it contributes 75% of
total export. The industry is associated with its strength, weakness, threat and opportunity.
In this study an attempt has been made to describe the overall scenario of Bangladesh Ready
Made Garments industry. At this time of free economy everyone may be interested to know
about the largest export industry and the mechanism of doing business here. The present
study has been undertaken with consideration of this fact.
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1.2 Origin of the study
This report has been prepared by Abul Kalam Azad, ID: 201411137052, BBA, Batch: 37th
,
Major in HRM, Bangladesh University as a requirement of the internship program. The report
was based upon “Current Scenario Analysis of Readymade garments (RMG) industry in
Bangladesh. The supervisor is Engr. M.A. Ghulam Dastagir, Advisor, Dean and Head,
Department of Business Administration, Bangladesh University Honorable institute supervisor
duly approved the topic- “Current Scenario Analysis of Readymade garments (RMG)
industry in Bangladesh which was decided for doing the report. The report will definitely
increase the knowledge of other students to know the garments industry of Bangladesh.
1.3 Objectives of the study
The general objective of preparing this report is to fulfill the requirement of thesis Program
as well as completion the BBA Program through gaining the practical job experience and
view the application of theoretical knowledge in the real life. The report focuses on two parts.
They are:
1. Primary Objective
The broad project objective is to analyze the garments sector of Bangladesh and relate the
knowledge with the practical experience.
2. Secondary Objective
In order to reach the broad objective, some specific objectives are identified.
1. To know the different aspect of garments industry, its prospects and problems.
2. To show some statistics of RMG industry.
3. To analyze the statistical data related to RMG industry.
1.4. Methodology
1.4.1 Sources of data
Data regarding the completion of this report are collected from secondary sources.
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1.4.2 Secondary sources:
1. Various data source like BKMEA, BGMEA, Bangladesh bank, Export
Promotion Bureau, BTMC etc.
2. Internet browsing through website searching.
3.Annual report of the various organizations such as BKMEA, BGMEA,
Bangladesh bank, Export Promotion Bureau, BTMC etc
4.Different published material Such as books and articles.
1.5 Analysis of data:
For analyzing the collected data different statistical tools are used.
 For showing the trend of export, contribution of export to GDP, time series analysis has
been used.
 For determining the significance of RMG export and Total export simple regression
analysis has been used.
 For measuring the significance of profit and commission simple regression analysis
has been used.
1.6 Limitations of the study
1. In many cases, up to date information was not published.
2. In some cases, access to relevant papers and documents were strictly prohibited.
3. In some other cases, access was denied to procedural matters conducted directly by the
top management in the operations of foreign exchange business.
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Chapter-2
Literature Review
2.1 Overview of Bangladesh Ready Made Garments Industry
Agriculture has been the backbone of economy and chief source of income for the people of
Bangladesh, the country made of villages. Government wants to decrease poverty by getting
highest productivity from agriculture and achieve self-reliance in food production. Apart
from agriculture, the country is much concerned about the growth of export division.
Bangladesh have accelerated and changed her exports substantially from time to time. After
Bangladesh came into being, jute and tea were the most export-oriented industries. But with
the continual perils of flood, failing jute fiber prices and a considerable decline in world
demand, the role of the jute sector to the country‟s economy has deteriorated (Spin anger,
1986). The RMG industry is the only multi-billion-dollar manufacturing and export industry
in Bangladesh. Whereas the industry contributed only 0.001 per cent to the country‟s total
export earnings in 1976, its share increased to about 76 per cent of those earnings in 2006&
still now. Bangladesh exported garments worth the equivalent of $6.9 billion in 2006, which
was about 2.5 per cent of the global total value ($276 billion) of garment exports. The
country‟s RMG industry grew by more than 15 per cent per annum on average during the last
15 years. The foreign exchange earnings and employment generation of the RMG sector have
been increasing at double-digit rates from year to year. Some important issues related to the
RMG industry of Bangladesh are noted in table
Table1. Important issues related to the Bangladesh ready-made garment industry
Year Issue
1970-1980 Early period of growth
1982-1985 Boom days
1985 Imposition of quota restriction
1990 Knitwear sector developed significantly
1993 Child labor issue and its solution
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2003 Withdrawal of Canadian quota restriction
2006 Phase out of quota restriction
2007 Riots and strike by garments labor
2008-2009
2009-2022
Stable growth
Continuous growth
2016-2022 Stable growth & Development
Source: Compiled by the databases of the Bangladesh Garment Manufacturers and Exporters
Association, and the Export Promotion Bureau, Bangladesh.
Currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 per cent of
those firms are locally owned with the exception of a few foreign firms located in export
processing zones (Gonzales, 20014). The RMG firms are located mainly in three main cities:
the capital city Dhaka, the port city Chittagong and the industrial city Narayangonj.
Bangladesh RMG firms vary in size. Based on Bangladesh Garment Manufacturers and
Exporters Association (BGMEA) data, Mainuddin (2000) found that in 1997 more than 75
per cent of the firms employed a maximum of 400 employees each. Garment companies in
Bangladesh form formal or informal groups. The grouping helps to share manufacturing
activities, to diversify risks; horizontal as well as vertical coordination can be easily found in
such group activities. Ready-made garments manufactured in Bangladesh are divided mainly
into two broad categories: woven and knit products. Shirts, T-shirts and trousers are the main
woven products and undergarments, socks, stockings, T-shirts, sweaters and other casual and
soft garments are the main knit products. Woven garment products still dominate the garment
export earnings of the country. The share of knit garment products has been increasing since
the early 1990s; such products currently account for more than 40 per cent of the country‟s
total RMG export earnings (BGMEA website). Although various types of garments are
manufactured in the country, only a few categories, such as shirts, T-shirts, trousers, jackets
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and sweaters, constitute the major production-share (BGMEA website; and Nath, 2001).
Economies of scale for large-scale production and export-quota holdings in the
corresponding categories are the principal reasons for such a narrow product concentration.
Foreign buyers are concerned about the different compliance of law. So, they were bothered
about the child labor issue of Bangladesh. But later on this problem is salute and now
garments are restricted to employ child labor. In 2006 the quota facilities for Bangladesh was
withdrawn. Everybody thought it would be a great shock for garments industry. But in reality
Bangladesh has faced this challenge with great courage. The fact is that the export of
garments product has increased after the withdrawn of this quota. And the last 10 years were
really good time for garment industry. The political situation was stable for some times &
also unstable for some times the boost growth of the industry is continuous.
2.2 Size of the garments industry of Bangladesh
The garment industry is by far the country‟s most important manufacturer, earning around $5
billion annually and accounting for about two thirds of all exports. Bangladesh has near about
more than 4,000 garment factories with up to 10 million livelihoods dependent on it directly
or indirectly. In 2007 it provided jobs for 2.2 million people, accounted for 10.5% of the
country‟s GDP, and contributed 40% of its manufacturing output. Exports have been growing
at an impressive rate in recent years. In 2007/07 alone, they increased by 18.2% to reach
US$9.6 billion, a record level for the fifth consecutive year. The contribution to GDP
increases at 13.25% in 2008. About 80 per cent of garment workers are women. The Ready
Made Garments sector has more potential than any other sector to contribute to the reduction
of poverty. Despite the phenomenal success of the RMG sector the working conditions and
wages of workers in the industry are cause for serious concern. Bangladesh‟s current position
as a leading garments exporting nation needs to be consolidated. The economy-wide
reverberations of failure would be disastrous. We believe it is in everybody‟s interest to
sustain this industry – an industry which changed the lives of so many people, particularly
women, in Bangladesh.
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Table: Size of Bangladesh Textile Industry
Sub-sector
No. of
unites
Installed machine
capacity
Production
capacity (m)
Manpower
Textile spinning 341
7.20 ml. spld
0.18 ml. rotor
1,600 kg 400,000
Textile weaving 400 25,000 SL/SLL 1,600 mtr 80,000
Specialized textile and
power loom
1,065 23,000 SL/SLL 400 mtr 43,000
Handloom (GF/F) 148,342 498,000 handloom 837 mtr 1,020,000
Knitting, knit dyeing (GF):
(a) Export-oriented 800 12,000 knit/Dy/M 3,600 mtr 300,000
(b) Local market 2,000 5,000 knit/M 500 mtr 24,000
Dyeing and finishing (FF):
(a) Semi-mechanized 180 - 120 mtr 10,000
(b) Mechanized 130 - 1,600 mtr 23,000
Export oriented RMG 4,500 - 475 doz 2,000,000
Source: Director's Report 2022, Bangladesh Textile Mills
Association
2.3 Bangladesh garments industry is now matured
Bangladesh garments industry has just woke up one morning and find itself a matured one. If
we follow DS reports on the conditions of Bangladesh garments industries, we may as well
have the same idea. Until 1/11/2022, as per some media, everything was a mess. Now a day,
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while teachers and lawyers can‟t hold elections, garments industries owners hold elections
under direct government patronage. And DS must also speak well of the team mates.
Maturation of a large industry like RMG sector in Bangladesh is not an overnight
phenomenon. The industry was trying to be in a matured stage from last ten years but the
unrest political situation was the main obstacle. Bangladesh‟s garments exports have
experienced a boom from the last two years because of a stable business climate under the
country‟s state of emergency. The nation‟s exports of knitted and woven items rose by
nearly 17 percent to a record 10.7 billion dollars in the financial year to June 2022. And now
the industry is at the matured stage.
Important statistics and data on International Trade are given as follows:-
Table-1: Textile & Clothing Tariff rates in Asian Countries.
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Chapter 3
Analysis & findings of RMG sector in Bangladesh
3.1 Major market of RMG industry
The RMG industry of Bangladesh fully depends on the export. The major importer of RMG
products are USA and Europe. But there is other country that has a contribution to the total
RMG export. The following table contains the list of major importer of our RMG products.
Table-2 : Major market of RMG industry
Comparative Export Performance of Bangladeshi Knit Production Major Importing
Countries:
(Figures in Million US $)
Country 2012-12 2013-13 2014-14 2022-22
Germany 2022.05 2039.97 2168.13 2573.70
UK 990.98 1103.30 1259.84 1335.25
USA 1119.04 1013.95 1130.90 1197.85
France 999.71 855.18 892.45 964.27
Spain 595.92 660.73 702.90 856.28
Italy 525.17 571.46 554.94 731.91
Canada 432.92 401.82 461.97 445.10
Netherlands 591.07 325.28 246.77 385.48
Belgium 299.74 320.46 317.19 440.63
Denmark 256.32 318.72 375.62 450.71
Source: Export Promotion Bureau, Bangladesh
* FY = Financial Year (July-June )
Source: Bangladesh bank ( April to June)
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3.2 Contribution to Economy
The Ready-Made Garments (RMG) industry contributes to the Bangladesh economy in a
distinctive manner. The last 20 years witnessed unparalleled growth in this sector, which is
also the largest exporting industry in Bangladesh. It has attained a high profile in terms of
foreign exchange earnings, exports, industrialization and contribution to GDP within a short
span of time. The industry plays a significant role in terms of employment generation. Nearly
two million workers are directly and more than ten million inhabitants are indirectly
associated with the industry. In addition to its economic contribution, the expansion of RMG
industry has caused noticeable changes by bringing more than 1.12 million women into the
workforce. Hence it is quite apparent that this sector has played a massive role in the
economic development of the country.
RMG‟s contribution in terms of GDP is highly remarkable; it has reached 13 percent of GDP
which was only about 3 percent in 1991. It also plays a pivotal role to promote the
development of other key sectors of the economy like banking, insurance, shipping, hotel,
tourism, road transportation, railway container services, etc.
One of the key advantages of the RMG industry is its cheap labor force, which provides a
competitive edge over its competitors. The sector has created employment opportunities for
about two million people of which 70 percent are women who mostly come from rural areas.
Thus the industry helps in the country‟s social development, women empowerment and
poverty alleviation. Currently RMG earns the lion‟s share of foreign exchange earnings.
Macro contribution
 Contribution to Export and GDP
The Bangladesh RMG industry, with its woven and knit sub-components, is a pre-dominantly
export oriented sector, with 95 per cent of the woven and 90 per cent of the knit exports
being directed to foreign markets. The cumulative foreign currency earnings by the sector,
since 1978, when first export was registered, is estimated at 70.56 billion US dollars.
Bangladesh‟s RMG export earning stood at 9.21 billion US dollars in FY2008. In 2008 this
sector contributed 75.64% of the total Bangladesh export of 12.78 billion dollars in the same
year. RMG export in FY2008 was equivalent to 13.25% of Bangladesh‟s GDP over the
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corresponding year. At present the local value addition by the RMG sector is estimated to be
45%. Accordingly, local value addition by the sector in 2008 was about 4.15 billion US
dollars which was equivalent to 5.96% of GDP for the same year. The value addition created
by the sector itself is estimated at 25% of total RMG export earnings which amounted to
about 2.30 billion dollars or equivalent to 3.32% of GDP [ Appendix Table-4].
Employment Creation and Wage Bill
RMG sector is one of the major employers in the economy. Around three million people are
employed in RMG industry and about 70 per cent of which are women. As a matter of fact in
the 1990s a large part of the incremental labor force in the manufacturing sector was
absorbed by the RMG sector. The RMG workers received USD 315.25 million as their wage
in FY 2008. This purchasing power contributed significantly to the growth of the economy
through its multiplier impact in terms of consumption expenditure and savings.
3.3 RMG industry contribution to different sector
Growth of RMG sector has spawned a whole new set of linkage industries and facilitated
expansion of many service sector activities. The RMG industry not only propelled the growth
of spinning, weaving, dyeing and finishing industries, production of accessories and spare
parts, but also rendered large externalities by contributing to other economic activities in
such areas as banking, insurance, real estate, packaging, hotels and tourism, recycling,
consumer goods utility services and transportation. RMG sector has overwhelmingly high
backward linkage with textile sector providing fabrics, yarn and other ancillaries. It has
important backward linkage with utilities such as electricity, gas, and machinery and spare
parts supplying.
 Banking and Insurance
Growth of the RMG sector and the related activities has contributed a lot to the robust growth
of the financial sector in Bangladesh. In FY 2008 the banking sector earned about 72.77
million dollars from business with the RMG sector in the form of interest and charges and
L/C charges. More than one-tenth of the commercial banks‟ asset portfolio belongs to the
RMG and textile sector in the country. A World Bank survey revealed that almost all firms
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(98%) are the clients of the commercial banks for working capital and procurement of
machines and equipment (57%).
The RMG sector has also contributed to the growth of the country‟s insurance sector. On
average, every year the premium paid by the RMG sector to the insurance companies was
about 6 million dollars. All firms have their machines and plants insured and, additionally,
87% of importers of input and 15% of the RMG exporters get their imports/exports insured.
 Shipping and Logistics
The RMG sector has contributed to the shipping business in Bangladesh and stimulated
setting up of several container yards, expansion of port facilities to handle large container
carrying trains, increase of cargo handling and storage facilities. RMG manufacturers also
extensively use services of Clearing & Forwarding Agents for the purpose of customs
clearance of inputs and finished goods. It is estimated that port usage fees earned from the
RMG sector account for more than 40% of the income of the port authority. RMG sector
contributed about US$130.80 million in FY2008 to earnings of the Shipping business of the
country by way of port charges, C&F Agent‟s commissions, freight charges, forwarding
charges etc.
 Transport Communication
The growth and development of inland transport services to a considerable extent owe to the
growth of the RMG industry. Both wheel transport service and railway service are widely
used by RMG sector for activities related to manufacturing and cargo movement. The
concept of covered van emerged in Bangladesh for safe transportation of the RMG products
in particular. In 2008 the inland transport industry received about 55.27 million dollars as
revenue from the RMG sector.
 Contribution to Government Exchequer
The RMG sector contributes to the government exchequer both directly and indirectly. In FY
2008 the sector paid 10.13 million dollars as stamp and postage, license renewal fee etc. The
sector also paid USD 12.61 million to the government as direct taxes in FY 2022.
 Professional Services
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The RMG sector extensively uses professional services from CA firms, legal agencies, and
business consultants. In FY 2008 total payment for professional services is estimated at 7.37
million dollars.
 Engineering Sector
The RMG industry paid 28.55 million dollars to the engineering sector which included
payments to repairing and maintenance service industry (USD 8.29 million), electrical
engineering (USD 9.21 million), transport vehicle maintenance service ( USD 5.53 Million),
and machine tools service (USD 5.52 Million).
 Utility Services
Payment of Electricity bill by the RMG industry is estimated to be 29.47 million dollars in
FY2002. Utility payments for gas, WASA etc. amounted to an additional 7.37 million
dollars, in 2022. It‟s about 49 million dollar in 2022.
 Real Estate
Demand for real estate development by the garment industry to accommodate offices and
factories of over 4000 garment units has generated a lot of activities in the Construction
Industry. The RMG industries paid approximately 52.50 million dollars as factory, office and
garage rent in FY 2022.
 Information and Communication Technology
The RMG sector also plays a catalytic role in the growth of the country‟s ICT sector. The
services consumed by the RMG industry generated revenue for the ICT sector. Payments for
ICT services which include communication, hardware and software services are estimated at
19.34 million dollars in FY 2022.
 Hotel and Tourism
A large number of overseas apparel buyers and their representatives visit Bangladesh every
year for business purpose. In FY2022 the RMG industry created a business of approximately
9.21 million dollars for the country‟s tourism industry.
 Waste Recycling Industry
Approximately 0.5 million people are engaged in waste (mainly, the waste out prices of
fabrics) recycling industry of the country which get their materials from the RMG industries.
With these waste materials, they are making stuff toys, patterns, quilts, cushions etc.
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 Emerging Consumer Market
The 2.2 million workers in the industry have created a large demand for consumer goods. A
regular source of earning increases the basic consumption needs such as improved diet, better
healthcare, improvements in family utensils and housing conditions etc. The sector has
created an increasing demand for consumption of low cost commodities, cosmetics items,
dresses, footwear, fast food and other products. A whole industry has been created to service
this growing demand and created employment opportunities for hundreds of thousands of
people.
(Source of all the above used data is Appendix Table 4)
3.3 Social impacts of the RMG Sector
 Women Empowerment
It is well recognized that women‟s participation in income generation activities lends them a
better status within the family and provides them with considerable freedom. A job ensures
equitable access to household resources (nutrition) and larger investment on female human
capital (health and education). Employment opportunities draw attention to women‟s needs
for public facilities such as transportation, communication, safety etc. and create a demand
for policy response in these areas. It also has created a demand for education and health. As
the income by the female member reduces dependency on male income it reduces their
vulnerability. It also reduces the possibility of domestic violence against women. Expansion
of women‟s employment has contributed positively to the improvement of the savings
behavior of the poor people since women tend to be better savers.
Employment in the RMG industry has provided direct access to cash income for the first time
to many poor women. A survey, conducted by the BIDS in 1997 showed that for 96 percent
of the female workers in the non-EPZ areas, work in the garment industry was the maiden
wage employment8. The survey also showed that women were taking up such roles paying
for house rents and schooling expenses for their children or brothers and sisters. Despite the
fact that they have lower incomes, the female garment workers were spending the same
amount as the male workers on the studies of their family members. The same survey further
showed that female workers were spending their earnings on their marriage, thus taking a big
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burden off their families. The independent earnings also allow these women to have a greater
share in household decision making. Evidently, wage work at the garment industry has
empowered women and improved their status.
 Savings
Regular earning enables a large number of the garment workers to go for some savings.
Workers investments on family pension schemes etc. create savings. A BIDS survey
conducted in the early 1990s found that 21 percent of both male and female workers aged 15
years and above had their own bank accounts. A higher proportion of workers (30 percent)
had bank accounts in the EPZ. Findings showed that women are on average better savers than
men and save about 7.6 percent of their otherwise small income.
 Child Labor
In recent years, international debate on child labor has intensified. The elimination of child
labor is also among the core labor standards in the ILO Convention. The Harkin Bill placed
at the US Senate entitled “The Child Labor Deterrence Act of 1993” which called for the
elimination of child labor in the export oriented manufacturing and mining industries. As a
consequence many garment industries had to retrench child workers from their factories. In
many countries these retrenched children ended up in more strenuous and less-remunerative
jobs, or worst, turned to begging in the street. The Bangladesh RMG sector set a unique
example through collective efforts which eventually led to the development of a safety-net
program for the child labors. The BGMEA/ILO/ UNICEF Child Labor Project in the garment
industry of Bangladesh, funded by the US Development of Labor was the first of a series of
child labor programs executed by the International Program on the Elimination of Child
Labor of the ILO. This project, initiated in 1995, is based on a Memorandum of
Understanding (MOU) signed by the BGMEA and two international organizations, the ILO
and UNICEF, with the aim of progressively phasing out child labor from more than 2,500
factories that are members of the association.
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The key elements of the MOU were:
(a) A fact-finding survey to determine the extent of child labor in the garment industry;
(b) The establishment of an education program in which identified child workers should be
enrolled;
(c) The establishment of a monitoring and verification system;
(d) The provision of income compensation in the farm of a monthly stipend of Tk. 300, the
equivalent of (at that time) US$ 7. The costs are to be shared by on fifty-fifty basis by
BGMEA, the ILO and other donors.
Many of the retrenched child workers have been placed in schools and are receiving a
monthly stipend. Football manufacturing industry of Pakistan has been following the globally
acclaimed BGMEA Model of Child Labor Elimination. BGMEA has so far spent over
600,000 US dollars for the project. Successfully addressing of this issue has created a very
favorable image about Bangladesh abroad and has promised continued market access for the
sector.
 Population Control
Employment opportunities especially for women created positive impact on family planning
and population control in the country. Independent working-women are getting more
conscious about the advantage of a small family, and are exposed to modern family planning
methods. Working adolescent girls tend to avoid early marriage as they have their own
source of income and are self-dependent. The mean age at marriage for girls working in
RMG factories tend to be higher than the national average.
3.4 Condition of workers of RMG sector
 According to BGMEA about 3 million people are employed in the RMG sector (around
80% are female). Growing apprehension is the already deprived garment workers may
face further retrenchment which may worsen the existing poor working and living
standard of the workers.
 A “decent employment” means rising productivity and real wages by ensuring rights to
work, employment, social protection, freedom of association and social dialogue in an
integrated approach. The concept of decent work has significant gender implications in
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Bangladesh RMG sector since women constitute a vast majority of the labor force, and
women and the worst victims of violations of decent work conditions.
 Women workers are particularly deprived of their special legal rights (e. g. maternity
benefits) and remain more exposed to exploitation within their particular spheres of work.
The female workers tend to be underpaid and exposed to physical assault by both fellow
colleagues and employers.
 Results of a study for ILO re-confirmed us the absence of decent work in most of the
RMG industries as they offer low wage, long working hours, poor health and safety
protection and in most cases there is no formal contract for job security and social
protection.
 The national labor movements are continuously demanding for National Minimum Wage.
The minimum wages rule for the garment sector, endorsed in 2007. The minimum wage
is Tk 1650.
 No formal appointment letter is issued to the employees‟ contractually defining their
terms of employment. In most cases the industries do not follow proper dismissal
procedure for their workers. Since the workers do not get any formal contract, the
employers can hire and fire them at any time without showing any reason.
 The exhaustive and prolonged work schedule of RMG industries sometimes causes
occupational disease among the workers, which ultimately impacts negatively on their
productivity.
 The recent collapse of a garment factory building at Savar shows how insecure and
vulnerable the workers are in the RMG sector. Therefore it is now urgent to improve
OSH condition at workplaces for the business interest of the RMG owner in quota free
market.
 Bangladesh does not have any national social safety net program like contributory
provident fund, medical allowances, unemployment allowances etc. Small and one time
retrenchment benefits are not adequate for workers and their families in situations of
massive income losses. In most cases the workers do not have their own savings and are
not prepared to face any adverse situation.
 Though export-oriented apparel industry is the lifeblood of Bangladesh‟s foreign
exchange earning, the basic rights, welfare issues of garment workers are severely
neglected.
 The basic problem of the ordinary workers and labor movement in garments sector are
low scope of operation, non-recognition of legally registered unions at the factory level,
long working hours and practically no weekly holiday that left hardly anytime for
workers to participate union activities, non-compliance of existing labor laws, high
19
occupational accidents etc. On the other hand, creation of yellow trade unions by the
garments owners, imposition of self-made code of conduct, apathy to active social
dialogue made ordinary workers and trade unions more vulnerable.
 Closer cooperation between employers and employees are important to ensure the
sustainability of an industry. However, it was evident that there is a lack of adequate
communication between employees and employers and role of such social dialogue in
building a healthy working relationship at factory level are always absent. It is absolutely
difficult for workers to form legally registered in house union as a systematic tool to carry
on social dialogue with employers at workplace.
3.6 Women Seeking Accountability in the Bangladeshi Garment Industry
From an employers‟ perspective, they were an ideal workforce for an industry that sought to
compete in the global economy on the basis of cheap labor. They could be paid much less
than men with equivalent skills and be treated as a largely informal workforce to whom
employers had no obligation aside from paying their wages.
Today, things are beginning to change. Female education has gone up steadily; there has
been widespread dissemination of ideas about women‟s rights through non-governmental
organizations (NGOs), state pronouncements and the media, while microfinance has
increased and diversified employment opportunities in the countryside. Women enter the
industry not just because of poverty, but also for the prospect of improving their family‟s
standard of living, sending their children to school, saving for their dowries or supporting
ageing parents. They have been able to leverage their earnings into increased decision-
making power within their families and independent purchasing power in the market place.
They have also become increasingly visible in collective actions in support of their rights,
which have linked local and global movements.
At the global level, campaigns have drawn attention to abuses of workers‟ rights in global
supply chains and put pressure on international corporations to take greater responsibility for
employees through corporate codes of conduct. Local employers in the Bangladesh garment
industry must now demonstrate compliance with these codes to win orders from international
buyers. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has
formulated its own code of conduct for the industry, in collaboration with the major trade
unions, and has set up a compliance unit that monitors labor conditions in members‟
20
factories. It has been known to freeze licenses of members whose factories have made
headlines for violations. Legal success in winning favorable verdicts for workers in the labor
courts also led BGMEA to set up its own conciliation and arbitration cell, with equal
representation of employers and trade unions. This is intended to provide a less expensive
and time-consuming mechanism for settling disputes between employers and workers.
In 2007, the Government passed a new labor code, after 12 years of deliberation and
activism. It applies to all workers, and the new sections relevant to the garment industry
include written contracts and identity cards, timely payment of wages, revised minimum
wage, paid maternity leave and explicit laws against sexual harassment. Despite this
progress, there is still much to be done to improve women worker‟s rights.
3.7 Some tragedies of RMG sector
“It is heartbreaking that year after year women and men are killed while making clothes for
stores in our communities,” said InekeZeldenrust of the Clean Clothes Campaign
International Secretariat, an international network that for years has highlighted the safety
risks plaguing the Bangladesh garment industry.
The spate of tragedies began on Thursday, February 23, 2007 when a fire, possibly caused by
an electrical short circuit, destroyed the four-story KTS Textile Industries in Bangladesh‟s
port city of Chittagong. Initial reports stated that 54 were killed and at least 60 were injured,
however other sources peg the death toll at several hundred in what local garment workers
rights‟ advocates are calling the worst tragedy in the history of the Bangladesh garment
industry. Over 1,000 workers were reportedly in the factory at the time of the 7 p.m. fire.
According to the workers, the exits were locked. In 2006 two electricians reportedly died at
this same facility, located in the Kalurghat Industrial Area, when they were electrocuted. This
facility reportedly produced for US companies Uni Hosiery, Mermaid International, ATT
Enterprise, and VIDA Enterprise Corp. Meanwhile, authorities have apparently sealed off
three other factories connected to this facility (Vintex Fashion, Cardinal Fashion and Arena
Fashion) citing unplanned construction and inadequate safety measures as life-threatening for
their more than 6,000 workers.
21
Just days after the KTS fire, 19 people were reported dead and 50 injured when a five-story
building collapsed in Bangladesh‟s capital city of Dhaka. The PhoenixBuilding in the
Tejgaon industrial area collapsed following unauthorized renovations to convert the upper
stories of the building that housed various offices and factories, including a garment factory,
into a 500-bed private hospital. One hundred fifty construction workers and an as yet
unreported number of garment workers were reportedly in the building Saturday morning
when it collapsed. Rescue operations, hampered by lack of equipment, are still underway, as
many are feared to be trapped under tons of concrete rubble. Hundreds of activists from
workers‟ rights groups marched through Dhaka on Saturday demanding compensation for the
victims families and punishment for the factory owners. Police have reportedly been
searching for the building‟s owner Deen Mohammad, also chairman of the City Bank of
Bangladesh, but have been unable to locate him. Phoenix Garments exports clothing mainly
to Europe.
That same day in Chittagong, 57 workers at the Imam Group of Industries (reportedly
housing the Moon Fashion Limited, Imam Fashion, Moon Textile, Leading Fashion and
BimonInda garment factories) were injured when a transformer explodes and fearing fire,
they tried to exit through a narrow exit. Four are reportedly in critical condition following the
stampede.
There is a clear need for a long-term wide scale program to address health and safety in the
garment/textile sectors. The failure to implement safety measures in these sectors in
Bangladesh has resulted in a conditions where the death and injury of workers has become
alarmingly routine: in 2000 53 workers died at Choudury Knitwear, 24 died in 2001 at Maico
Sweater, nine died in 2005 at the Misco Supermarket building, and 23 died at Shan Knitting
and 64 died at the Spectrum-Shahriyar factory in 2006.there was savar tragedy which
happened recently.
3.8 Step need to be taken to minimize the risk
 A real and effective national consensus should be the prime concern to get prepared for
post MFA Bangladesh needs to prepare a time bound national action plan to minimize the
potential risks. It needs to priorities its immediate actions from a number of possible
solutions.
22
 As most of the labor laws have become old and not time befitting, government should
formulate a National Policy on Ready Made Garments to establish a development
trajectory for the sector to survive, in a quota-free world.
 The growth of RMG sector was facilitated by the supply of low cost labor and since the
female workers could easily learn the sewing techniques, the management took very
limited or no effort for any further development of its workers. The apprehension
regarding the post-MFA also discouraged the employers to arrange further training
programs for their work force. However this not only limited workers skill, but also
contributed to loss of production through lose of production time, low labor productivity,
re-working, quality inconsistence, materials wastage, etc.
 Improved working conditions can help to increase productivity level. Investment in
human resources, e.g. training, betterment of working conditions, maintenance of proper
safety and health measures, protection from physical and psychological harassment,
freedom of association and rights to collective bargaining at factory/enterprise level etc
will certainly improve the productivity of the workers.
 Rights and welfare of the employees working in the subcontracting garments factories of
the multinational companies should be ensured under corporate social responsibility. The
multinational companies should be enforced to make regular visit to the subcontracting
factories to ensure core labor standards. Employers associations may works as the
watchdog of such initiative. The role of trade unions is to monitor the implementation of
CSR at both large companies and subcontractors.
 The CCC believes that follow-up to these tragedies from local and international
stakeholders must include
1. support for adequate rescue and relief efforts and financial compensation for the injured
workers and the families of the dead;
2. full, independent and transparent investigation and follow-up for all these incidents; and
3. Immediate structural measures to prevent future, similar incidents.
 Industry, along with public authorities (at the local and international levels) must commit
to launch an immediate initiative to take on the safety issues that plague the garment
industry in Bangladesh, including a structural review of multi-story buildings and
facilities inspection mechanisms, explained Zeldenrust.
 Introduction of Labor Standard Stickers on the exported goods, the monitoring and
issuance of such stickers may be made under joint supervision of the government and the
trade unions. The international buyers, government, trade unions may also encourage the
employers to opt for Social Accountability.
23
 To protect the rights and interests of livelihood security of RMG workers, it is necessary
to set up a Social Safety Net programs (contributory provident fund, gratuity,
retrenchment fund) and compulsory Workers Insurance. Also an effective Special Fund
(easily accessible for affected ordinary workers) can be made to deal with any adverse
situation in the post-MFA environment.
 The workers at the garment sector lives under a terrible socio-economic condition with
unstable and temporary employment, poor working conditions, long working hours,
forced overtime & sexual harassment.
 The promotion o ILO‟s “decent work” program would be the most comprehensive effort
to protect the workers of RMG sector in a quota-free world.
3.10 Possible way to Face the Coming Challenges for RMG sector in Bangladesh:
To face the upcoming challenges in RMG sector, the country should take the following
measures:
1. Formulation of a national policy on RMB industry and workers for post MFA period.
2. Unconditional and quick implementation of core labor standards and labor laws at
workplace of all RMGs.
3. Establishing a compulsory social safety net package for RMG workers.
4.Exploration of new market for RMG to protect the industry and the workers and take
maximum advantage of free excess to Canadian, Australian and other markers.
5. Capacity building training and re-training activity for employers and workers in RMG
sector to develop productivity and efficiency level.
6. Develop backward linkage industries for RMG.
7. Export and product diversification.
8. Building alliances with likeminded neighbors and competitors within the LDCs.
9. Continuous training program to sensitize the workers about their rights and 10.interest
should be undertaken in cooperation with and financial assistance from the fraternal
organizational abroad.
3.11 Prospects of the RMG Industry:
Despite many difficulties faced by the RMG industry over the past years, it continued to
show its robust performance and competitive strength. The resilience and bold trend in this
MFA phase-out period partly reflects the imposition of „safeguard quotas‟ by US and similar
24
restrictions by EU administration on China up to 2009, which has been the largest supplier of
textiles and apparel to USA. Other factors like price competitiveness, enhanced GSP facility,
market and product diversification, cheap labor, increased backward integration, high level of
investment, and government support are among the key factors that helped the country to
continue the momentum in export earnings in the apparel sector. Some of these elements are
reviewed below.
 Market Diversification
Bangladeshi RMG products are mainly destined to the US and EU. Back in 1996-97,
Bangladesh was the 7th
and 5th
largest apparel exporter to the USA and European Union
respectively. The industry was successful in exploring the opportunities in markets away
from EU and US. In FY06, a successful turnaround was observed in exports to third
countries, which having a negative growth in FY05 rose three-fold in FY06, which helped to
record 23.1 percent overall export growth in the RMG sector. It is anticipated that the trend
of market diversification will continue and this will help to maintain the growth momentum
of export earnings. At the same time a recent WTO review points out that Bangladesh has not
been able to exploit fully the duty free access to EU that it enjoys. While this is pointed out to
be due to stringent rules of origin (ROO) criteria, the relative stagnation in exports to EU
requires further analysis.
Table- 3: Region-wise Share of RMG Export
Region wise Export Performance FY 2014-14 & 2022-22
Region 2014-14 2022-22
EU 7306.28 8682.25
USA & Canada 1592.87 1642.96
European Free Trade Association 125.98 133.89
Latin American Integration
Association
216.81 216.22
Emerging Markets 937.81 1134.54
25
Others 296.13 239.95
Source: Export promotion Bureau
 Product Diversification
The growth pattern of RMG exports can be categorized into two distinct phases. During the
initial phase it was the woven category, which contributed the most. Second phase is the
emergence of knitwear products that powered the recent double digit (year-on-year) growth
starting in FY04.
In the globalize economy and ever-changing fashion world, product diversification is the key
to continuous business success. Starting with a few items, the entrepreneurs of the RMG
sector have also been able to diversify the product base ranging from ordinary shirts, T-shirts,
trousers, shorts, pajamas, ladies and children‟s wear to sophisticated high value items like
quality suits, branded jeans, jackets, sweaters, embroidered wear etc. It is clear that value
addition accrues mostly in the designer items, and the sooner local entrepreneurs can catch on
to this trend the brighter be the RMG future.
 Backward Integration
RMG industry in Bangladesh has already proved itself to be a resilient industry and can be a
catalyst for further industrialization in the country. However, this vital industry still depends
heavily on imported fabrics. After the liberalization of the quota regime some of the major
textile suppliers Thailand, India, China, Hong Kong, Indonesia and Taiwan increased their
own RMG exports.
If Bangladesh wants to enjoy increased market access created by the global open market
economy it has no alternative but to produce textile items competitively at home through the
establishment of backward linkage with the RMG industry. To some extent the industry has
foreseen the need and has embarked on its own capacity building. The trend of back-to-back
import has been declining over the years implying a rising contribution of domestic value
addition (Figure 2). This is an optimistic indication that a well equipped and modern
backward linkage industry may well prove cost effective and thus helping Bangladesh to
meet the challenges in the post-MFA era.
26
 Flow of Investment
It is plausible that domestic entrepreneurs alone may not be able to develop the textile
industry by establishing modern mills with adequate capacity to meet the growing RMG
demand. It is important to have significant flow of investment both in terms of finance and
technology. The investment outlook in this sector is encouraging, although the uncertainties
before the MFA phase-out period caused a sluggish investment scenario. In part the
momentum in the post-MFA phase-out period is indicative of the efforts underway towards
capacity building through backward integration. This is evident in the pace of lending to the
RMG sector and in the rising import share of RMG related machinery. However further
progress would be necessary to improve and sustain competitiveness on a global scale.
 A Supportive Policy Regime
Government of Bangladesh has played an active role in designing policy support to the RMG
sector that includes back-to-back L/C, bonded warehouse, cash incentives, export credit
guarantee scheme, tax holiday and related facilities. At present government operates a cash
compensation scheme through which domestic suppliers to export-oriented RMG units
receive a cash payment equivalent to 5 percent of the net FOB value of exported garments.
The FY04 budget also lowered the corporate income tax rate for the RMG industry from 30
to 10 percent for the period up to June 30, 2007. From FY05 the tax regime has been further
changed, and a 0.25 percent tax at source will be deducted from the value of the export
proceeds of Woven and Knitwear category. At the same time, income tax rate for textile
manufacturers were reduced to 15 percent from its earlier level for the period up to June 30,
2009. The reduced tax rates and other facilities are likely to have a positive impact on the
RMG sector.
 Lead Time
„Lead time‟ is a crucial factor maintaining export competitiveness. Bangladesh happens to
feature the longest lead time in the RMG world. The lead time for Bangladesh is 120 days on
an average, while the corresponding period for Sri Lanka is about 19-45 days and for India it
is only about 12 days. Various factors like the distance from major markets, importation of
raw materials, port congestion, strikes, poor roads, etc. are some of the factors responsible for
this. At present the fashion seasons are becoming short with a changing trend, it would not be
27
possible to compete if the lead time extends beyond 30-40 days. Therefore, bringing down
the „lead time‟ to about 30-40 days is a major challenge for the country‟s RMG sector.
Clearly more business can be captured only if the lead time could be improved.
 Infrastructural Impediments
The existence of sound infrastructural facilities is a prerequisite for economic development.
In Bangladesh, continuing growth of the RMG sector is dependent on the development of a
strong backward linkage in order to reduce the lead time. However, other factors constraining
competitiveness of Bangladesh‟s RMG exports included the absence of adequate physical
infrastructure and utilities (e.g., transportation, telecommunication, stable power supply,
efficient seaport, political tolerance, quality control and a smoothly functioning bureaucracy).
According to a recent World Bank-IFC publication (2007) records that a businessman in
Bangladesh needs 35 days to export and incurs USD 902 per container, whereas his
counterpart in India requires 27 days and spends USD 864 per container. The comparable
figures for Pakistan, Sri Lanka and Vietnam are 24 days and USD 996, 25 days and USD
797, and 35 days and USD 701, respectively.
 Labor Productivity
The productive efficiency of labor is more important determinant for gaining comparative
advantage than the physical abundance of labor. In Bangladesh, the garment workers are
mostly women with little education and training. The employment of an uneven number of
unskilled labors by the garment factories results in low productivity and comparatively more
expensive apparels. Bangladesh labor productivity is known to be lower when compared with
that of Sri Lanka, South Korea and Hong Kong SAR. Bangladesh must look for ways to
improve the productivity of its labor force if it wants to compete regionally if not globally.
 Cheap Labor Force
The strength of a firm depends on its specific comparative advantages, which its competitors
do not possess. To date the local industry has flourished in spite of the challenges cited above
(e.g., lead time, infrastructure, and bureaucratic red tape) on the back of cheap female labor.
The wages paid to RMG workers in Bangladesh are the lowest even by the South Asian
regional standard. Figure 4 illustrates the comparative average hourly wages in apparel
industry of selected developed and developing countries.
28
 Research and Training
The country has no dedicated research institute related to the apparel sector. RMG is highly
fashion oriented and constant market research is necessary to become successful in the
business. Here India has had a head start and Mumbai and Delhi are on line to become
fashion centers on a global scale. At present whatever design work is done in the country,
these are mostly carried out with foreign workers and experts. BGMEA has already
established an institute which offers bachelor‟s degree in fashion designing and BKMEA is
planning on setting up a research and training institute. These and related initiatives need
encouragement possibly intermediated by donor-assisted technology and knowledge transfer.
A facilitating public sector role can be very relevant here.
3.12 Recent riots and strikes by the garments worker
Garments worker raise their voice in different times to attain their rights. From analyzing
different news it can be viewed that the bursting riots of 2007 has not created in a day. There
is a long way behind this and a lot of reasons. In July 4, 2001 the national strike took place
throughout the garment industry. The strike, planned months in advance, was called by the
NGWF and six other union federations. The garment workers called the strike across the
country demanding implementation of their six point charter. At least 17 garment factories
were damaged in the city by elements hired by some owners, alleged the striking workers.
Police arrested 13 garment workers from Mohakhali area for their alleged involvement in
demanding the factories.
Then several times the garments worker places their demand in different way. Their main
demand was to increase their basic wage at Tk 3000. For achieving this demand, in 2006-
2007 all hell broke loose as a riot broke out in and around the capital Dhaka city when a
garments worker was shot in Savar, an industrial zone 30km away from Dhaka as police was
trying to control the angry protesters. This riot came to an end under the state of emergency.
it is minimized in 2022 and 2022.
29
3.12.1Reason behind the riot
Around 2.2 million people are employed in the garments sector and around 70% of whom is
woman. From the beginning of the industry the rights of the worker is violating. The workers
wage was determined as Tk 930 for a new worker in 1994. And this rate was continued till
2007. The other facilities like safety, healthy working environment, security etc. were not
provided to the worker. The reason behind the riot can be listed as below.
1. A new wage structure for the garment workers on the basis of a basic minimum wage of
tk 3000 (unskilled).
2. Ensure the health and safety of garment workers.
3. Necessary steps for the development and expansion of the garment industry and its
markets.
4. Implementation of trade union rights in the garment sector. Trade union rights for the
EPZ workers.
5. Separate industrial zones for the garments industry. Settlements, schools and hospitals in
the zones.
6. Implementation of the Memorandum of Agreement signed between the MGMEA and the
BGWUC in 1997 and 2000 (appointment letter, identity card, service book, weekly
holiday, maternity leave, etc.)
3.13 Effect of world ongoing financial crisis on Bangladesh Garments Sector
The ongoing financial crisis has not affect the Bangladesh Garments Industry at a large
extent till now. But no one no what will happen. And there is a controversy about the future
effect of this financial crisis on RMG sector. Some argues that it will affect the industry in a
positive manner. The arguments behind this is that the western buyers are cutting their prices
because of the financial crisis but China and other garment manufacturing countries can‟t
afford the price cut, but Bangladesh can because our labors are cheaper and they can work
overtime.
But many exporters are really worried about the effect of financial crisis on this sector. The
Bangladesh Knitwear Manufacturers Association (BKMEA) reported a ten per cent drop in
knitted items such as T-shirts and pullovers. Buyers are now renegotiating prices and
delaying orders citing the ongoing financial turmoil.
30
It‟s true some of the top retailers are downsizing their inventories due to the crisis. But
Bangladeshi exporters have to be careful. If they can make shipment timely and keep the
quality intact, global financial crisis will not affect the RMG sector of Bangladesh.
3.14 Ready Made Garments Sector of Bangladesh & its Statistics
Export Performance of RMG of Bangladesh for 2013-13, 2014-14 & 2022-2022 in Million
US ($)
Monthly Growth Rate Compared to Last Year (%) Monthly Growth Rate Compared to Last Year
(%) Monthly Growth Rate Compared to Last Year (%)
Export Performance of RMG of Bangladesh for 2013-22 in Million US ($)
Export of RMG in FY 12-22 (in Million USD) Monthly Growth Rate Compared to Last
Year (%)
Year Month Knit Woven Total Month Knit Woven Total
2013
July 1001.07 993.84 1994.91 July -0.68 +11.92 +5.22
August 792.53 765.85 1558.38 August -24.70 -12.03 -18.96
September 746.32 697.17 1443.40 September +43.72 +46.49 +45.04
October 873.16 761.48 1634.64 October +9.68 +8.05 +8.92
November 653.96 710.04 1364.00 November +5.18 +13.26 +9.24
December 908.93 1042.68 1951.62 December +14.44 +17.06 +15.83
2014
January 944.96 1147.64 2092.60 January +22.17 +23.29 +22.78
February 811.24 979.71 1790.71 February +10.81 +12.19 +11.56
March 854.68 991.77 1846.45 March +22.24 +17.01 +19.38
April 795.00 835.17 1630.28 April +13.80 +15.72 +14.77
May 1008.37 997.72 2007.09 May +15.11 +15.13 +15.12
June 1085.63 1116.78 2202.41 June +18.59 +23.20 +20.88
Total FY 12-13 10,475.88 11,039.85 21,515.73
Total FY 12-
13
+10.43 +14.96 +12.71
Share in National
Export
38.77% 40.86% 79.63%
Export Performance of RMG of Bangladesh for 2014-22 in Million US ($)
31
Export of RMG in FY 13-22 (in Million USD) Monthly Growth Rate Compared to Last
Year (%)
Year Month Knit Woven Total Month Knit Woven Total
2014
July 1253.76 1262.38 2516.14 July +25.24 +27.02 +26.12
August 848.15 796.05 1644.2 August +7.01 +3.94 +5.50
September 1058.29 985.26 2043.55 September +41.82 +41.32 +41.57
October 862.01 820.49 1682.50 October -1.28 +7.75 +2.93
November 877.61 889.35 1766.96 November +34.20 +25.25 +29.54
December 1048.87 1229.98 2278.85 December +15.40 +17.96 +16.77
2022
January 1045.83 1195.20 2241.03 January +10.67 +4.14 +7.09
February 915.76 1049.64 1965.40 February +12.88 +7.14 +9.74
March 920.69 993.37 1914.06 March +7.72 +0.16 +3.66
April 972.38 944.95 1917.33 April +22.30 +13.14 +17.61
May 1115.73 1092.26 2207.99 May +10.65 +9.48 +10.06
June 1130.74 1183.14 2313.88 June +4.16 +5.94 +5.06
Total FY 2014-2022 12,049.81 12,442.07 24,491.88
Total FY
2014-2022
+15.02 +12.70 +13.83
Share in National
Export
39.93% 41.22% 81.15%
Export Performance of RMG of Bangladesh for 2022-22 in Million US ($)
Export of RMG in FY 14-22 (Jul-Oct) (in Million
USD)
Monthly Growth Rate Compared to Last
Year (%) (Jul-Oct)
Year Month Knit Woven Total Month Knit Woven Total
2022
July 1307.90 1210.08 2517.98 July +4.32 -4.14 +0.07
August 898.44 815.34 1713.78 August +5.93 +2.42 +4.23
September 1064.12 937.29 2001.41 September +0.55 -4.87 -2.06
October 787.96 731.53 1519.49 October -8.59 -10.84 -9.69
November November
December December
2016
Total FY 2014-2022
(Jul-Oct)
4,058.42 3,694.24 7,752.66
Total FY
2014-2022
(Jul-Oct)
+0.90 -4.40 -1.70
Share in National 42.04% 38.27% 80.32%
32
Export
Source: Export Promotion Bureau, Bangladesh
Export Performance of RMG over Government's Strategic Target for 2014-22
Product Target (million USD) 2022-15
Performance Over Target 2022-15
(Jul-Oct)
Knitwear 13,215.61 4,058.42
Woven 13,681.77 3,694.24
3.15 Major Export product for 20013-2022
It is said earlier, contribution of garments export to total export is 75% or more. Two major
types of garments products are exported. One is woven garments and another is knitwear.
The 2014-2022 export scenarios are presented here by chart.
Sector Contribution of the
RMG Sector in
Bangladesh
Economy
[Million USD]
Share in Total
RMG Export
Local Fabrics Inputs 1915.00 20.79
Imported Fabrics and Other Inputs 4532.83 49.20
Employment (Wage and Salary Bills) 1122.85 12.19
Management Payment 401.61 4.36
Workers Payment 721.24 7.83
Linkage 182.38 1.98
Buying House Commission 80.14 0.87
33
Dying & washing Industry 58.03 0.63
Process Contract 35.92 0.39
Printing & Stationery 8.29 0.09
Banking 72.77 0.79
Earnings from interest & charges 29.48 0.32
L/C charges 43.29 0.47
Insurance 11.05 0.12
Insurance on import 7.37 0.08
Fire Insurance 3.68 0.04
Professional Services 7.37 0.08
Professional Services 5.53 0.06
CA Firms [Audit] 0.92 0.01
Legal Services 0.92 0.01
Tours & travels including hotel 9.21 0.10
Engineering Sector 28.55 0.31
Repair & maintenance Service industry 8.29 0.09
Transport Vehicle Maintenance Service
Industry
5.53 0.06
Electrical Engineering 9.21 0.10
Machine Tools Services Industry 5.52 0.06
Machinery Trade 61.72 0.67
34
Operational equipment purchase 28.55 0.31
Spare parts 11.97 0.13
Depreciation 21.20 0.23
Shipping & Port 130.80 1.42
C&F Agents 66.32 0.72
Freight charges 52.50 0.57
Forwarding charges 11.98 0.13
Transport Sector (Land and Railway) 55.27 0.60
Petrol & lubricant 5.53 0.06
Real estate 52.50 0.57
Factory rent 51.58 0.56
Office rent 0.92 0.01
Garage rent 0.00 0.00
Information and Communication
Technology
19.34 0.21
Electronics and Compute Services Industry 5.53 0.06
Mobile & telephone bill 12.89 0.14
Telex, fax, internet 0.92 0.01
Other 11.97 0.13
Security & Protection 4.61 0.05
Media (Business promotion) 7.36 0.08
35
CPD Occasional Paper Series 50 Sector
Contribution of the RMG Sector in
Bangladesh Economy [Million USD] Share
in Total RMG Export News and
Publications
0.17 0.00
Gift & souvenir 0.14 0.00
Payment to Government 272.65 2.96
Direct Payment 16.58 0.18
Stamp & Postage 3.68 0.04
License renewal, rent, rates 6.45 0.07
Payments to EPB 1.84 0.02
Tax 4.61 0.05
Indirect Payment to the GOB 256.07 2.78
WASA bill 2.76 0.03
Electric bill 29.47 0.32
Gas 4.61 0.05
Miscellaneous 219.23 2.38
Gross Margin 720.32 7.82
Total Export 9211.20 100.00
Memo Items
Direct Value Addition by the RMG
Sector
2302.80 25.0
36
From the pie chart it can be found that the most dominating sector is the garments sector in
case of export. Woven garments contribute 38.25% and Knitwear contributes 37.39%.
Table-8: Contribution of Bangladesh RMG sector to national economy, FY 2022
Source: Estimated on the basis of Analysis of Statements of Accounts of selected RMG units.
3.16 Facts About Bangladesh Knitwear Sector:
Export Earnings: US$ 12.05 billion in FY 2014-22
Export Quantity: 510.92 million dozens in FY 2014-22
CAGR Growth (FY 2009-09-FY2014-22): 11.04%
Average Growth Rate Per Year: About 20.55% (Last 19 years)
During Recession (FY 2009-09) Annual Growth Rate of Knitwear Export: 16.20%
Knitwear Share in Garments Exports: 49.20% in FY 2014-2022
National Export: 39.93% in FY 2014-2022
Net Retention Rate: About 45%
Domestic Value Addition: About 80%
Export Concentration: EU27-72.05%, USA-9.94% and Canada-3.69%
2nd largest supplier of Knitwear in the world after China.
2nd largest supplier of Knitwear in terms of quantity.
Employment Generation:
Direct - 4.0 million; about 75% of them are women.
Indirect - 0.70 million
Number of Member Units About - 1982 (Up to 30 November'2022
From the above Table it is focused that he RMG industry not only propelled the growth of
spinning, weaving, dyeing and finishing industries, production of accessories and spare parts,
but also rendered large externalities by contributing to other economic activities in such areas
as banking, insurance, real estate, packaging, hotels and tourism, recycling, consumer goods
utility services and transportation. RMG sector has overwhelmingly high backward linkage
with textile sector providing fabrics, yarn and other ancillaries. It has important backward
linkage with utilities such as electricity, gas, and machinery and spare parts supplying.
Local Value Retention 4145.04 45.0
37
Table- 9 : Percentage of Back to Back LC
Source: Bangladesh Bank
3.17 Reducing trend of Back to Back LC
Reducing trend of Back to Back LC indicates the local value addition by RMG industry.
Here is the table showing the percentage of back to back LC for the last ten years.
Year % of Back to Back LC
2018 47.74
2019 44.13
2020 51.74
2021 45.10
2022 43.20
2011 42.0
2012 39.0
2013 34.3
2014 30.0
2022 28.10
38
3.18 Statistical analysis on RMG sector
This chapter reveals the statistical analysis on the RMG Sector for last ten years, its growth
and the significance of RMG export to total export and the significance of RMG export
growth to GDP growth. For analyzing the performance of RMG industry of Bangladesh some
statistical tools has been used.
3.18.1 Time Series Analysis
Here, the trend of RMG Export has been revealed through indirect method of time series
analysis by using eleven years data. The model of Time series analysis is
Here,
a = Constant
b= Slope
Y= Dependent variable
t = Time
Y = a + bt
RMG Export Trend
Export is an influential tool for foreign exchange business. Any decrease in export can cause
a huge decrease in foreign exchange income as well as profit. The trend of export business
for last five years is presented here.
Table Calculation for RMG Export trend
Year
(n)
Export
(Y)(mill $)
Time (t) Yt t2
2012 3001.25 -5 -15006.30 25
2013 3781.94 -4 -15127.80 16
2014 4019.98 -3 -12059.90 9
39
2015 4349.41 -2 -8698.82 4
2016 4859.83 -1 -4859.83 1
2017 4583.8 0 0 0
2018 4900.0 1 4900 1
2019 5700.00 2 11400 4
2020 6300.00 3 18900 9
2021 7900.8 4 31603.20 16
2022 9211.2 5 46056 25
n = 11 ∑Y=
58608.21
∑Yt =
57106.60
∑t2
= 110
b = ∑Yt / ∑t2
= 57106.60 / 110
= 519.15
Now,
a = ∑Y/n
= 58608.21/11
= 5328.02
So the equation for Export Business is,
Y = 5328.02 + 519.15 t
Here, Y = RMG Export of Bangladesh
40
REGRESSION ANALYSIS
In this age of globalization the demand for RMG products is increasing day by day. This
increasing trend in export sector helps to build the economy of Bangladesh. For showing the
significance of RMG export to total export and the significance of RMG export growth to
GDP growth simple regression analysis has been done. Software SPSS 15.0 is used to do
this statistical analysis.
The outputs that are got by using SPSS 15.0 software are enclosed in the appendix and
interpretations of those are presented below sequentially.
Simple regression between RMG Export & Total Export
RMG Export is one of the major sources of Total export of Bangladesh. Simple regression
analysis has been used to show the relationship between Total export and RMG export. Here,
RMG export is considered as independent variable and Total export is considered as
dependent variable. The model will be as follows.
i. Regression equation
From the simple regression analysis the following equation is formed by considering total
export as dependent variable (denoted as Y) and RMG export (denoted as X) as independent
variable. The equation is:
This equation indicates if RMG export of Bangladesh increases for US$1 million, Total
Export will be increased by US$ 1.221 million.
ii. Mean and standard deviation
The mean of Total export is US$3438.50 million, which indicates the average total export per
year of Bangladesh is US$3438.50 million. And the standard deviation is US$ 3196.15
million. So, the variability of total export is US$ 3196.15million.
Mean of RMG export is US$ 2276.23 million. That means the average amount of RMG
export per year is US$ 2276.23 million. And the standard deviation is US$ 2613.37 million.
So, the variability of RMG export is US$ 2613.37 million.
41
iii. Correlation Matrix
The correlation between Total export and RMG export is 0.999 & significance level (1-
tailed) is .000. Here, the significant level is bellow .05. So, there is a significant relationship
between Total export and RMG export.
iv. Co-efficient of multiple determination& Co-efficient of multiple correlation
Here, r2
= 0.997. r2
stands for Co-efficient of multiple determination. The result indicates that
RMG export explains 99.7% of the variation in the Total export. So, this variable is very
influential as it can explain more than 50%. Again, r = 0.999, r stands for Co-efficient of
multiple correlation. The result shows that there exits a high degree of positive relationship
between Total export and RMG export.
42
Chaper-4
FINDINGS
4.1 FINDINGS of Ready Made Garments Sector OF Bangladesh
Findings
After explaining different aspect of Bangladesh RMG sector different issue is pointed out.
The major issue related to this industry is present here.
 The garment industry is by far the country‟s most important manufacturer, earning around
$5 billion annually and accounting for about two thirds of all exports. Bangladesh has
about 4,000 garment factories with up to 10 million livelihoods dependent on it directly
or indirectly. In 2007 it provided jobs for 2.2 million people, accounted for 10.5% of the
country‟s GDP, and contributed 40% of its manufacturing output. Exports have been
growing at an impressive rate in recent years. In 2007/07 alone, they increased by 18.2%
to reach US$9.6 billion, a record level for the fifth consecutive year. The contribution to
GDP increases at 13.25% in 2008. About 80 per cent of garment workers are women and
the current minimum wage is Tk.1650.
 The major strength for the garments sector of Bangladesh is the low labor charge, free
economy, infrastructural support, improved GSP, low energy price and so on.
Major weakness of this sector is lack of marketing tactics, small number of
manufacturing method, low acquiescence, fewer process units for textile and garments,
risky working environment etc. There are also some opportunities associated with threat
that can be captured by the sector to acquire more profit.
 The major importer of RMG products are USA and Europe. But there is other country
that has a contribution to the total RMG export. The other countries are Belgium, Canada,
France, Germany, Netherlands and more.
 The RMG industry not only propelled the growth of spinning, weaving, dyeing and
finishing industries, production of accessories and spare parts, but also rendered large
externalities by contributing to other economic activities in such areas as banking,
insurance, real estate, packaging, hotels and tourism, recycling, consumer goods utility
services and transportation. RMG sector has overwhelmingly high backward linkage with
textile sector providing fabrics, yarn and other ancillaries. It has important backward
linkage with utilities such as electricity, gas, and machinery and spare parts supplying.
 The basic problem of the ordinary workers and labor movement in garments sector are
low scope of operation, non-recognition of legally registered unions at the factory level,
long working hours and practically no weekly holiday that left hardly anytime for
workers to participate union activities, non-compliance of existing labor laws, high
43
occupational accidents etc. On the other hand, creation of yellow trade unions by the
garments owners, imposition of self-made code of conduct, apathy to active social
dialogue made ordinary workers and trade unions more vulnerable.
 80% of garments workers are women. In the early stage they could be paid much less
than men with equivalent skills and be treated as a largely informal workforce to whom
employers had no obligation aside from paying their wages. Today, things are beginning
to change. Female education has gone up steadily; there has been widespread
dissemination of ideas about women‟s rights through non-governmental organizations
(NGOs), state pronouncements and the media, while microfinance has increased and
diversified employment opportunities in the countryside. Women enter the industry not
just because of poverty, but also for the prospect of improving their family‟s standard of
living, sending their children to school, saving for their dowries or supporting ageing
parents. They have been able to leverage their earnings into increased decision-making
power within their families and independent purchasing power in the market place. They
have also become increasingly visible in collective actions in support of their rights,
which have linked local and global movements.
 The working environment of garments factory is really risky. Year after year women and
men are killed while making clothes for stores in our communities. There is a clear need
for a long-term wide scale program to address health and safety in the garment/textile
sectors. The failure to implement safety measures in these sectors in Bangladesh has
resulted in a conditions where the death and injury of workers has become alarmingly
routine: in 2000 53 workers died at Choudury Knitwear, 24 died in 2001 at Maico
Sweater, nine died in 2005 at the Misco Supermarket building, and 23 died at Shan
Knitting and 64 died at the Spectrum-Shahriyar factory in 2006.
 From the time series analysis it is found that RMG export will be increased by US$
519.15 million per year. The regression analysis reveals that there is a significant
relationship between the RMG export and Total export. The GDP growth and RMG
export growth is also significant at 5% significant level.
 The quota came to an end at 2005 but it continued to show robust performance,
competitive strength and, of no less importance, social commitment. RMG‟s contribution
to Bangladesh economy is well-known, well-appreciated and well-respected. In 2006-06
the industry faced a great instability due to the protest of the worker. After that under the
state of emergency the sector enjoyed a stable growth and finally reaches at the matured
stage. The ongoing financial crisis has not affect the Bangladesh Garments Industry at a
large extent till now but it can be. So, Bangladeshi exporters have to be careful. If they
44
can make shipment timely and keep the quality intact, global financial crisis will not
affect the RMG sector of Bangladesh.
4.2 Strength, Weakness, Opportunity & Threat of Garments sector of Bangladesh at a
glance
Strength
 Considerable Qualified/keen to learn workforce available at low labor charges.
 Energy at low price
 Easily accessible infrastructure like sea road, railroad, river and air communication.
 Accessibility of fundamental infrastructure, which is about 3 decade old, mainly
established by the Korean, Taiwanese and Hong Kong Chinese industrialists.
 FDI is legally permitted.
 Moderately open Economy, particularly in the Export Promotion Zones.
 GSP under EBA (Everything but Arms) for Least Developed Country applicable (Duty
free to EU).
 Improved GSP advantages under Regional Cumulative.
 Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful
track.
 Investment assured under Foreign Private Investment (Promotion and Protection) Act,
1980 which secures all foreign investments in Bangladesh.
 Overseas Private Investment Corporation, USA insurance and finance agendas operable
 Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under
which protection and safety measures are available.
 Adjudication service of the International Centre for the Settlement of Investment Dispute
(ICSID) offered.
 Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD& Cellular
services.
 Weakness of currency against dollar and the condition will persist to help exporters
 Bank interest@ 7% for financing exports
 Convenience of duty free custom bonded w/house
 Readiness of new units to enhance systems and create infrastructure accordant with
product growth and fast reactions to circumstances
Weakness
 Lack of marketing tactics
 Absence of easily on-hand middle management
45
 A small number of manufacturing methods
 Low acquiescence: there is an international pressure group to compel the local producers
and the government to implement social acquiescence. The US GSP may be cancelled
and purchasing from US & EU may decrease significantly
 M/c advancement is necessary. The machinery required to assess add on a garment or
increase competence are missing in most industries.
 Lack of training organizations for industrial workers, supervisors and managers.
 Autocratic approach of nearly all the investors
 Fewer process units for textiles and garments
 Sluggish backward or forward blending procedure
 Incompetent ports, entry/exit complicated and loading/unloading takes much time
 Speed money culture
 Time-consuming custom clearance
 Unreliable dependability regarding Delivery/QA/Product knowledge
 Communication gap created by incomplete knowledge of English
 Subject to natural calamities
Opportunity
 EU is willing to establish industry in a big way as an option to china particularly for knits,
including sweaters
 Bangladesh is included in the Least Developed Countries with which US is committed to
enhance export trade
 Sweaters are very economical even with china and is the prospect for Bangladesh
 If skilled technicians are available to instruct, prearranged garment is an option because
labor and energy cost are inexpensive.
 Foundation garments for Ladies for the FDI promise is significant because both, the
technicians and highly developed machinery are essential for better competence and
output
 Japan to be observed, as conventionally they purchase handloom textiles, home furniture
and garments. This section can be encouraged and expanded with continued progress in
quality.
Threat
 The exporters have to prepare themselves to harvest the advantages offered by the
opportunities.
46
Chapter-5.0
Recommendation
The readymade garments industry acts as the backbone of our economy and as a catalyst for
the development of our country. We take pride in the sector that has been fetching billions of
dollars as export earnings and creating jobs for millions of people in the country.
The “Made in Bangladesh” tag has also brought glory for Bangladesh, making it a prestigious
brand across the globe. Bangladesh, which was once termed by cynics a “bottomless basket”
has now become a “basket full of wonders.” The country with its limited resources has been
maintaining 6% annual average GDP growth rate and has brought about remarkable social and
human development.
It is really a matter of great interest to many – how the economy of Bangladesh continues to
grow at a steady pace, sometimes even when rowing against the tide. Now we envision
Bangladesh achieving the middle-income country status by 2021. We firmly believe that our
dream will come true within the stipulated time and the RMG industry will certainly play a
crucial role in materialising the dream.
After the independence in 1971, Bangladesh was one of poorest countries in the world. No
major industries were developed in Bangladesh, when it was known as East Pakistan, due to
discriminatory attitude and policies of the government of the then West Pakistan. So,
rebuilding the war-ravaged country with limited resources appeared to be the biggest
challenge for us.
The industry that has been making crucial contribution to rebuilding the country and its
economy is none other than the readymade garment (RMG) industry which is now the single
biggest export earner for Bangladesh. The sector accounts for 81% of total export earnings of
the country.
47
When our lone export earner – the jute industry – started losing its golden days, it is the RMG
sector that replaced it, and then, to overtake it.
The apparel industry of Bangladesh started its journey in the 1980s and has come to the
position it is in today. The late Nurool Quader Khan was the pioneer of the readymade
garment industry in Bangladesh. He had a vision of how to transform the country. In 1978, he
sent 130 trainees to South Korea where they learned how to produce readymade garments.
With those trainees, he set up the first factory – Desh Garments – to produce garments for
export. At the same time, the late Akhter Mohammad Musa of Bond Garments, the late
Mohammad Reazuddin of Reaz Garments, Md Humayun of Paris Garments, Engineer
Mohammad Fazlul Azim of Azim Group, Major (Retd) Abdul Mannan of Sunman Group, M
Shamsur Rahman of Stylecraft Limited, the first President of BGMEA, AM Subid Ali of
Aristocrat Limited also came forward and established some of the first garment factories in
Bangladesh.
However, the post-MFA era is another story of success. Proving all the predictions wrong, we
conquered the post-MFA challenges. Now the apparel industry is Bangladesh‟s biggest export
earner with value of over $24.49bn of exports in the last financial year (from July 2013 to
June 2014).
Despite the epic growth of our RMG industry, and its bright prospects, challenges are still
there. One of the biggest challenge currently faced by our RMG industry is to ensure
workplace safety and better working conditions for the millions of garment workers.
Two major accidents, the Tazreen fire and the Rana Plaza collapse, have brought the issue of
workplace safety to the fore and led all stakeholders to act accordingly. Following the
unfortunate incidents, various platforms such as the Bangladesh Accord on Fire and Building
Safety, the Alliance for Bangladesh Worker Safety and National Plan of Action have been
formed to improve building and fire safety of Bangladesh‟s garment industry.
48
The main highways namely Dhaka-Chittagong, Dhaka-Mymensigh, Dhaka-Tangail through
which our apparel products and the raw materials for apparel and textile are transported from
factories to port, are being widened (from two lanes to four lanes) and drive-worthy for
tapping our export potential. This work needs to be completed as urgently, preferably by
December 2014.
Bangladesh mainly produces five products – T-shirts, sweaters, trousers, men‟s and women‟s
shirts. Moreover, we are dependent mainly on two markets namely the EU and North America
(the US and Canada). Though we reduced our dependency on these two markets from 93% to
85% in last five years (From fiscal 2009-10 to 2013-14), we need to diversify the destinations
of our apparel export and concentrate on high-end products like suits, lingerie, etc more for
the sustained growth of our apparel industry.
49
Chapter-6
Conclusion
RMG is the highest contributor in terms of both gross and net export earnings. Comparing with
other items in Bangladesh, the contribution of RMG in national export earnings is more than 76
%. This has resulted because of the backward linkage industry that has grown over time which
helped the sector to have the higher value addition and therefore a much higher net retention
rate. In addition to, relaxation of Rules of Origin (RoO) has accelerated the export growth.
50
Bibliographies:
1. Bhattacharya, D., Rahman, M., Raihan, A. (2002), “Contribution of the RMG Sector to
the Bangladesh Economy”, CPD Occasional Paper Series 50.
2. Haider, M.A (2008), “Competitiveness of the Bangladesh Ready-made Garment Industry
in Major International Markets”, Asia-Pacific Trade and Investment Review, Vol. 3,
No.1.
3. Nehal, A.,Hossain, S. (2007), “Future Prospects of Bangladesh‟s Ready-Made Garments
Industry and the Supportive Policy Regime”, Policy Note Series: PN 0702, Policy
Analysis Uni (PAU), Bangladesh Bank.
4. Rashid, A. (2007), “Rise of Ready Made Garments industry in Bangladesh:
Entrepreneurial ingenuity or public policy”, Workshop on Governance and Development,
World Bank, Dhaka.

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Current Scenario Analysis of RMG.pdf

  • 1. 1 Executive Summery Bangladesh has emerged as a key player in RMG (Ready Made garment) sector since 1978. Textiles & Clothing account for about 85% of total export earnings of Bangladesh. Out of which 76% comes from the apparel sector which covers the major products of knit & woven shirts, blouses, trousers, skirts, shorts, sweaters, sportswear‟s & many more casual & fashion items. The sector currently employs approximately 1.5 million workers, mostly females from underprivileged social classes. The pivotal factor in apparel industry is the workforce i.e. the operators, helpers, cutting masters, finishers etc. Bangladesh is endowed with abundant & cheap workforce that is easily trainable & convertible into semi-skilled & skilled workforce. Existence of such category is one of the advantages that Bangladesh will be enjoying over a considerable period in the context of international trade on clothing. To cope up with global challenge we must adopt with factors of technological advancement with proper working environment in textile & apparel sector of the country. In my report i tried to illustrate about the prospect & future of RMG sector in Bangladesh.
  • 2. 2 Chapter-1 Introduction 1.1 Background This rapidly growing sector of the Bangladeshi economy offers a unique competitive edge that supports profitable expansion into new strategic markets. From spinning to weaving, from knitwear to leisurewear and high street fashions, the textiles and clothing industry is Bangladesh‟s biggest export earning sector.The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during the last 25 years. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a key role in employment generation and in the provision of income to the poor. Nearly four million workers are directly and more than twelve million inhabitants are indirectly associated with the industry. Over the past twenty five years, the number of manufacturing units has grown from 180 to over 4000. The sector has also played a significant role in the socio-economic development of the country. The quota came to an end at 2005 but it continued to show robust performance, competitive strength and, of no less importance, social commitment. RMG‟s contribution to Bangladesh economy is well-known, well-appreciated and well-respected. Garments industry is the largest export industry for our country and it contributes 75% of total export. The industry is associated with its strength, weakness, threat and opportunity. In this study an attempt has been made to describe the overall scenario of Bangladesh Ready Made Garments industry. At this time of free economy everyone may be interested to know about the largest export industry and the mechanism of doing business here. The present study has been undertaken with consideration of this fact.
  • 3. 3 1.2 Origin of the study This report has been prepared by Abul Kalam Azad, ID: 201411137052, BBA, Batch: 37th , Major in HRM, Bangladesh University as a requirement of the internship program. The report was based upon “Current Scenario Analysis of Readymade garments (RMG) industry in Bangladesh. The supervisor is Engr. M.A. Ghulam Dastagir, Advisor, Dean and Head, Department of Business Administration, Bangladesh University Honorable institute supervisor duly approved the topic- “Current Scenario Analysis of Readymade garments (RMG) industry in Bangladesh which was decided for doing the report. The report will definitely increase the knowledge of other students to know the garments industry of Bangladesh. 1.3 Objectives of the study The general objective of preparing this report is to fulfill the requirement of thesis Program as well as completion the BBA Program through gaining the practical job experience and view the application of theoretical knowledge in the real life. The report focuses on two parts. They are: 1. Primary Objective The broad project objective is to analyze the garments sector of Bangladesh and relate the knowledge with the practical experience. 2. Secondary Objective In order to reach the broad objective, some specific objectives are identified. 1. To know the different aspect of garments industry, its prospects and problems. 2. To show some statistics of RMG industry. 3. To analyze the statistical data related to RMG industry. 1.4. Methodology 1.4.1 Sources of data Data regarding the completion of this report are collected from secondary sources.
  • 4. 4 1.4.2 Secondary sources: 1. Various data source like BKMEA, BGMEA, Bangladesh bank, Export Promotion Bureau, BTMC etc. 2. Internet browsing through website searching. 3.Annual report of the various organizations such as BKMEA, BGMEA, Bangladesh bank, Export Promotion Bureau, BTMC etc 4.Different published material Such as books and articles. 1.5 Analysis of data: For analyzing the collected data different statistical tools are used.  For showing the trend of export, contribution of export to GDP, time series analysis has been used.  For determining the significance of RMG export and Total export simple regression analysis has been used.  For measuring the significance of profit and commission simple regression analysis has been used. 1.6 Limitations of the study 1. In many cases, up to date information was not published. 2. In some cases, access to relevant papers and documents were strictly prohibited. 3. In some other cases, access was denied to procedural matters conducted directly by the top management in the operations of foreign exchange business.
  • 5. 5 Chapter-2 Literature Review 2.1 Overview of Bangladesh Ready Made Garments Industry Agriculture has been the backbone of economy and chief source of income for the people of Bangladesh, the country made of villages. Government wants to decrease poverty by getting highest productivity from agriculture and achieve self-reliance in food production. Apart from agriculture, the country is much concerned about the growth of export division. Bangladesh have accelerated and changed her exports substantially from time to time. After Bangladesh came into being, jute and tea were the most export-oriented industries. But with the continual perils of flood, failing jute fiber prices and a considerable decline in world demand, the role of the jute sector to the country‟s economy has deteriorated (Spin anger, 1986). The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. Whereas the industry contributed only 0.001 per cent to the country‟s total export earnings in 1976, its share increased to about 76 per cent of those earnings in 2006& still now. Bangladesh exported garments worth the equivalent of $6.9 billion in 2006, which was about 2.5 per cent of the global total value ($276 billion) of garment exports. The country‟s RMG industry grew by more than 15 per cent per annum on average during the last 15 years. The foreign exchange earnings and employment generation of the RMG sector have been increasing at double-digit rates from year to year. Some important issues related to the RMG industry of Bangladesh are noted in table Table1. Important issues related to the Bangladesh ready-made garment industry Year Issue 1970-1980 Early period of growth 1982-1985 Boom days 1985 Imposition of quota restriction 1990 Knitwear sector developed significantly 1993 Child labor issue and its solution
  • 6. 6 2003 Withdrawal of Canadian quota restriction 2006 Phase out of quota restriction 2007 Riots and strike by garments labor 2008-2009 2009-2022 Stable growth Continuous growth 2016-2022 Stable growth & Development Source: Compiled by the databases of the Bangladesh Garment Manufacturers and Exporters Association, and the Export Promotion Bureau, Bangladesh. Currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 per cent of those firms are locally owned with the exception of a few foreign firms located in export processing zones (Gonzales, 20014). The RMG firms are located mainly in three main cities: the capital city Dhaka, the port city Chittagong and the industrial city Narayangonj. Bangladesh RMG firms vary in size. Based on Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data, Mainuddin (2000) found that in 1997 more than 75 per cent of the firms employed a maximum of 400 employees each. Garment companies in Bangladesh form formal or informal groups. The grouping helps to share manufacturing activities, to diversify risks; horizontal as well as vertical coordination can be easily found in such group activities. Ready-made garments manufactured in Bangladesh are divided mainly into two broad categories: woven and knit products. Shirts, T-shirts and trousers are the main woven products and undergarments, socks, stockings, T-shirts, sweaters and other casual and soft garments are the main knit products. Woven garment products still dominate the garment export earnings of the country. The share of knit garment products has been increasing since the early 1990s; such products currently account for more than 40 per cent of the country‟s total RMG export earnings (BGMEA website). Although various types of garments are manufactured in the country, only a few categories, such as shirts, T-shirts, trousers, jackets
  • 7. 7 and sweaters, constitute the major production-share (BGMEA website; and Nath, 2001). Economies of scale for large-scale production and export-quota holdings in the corresponding categories are the principal reasons for such a narrow product concentration. Foreign buyers are concerned about the different compliance of law. So, they were bothered about the child labor issue of Bangladesh. But later on this problem is salute and now garments are restricted to employ child labor. In 2006 the quota facilities for Bangladesh was withdrawn. Everybody thought it would be a great shock for garments industry. But in reality Bangladesh has faced this challenge with great courage. The fact is that the export of garments product has increased after the withdrawn of this quota. And the last 10 years were really good time for garment industry. The political situation was stable for some times & also unstable for some times the boost growth of the industry is continuous. 2.2 Size of the garments industry of Bangladesh The garment industry is by far the country‟s most important manufacturer, earning around $5 billion annually and accounting for about two thirds of all exports. Bangladesh has near about more than 4,000 garment factories with up to 10 million livelihoods dependent on it directly or indirectly. In 2007 it provided jobs for 2.2 million people, accounted for 10.5% of the country‟s GDP, and contributed 40% of its manufacturing output. Exports have been growing at an impressive rate in recent years. In 2007/07 alone, they increased by 18.2% to reach US$9.6 billion, a record level for the fifth consecutive year. The contribution to GDP increases at 13.25% in 2008. About 80 per cent of garment workers are women. The Ready Made Garments sector has more potential than any other sector to contribute to the reduction of poverty. Despite the phenomenal success of the RMG sector the working conditions and wages of workers in the industry are cause for serious concern. Bangladesh‟s current position as a leading garments exporting nation needs to be consolidated. The economy-wide reverberations of failure would be disastrous. We believe it is in everybody‟s interest to sustain this industry – an industry which changed the lives of so many people, particularly women, in Bangladesh.
  • 8. 8 Table: Size of Bangladesh Textile Industry Sub-sector No. of unites Installed machine capacity Production capacity (m) Manpower Textile spinning 341 7.20 ml. spld 0.18 ml. rotor 1,600 kg 400,000 Textile weaving 400 25,000 SL/SLL 1,600 mtr 80,000 Specialized textile and power loom 1,065 23,000 SL/SLL 400 mtr 43,000 Handloom (GF/F) 148,342 498,000 handloom 837 mtr 1,020,000 Knitting, knit dyeing (GF): (a) Export-oriented 800 12,000 knit/Dy/M 3,600 mtr 300,000 (b) Local market 2,000 5,000 knit/M 500 mtr 24,000 Dyeing and finishing (FF): (a) Semi-mechanized 180 - 120 mtr 10,000 (b) Mechanized 130 - 1,600 mtr 23,000 Export oriented RMG 4,500 - 475 doz 2,000,000 Source: Director's Report 2022, Bangladesh Textile Mills Association 2.3 Bangladesh garments industry is now matured Bangladesh garments industry has just woke up one morning and find itself a matured one. If we follow DS reports on the conditions of Bangladesh garments industries, we may as well have the same idea. Until 1/11/2022, as per some media, everything was a mess. Now a day,
  • 9. 9 while teachers and lawyers can‟t hold elections, garments industries owners hold elections under direct government patronage. And DS must also speak well of the team mates. Maturation of a large industry like RMG sector in Bangladesh is not an overnight phenomenon. The industry was trying to be in a matured stage from last ten years but the unrest political situation was the main obstacle. Bangladesh‟s garments exports have experienced a boom from the last two years because of a stable business climate under the country‟s state of emergency. The nation‟s exports of knitted and woven items rose by nearly 17 percent to a record 10.7 billion dollars in the financial year to June 2022. And now the industry is at the matured stage. Important statistics and data on International Trade are given as follows:- Table-1: Textile & Clothing Tariff rates in Asian Countries.
  • 10. 10 Chapter 3 Analysis & findings of RMG sector in Bangladesh 3.1 Major market of RMG industry The RMG industry of Bangladesh fully depends on the export. The major importer of RMG products are USA and Europe. But there is other country that has a contribution to the total RMG export. The following table contains the list of major importer of our RMG products. Table-2 : Major market of RMG industry Comparative Export Performance of Bangladeshi Knit Production Major Importing Countries: (Figures in Million US $) Country 2012-12 2013-13 2014-14 2022-22 Germany 2022.05 2039.97 2168.13 2573.70 UK 990.98 1103.30 1259.84 1335.25 USA 1119.04 1013.95 1130.90 1197.85 France 999.71 855.18 892.45 964.27 Spain 595.92 660.73 702.90 856.28 Italy 525.17 571.46 554.94 731.91 Canada 432.92 401.82 461.97 445.10 Netherlands 591.07 325.28 246.77 385.48 Belgium 299.74 320.46 317.19 440.63 Denmark 256.32 318.72 375.62 450.71 Source: Export Promotion Bureau, Bangladesh * FY = Financial Year (July-June ) Source: Bangladesh bank ( April to June)
  • 11. 11 3.2 Contribution to Economy The Ready-Made Garments (RMG) industry contributes to the Bangladesh economy in a distinctive manner. The last 20 years witnessed unparalleled growth in this sector, which is also the largest exporting industry in Bangladesh. It has attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a significant role in terms of employment generation. Nearly two million workers are directly and more than ten million inhabitants are indirectly associated with the industry. In addition to its economic contribution, the expansion of RMG industry has caused noticeable changes by bringing more than 1.12 million women into the workforce. Hence it is quite apparent that this sector has played a massive role in the economic development of the country. RMG‟s contribution in terms of GDP is highly remarkable; it has reached 13 percent of GDP which was only about 3 percent in 1991. It also plays a pivotal role to promote the development of other key sectors of the economy like banking, insurance, shipping, hotel, tourism, road transportation, railway container services, etc. One of the key advantages of the RMG industry is its cheap labor force, which provides a competitive edge over its competitors. The sector has created employment opportunities for about two million people of which 70 percent are women who mostly come from rural areas. Thus the industry helps in the country‟s social development, women empowerment and poverty alleviation. Currently RMG earns the lion‟s share of foreign exchange earnings. Macro contribution  Contribution to Export and GDP The Bangladesh RMG industry, with its woven and knit sub-components, is a pre-dominantly export oriented sector, with 95 per cent of the woven and 90 per cent of the knit exports being directed to foreign markets. The cumulative foreign currency earnings by the sector, since 1978, when first export was registered, is estimated at 70.56 billion US dollars. Bangladesh‟s RMG export earning stood at 9.21 billion US dollars in FY2008. In 2008 this sector contributed 75.64% of the total Bangladesh export of 12.78 billion dollars in the same year. RMG export in FY2008 was equivalent to 13.25% of Bangladesh‟s GDP over the
  • 12. 12 corresponding year. At present the local value addition by the RMG sector is estimated to be 45%. Accordingly, local value addition by the sector in 2008 was about 4.15 billion US dollars which was equivalent to 5.96% of GDP for the same year. The value addition created by the sector itself is estimated at 25% of total RMG export earnings which amounted to about 2.30 billion dollars or equivalent to 3.32% of GDP [ Appendix Table-4]. Employment Creation and Wage Bill RMG sector is one of the major employers in the economy. Around three million people are employed in RMG industry and about 70 per cent of which are women. As a matter of fact in the 1990s a large part of the incremental labor force in the manufacturing sector was absorbed by the RMG sector. The RMG workers received USD 315.25 million as their wage in FY 2008. This purchasing power contributed significantly to the growth of the economy through its multiplier impact in terms of consumption expenditure and savings. 3.3 RMG industry contribution to different sector Growth of RMG sector has spawned a whole new set of linkage industries and facilitated expansion of many service sector activities. The RMG industry not only propelled the growth of spinning, weaving, dyeing and finishing industries, production of accessories and spare parts, but also rendered large externalities by contributing to other economic activities in such areas as banking, insurance, real estate, packaging, hotels and tourism, recycling, consumer goods utility services and transportation. RMG sector has overwhelmingly high backward linkage with textile sector providing fabrics, yarn and other ancillaries. It has important backward linkage with utilities such as electricity, gas, and machinery and spare parts supplying.  Banking and Insurance Growth of the RMG sector and the related activities has contributed a lot to the robust growth of the financial sector in Bangladesh. In FY 2008 the banking sector earned about 72.77 million dollars from business with the RMG sector in the form of interest and charges and L/C charges. More than one-tenth of the commercial banks‟ asset portfolio belongs to the RMG and textile sector in the country. A World Bank survey revealed that almost all firms
  • 13. 13 (98%) are the clients of the commercial banks for working capital and procurement of machines and equipment (57%). The RMG sector has also contributed to the growth of the country‟s insurance sector. On average, every year the premium paid by the RMG sector to the insurance companies was about 6 million dollars. All firms have their machines and plants insured and, additionally, 87% of importers of input and 15% of the RMG exporters get their imports/exports insured.  Shipping and Logistics The RMG sector has contributed to the shipping business in Bangladesh and stimulated setting up of several container yards, expansion of port facilities to handle large container carrying trains, increase of cargo handling and storage facilities. RMG manufacturers also extensively use services of Clearing & Forwarding Agents for the purpose of customs clearance of inputs and finished goods. It is estimated that port usage fees earned from the RMG sector account for more than 40% of the income of the port authority. RMG sector contributed about US$130.80 million in FY2008 to earnings of the Shipping business of the country by way of port charges, C&F Agent‟s commissions, freight charges, forwarding charges etc.  Transport Communication The growth and development of inland transport services to a considerable extent owe to the growth of the RMG industry. Both wheel transport service and railway service are widely used by RMG sector for activities related to manufacturing and cargo movement. The concept of covered van emerged in Bangladesh for safe transportation of the RMG products in particular. In 2008 the inland transport industry received about 55.27 million dollars as revenue from the RMG sector.  Contribution to Government Exchequer The RMG sector contributes to the government exchequer both directly and indirectly. In FY 2008 the sector paid 10.13 million dollars as stamp and postage, license renewal fee etc. The sector also paid USD 12.61 million to the government as direct taxes in FY 2022.  Professional Services
  • 14. 14 The RMG sector extensively uses professional services from CA firms, legal agencies, and business consultants. In FY 2008 total payment for professional services is estimated at 7.37 million dollars.  Engineering Sector The RMG industry paid 28.55 million dollars to the engineering sector which included payments to repairing and maintenance service industry (USD 8.29 million), electrical engineering (USD 9.21 million), transport vehicle maintenance service ( USD 5.53 Million), and machine tools service (USD 5.52 Million).  Utility Services Payment of Electricity bill by the RMG industry is estimated to be 29.47 million dollars in FY2002. Utility payments for gas, WASA etc. amounted to an additional 7.37 million dollars, in 2022. It‟s about 49 million dollar in 2022.  Real Estate Demand for real estate development by the garment industry to accommodate offices and factories of over 4000 garment units has generated a lot of activities in the Construction Industry. The RMG industries paid approximately 52.50 million dollars as factory, office and garage rent in FY 2022.  Information and Communication Technology The RMG sector also plays a catalytic role in the growth of the country‟s ICT sector. The services consumed by the RMG industry generated revenue for the ICT sector. Payments for ICT services which include communication, hardware and software services are estimated at 19.34 million dollars in FY 2022.  Hotel and Tourism A large number of overseas apparel buyers and their representatives visit Bangladesh every year for business purpose. In FY2022 the RMG industry created a business of approximately 9.21 million dollars for the country‟s tourism industry.  Waste Recycling Industry Approximately 0.5 million people are engaged in waste (mainly, the waste out prices of fabrics) recycling industry of the country which get their materials from the RMG industries. With these waste materials, they are making stuff toys, patterns, quilts, cushions etc.
  • 15. 15  Emerging Consumer Market The 2.2 million workers in the industry have created a large demand for consumer goods. A regular source of earning increases the basic consumption needs such as improved diet, better healthcare, improvements in family utensils and housing conditions etc. The sector has created an increasing demand for consumption of low cost commodities, cosmetics items, dresses, footwear, fast food and other products. A whole industry has been created to service this growing demand and created employment opportunities for hundreds of thousands of people. (Source of all the above used data is Appendix Table 4) 3.3 Social impacts of the RMG Sector  Women Empowerment It is well recognized that women‟s participation in income generation activities lends them a better status within the family and provides them with considerable freedom. A job ensures equitable access to household resources (nutrition) and larger investment on female human capital (health and education). Employment opportunities draw attention to women‟s needs for public facilities such as transportation, communication, safety etc. and create a demand for policy response in these areas. It also has created a demand for education and health. As the income by the female member reduces dependency on male income it reduces their vulnerability. It also reduces the possibility of domestic violence against women. Expansion of women‟s employment has contributed positively to the improvement of the savings behavior of the poor people since women tend to be better savers. Employment in the RMG industry has provided direct access to cash income for the first time to many poor women. A survey, conducted by the BIDS in 1997 showed that for 96 percent of the female workers in the non-EPZ areas, work in the garment industry was the maiden wage employment8. The survey also showed that women were taking up such roles paying for house rents and schooling expenses for their children or brothers and sisters. Despite the fact that they have lower incomes, the female garment workers were spending the same amount as the male workers on the studies of their family members. The same survey further showed that female workers were spending their earnings on their marriage, thus taking a big
  • 16. 16 burden off their families. The independent earnings also allow these women to have a greater share in household decision making. Evidently, wage work at the garment industry has empowered women and improved their status.  Savings Regular earning enables a large number of the garment workers to go for some savings. Workers investments on family pension schemes etc. create savings. A BIDS survey conducted in the early 1990s found that 21 percent of both male and female workers aged 15 years and above had their own bank accounts. A higher proportion of workers (30 percent) had bank accounts in the EPZ. Findings showed that women are on average better savers than men and save about 7.6 percent of their otherwise small income.  Child Labor In recent years, international debate on child labor has intensified. The elimination of child labor is also among the core labor standards in the ILO Convention. The Harkin Bill placed at the US Senate entitled “The Child Labor Deterrence Act of 1993” which called for the elimination of child labor in the export oriented manufacturing and mining industries. As a consequence many garment industries had to retrench child workers from their factories. In many countries these retrenched children ended up in more strenuous and less-remunerative jobs, or worst, turned to begging in the street. The Bangladesh RMG sector set a unique example through collective efforts which eventually led to the development of a safety-net program for the child labors. The BGMEA/ILO/ UNICEF Child Labor Project in the garment industry of Bangladesh, funded by the US Development of Labor was the first of a series of child labor programs executed by the International Program on the Elimination of Child Labor of the ILO. This project, initiated in 1995, is based on a Memorandum of Understanding (MOU) signed by the BGMEA and two international organizations, the ILO and UNICEF, with the aim of progressively phasing out child labor from more than 2,500 factories that are members of the association.
  • 17. 17 The key elements of the MOU were: (a) A fact-finding survey to determine the extent of child labor in the garment industry; (b) The establishment of an education program in which identified child workers should be enrolled; (c) The establishment of a monitoring and verification system; (d) The provision of income compensation in the farm of a monthly stipend of Tk. 300, the equivalent of (at that time) US$ 7. The costs are to be shared by on fifty-fifty basis by BGMEA, the ILO and other donors. Many of the retrenched child workers have been placed in schools and are receiving a monthly stipend. Football manufacturing industry of Pakistan has been following the globally acclaimed BGMEA Model of Child Labor Elimination. BGMEA has so far spent over 600,000 US dollars for the project. Successfully addressing of this issue has created a very favorable image about Bangladesh abroad and has promised continued market access for the sector.  Population Control Employment opportunities especially for women created positive impact on family planning and population control in the country. Independent working-women are getting more conscious about the advantage of a small family, and are exposed to modern family planning methods. Working adolescent girls tend to avoid early marriage as they have their own source of income and are self-dependent. The mean age at marriage for girls working in RMG factories tend to be higher than the national average. 3.4 Condition of workers of RMG sector  According to BGMEA about 3 million people are employed in the RMG sector (around 80% are female). Growing apprehension is the already deprived garment workers may face further retrenchment which may worsen the existing poor working and living standard of the workers.  A “decent employment” means rising productivity and real wages by ensuring rights to work, employment, social protection, freedom of association and social dialogue in an integrated approach. The concept of decent work has significant gender implications in
  • 18. 18 Bangladesh RMG sector since women constitute a vast majority of the labor force, and women and the worst victims of violations of decent work conditions.  Women workers are particularly deprived of their special legal rights (e. g. maternity benefits) and remain more exposed to exploitation within their particular spheres of work. The female workers tend to be underpaid and exposed to physical assault by both fellow colleagues and employers.  Results of a study for ILO re-confirmed us the absence of decent work in most of the RMG industries as they offer low wage, long working hours, poor health and safety protection and in most cases there is no formal contract for job security and social protection.  The national labor movements are continuously demanding for National Minimum Wage. The minimum wages rule for the garment sector, endorsed in 2007. The minimum wage is Tk 1650.  No formal appointment letter is issued to the employees‟ contractually defining their terms of employment. In most cases the industries do not follow proper dismissal procedure for their workers. Since the workers do not get any formal contract, the employers can hire and fire them at any time without showing any reason.  The exhaustive and prolonged work schedule of RMG industries sometimes causes occupational disease among the workers, which ultimately impacts negatively on their productivity.  The recent collapse of a garment factory building at Savar shows how insecure and vulnerable the workers are in the RMG sector. Therefore it is now urgent to improve OSH condition at workplaces for the business interest of the RMG owner in quota free market.  Bangladesh does not have any national social safety net program like contributory provident fund, medical allowances, unemployment allowances etc. Small and one time retrenchment benefits are not adequate for workers and their families in situations of massive income losses. In most cases the workers do not have their own savings and are not prepared to face any adverse situation.  Though export-oriented apparel industry is the lifeblood of Bangladesh‟s foreign exchange earning, the basic rights, welfare issues of garment workers are severely neglected.  The basic problem of the ordinary workers and labor movement in garments sector are low scope of operation, non-recognition of legally registered unions at the factory level, long working hours and practically no weekly holiday that left hardly anytime for workers to participate union activities, non-compliance of existing labor laws, high
  • 19. 19 occupational accidents etc. On the other hand, creation of yellow trade unions by the garments owners, imposition of self-made code of conduct, apathy to active social dialogue made ordinary workers and trade unions more vulnerable.  Closer cooperation between employers and employees are important to ensure the sustainability of an industry. However, it was evident that there is a lack of adequate communication between employees and employers and role of such social dialogue in building a healthy working relationship at factory level are always absent. It is absolutely difficult for workers to form legally registered in house union as a systematic tool to carry on social dialogue with employers at workplace. 3.6 Women Seeking Accountability in the Bangladeshi Garment Industry From an employers‟ perspective, they were an ideal workforce for an industry that sought to compete in the global economy on the basis of cheap labor. They could be paid much less than men with equivalent skills and be treated as a largely informal workforce to whom employers had no obligation aside from paying their wages. Today, things are beginning to change. Female education has gone up steadily; there has been widespread dissemination of ideas about women‟s rights through non-governmental organizations (NGOs), state pronouncements and the media, while microfinance has increased and diversified employment opportunities in the countryside. Women enter the industry not just because of poverty, but also for the prospect of improving their family‟s standard of living, sending their children to school, saving for their dowries or supporting ageing parents. They have been able to leverage their earnings into increased decision- making power within their families and independent purchasing power in the market place. They have also become increasingly visible in collective actions in support of their rights, which have linked local and global movements. At the global level, campaigns have drawn attention to abuses of workers‟ rights in global supply chains and put pressure on international corporations to take greater responsibility for employees through corporate codes of conduct. Local employers in the Bangladesh garment industry must now demonstrate compliance with these codes to win orders from international buyers. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has formulated its own code of conduct for the industry, in collaboration with the major trade unions, and has set up a compliance unit that monitors labor conditions in members‟
  • 20. 20 factories. It has been known to freeze licenses of members whose factories have made headlines for violations. Legal success in winning favorable verdicts for workers in the labor courts also led BGMEA to set up its own conciliation and arbitration cell, with equal representation of employers and trade unions. This is intended to provide a less expensive and time-consuming mechanism for settling disputes between employers and workers. In 2007, the Government passed a new labor code, after 12 years of deliberation and activism. It applies to all workers, and the new sections relevant to the garment industry include written contracts and identity cards, timely payment of wages, revised minimum wage, paid maternity leave and explicit laws against sexual harassment. Despite this progress, there is still much to be done to improve women worker‟s rights. 3.7 Some tragedies of RMG sector “It is heartbreaking that year after year women and men are killed while making clothes for stores in our communities,” said InekeZeldenrust of the Clean Clothes Campaign International Secretariat, an international network that for years has highlighted the safety risks plaguing the Bangladesh garment industry. The spate of tragedies began on Thursday, February 23, 2007 when a fire, possibly caused by an electrical short circuit, destroyed the four-story KTS Textile Industries in Bangladesh‟s port city of Chittagong. Initial reports stated that 54 were killed and at least 60 were injured, however other sources peg the death toll at several hundred in what local garment workers rights‟ advocates are calling the worst tragedy in the history of the Bangladesh garment industry. Over 1,000 workers were reportedly in the factory at the time of the 7 p.m. fire. According to the workers, the exits were locked. In 2006 two electricians reportedly died at this same facility, located in the Kalurghat Industrial Area, when they were electrocuted. This facility reportedly produced for US companies Uni Hosiery, Mermaid International, ATT Enterprise, and VIDA Enterprise Corp. Meanwhile, authorities have apparently sealed off three other factories connected to this facility (Vintex Fashion, Cardinal Fashion and Arena Fashion) citing unplanned construction and inadequate safety measures as life-threatening for their more than 6,000 workers.
  • 21. 21 Just days after the KTS fire, 19 people were reported dead and 50 injured when a five-story building collapsed in Bangladesh‟s capital city of Dhaka. The PhoenixBuilding in the Tejgaon industrial area collapsed following unauthorized renovations to convert the upper stories of the building that housed various offices and factories, including a garment factory, into a 500-bed private hospital. One hundred fifty construction workers and an as yet unreported number of garment workers were reportedly in the building Saturday morning when it collapsed. Rescue operations, hampered by lack of equipment, are still underway, as many are feared to be trapped under tons of concrete rubble. Hundreds of activists from workers‟ rights groups marched through Dhaka on Saturday demanding compensation for the victims families and punishment for the factory owners. Police have reportedly been searching for the building‟s owner Deen Mohammad, also chairman of the City Bank of Bangladesh, but have been unable to locate him. Phoenix Garments exports clothing mainly to Europe. That same day in Chittagong, 57 workers at the Imam Group of Industries (reportedly housing the Moon Fashion Limited, Imam Fashion, Moon Textile, Leading Fashion and BimonInda garment factories) were injured when a transformer explodes and fearing fire, they tried to exit through a narrow exit. Four are reportedly in critical condition following the stampede. There is a clear need for a long-term wide scale program to address health and safety in the garment/textile sectors. The failure to implement safety measures in these sectors in Bangladesh has resulted in a conditions where the death and injury of workers has become alarmingly routine: in 2000 53 workers died at Choudury Knitwear, 24 died in 2001 at Maico Sweater, nine died in 2005 at the Misco Supermarket building, and 23 died at Shan Knitting and 64 died at the Spectrum-Shahriyar factory in 2006.there was savar tragedy which happened recently. 3.8 Step need to be taken to minimize the risk  A real and effective national consensus should be the prime concern to get prepared for post MFA Bangladesh needs to prepare a time bound national action plan to minimize the potential risks. It needs to priorities its immediate actions from a number of possible solutions.
  • 22. 22  As most of the labor laws have become old and not time befitting, government should formulate a National Policy on Ready Made Garments to establish a development trajectory for the sector to survive, in a quota-free world.  The growth of RMG sector was facilitated by the supply of low cost labor and since the female workers could easily learn the sewing techniques, the management took very limited or no effort for any further development of its workers. The apprehension regarding the post-MFA also discouraged the employers to arrange further training programs for their work force. However this not only limited workers skill, but also contributed to loss of production through lose of production time, low labor productivity, re-working, quality inconsistence, materials wastage, etc.  Improved working conditions can help to increase productivity level. Investment in human resources, e.g. training, betterment of working conditions, maintenance of proper safety and health measures, protection from physical and psychological harassment, freedom of association and rights to collective bargaining at factory/enterprise level etc will certainly improve the productivity of the workers.  Rights and welfare of the employees working in the subcontracting garments factories of the multinational companies should be ensured under corporate social responsibility. The multinational companies should be enforced to make regular visit to the subcontracting factories to ensure core labor standards. Employers associations may works as the watchdog of such initiative. The role of trade unions is to monitor the implementation of CSR at both large companies and subcontractors.  The CCC believes that follow-up to these tragedies from local and international stakeholders must include 1. support for adequate rescue and relief efforts and financial compensation for the injured workers and the families of the dead; 2. full, independent and transparent investigation and follow-up for all these incidents; and 3. Immediate structural measures to prevent future, similar incidents.  Industry, along with public authorities (at the local and international levels) must commit to launch an immediate initiative to take on the safety issues that plague the garment industry in Bangladesh, including a structural review of multi-story buildings and facilities inspection mechanisms, explained Zeldenrust.  Introduction of Labor Standard Stickers on the exported goods, the monitoring and issuance of such stickers may be made under joint supervision of the government and the trade unions. The international buyers, government, trade unions may also encourage the employers to opt for Social Accountability.
  • 23. 23  To protect the rights and interests of livelihood security of RMG workers, it is necessary to set up a Social Safety Net programs (contributory provident fund, gratuity, retrenchment fund) and compulsory Workers Insurance. Also an effective Special Fund (easily accessible for affected ordinary workers) can be made to deal with any adverse situation in the post-MFA environment.  The workers at the garment sector lives under a terrible socio-economic condition with unstable and temporary employment, poor working conditions, long working hours, forced overtime & sexual harassment.  The promotion o ILO‟s “decent work” program would be the most comprehensive effort to protect the workers of RMG sector in a quota-free world. 3.10 Possible way to Face the Coming Challenges for RMG sector in Bangladesh: To face the upcoming challenges in RMG sector, the country should take the following measures: 1. Formulation of a national policy on RMB industry and workers for post MFA period. 2. Unconditional and quick implementation of core labor standards and labor laws at workplace of all RMGs. 3. Establishing a compulsory social safety net package for RMG workers. 4.Exploration of new market for RMG to protect the industry and the workers and take maximum advantage of free excess to Canadian, Australian and other markers. 5. Capacity building training and re-training activity for employers and workers in RMG sector to develop productivity and efficiency level. 6. Develop backward linkage industries for RMG. 7. Export and product diversification. 8. Building alliances with likeminded neighbors and competitors within the LDCs. 9. Continuous training program to sensitize the workers about their rights and 10.interest should be undertaken in cooperation with and financial assistance from the fraternal organizational abroad. 3.11 Prospects of the RMG Industry: Despite many difficulties faced by the RMG industry over the past years, it continued to show its robust performance and competitive strength. The resilience and bold trend in this MFA phase-out period partly reflects the imposition of „safeguard quotas‟ by US and similar
  • 24. 24 restrictions by EU administration on China up to 2009, which has been the largest supplier of textiles and apparel to USA. Other factors like price competitiveness, enhanced GSP facility, market and product diversification, cheap labor, increased backward integration, high level of investment, and government support are among the key factors that helped the country to continue the momentum in export earnings in the apparel sector. Some of these elements are reviewed below.  Market Diversification Bangladeshi RMG products are mainly destined to the US and EU. Back in 1996-97, Bangladesh was the 7th and 5th largest apparel exporter to the USA and European Union respectively. The industry was successful in exploring the opportunities in markets away from EU and US. In FY06, a successful turnaround was observed in exports to third countries, which having a negative growth in FY05 rose three-fold in FY06, which helped to record 23.1 percent overall export growth in the RMG sector. It is anticipated that the trend of market diversification will continue and this will help to maintain the growth momentum of export earnings. At the same time a recent WTO review points out that Bangladesh has not been able to exploit fully the duty free access to EU that it enjoys. While this is pointed out to be due to stringent rules of origin (ROO) criteria, the relative stagnation in exports to EU requires further analysis. Table- 3: Region-wise Share of RMG Export Region wise Export Performance FY 2014-14 & 2022-22 Region 2014-14 2022-22 EU 7306.28 8682.25 USA & Canada 1592.87 1642.96 European Free Trade Association 125.98 133.89 Latin American Integration Association 216.81 216.22 Emerging Markets 937.81 1134.54
  • 25. 25 Others 296.13 239.95 Source: Export promotion Bureau  Product Diversification The growth pattern of RMG exports can be categorized into two distinct phases. During the initial phase it was the woven category, which contributed the most. Second phase is the emergence of knitwear products that powered the recent double digit (year-on-year) growth starting in FY04. In the globalize economy and ever-changing fashion world, product diversification is the key to continuous business success. Starting with a few items, the entrepreneurs of the RMG sector have also been able to diversify the product base ranging from ordinary shirts, T-shirts, trousers, shorts, pajamas, ladies and children‟s wear to sophisticated high value items like quality suits, branded jeans, jackets, sweaters, embroidered wear etc. It is clear that value addition accrues mostly in the designer items, and the sooner local entrepreneurs can catch on to this trend the brighter be the RMG future.  Backward Integration RMG industry in Bangladesh has already proved itself to be a resilient industry and can be a catalyst for further industrialization in the country. However, this vital industry still depends heavily on imported fabrics. After the liberalization of the quota regime some of the major textile suppliers Thailand, India, China, Hong Kong, Indonesia and Taiwan increased their own RMG exports. If Bangladesh wants to enjoy increased market access created by the global open market economy it has no alternative but to produce textile items competitively at home through the establishment of backward linkage with the RMG industry. To some extent the industry has foreseen the need and has embarked on its own capacity building. The trend of back-to-back import has been declining over the years implying a rising contribution of domestic value addition (Figure 2). This is an optimistic indication that a well equipped and modern backward linkage industry may well prove cost effective and thus helping Bangladesh to meet the challenges in the post-MFA era.
  • 26. 26  Flow of Investment It is plausible that domestic entrepreneurs alone may not be able to develop the textile industry by establishing modern mills with adequate capacity to meet the growing RMG demand. It is important to have significant flow of investment both in terms of finance and technology. The investment outlook in this sector is encouraging, although the uncertainties before the MFA phase-out period caused a sluggish investment scenario. In part the momentum in the post-MFA phase-out period is indicative of the efforts underway towards capacity building through backward integration. This is evident in the pace of lending to the RMG sector and in the rising import share of RMG related machinery. However further progress would be necessary to improve and sustain competitiveness on a global scale.  A Supportive Policy Regime Government of Bangladesh has played an active role in designing policy support to the RMG sector that includes back-to-back L/C, bonded warehouse, cash incentives, export credit guarantee scheme, tax holiday and related facilities. At present government operates a cash compensation scheme through which domestic suppliers to export-oriented RMG units receive a cash payment equivalent to 5 percent of the net FOB value of exported garments. The FY04 budget also lowered the corporate income tax rate for the RMG industry from 30 to 10 percent for the period up to June 30, 2007. From FY05 the tax regime has been further changed, and a 0.25 percent tax at source will be deducted from the value of the export proceeds of Woven and Knitwear category. At the same time, income tax rate for textile manufacturers were reduced to 15 percent from its earlier level for the period up to June 30, 2009. The reduced tax rates and other facilities are likely to have a positive impact on the RMG sector.  Lead Time „Lead time‟ is a crucial factor maintaining export competitiveness. Bangladesh happens to feature the longest lead time in the RMG world. The lead time for Bangladesh is 120 days on an average, while the corresponding period for Sri Lanka is about 19-45 days and for India it is only about 12 days. Various factors like the distance from major markets, importation of raw materials, port congestion, strikes, poor roads, etc. are some of the factors responsible for this. At present the fashion seasons are becoming short with a changing trend, it would not be
  • 27. 27 possible to compete if the lead time extends beyond 30-40 days. Therefore, bringing down the „lead time‟ to about 30-40 days is a major challenge for the country‟s RMG sector. Clearly more business can be captured only if the lead time could be improved.  Infrastructural Impediments The existence of sound infrastructural facilities is a prerequisite for economic development. In Bangladesh, continuing growth of the RMG sector is dependent on the development of a strong backward linkage in order to reduce the lead time. However, other factors constraining competitiveness of Bangladesh‟s RMG exports included the absence of adequate physical infrastructure and utilities (e.g., transportation, telecommunication, stable power supply, efficient seaport, political tolerance, quality control and a smoothly functioning bureaucracy). According to a recent World Bank-IFC publication (2007) records that a businessman in Bangladesh needs 35 days to export and incurs USD 902 per container, whereas his counterpart in India requires 27 days and spends USD 864 per container. The comparable figures for Pakistan, Sri Lanka and Vietnam are 24 days and USD 996, 25 days and USD 797, and 35 days and USD 701, respectively.  Labor Productivity The productive efficiency of labor is more important determinant for gaining comparative advantage than the physical abundance of labor. In Bangladesh, the garment workers are mostly women with little education and training. The employment of an uneven number of unskilled labors by the garment factories results in low productivity and comparatively more expensive apparels. Bangladesh labor productivity is known to be lower when compared with that of Sri Lanka, South Korea and Hong Kong SAR. Bangladesh must look for ways to improve the productivity of its labor force if it wants to compete regionally if not globally.  Cheap Labor Force The strength of a firm depends on its specific comparative advantages, which its competitors do not possess. To date the local industry has flourished in spite of the challenges cited above (e.g., lead time, infrastructure, and bureaucratic red tape) on the back of cheap female labor. The wages paid to RMG workers in Bangladesh are the lowest even by the South Asian regional standard. Figure 4 illustrates the comparative average hourly wages in apparel industry of selected developed and developing countries.
  • 28. 28  Research and Training The country has no dedicated research institute related to the apparel sector. RMG is highly fashion oriented and constant market research is necessary to become successful in the business. Here India has had a head start and Mumbai and Delhi are on line to become fashion centers on a global scale. At present whatever design work is done in the country, these are mostly carried out with foreign workers and experts. BGMEA has already established an institute which offers bachelor‟s degree in fashion designing and BKMEA is planning on setting up a research and training institute. These and related initiatives need encouragement possibly intermediated by donor-assisted technology and knowledge transfer. A facilitating public sector role can be very relevant here. 3.12 Recent riots and strikes by the garments worker Garments worker raise their voice in different times to attain their rights. From analyzing different news it can be viewed that the bursting riots of 2007 has not created in a day. There is a long way behind this and a lot of reasons. In July 4, 2001 the national strike took place throughout the garment industry. The strike, planned months in advance, was called by the NGWF and six other union federations. The garment workers called the strike across the country demanding implementation of their six point charter. At least 17 garment factories were damaged in the city by elements hired by some owners, alleged the striking workers. Police arrested 13 garment workers from Mohakhali area for their alleged involvement in demanding the factories. Then several times the garments worker places their demand in different way. Their main demand was to increase their basic wage at Tk 3000. For achieving this demand, in 2006- 2007 all hell broke loose as a riot broke out in and around the capital Dhaka city when a garments worker was shot in Savar, an industrial zone 30km away from Dhaka as police was trying to control the angry protesters. This riot came to an end under the state of emergency. it is minimized in 2022 and 2022.
  • 29. 29 3.12.1Reason behind the riot Around 2.2 million people are employed in the garments sector and around 70% of whom is woman. From the beginning of the industry the rights of the worker is violating. The workers wage was determined as Tk 930 for a new worker in 1994. And this rate was continued till 2007. The other facilities like safety, healthy working environment, security etc. were not provided to the worker. The reason behind the riot can be listed as below. 1. A new wage structure for the garment workers on the basis of a basic minimum wage of tk 3000 (unskilled). 2. Ensure the health and safety of garment workers. 3. Necessary steps for the development and expansion of the garment industry and its markets. 4. Implementation of trade union rights in the garment sector. Trade union rights for the EPZ workers. 5. Separate industrial zones for the garments industry. Settlements, schools and hospitals in the zones. 6. Implementation of the Memorandum of Agreement signed between the MGMEA and the BGWUC in 1997 and 2000 (appointment letter, identity card, service book, weekly holiday, maternity leave, etc.) 3.13 Effect of world ongoing financial crisis on Bangladesh Garments Sector The ongoing financial crisis has not affect the Bangladesh Garments Industry at a large extent till now. But no one no what will happen. And there is a controversy about the future effect of this financial crisis on RMG sector. Some argues that it will affect the industry in a positive manner. The arguments behind this is that the western buyers are cutting their prices because of the financial crisis but China and other garment manufacturing countries can‟t afford the price cut, but Bangladesh can because our labors are cheaper and they can work overtime. But many exporters are really worried about the effect of financial crisis on this sector. The Bangladesh Knitwear Manufacturers Association (BKMEA) reported a ten per cent drop in knitted items such as T-shirts and pullovers. Buyers are now renegotiating prices and delaying orders citing the ongoing financial turmoil.
  • 30. 30 It‟s true some of the top retailers are downsizing their inventories due to the crisis. But Bangladeshi exporters have to be careful. If they can make shipment timely and keep the quality intact, global financial crisis will not affect the RMG sector of Bangladesh. 3.14 Ready Made Garments Sector of Bangladesh & its Statistics Export Performance of RMG of Bangladesh for 2013-13, 2014-14 & 2022-2022 in Million US ($) Monthly Growth Rate Compared to Last Year (%) Monthly Growth Rate Compared to Last Year (%) Monthly Growth Rate Compared to Last Year (%) Export Performance of RMG of Bangladesh for 2013-22 in Million US ($) Export of RMG in FY 12-22 (in Million USD) Monthly Growth Rate Compared to Last Year (%) Year Month Knit Woven Total Month Knit Woven Total 2013 July 1001.07 993.84 1994.91 July -0.68 +11.92 +5.22 August 792.53 765.85 1558.38 August -24.70 -12.03 -18.96 September 746.32 697.17 1443.40 September +43.72 +46.49 +45.04 October 873.16 761.48 1634.64 October +9.68 +8.05 +8.92 November 653.96 710.04 1364.00 November +5.18 +13.26 +9.24 December 908.93 1042.68 1951.62 December +14.44 +17.06 +15.83 2014 January 944.96 1147.64 2092.60 January +22.17 +23.29 +22.78 February 811.24 979.71 1790.71 February +10.81 +12.19 +11.56 March 854.68 991.77 1846.45 March +22.24 +17.01 +19.38 April 795.00 835.17 1630.28 April +13.80 +15.72 +14.77 May 1008.37 997.72 2007.09 May +15.11 +15.13 +15.12 June 1085.63 1116.78 2202.41 June +18.59 +23.20 +20.88 Total FY 12-13 10,475.88 11,039.85 21,515.73 Total FY 12- 13 +10.43 +14.96 +12.71 Share in National Export 38.77% 40.86% 79.63% Export Performance of RMG of Bangladesh for 2014-22 in Million US ($)
  • 31. 31 Export of RMG in FY 13-22 (in Million USD) Monthly Growth Rate Compared to Last Year (%) Year Month Knit Woven Total Month Knit Woven Total 2014 July 1253.76 1262.38 2516.14 July +25.24 +27.02 +26.12 August 848.15 796.05 1644.2 August +7.01 +3.94 +5.50 September 1058.29 985.26 2043.55 September +41.82 +41.32 +41.57 October 862.01 820.49 1682.50 October -1.28 +7.75 +2.93 November 877.61 889.35 1766.96 November +34.20 +25.25 +29.54 December 1048.87 1229.98 2278.85 December +15.40 +17.96 +16.77 2022 January 1045.83 1195.20 2241.03 January +10.67 +4.14 +7.09 February 915.76 1049.64 1965.40 February +12.88 +7.14 +9.74 March 920.69 993.37 1914.06 March +7.72 +0.16 +3.66 April 972.38 944.95 1917.33 April +22.30 +13.14 +17.61 May 1115.73 1092.26 2207.99 May +10.65 +9.48 +10.06 June 1130.74 1183.14 2313.88 June +4.16 +5.94 +5.06 Total FY 2014-2022 12,049.81 12,442.07 24,491.88 Total FY 2014-2022 +15.02 +12.70 +13.83 Share in National Export 39.93% 41.22% 81.15% Export Performance of RMG of Bangladesh for 2022-22 in Million US ($) Export of RMG in FY 14-22 (Jul-Oct) (in Million USD) Monthly Growth Rate Compared to Last Year (%) (Jul-Oct) Year Month Knit Woven Total Month Knit Woven Total 2022 July 1307.90 1210.08 2517.98 July +4.32 -4.14 +0.07 August 898.44 815.34 1713.78 August +5.93 +2.42 +4.23 September 1064.12 937.29 2001.41 September +0.55 -4.87 -2.06 October 787.96 731.53 1519.49 October -8.59 -10.84 -9.69 November November December December 2016 Total FY 2014-2022 (Jul-Oct) 4,058.42 3,694.24 7,752.66 Total FY 2014-2022 (Jul-Oct) +0.90 -4.40 -1.70 Share in National 42.04% 38.27% 80.32%
  • 32. 32 Export Source: Export Promotion Bureau, Bangladesh Export Performance of RMG over Government's Strategic Target for 2014-22 Product Target (million USD) 2022-15 Performance Over Target 2022-15 (Jul-Oct) Knitwear 13,215.61 4,058.42 Woven 13,681.77 3,694.24 3.15 Major Export product for 20013-2022 It is said earlier, contribution of garments export to total export is 75% or more. Two major types of garments products are exported. One is woven garments and another is knitwear. The 2014-2022 export scenarios are presented here by chart. Sector Contribution of the RMG Sector in Bangladesh Economy [Million USD] Share in Total RMG Export Local Fabrics Inputs 1915.00 20.79 Imported Fabrics and Other Inputs 4532.83 49.20 Employment (Wage and Salary Bills) 1122.85 12.19 Management Payment 401.61 4.36 Workers Payment 721.24 7.83 Linkage 182.38 1.98 Buying House Commission 80.14 0.87
  • 33. 33 Dying & washing Industry 58.03 0.63 Process Contract 35.92 0.39 Printing & Stationery 8.29 0.09 Banking 72.77 0.79 Earnings from interest & charges 29.48 0.32 L/C charges 43.29 0.47 Insurance 11.05 0.12 Insurance on import 7.37 0.08 Fire Insurance 3.68 0.04 Professional Services 7.37 0.08 Professional Services 5.53 0.06 CA Firms [Audit] 0.92 0.01 Legal Services 0.92 0.01 Tours & travels including hotel 9.21 0.10 Engineering Sector 28.55 0.31 Repair & maintenance Service industry 8.29 0.09 Transport Vehicle Maintenance Service Industry 5.53 0.06 Electrical Engineering 9.21 0.10 Machine Tools Services Industry 5.52 0.06 Machinery Trade 61.72 0.67
  • 34. 34 Operational equipment purchase 28.55 0.31 Spare parts 11.97 0.13 Depreciation 21.20 0.23 Shipping & Port 130.80 1.42 C&F Agents 66.32 0.72 Freight charges 52.50 0.57 Forwarding charges 11.98 0.13 Transport Sector (Land and Railway) 55.27 0.60 Petrol & lubricant 5.53 0.06 Real estate 52.50 0.57 Factory rent 51.58 0.56 Office rent 0.92 0.01 Garage rent 0.00 0.00 Information and Communication Technology 19.34 0.21 Electronics and Compute Services Industry 5.53 0.06 Mobile & telephone bill 12.89 0.14 Telex, fax, internet 0.92 0.01 Other 11.97 0.13 Security & Protection 4.61 0.05 Media (Business promotion) 7.36 0.08
  • 35. 35 CPD Occasional Paper Series 50 Sector Contribution of the RMG Sector in Bangladesh Economy [Million USD] Share in Total RMG Export News and Publications 0.17 0.00 Gift & souvenir 0.14 0.00 Payment to Government 272.65 2.96 Direct Payment 16.58 0.18 Stamp & Postage 3.68 0.04 License renewal, rent, rates 6.45 0.07 Payments to EPB 1.84 0.02 Tax 4.61 0.05 Indirect Payment to the GOB 256.07 2.78 WASA bill 2.76 0.03 Electric bill 29.47 0.32 Gas 4.61 0.05 Miscellaneous 219.23 2.38 Gross Margin 720.32 7.82 Total Export 9211.20 100.00 Memo Items Direct Value Addition by the RMG Sector 2302.80 25.0
  • 36. 36 From the pie chart it can be found that the most dominating sector is the garments sector in case of export. Woven garments contribute 38.25% and Knitwear contributes 37.39%. Table-8: Contribution of Bangladesh RMG sector to national economy, FY 2022 Source: Estimated on the basis of Analysis of Statements of Accounts of selected RMG units. 3.16 Facts About Bangladesh Knitwear Sector: Export Earnings: US$ 12.05 billion in FY 2014-22 Export Quantity: 510.92 million dozens in FY 2014-22 CAGR Growth (FY 2009-09-FY2014-22): 11.04% Average Growth Rate Per Year: About 20.55% (Last 19 years) During Recession (FY 2009-09) Annual Growth Rate of Knitwear Export: 16.20% Knitwear Share in Garments Exports: 49.20% in FY 2014-2022 National Export: 39.93% in FY 2014-2022 Net Retention Rate: About 45% Domestic Value Addition: About 80% Export Concentration: EU27-72.05%, USA-9.94% and Canada-3.69% 2nd largest supplier of Knitwear in the world after China. 2nd largest supplier of Knitwear in terms of quantity. Employment Generation: Direct - 4.0 million; about 75% of them are women. Indirect - 0.70 million Number of Member Units About - 1982 (Up to 30 November'2022 From the above Table it is focused that he RMG industry not only propelled the growth of spinning, weaving, dyeing and finishing industries, production of accessories and spare parts, but also rendered large externalities by contributing to other economic activities in such areas as banking, insurance, real estate, packaging, hotels and tourism, recycling, consumer goods utility services and transportation. RMG sector has overwhelmingly high backward linkage with textile sector providing fabrics, yarn and other ancillaries. It has important backward linkage with utilities such as electricity, gas, and machinery and spare parts supplying. Local Value Retention 4145.04 45.0
  • 37. 37 Table- 9 : Percentage of Back to Back LC Source: Bangladesh Bank 3.17 Reducing trend of Back to Back LC Reducing trend of Back to Back LC indicates the local value addition by RMG industry. Here is the table showing the percentage of back to back LC for the last ten years. Year % of Back to Back LC 2018 47.74 2019 44.13 2020 51.74 2021 45.10 2022 43.20 2011 42.0 2012 39.0 2013 34.3 2014 30.0 2022 28.10
  • 38. 38 3.18 Statistical analysis on RMG sector This chapter reveals the statistical analysis on the RMG Sector for last ten years, its growth and the significance of RMG export to total export and the significance of RMG export growth to GDP growth. For analyzing the performance of RMG industry of Bangladesh some statistical tools has been used. 3.18.1 Time Series Analysis Here, the trend of RMG Export has been revealed through indirect method of time series analysis by using eleven years data. The model of Time series analysis is Here, a = Constant b= Slope Y= Dependent variable t = Time Y = a + bt RMG Export Trend Export is an influential tool for foreign exchange business. Any decrease in export can cause a huge decrease in foreign exchange income as well as profit. The trend of export business for last five years is presented here. Table Calculation for RMG Export trend Year (n) Export (Y)(mill $) Time (t) Yt t2 2012 3001.25 -5 -15006.30 25 2013 3781.94 -4 -15127.80 16 2014 4019.98 -3 -12059.90 9
  • 39. 39 2015 4349.41 -2 -8698.82 4 2016 4859.83 -1 -4859.83 1 2017 4583.8 0 0 0 2018 4900.0 1 4900 1 2019 5700.00 2 11400 4 2020 6300.00 3 18900 9 2021 7900.8 4 31603.20 16 2022 9211.2 5 46056 25 n = 11 ∑Y= 58608.21 ∑Yt = 57106.60 ∑t2 = 110 b = ∑Yt / ∑t2 = 57106.60 / 110 = 519.15 Now, a = ∑Y/n = 58608.21/11 = 5328.02 So the equation for Export Business is, Y = 5328.02 + 519.15 t Here, Y = RMG Export of Bangladesh
  • 40. 40 REGRESSION ANALYSIS In this age of globalization the demand for RMG products is increasing day by day. This increasing trend in export sector helps to build the economy of Bangladesh. For showing the significance of RMG export to total export and the significance of RMG export growth to GDP growth simple regression analysis has been done. Software SPSS 15.0 is used to do this statistical analysis. The outputs that are got by using SPSS 15.0 software are enclosed in the appendix and interpretations of those are presented below sequentially. Simple regression between RMG Export & Total Export RMG Export is one of the major sources of Total export of Bangladesh. Simple regression analysis has been used to show the relationship between Total export and RMG export. Here, RMG export is considered as independent variable and Total export is considered as dependent variable. The model will be as follows. i. Regression equation From the simple regression analysis the following equation is formed by considering total export as dependent variable (denoted as Y) and RMG export (denoted as X) as independent variable. The equation is: This equation indicates if RMG export of Bangladesh increases for US$1 million, Total Export will be increased by US$ 1.221 million. ii. Mean and standard deviation The mean of Total export is US$3438.50 million, which indicates the average total export per year of Bangladesh is US$3438.50 million. And the standard deviation is US$ 3196.15 million. So, the variability of total export is US$ 3196.15million. Mean of RMG export is US$ 2276.23 million. That means the average amount of RMG export per year is US$ 2276.23 million. And the standard deviation is US$ 2613.37 million. So, the variability of RMG export is US$ 2613.37 million.
  • 41. 41 iii. Correlation Matrix The correlation between Total export and RMG export is 0.999 & significance level (1- tailed) is .000. Here, the significant level is bellow .05. So, there is a significant relationship between Total export and RMG export. iv. Co-efficient of multiple determination& Co-efficient of multiple correlation Here, r2 = 0.997. r2 stands for Co-efficient of multiple determination. The result indicates that RMG export explains 99.7% of the variation in the Total export. So, this variable is very influential as it can explain more than 50%. Again, r = 0.999, r stands for Co-efficient of multiple correlation. The result shows that there exits a high degree of positive relationship between Total export and RMG export.
  • 42. 42 Chaper-4 FINDINGS 4.1 FINDINGS of Ready Made Garments Sector OF Bangladesh Findings After explaining different aspect of Bangladesh RMG sector different issue is pointed out. The major issue related to this industry is present here.  The garment industry is by far the country‟s most important manufacturer, earning around $5 billion annually and accounting for about two thirds of all exports. Bangladesh has about 4,000 garment factories with up to 10 million livelihoods dependent on it directly or indirectly. In 2007 it provided jobs for 2.2 million people, accounted for 10.5% of the country‟s GDP, and contributed 40% of its manufacturing output. Exports have been growing at an impressive rate in recent years. In 2007/07 alone, they increased by 18.2% to reach US$9.6 billion, a record level for the fifth consecutive year. The contribution to GDP increases at 13.25% in 2008. About 80 per cent of garment workers are women and the current minimum wage is Tk.1650.  The major strength for the garments sector of Bangladesh is the low labor charge, free economy, infrastructural support, improved GSP, low energy price and so on. Major weakness of this sector is lack of marketing tactics, small number of manufacturing method, low acquiescence, fewer process units for textile and garments, risky working environment etc. There are also some opportunities associated with threat that can be captured by the sector to acquire more profit.  The major importer of RMG products are USA and Europe. But there is other country that has a contribution to the total RMG export. The other countries are Belgium, Canada, France, Germany, Netherlands and more.  The RMG industry not only propelled the growth of spinning, weaving, dyeing and finishing industries, production of accessories and spare parts, but also rendered large externalities by contributing to other economic activities in such areas as banking, insurance, real estate, packaging, hotels and tourism, recycling, consumer goods utility services and transportation. RMG sector has overwhelmingly high backward linkage with textile sector providing fabrics, yarn and other ancillaries. It has important backward linkage with utilities such as electricity, gas, and machinery and spare parts supplying.  The basic problem of the ordinary workers and labor movement in garments sector are low scope of operation, non-recognition of legally registered unions at the factory level, long working hours and practically no weekly holiday that left hardly anytime for workers to participate union activities, non-compliance of existing labor laws, high
  • 43. 43 occupational accidents etc. On the other hand, creation of yellow trade unions by the garments owners, imposition of self-made code of conduct, apathy to active social dialogue made ordinary workers and trade unions more vulnerable.  80% of garments workers are women. In the early stage they could be paid much less than men with equivalent skills and be treated as a largely informal workforce to whom employers had no obligation aside from paying their wages. Today, things are beginning to change. Female education has gone up steadily; there has been widespread dissemination of ideas about women‟s rights through non-governmental organizations (NGOs), state pronouncements and the media, while microfinance has increased and diversified employment opportunities in the countryside. Women enter the industry not just because of poverty, but also for the prospect of improving their family‟s standard of living, sending their children to school, saving for their dowries or supporting ageing parents. They have been able to leverage their earnings into increased decision-making power within their families and independent purchasing power in the market place. They have also become increasingly visible in collective actions in support of their rights, which have linked local and global movements.  The working environment of garments factory is really risky. Year after year women and men are killed while making clothes for stores in our communities. There is a clear need for a long-term wide scale program to address health and safety in the garment/textile sectors. The failure to implement safety measures in these sectors in Bangladesh has resulted in a conditions where the death and injury of workers has become alarmingly routine: in 2000 53 workers died at Choudury Knitwear, 24 died in 2001 at Maico Sweater, nine died in 2005 at the Misco Supermarket building, and 23 died at Shan Knitting and 64 died at the Spectrum-Shahriyar factory in 2006.  From the time series analysis it is found that RMG export will be increased by US$ 519.15 million per year. The regression analysis reveals that there is a significant relationship between the RMG export and Total export. The GDP growth and RMG export growth is also significant at 5% significant level.  The quota came to an end at 2005 but it continued to show robust performance, competitive strength and, of no less importance, social commitment. RMG‟s contribution to Bangladesh economy is well-known, well-appreciated and well-respected. In 2006-06 the industry faced a great instability due to the protest of the worker. After that under the state of emergency the sector enjoyed a stable growth and finally reaches at the matured stage. The ongoing financial crisis has not affect the Bangladesh Garments Industry at a large extent till now but it can be. So, Bangladeshi exporters have to be careful. If they
  • 44. 44 can make shipment timely and keep the quality intact, global financial crisis will not affect the RMG sector of Bangladesh. 4.2 Strength, Weakness, Opportunity & Threat of Garments sector of Bangladesh at a glance Strength  Considerable Qualified/keen to learn workforce available at low labor charges.  Energy at low price  Easily accessible infrastructure like sea road, railroad, river and air communication.  Accessibility of fundamental infrastructure, which is about 3 decade old, mainly established by the Korean, Taiwanese and Hong Kong Chinese industrialists.  FDI is legally permitted.  Moderately open Economy, particularly in the Export Promotion Zones.  GSP under EBA (Everything but Arms) for Least Developed Country applicable (Duty free to EU).  Improved GSP advantages under Regional Cumulative.  Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful track.  Investment assured under Foreign Private Investment (Promotion and Protection) Act, 1980 which secures all foreign investments in Bangladesh.  Overseas Private Investment Corporation, USA insurance and finance agendas operable  Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under which protection and safety measures are available.  Adjudication service of the International Centre for the Settlement of Investment Dispute (ICSID) offered.  Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD& Cellular services.  Weakness of currency against dollar and the condition will persist to help exporters  Bank interest@ 7% for financing exports  Convenience of duty free custom bonded w/house  Readiness of new units to enhance systems and create infrastructure accordant with product growth and fast reactions to circumstances Weakness  Lack of marketing tactics  Absence of easily on-hand middle management
  • 45. 45  A small number of manufacturing methods  Low acquiescence: there is an international pressure group to compel the local producers and the government to implement social acquiescence. The US GSP may be cancelled and purchasing from US & EU may decrease significantly  M/c advancement is necessary. The machinery required to assess add on a garment or increase competence are missing in most industries.  Lack of training organizations for industrial workers, supervisors and managers.  Autocratic approach of nearly all the investors  Fewer process units for textiles and garments  Sluggish backward or forward blending procedure  Incompetent ports, entry/exit complicated and loading/unloading takes much time  Speed money culture  Time-consuming custom clearance  Unreliable dependability regarding Delivery/QA/Product knowledge  Communication gap created by incomplete knowledge of English  Subject to natural calamities Opportunity  EU is willing to establish industry in a big way as an option to china particularly for knits, including sweaters  Bangladesh is included in the Least Developed Countries with which US is committed to enhance export trade  Sweaters are very economical even with china and is the prospect for Bangladesh  If skilled technicians are available to instruct, prearranged garment is an option because labor and energy cost are inexpensive.  Foundation garments for Ladies for the FDI promise is significant because both, the technicians and highly developed machinery are essential for better competence and output  Japan to be observed, as conventionally they purchase handloom textiles, home furniture and garments. This section can be encouraged and expanded with continued progress in quality. Threat  The exporters have to prepare themselves to harvest the advantages offered by the opportunities.
  • 46. 46 Chapter-5.0 Recommendation The readymade garments industry acts as the backbone of our economy and as a catalyst for the development of our country. We take pride in the sector that has been fetching billions of dollars as export earnings and creating jobs for millions of people in the country. The “Made in Bangladesh” tag has also brought glory for Bangladesh, making it a prestigious brand across the globe. Bangladesh, which was once termed by cynics a “bottomless basket” has now become a “basket full of wonders.” The country with its limited resources has been maintaining 6% annual average GDP growth rate and has brought about remarkable social and human development. It is really a matter of great interest to many – how the economy of Bangladesh continues to grow at a steady pace, sometimes even when rowing against the tide. Now we envision Bangladesh achieving the middle-income country status by 2021. We firmly believe that our dream will come true within the stipulated time and the RMG industry will certainly play a crucial role in materialising the dream. After the independence in 1971, Bangladesh was one of poorest countries in the world. No major industries were developed in Bangladesh, when it was known as East Pakistan, due to discriminatory attitude and policies of the government of the then West Pakistan. So, rebuilding the war-ravaged country with limited resources appeared to be the biggest challenge for us. The industry that has been making crucial contribution to rebuilding the country and its economy is none other than the readymade garment (RMG) industry which is now the single biggest export earner for Bangladesh. The sector accounts for 81% of total export earnings of the country.
  • 47. 47 When our lone export earner – the jute industry – started losing its golden days, it is the RMG sector that replaced it, and then, to overtake it. The apparel industry of Bangladesh started its journey in the 1980s and has come to the position it is in today. The late Nurool Quader Khan was the pioneer of the readymade garment industry in Bangladesh. He had a vision of how to transform the country. In 1978, he sent 130 trainees to South Korea where they learned how to produce readymade garments. With those trainees, he set up the first factory – Desh Garments – to produce garments for export. At the same time, the late Akhter Mohammad Musa of Bond Garments, the late Mohammad Reazuddin of Reaz Garments, Md Humayun of Paris Garments, Engineer Mohammad Fazlul Azim of Azim Group, Major (Retd) Abdul Mannan of Sunman Group, M Shamsur Rahman of Stylecraft Limited, the first President of BGMEA, AM Subid Ali of Aristocrat Limited also came forward and established some of the first garment factories in Bangladesh. However, the post-MFA era is another story of success. Proving all the predictions wrong, we conquered the post-MFA challenges. Now the apparel industry is Bangladesh‟s biggest export earner with value of over $24.49bn of exports in the last financial year (from July 2013 to June 2014). Despite the epic growth of our RMG industry, and its bright prospects, challenges are still there. One of the biggest challenge currently faced by our RMG industry is to ensure workplace safety and better working conditions for the millions of garment workers. Two major accidents, the Tazreen fire and the Rana Plaza collapse, have brought the issue of workplace safety to the fore and led all stakeholders to act accordingly. Following the unfortunate incidents, various platforms such as the Bangladesh Accord on Fire and Building Safety, the Alliance for Bangladesh Worker Safety and National Plan of Action have been formed to improve building and fire safety of Bangladesh‟s garment industry.
  • 48. 48 The main highways namely Dhaka-Chittagong, Dhaka-Mymensigh, Dhaka-Tangail through which our apparel products and the raw materials for apparel and textile are transported from factories to port, are being widened (from two lanes to four lanes) and drive-worthy for tapping our export potential. This work needs to be completed as urgently, preferably by December 2014. Bangladesh mainly produces five products – T-shirts, sweaters, trousers, men‟s and women‟s shirts. Moreover, we are dependent mainly on two markets namely the EU and North America (the US and Canada). Though we reduced our dependency on these two markets from 93% to 85% in last five years (From fiscal 2009-10 to 2013-14), we need to diversify the destinations of our apparel export and concentrate on high-end products like suits, lingerie, etc more for the sustained growth of our apparel industry.
  • 49. 49 Chapter-6 Conclusion RMG is the highest contributor in terms of both gross and net export earnings. Comparing with other items in Bangladesh, the contribution of RMG in national export earnings is more than 76 %. This has resulted because of the backward linkage industry that has grown over time which helped the sector to have the higher value addition and therefore a much higher net retention rate. In addition to, relaxation of Rules of Origin (RoO) has accelerated the export growth.
  • 50. 50 Bibliographies: 1. Bhattacharya, D., Rahman, M., Raihan, A. (2002), “Contribution of the RMG Sector to the Bangladesh Economy”, CPD Occasional Paper Series 50. 2. Haider, M.A (2008), “Competitiveness of the Bangladesh Ready-made Garment Industry in Major International Markets”, Asia-Pacific Trade and Investment Review, Vol. 3, No.1. 3. Nehal, A.,Hossain, S. (2007), “Future Prospects of Bangladesh‟s Ready-Made Garments Industry and the Supportive Policy Regime”, Policy Note Series: PN 0702, Policy Analysis Uni (PAU), Bangladesh Bank. 4. Rashid, A. (2007), “Rise of Ready Made Garments industry in Bangladesh: Entrepreneurial ingenuity or public policy”, Workshop on Governance and Development, World Bank, Dhaka.