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NORTHERN UNIVERSITY BANGLADESH A REPORT ON PROBLEMS AND PROSPECTS OF PRODUCTIONS OF OPERATION MANAGEMENT OF GARMENTS SECTOR IN BANGLADESH. i

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Page 1: A REPORT ON PROBLEMS AND PROSPECTS OF PRODUCTION OF  OPERATION MANAGEMENT OF GARMENT SECTOR IN BANGLADESH

NORTHERN UNIVERSITY BANGLADESH

A REPORT

ON

PROBLEMS AND PROSPECTS OF

PRODUCTIONS OF OPERATION MANAGEMENT OF

GARMENTS SECTOR IN BANGLADESH.

Date of Submission: July 11, 2012

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A REPORT

ON

PROBLEMS AND PROSPECTS OF

PRODUCTIONS OF OPERATION MANAGEMENT OF

GARMENTS SECTOR IN BANGLADESH.

SUBMITTED BY:

Name ID Program

Abu Bakar

siddique

100261155 BBA,7A

SUBMITTED TO:

Tamanna Jarin

Department of Business Administration

Northern University Bangladesh.

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STUDENT DECLARATION

I do hereby declare that report “problems and prospects of production of operation

management of garments sector of Bangladesh” submitted by me to Tamanna Jarin,

lecturer in DBA, Northern University Bangladesh, Khulna campus, Khulna for the

degree of Bachelor of Business Administration is an original work.

All the related information of the report will be strongly maintained confidentially

and only will be used for educational purpose.

I tried to my best to prepare this report as early as possible.

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LETTER OF TRANSMITTAL

Date: July11, 2012

To

Tamanna Jarin,

Department of Business Administration.

Northern University Bangladesh.

Khulna Campus, Khulna.

Subject: Submission of the report on “ problems and prospects of production of

operation management of garments sector of Bangladesh”

Dear Mam,

With due respect, it is stated that we are submitting our report on “problems and

prospects of production of operation management of garments sector of Bangladesh”

This is the requirement for obtaining the course of Operation management offered by

course teacher of Northern University Bangladesh, Khulna Campus.

It was pleasure experience on our part to go through the processes, which reiterate my

classroom knowledge. Despite my insufficient knowledge, I hope the report has attained

its purpose to a considerable extent.

Thanking you for your valuable advice and cooperation.

Yours Sincerely,----------------------------ABU BAKAR SIDDIQUEID: 100261155Bachelor of Business AdministrationNorthern University Bangladesh.Khulna,Kampus

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Acknowledgement

At first I desire to express our deepest sense of gratitude of almighty Allah.

With profound regard I gratefully acknowledge our respected course teacher

Tamanna Jarin, Lecturer, Department of Business Administration, Faculty of

Business, Northern University Bangladesh. Khulna Campus, Khulna help and day

to day suggestion during preparation of the report.

I like to give thanks especially to our friends and many individuals, for

their enthusiastic encouragements and helps during the preparation of this report

me by sharing ideas regarding this subject and for their assistance in

typing and proof reading this manuscript. Without helping it would not be

possible to prepare. So, Again I like to give thanks all of you for helping me to do it

perfectly.

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ABBREVIATION

RMG = Ready-Made Garments.

MFA = Multi Fiber Agreement.

ATC = Agreement on Textile and Clothing.

GoB = Government of Bangladesh.

HDI = Human Development Index.

U N D P = United Nations Development Project.

GDP = Gross Development Profit.

WTO = World Trade Organization.

EU = European Union.

USA = United State of America.

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TABLE OF CONTENTS

Contents Page no

Title i

Student declaration iii

Letter of transmittal iv

Acknowledgement v

Abbreviation vi

Table of Contents vii

Executive Summary ix

CHAPTER 1:

INTRODUCTION 1-3

1.1. Purpose of the Report 1

1.2. origin of the report 1

1.3. Objectives of the Report 1

1.4. Sources of Data and Methodology 2

1.5. Scope of the Report 2

1.6. Limitations of the Report 3

CHAPTER 2:

OVERVIEW OF THE STUDY 4-11

2.1. Key concept of topic 4

2.2. Definition of production 4

2.3. Definition of operation 4

2.4. Importance of production 4

2.5. Importance of operation 5

2.6. The Bangladesh Garment Industry 6

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2.7. Contribution of the RMG Industry 7

2.8. Exporting Condition of Garments Industry 9

2.9. The Bangladesh Garment Industry: Challenges of the 21st century11

CHAPTER 3:

THE PROBLEMS AND PROEPECTS: 13-20

3.1. Problems 13

3.2. Prospects 16

CHAPTER 4:

ANALYSIS AND FINDINGS: 21-26

4.1. Strength 21

4.2. Weakness 22

4.3. Opportunity 23

4.4. Threats 25

CHAPTER 5:

RECOMMENDATIONS AND CONCLUSION: 27-29

5.1. Recommendations 27

5.2. Conclusion 28

REFERENCES 29-30

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EXECUTIVE SUMMARY

The phase-out of the quota is likely to have particular significance for the export

of Bangladesh apparels to the US market. MFA’s impacts are not much related to a question of

our $2 billion exports to the USA; or the $5 billion worth of exports made

by Bangladesh globally. Rather, it is a question of how Bangladesh’s entire economy

wills is affected by the issue of quota phase out. RMG exports constitute about 75% of

Bangladesh’s annual export and provide direct employment to 1.5 million females

and indirectly an additional 8 to 10 million people. The global clothing trade is

evolving on a continuous basis and that the phase out of quota restrictions and

forming of trade blocs has become a reality. Moreover Bangladesh is convulsed by

fierce class struggles, centered on the country’s garment industry. Many tens of

thousands of workers have gone on strike, blocked roads, attacked factories and other

buildings, demonstrated, fought the police and rioted in the streets. Every day comes

news of fresh strikes in a variety of industries —mainly the ready-made garment (RMG)

sector, but also mill workers, river transport workers, rail

workers, journalists, lecturers and teachers. The revolt began on 20 May2006 with

garment workers’ strikes in the Bangladeshi capital Dhaka — beginning in a small

number of factories over issues including the arrest of worker activists and non-

payment of wages. By23 May2006 this struggle had been generalized, with action at a much

larger number of factories and demonstrations across the city. A massive army and

police presence around  garment factories, in some cases completely blockading and creating

check points for entry to Export Processing Zones, temporarily calmed things; but

strikes continued to take place at numerous factories, leading to solidarity strikes

from nearby workplaces.

\

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INTRODUCTION

The tremendous success of readymade garment exports from Bangladesh

over the last two decades has surpassed the most optimistic expectations. Today

the apparel export sector is a multi-billion-dollar manufacturing and export

industry in the country. The overall impact of the readymade garment exports

is certainly one of the most significant social and economic developments in

contemporary Bangladesh. With over one and a ha l f mi l l i on wom en

wor kers employed in s e mi - sk i l l e d and sk i l l e d jobs pro duc ing

clothing for exports, the development of the apparel export industry has had far-

reaching implications for the society and economy of Bangladesh.

1.1. Purpose of the Study:

The report is required course for the students who are studying BBA (Bachelor of

Business Administration) of Northern University Bangladesh under the course titled

Operation Management

1.2. Origin of the report:

F o r t h e a s s e s s m e n t , b o t h p r i m a r y a n d s e c o n d a r y d a t a w a s

c o l l e c t e d . F o r t h i s w e interviewed one garments company through

using a structured questionnaire. Personal interview technique was

applied while fill up the questionnaire on respondents. And I also

analysis some report of various garment industries.

1.3. Objectives of the Study:

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˃ Broad Objective: The main objective of this study is problems and prospects of

garments sector of Bangladesh.

˃ Specific Objective:

To present an overview of key concept relating problems.

To study the definition of various problems.

To study the classification of problems and prospects.

To study the prospects of Bangladesh.

To study the challenges of development of Bangladesh.

To study the effect of global in Bangladesh.

1.4. Sources of Data and Methodology:

The report was fully exploratory in nature. Data have been collected from

secondary sources.

Ms-Word and other required computer program were used to process

the Quantitative data on which final report was prepared.

The theoretical part of this report has been collected from text that I

studied in our program.

Most of the parts are collected from internet in different website.

1.5. Scope of the study:

This study has focused upon the various problems regarding with the garments

company and the prospect of these industries. We have taken 5 garments company

to gather data on the present situation of the garments industries as well as

problem regarding and the future of the industries

1.6. Limitations of the Report:

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Since our study is based on both primary and secondary data, there is a

possibility of ge t t ing fake in format ion . I f the su rveyed per sonne l

pro v id e us w i th any fabr i ca te d information about their

Opinion of their organization, then the report findings may be erroneous.

Above all, this study is weak in some points. The notable ones are an Opinion of

their organization, and then the report findings may be erroneous. Above

all, this study is weak in some points. The notable ones are as under:

The survey was conducted in a very short time so we were not able to collect more information.

This survey made on crisis situation of Bangladesh, so it was

difficult to collect more samples.

Only the big and the reputed Garments Company consider here as sample.

The questionnaire contains some questions that, if answered

properly, might damage the company’s image. In this type of

questions, the respondents might  provide socially acceptable

answers. This risk was unavoidable.

Another limitation of this study is the person’s private

information were not disclosing some, data and information for

obvious reasons, which could be very much useful.

Lack of experience in this field.

Lack of proper authority to conduct the interview program.

And I also say that lack of proper time.

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OVERVIEW OF THE STUDY

2.1. Key concept of topic:

Problems and prospects of production of operation management of garments sector

of Bangladesh It is most vital part for business of a country. The major key concepts

are Problems and prospects

2.2. Definition of Production:

The processes and methods employed to transform tangible inputs (raw materials,

semi finished goods, or subassemblies) and intangible inputs (ideas, information,

knowledge) into goods or services.

2.3. Definition of Operation:

Operations means transform resource or data inputs into desired goods, services, or results, and create and deliver value to the customers.

2.4. Importance of production:

It needs no exaggeration to say that production makes significant contribution to

society well being. The standard of living of people depends on production of goods

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and services. The More production higher, the standard of living of the people is

better. Alexander Solzhenitsyn in hi novel August 1914 beautifully sums up the

importance of production. One of the characters in the work in Suyataslav

Iakintovich Obodovsky, a former anarchist, who maintains the following

position :As for industry, anyone who has created something with his owns hands

knows that production is neither capitalist nor socialists but one thing only, it is

what creates national wealth ,the common national basis without which no country

can exist. Production function can offer competitive advantage to a firm in the

following areas:

1. Shorter new-product lead time.

2. More inventory turns.

3. Shorter manufacturing lead time.

4. Higher quality.

5. Greater flexibility.

6. Better customer service.

7. Reduced wastage.

Many causes that deny competitive advantages to any firm can be attributed to

manufacturing function specifically to poor quality and reliability, delayed

deliveries, high production costs and lack of adequate inventory at the right

time.Economic prosperity and a greater standard of living of Japanese may be

attributed to high productivity. It may be stated that the production function offers

vast scope for achieving productivity with effective management of materials and

lead time, and with better control of cost, a firm will be able to bring out more

output from a given input at reasonable cost.

2.5. Importance of operation:   

To be able produce professional managers capable of fulfilling

strategic roles within business and government enterprises the need

for the practice of operations management cannot  be forgone.

Operations management is very important in business operations since

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it forms the heart of the orga nization by controlling the system of

operation. Operations management deals with the design, operation,

and improvement of the systems that create and deliver a

firm’s primary products and services. Like marketing and finance,

operations management is a functional field of business with clear

management responsibilities. Guinness Ghana limited is accompanying in

which produces alcoholic and nonalcoholic beverages such as Guinness

and Malta Guinness respective. So, operation is one of the most important matters

in business.

2.6. The Bangladesh Garment Industry:

For Bangladesh, the readymade garment export industry has been the proverbial

goose that lays the golden eggs for over fifteen years now. Sector now

dominates the modern economy in export earnings, secondary impact and

employment generated. The events in1998 serve to highlight the vulnerability

of this industry to both internal and external shocks on the demand and

supply side. Given the dominance of the sector in the overall modern economy of

Bangladesh, this vulnerability should be a matter of some concern to the

policymakers in Bangladesh. Although in gross terms the sector’s contributions to

the country’s export earnings is around 74 percent, in net terms the share would be

much less pa r t ia l l y becaus e the backward l inka ges in t ex t i l e have

bee n s l ow to deve l op . The dependence on a single sector, no matter how

resilient or sturdy that sector is, is a matter of policy concern. We believe the

policymakers in Bangladesh should work to reduce this dependence by

moving quickly to develop the other export industries using the lessons

learned from the success of apparel exports. Support for the apparel sector should

not be reduced. In fact, another way to reduce the vulnerability is to diversify the

product and the market mix. It is heartening to observe that the knit products are

rapidly gaining share in overall garment exports as these products are sold

in quota-free markets and reflect the strength of Bangladeshi producers in the

fully competitive global apparel markets. Preliminary data and informal evidence

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indicate that this sector seems to have weathered the devastating floods relatively

well. The industry is one hundred percent export-oriented and therefore insulated

from domestic demand shocks; however, it remains vulnerable to domestic supply

shocks and the smooth functioning of the banking, transportation ano ther

forward and backward linkage sectors of the economy. The Dhaka-Citation road

remains the main transportation link connecting the production units, mostly

situated in and around Dhaka and the port in Citation, where the raw material and

the finished products are shipped in and out. Despair increased dependence on air

transportation, trucks remain the main vehicles. For transporting raw

materials and finished products for Bangladesh garment exports. The floods

disrupted the normal flow of traffic on this road. Eventually, this road link was

completely severed for several days when large

Sections of the road went under water for a few weeks during the latter

phase of the floods. This declining of the road connection between Dhaka 6

the port in Citation was as serious threat as one can imagine for the garment

exporters. The industry responded by calling upon the Bangladesh navy to help with

trawlers and renting a plane from Thai Air that was used to directly fly garment

consignments from the Dhaka airport to the Citation airport several times a day.

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Pic

ture: Garments products of Bangladesh

2.7. Contribution of the RMG Industry:

RMG business started in the late 70s as a negligible non-traditional sector with a

narrow export base and by the year 1983 i t emerged as a promis ing

expor t earn ing s ec tor ; pre sen t ly i t contributes around 75 percent of

the total export earnings. Over the past one and half decade, RMG export

earnings have increased by more than 8 times with an exceptional growth

rate of 16.5 percent per annum. In FY06, earnings reached about 8 billion

USD, which was only less than a billion USD in FY91. Excepting FY02, the

industry registered significant positive growth throughout this period

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In terms of GDP, RMG’s contribution is highly remarkable; it reaches 13 percent of GDP

which was only about 3 percent in FY91. This is a clear indication of

the industry’s contribution to the overall economy. 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. A 1999 study found the industry

supporting approximately USD 2.0 billion worth of  economic activities

(Bhattacharya and Rahman), when the value of exports stood at a little

over USD 4.0 billion. One of the key advantages of the RMG industry is its cheap

labor force, which provides a compet i t i ve edge over i t s compet i tor s .

The s ec tor has crea ted jobs for about two million people of which 70

percent are women who mostly come from rural areas. The sector opened up

employment opportunities for many more individuals through direct and

indirect economic activities, which eventually helps the country’s

social development, woman empowerment and poverty alleviation.

2.8. Exporting Condition of Garments Industry

The Ready-Made Garments (RMG) industry occupies a

unique position in the Bangladesh economy. It is the largest

exporting industry in Bangladesh, which Experienced

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phenomenal growth during the last 20 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 unemployment generation and in the provision of

income to the poor. Nearly two million workers are directly and more

than ten million inhabitants are indirectly associated with the industry.

Over the past twenty years, the number of manufacturing units has

grown from 180 to over 3600. The sector has a lso played a

s igni f icant role in the socio- economic development of the country.

The Agreement on Textile and Clothing (ATC) introduced in 1994,

aimed at bringing textiles and clothing within the domain of WTO

rules by abolishing all quotas by the end of 2004. It provides an

adjustment period of 10 years, so that countries affected byte MFA

could take the necessary steps to adjust to the new

trading environment . Liberalization of trade following the

Uruguay Round agreement presents opportunities as well as challenges

for a developing country like Bangladesh in RMG sector. In the Post-

Uruguay Round period, traditional instruments of trade policy

such as tariffs, quotas, and subsidies will become less feasible and less

relevant. In a liberalized trade régime, competition among textiles and

clothing exporting countries is likely to become intense. The objective of

this paper is to identify the prospects of RMG industry after the MFA

phase out by analyzing the current scenario along with different policy

measures and the available options in order to be more competitive in

the new regime. The export made by Garments Industries of

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Bangladesh is improving year after year except some of the

year. Strike, layout, shutdown of company, political problem,

economic problem, inflation etc. are the prime cause of

decreasing export in this important sector. But above it,

Readymade Garments Industries is the leading sector inexpert sector.

Year USA %

1991-92 624.16 32.49

1997 – 98 2547.13 14.1

2002 – 03 4859.83 11.7

003 – 04 4583.75 5.6

2004 – 05 4912.12 7.2

2005 – 06 5686.09 15.8

2006 - 07 6198. 53 17. 5

2007 – 08 5253. 36 13. 89

2008 – 09 7152. 26 19. 5

2009 – 10 7413. 01 21. 24

20010 – 11 7502. 11 23. 12

Figure: Year Export by the garments industries (in US $ million)

Position of Bangladesh is exporting product in USA is not very satisfactory but this situation is better than any other condition of the previous time. But if our Government take some essential law and break out the wall of biasness then the position of Bangladesh in Garments sector in would.

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From the survey we have found some tremendous information that help to build our practical knowledge about the garments industry of our country.

2.9. The Bangladesh Garment Industry: Challenges of the 21st century:

Readymade Garment (RMG) Industry occupies a dominant position in the export-

manufacturing sector of Bangladesh. The advent of the RMG sector happened

during the early 80s in Bangladesh. Since then, due to supportive policies of the

Government of Bangladesh (GoB), this industry has experienced a significant

growth. In 1988, the export-oriented RMG sector overtook the traditionally

dominant jute sector in terms of gross export accruals. And since then this sector

has continued to consolidate it predominant position in the export basket of

Bangladesh. According to data of 2003-2004 financial year, the export earnings of

the RMG sector was 5686.09 million US dollars, which constituted 74.79 percent of

total export earnings. The industry, which started with only a few factory units

during 1980s, now boasts 4094 factory units employing around 1.5 million workers.

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The garments products of Bangladesh include both knit and woven wear. Share of

knitwear in the total production of garment in Bangladesh is steadily increasing

over time. At present, knit wear accounts for about 33 percent of the total

production. Of the woven wears, high-value products are shirts, jackets, coats,

blouses, sportswear and many more casual and fashion apparels. Recent data shows

that production of these high value items either decreased over the years or

increased at a very nominal rate compared to other basic low value-added items

such as trousers or shorts. Thus, product diversification in the Bangladesh garment

industry has been rather slow and products are mainly low value-added or low-

fashion items. Of all the produced items in 2001-2, around 40 per cent were

exported to USA markets and 53 per cent were exported to the EU markets, with

Germany being the highest imported or Bangladeshi garments. However, data of

2003-4 shows that exports to EU has increased to 65 per cent.

2.9.1. Faces the Challenge of Globalization:

Bangladesh faces the challenge of achieving accelerated economic

growth and alleviating the massive poverty that afflicts nearly two-fifths of its

135 million people. To meet this challenge, market-oriented liberalizing policy

reforms were initiated in themid-1980s and were pursued much more

vigorously in the 1990s. These reforms were particularly aimed at moving

towards an open economic regime and integrating with the global economy.

During the 1990s, notable progress was made in economic performance.

Along with m a i n t a i n i n g e c o n o m i c s t a b i l i z a t i o n w i t h a

s i g n i f i c a n t l y r e d u c e d a n d d e c l i n i n g dependence on foreign aid, the

economy appeared to begin a transition from stabilization to growth. The average

annual growth in per capita income had steadily accelerated from about 1.6 per cent

per annum in the first half of the 1980s to 3.6 percent by the latter half of the 1990s.

This improved performance owed itself both to a slowdown in population growth

and a sustained increase in the rate of GDP growth, which averaged 5.2 percent

annually during the second half of the 1990s. During this time, progress

in the human development indicators was even more impressive.

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Bangladesh was in fact among the top performing countries in the 1990s, when

measured by its improvement in the Human Development Index (HDI) as

estimated by the United Nations Development Project ( U N D P ) . I n

t e r m s o f t h e i n c r e a s e i n t h e v a l u e o f H D I b e t w e e n 1 9 9 0 a n d

2 0 0 1 , Bangladesh is surpassed only by China and Cape Verde. While most low-income

countries depend largely on the export of primary commodities, Bangladesh has

made the transition from being primarily a jute-exporting country to

garm ent -exp or t ing one . Th i s t rans i t i o n has be en d i c ta ted by the

cou ntry ' s r e s our ce endowment, characterized by extreme land scarcity and a

very high population density, making economic growth dependent on the export of

labor-intensive manufactures. In the wake of the 2001 global recession,

Bangladesh's reliance on foreign countries as market for exports and as a source of

remittances has become obvious. If Bangladesh is to become less vulnerable to the

economic fortunes of others, it will need to strengthen its domestic economy,

creating jobs and markets at home. A strong domestic sector and an imp rov ed

ove ra l l inv es tme nt env i ro nment w i l l pro v id e a mor e s t ab l e source

o f   income - like what the garment industry has provided so far - and will

rekindle and sustain Bangladesh's economic growth.

THE PROBLEMS AND PROEPECTS

3.1. Problems:

The garment industry of Bangladesh has been the key export division

and a main source of foreign exchange for the last 25 years. National

labor laws do not apply in the EPZs, leaving BEPZA in full control

over work conditions, wages and benefits. Garment factories in

Bangladesh provide employment to 40 percent of industrial workers.

But without the proper laws the worker are demanding their various

wants and as a result conflict is began with the industry. Low working

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salary is another vital fact which makes the labor conflict. Worker

made strike, layout to capture their demand. Some time bonus and the

overtime salary are the important cause of crisis. Insufficient

government policy about this sector is a great  problem in Garments

Company.There is some other problems which are associated with this

sector. Those are- lack of  marketing tactics, absence of easily on-hand

middle management, a small number of  manufacturing methods, 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, time-consuming custom clearance etc.

There are many types of reasons for which problems are created or raised in the

garments industry which is below:

Raw materials: Bangladesh imports raw materials for garments like cotton,

thread color etc. This dependence on raw materials hampers the development of

garments industry. Moreover, foreign suppliers often supply low quality

materials, which result in low quality products

1. Unskilled workers:  Most of the illiterate women workers employed in

garments are unskilled and so their products often become lower in quality.

2. Improper working environment: Taking the advantages of workers'

poverty and ignorance the owners forced them to work in unsafe and

unhealthy work place overcrowded with workers beyond capacity of the factory

floor and improper ventilation. Morning to evening to earn our countries the

major portion of our foreign exchange. Anybody visiting the factory the first

impression he or she will have that these workers are in a roost. Improper

ventilation, stuffy situation, filthy rooms are the characteristics of the majority

of our factories. The owners profit are the first priority and this attitude has

gone to such an extent that they do not care about their lives. 

3.  Lack of managerial knowledge: There are some other problems which

are associated with this sector. Those are- lack of marketing tactics, absence of

easily on-hand middle management, a small number of manufacturing methods,

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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, time-

consuming custom clearance etc.

4. Gendered division of labor: In the garment industry in Bangladesh, tasks

are allocated largely on the basis of gender. This determines many of the

working conditions of women workers. All the workers in the sewing section are

women, while almost all those in the cutting, ironing and finishing sections are

men. Women workers are absorbed in a variety of occupations from cutting,

sewing, inserting buttons, making button holes, checking, cleaning the threads,

ironing, folding, packing and training to supervising.

5. Wages: The government of Bangladesh sets minimum wages for various

categories of workers. According of Minimum Wage Ordinance 1994,

apprentices’ helpers are to receive Tk500 and Tk930 per month respectively.

Apprentices are helpers who have been working in the garment industry for less

than three months. After three months, Apprentices are appointed as helpers.

Often female helpers are discriminated against in terms of wages levels, and

these wages are also often fixed far below the minimum wage rate. A survey

conducted in 1998 showed that 73% of female helpers, as opposed to 15% of

their male counterparts, did not receive even the minimum wage.

6. Insufficient of loan: Insufficiency of loan in time, uncertainly of

electricity, delays in getting materials, lack of communication, and problem in

taxes etc. Often obstruct the industry. In the world market 115 to 120 items of

dress are in demand where as Bangladesh supplies only ten to twelve items of

garments. India, south Korea, Hong Kong, Singapore, Thailand, Taiwan etc,

have made remarkable progress in garments industries. Bangladesh is going to

challenge the garments of those countries in the world market.

7. Unit labor cost: Unit labor cost: Bangladesh has the cheapest unit labor

cost in South Asia. It costs only 11 cents to produce a shirt in Bangladesh,

whereas it costs 79 cents in Sri Lanka and 26 cents in India. Clearly,

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Bangladesh’s comparative advantage lies in having the cheapest unit labor

cost.

8. Working hours: Though the wages are low, the working hours are very long.

The RMG factories claim to operate one eight-hour shift six days a week. The

1965 factory Act allows women to work delivery deadlines; however, women are

virtually compelled to work after 8 o’clock. Sometimes they work until 3 o’clock

in the morning and report back to start work again five hours later are 8

o’clock. They are asked to work whole months at a time the Factory Act, which

stipulates that no employee should work more than ten days consecutively

without a break.

9. Poor accommodation facilities: As most of the garment workers come

from the poor family and comes from the remote areas and they have to

attend to the duties on time, these workers have to hire a room near the

factory where four to five huddle in a room and spend life in sub human

condition. 

10.Safety Problems: Because of the carelessness of the factory management and

for their arrogance factory doors used to be kept locked for security reason

defying act Safety need for the worker is mandatory to maintain in all the

organization. But without the facility of this necessary product a lot of accident

is occur incurred every year in most of the company. Some important cause of

the accident are given below-

Routes are blocked by storage materials

Lack of signage for escape route

Doors, opening along escape routes, are not fire resistant

Doors are not self-closing and often do not open along the direction of

escape

Ire exit or emergency staircase lacks proper maintenance 

13. Price competitiveness: China and some other competitors of

Bangladesh have implemented sharp price-cutting policies in exporting garment

products over the last few years, but Bangladesh has failed to respond effectively to

such policies. China was able to drop the export price of 29 garment categories by 46

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per cent on average in the United States within a year, from $6.23 per sq meter in

December 2001 to $3.37 per sq meter in December 2002. Bangladesh needs to respond

to such price-cutting policies of its rivals in order to remain competitive in the quota-

free global market.

3.2. Prospects:

Bangladeshi Garment Industry is the largest industrial sector of the country.

Though the history of Readymade Garment Industry is not older one but

Bangladeshi clothing business has a golden history. Probably it started from the

Munhall age in the Indian subcontinent through Dhaka Muslin. It had global

reputation as well as demandable market around the globe especially in the

European market.

After industrial revolution in the west they were busy with technological

advancement & started outsourcing of ready made garments to meet up their daily

demands. Many LDCs took that chance & started ready made garment export at

that markets. As an LDC Bangladesh took this chance enjoyed quota & other

facilities of them. Thus ready made garment industry started to contribute in our

economy from late eighties (1977).

The history of the garment industry dates back to 1977 when the first consignment was

exported to then West Germany by Jewel Garments. The number of units, however,

remained a meager 46 until the end of 1983. From a humble beginning the sector has

thus made phenomenal growth over the last two decades, the number of units growing

to around 4500. The RMG industry achievement is noteworthy,

particularly for a country plagued with poor resource endowments and adverse

conditions for industrialization. Exports increased from approximately 32 million US

dollars in 1983/84 to 1.4 billion dollars in 1992/93. In 1987/88, the RMG export share

surpassed that of raw jute and allied products. The figure further rose to 5.7 billion

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dollars in 2003/04, representing a contribution of about 75 percent of the country's total

export earnings in that year. The employment generated by the sector is estimated to be

around 1.5 million workers.

Several factors account for the outstanding successes of the RMG industry in

Bangladesh. At the same time this industry had faced & till facing many problems also.

These problems & prospects of RMG industry in Bangladesh is my topic to find out as

well as to make critical analysis on these. The importance of my study has been raised

up by recent labor unrest in RMG sector.

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

restrictions by EU administration on China up to 2008, which has been

the largest supplier of textiles and apparel to USA. Other factors like

price competitiveness, enhanced GSP facil ity, market and product

diversification, cheap labor, i n c r e a s e d  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;

3.2.1. 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 FY07, a successful

turnaround was observed in exports to third countries, which having a

negative growth in FY06 rose three-fold in FY07, 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

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stringent rules of origin (ROO) criteria, the relative stagnation in exports to EU

requires further analyst

3.2.2. 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. 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

3.2.3. 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 RMexports,

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Figure: Trend to back-to-back linkage

3.2.4. 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. Figure 3 indicates that the investment outlook

in this sector is encouraging, although the uncertainties before the MF A

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 scald.

3.2.5 Policy Regime of Government:

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. 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. 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, 2008. The reduced tax rates and other

facilities are likely to have a positive impact on the RMG sector

3.2.6. Research and Training:

His country has no dedicated research institute related to the apparel

sector. RMG is highly fashion oriented and constant market research is necessary to

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become successful in the business. BGMEA has already established an

institute which offers bachelor’s degree in fa sh ion de s ign ing and

BKMEA is planning on setting up a research and t raining institute.

These and relate initiative Sneed encouragement possibly intermediated

by donor-assisted.

ANALYSIS AND FINDING

4.1. Strength:

RMG is the leading industry in Bangladesh. It is basically a labor-intensive industry

and it needs limited financial investment and relatively simple technology compared

to other high technical industries. The success story of Garment Industry in

Bangladesh is the story as to how the readymade garments starting in the late

seventies as an insignificant non-traditional item of export. In 1998-99 this sector

has earned 4019.98 million US$ through exporting which is75.67% of the total

export (Redwan, 1995).The tremendous success of Readymade Garment (RMG)

exports from Bangladesh over last two decades has surpassed the most optimistic

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expectations. At present Bangladesh is the 6th largest exporter to USA and in 1997

Bangladesh becomes 18th largest exporter in the world. Now Bangladesh ranks first

export of T-shirts to Europe (BGMEA, 1997-98) The overall impact of the

readymade garment export industry is certainly one of the most significant social

end economic developments in contemporary Bangladesh. The remarkable

achievement of RMG sector is now exposed to each and every country. Despite these

impressive achievements and the probable challenges in the near future, if properly

managed, the prospects for further expansion and growth for this sector remain

bright. There are some major threats still exits in this sector but Bangladesh has the

ability to overcome these threats. Readymade Garment (RMG) industry holds a key

position in the economy of Bangladesh interims of foreign exchange earning,

employment generation and poverty alleviation. Right now RMG sector is the

highest foreign currency earner in Bangladesh. Apart from contributing to huge

foreign exchange earnings, RMG industry has become the largest source of

employment generation. Around 2 million people are presently involved of whom

90% are distressed women the RMG industry of Bangladesh. In addition a rough

estimate shows that the sector through linkage effects is currently generating about

US$ 2 billion worth of domestic economic activities (Bhattacharya, 2000)RMG

industry is the most important sector for the economy of Bangladesh. It accounts

for 75.14% in 2000-2001 of the country total export earnings (BGMEA Newsletter,

2001) About1.5 million workers of whom 90% are distressed women are engaged in

about 3200 garment factories as on June 2000(BGMEA, 1997-98).It is largest

manufacturing sector contributing about 5% to the GDP.

4.2. Weakness:

In RMG sector, value-addition is 30% only because a RMG unit has to import 70%

of the total value of the product. The low value added represented that the

backward linkage industries such as fabrics and accessories, which directly feed into

the garment sector, have not satisfactorily developed. The weakest point of the

Bangladeshi apparel industry is that it is still at the mercy of the exterior suppliers

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of its main raw materials namely the fabrics. Right now Bangladesh has very limited

capacity to produce fabrics required by the RMG factories. Her competitors India,

Pakistan, Thailand, Malaysia and other countries have their textiles mills that can

produce quality fabrics for the respective apparel industries. This sector will remain

in intense competition in the context; it is very necessary to find out opportunities

and challenges of RMG industry of Bangladesh in order to face firm competition in

the free market environment. Japan is one of the potential markets for exports from

Bangladesh. Quality and fashion conscious Japan is importing readymade garments

from Bangladesh at an increasing rate even though this increase is very negligible.

An extremely large program has to be taken to increase the exports. There exists

supportive policy environment in the RMG sector of Bangladesh. The package of

textile sector incentive has been aimed at primarily to boost up the exporters.

Government has extended some major incentives and facilities for the local and

foreign investors to help increase investment in the country for all industrial sectors

including textiles and clothing Still there are some threats existing in our RMG

sector. According to the Ministry of Textiles, the local fabric manufacturers

currently supply less than 19% of total woven fabric requirement. About 70% of

the total fabric requirement of the knit sector is domestically produced as reported

by the BTMA. Textile policy 1995 envisages established of 246 spinning mills with

25000spindles each, 481 weaning mills each with capacity to produce 17 million

meters of fabrics, 481dyeing-printing-finishing units each with same capacity for

yarn and woven fabric by the year 2005. The findings show that the workers needed

significantly shorter time to produce a shirt of a given specification than the time.

4.3. Opportunity:

The hundred percent export-oriented RMG industries have experienced

phenomenal growth during the last 15 years. Within a very short period of time, it

has attained great importance in terms of its contribution to GDP, foreign exchange

earnings and employment and also as a vehicle of social changes. The export earning

data of Bangladesh, shows that in 19884-85, ready-made garment sector earned

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12.39 %( $116 million) of the total export. This was raised to 36.46 %($471 million)

in 1989-90. This share rapidly went up to 53.36 %($1064 million) in 1991-92.

Surprisingly, the share showed no increase for the last three years. Bangladesh

garments products are facing various barriers and difficulties in the international

market. Garments contribution to the total export earning remained constant at

around 52% for the last two years (52.84%) in 1994-95 and 52.63% in 1995-96. This

stagnant situation demands immediate attention of the international market

researcher and the government as well. This research therefore, attempts to assess

the present status of the RMG sector and suggests strategies to overcome the

present crises.

The most youthful export sector in Bangladesh, the RMG industry, has been

earning over 60% of the foreign currency for the country during the last few years.

In 1995, it contributed 66% to the nations total earning from export. The

membership of BGMEA, which started with 19 (Nineteen) in early 1983, has

reached 2383, as on August 31, 1996, increasing by 25% each year. Garment export

in value has been increasing on an average by 27% each year. As the rate of

increase (20%) per year, is expected to continue through the MFA phasing out

transition, growth prospect of apparel industry looks brighter (The Daily Sang bad:

1996).

Bangladesh has opportunities of expanding the market through the following

strategies.

i) Cost Effective Strategy

ii) New Product Development and Diversification Strategy

iii) Market Diversification Strategy

Combined together these three strategies calls for total quality management (TQM)

approach.

4.3.1. Cost Effective Strategy:

It has three ways to calculate cost effective strategy. These are given below:

a. Backward Integration

b. Labor Productivity Improvement

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c. Productivity of Bangladesh RMG Industry Increasing

4.3.2. Product Diversification Strategy:

An analysis of the product mix of the apparel industry reveals that, so far,

Bangladesh has been able to export very limited categories of products. The

factories of Bangladesh produce shirts, jackets, trousers and other garment; the

shares of these categories in the total production are estimated as follows:

Category Share (%)

Shirts 60.00

Jackets 11.00

Knits 10.00

Trousers 7.00

Others 11.50

As the above figure indicates, Bangladesh has concentrated in the production and

export of shirts. This means that there is a scope and actually a need of structural

change in product mix. Exporters are producing mostly those items on which quotas

are available. Besides, the products served mainly low and medium end markets.

The reason for this is the buyers decision to buy low priced items from Bangladesh.

This relatively narrow base of products may in future limit the market share and

the competitive edge of Bangladesh. Most of its competitors have much broader

product mix.

4.3.3. Market Diversification Strategy:

Bangladesh has concentrated only in a few markets. It has eyed for mostly USA,

Canada and Europe. About 46% of its total apparel exports go to the US markets

and 14% to Canada. The rest 40% go to EU and other European markets. The

competitors of Bangladesh, for example, India has continued to expand its trade,

diversify its markets and change product mix of its exports. As the recent

performances indicate, the production and marketing capabilities of Bangladesh

have increased substantially. But still it lacks the core competence necessary to stay

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in a highly competitive market which one can anticipate in post MFA period. If it

wants to maintain its world market share and competitive edge, it needs to diversify

its products and markets.

4.4. Threats: (Specialist in Finance, Audit and Risk

Management)

Many industry analysts have pointed out in the past and predicted some critical

threats, which could affect the garment industry of Sri Lanka, for the past 20 years

and these have become a reality now. Failure to implement appropriate timely

measures to effectively deal with such threats has driven the industry into turmoil

thereby putting the livelihoods of many hundreds of thousands of people directly at

risk.

The government has a right to deny unnecessary foreign interference in the internal

affairs of the country but it should endeavor to settle any differences by diplomatic

means and if it’s not possible, it needs to take adequate remedial steps to ameliorate

any unfavorable implications on society and the industry itself.It was reported that

the garment exporters will have to absorb an additional duty of nearly 8%-10% on

their exports if the current GSP+ scheme is terminated. This will inevitably increase

the selling prices of our garments in the European market, thereby making them

uncompetitive when compared to some other low-cost garment exporters like China

and those countries, which will continue to be part of GSP+. Currently, even with

these GSP+ duty concessions, most garment exporters are still faced with enormous

difficulty in remaining competitive and profitable due to the intensifying industry

competition and the strength of bargaining power of buyers (direct buyers and

buying offices), who set prices. Eventually this would reduce the demand for Sri

Lankan garments in foreign markets thereby depriving the country of some of its

foreign exchange earnings.

On the other hand, since these shares do not carry residual rights on the assets of

the firm (unlike ordinary shares), in consideration of the time value of the

redemption value (present value), this would effectively have some characteristics of

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a government grant (assuming no premium on redemption). As in the case of any

other preference shares, these shares would also require the firms to pay preference

dividends to the government out of their profits (if profitable) before paying

dividends to ordinary shareholders. Generally preference shares rank below

ordinary shares and above debt finance in terms of the return expected by investors

in consideration of their risks. In consideration of all these factors, these funds

would be a very low-cost source of finance with least strains on their costs

(profitability) and their cash flows. The magnitude of the benefits would be

determined by the conditions of the share issue including the dividend rates, the

premium on redemption, if any, and whether these shares will be subject to

accumulation of dividends. Firms issuing these shares will continue to show the

amount received from the government as a liability (preference share capital

effectively represents debt rather than equity) in their balance sheets. Assuming the

government will not request their redemption in the foreseeable future and no

obligation to pay dividends on these shares, still they would not be able to treat the

funds as a revenue (or reduction in costs) unless the government explicitly waives its

rights. Instead they can use those cash resources to finance their working capital

needs, long term investments or discharge other costly or maturing liabilities with

no worries over the cost and the repayment of the new finance. This will effectively

reduce the cost of financing and hence, can be treated as a cheaper source of

finance. On the other hand, it’s questionable as to what extent and how these funds

(even if the government relinquishes its rights) will be able to provide a cushion

against such impediments in the long term. Though this may be viable in the short

term, it seems sensible to focus on increasing the scale benefits, long-term cost

reduction.

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RECOMMENDATION & CONCLUSION

5.1. Recommendation:

Bangladesh economy at present is more globally integrated than at any time in the

past. The MFA phase-out will lead to more efficient global realignments of the

Garments and Clothing industry. The phase out was expected to have negative

impact on the economy of Bangladesh. Recent data reveals that Bangladesh

absorbed the shock successfully and indeed RMG exports grew significantly both in

FY06 and (especially) in FY07. Due to number of steps taken by the industry,

Bangladesh still remains competitive in RMG exports even in this post phase-

out period. Our Garments Industries can improve their position in the

world map by reducing the ov era l l pro b lems . Such as ma nag eme nt

l a bor con f l i c t , proper man age ment po l i cy , efficiency of the manager,

maintainable time schedule for the product, proper strategic plan etc. Government

also have some responsibility to improve the situation by providing- proper  policy

to protect the garments industries, solve the license problem, quickly

loading facility in the port, providing proper environment for the work,

keep the industry free

 

From all kind of political problems and the biasness Credit must be

provided when the industry fall in need. To be an upper position holder in

the world Garments Sector there is no way except follow the above

recommendations. We hope by maintaining proper management

and policy strategies our country will take the apex position in future

5.2. Conclusions:

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

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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. To remain competitive in the post-MFA phase, Bangladesh

needs to remove all the structural impediments in the transportation

facilities, telecommunication network, and power supply, management

of seaport, utility services and in the law and order situation. The

government and the RMG sector would have to jointly work together

to maintain competitiveness in the global RMG mar ket. Given the

remarkable entrepreneurial initiatives and the dedication of its

workforce, Bangladesh can look forward to advancing its share of the

global RMG market.

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References:

Abdullah, Md. Abu Yousuf, 1997, “International Trade Implications and Future of Ready-Made Garments Sector of Bangladesh” Journal of Business Administration, Vol.23, No. 3 & 4, Page 41-69.

Azim, M. Tahlil , and Nair Uddin, 2003, “Challenges for Garments Sector in Bangladesh after 2004: Avenues for Survival and Growth” Bangladesh Institute of  International and Strategic Studies Journal, Vol. 24, No. 1, Page 49-82.

Bhattacharya, D and M. Raman, 1999, “Female Employment Under Export-Propelled Industrializat ion: Prospects for Internalizing Global Opportunities in Bangladesh’s Apparel Sector”, UNRISD Occasional Paper.

Bhattacharya, D and M. Raman, 2000, “Experience with Implementation of WTO-ATC and Implications for Bangladesh”, CPD Occasional Paper Series, Paper 7.

Bhattacharya, D, M. Rahman and A. Raihan, 2002, “Contribution of the RMG Sector to the Bangladesh Economy”, CPD Occasional Paper Series, Paper 50.

Bow, J. J, 2000, “Bangladesh’s Export Apparel Industry into the 21stCentury – the Next Challenge”, The Asia Foundation.

Centre for Policy Dialogue, 1999, “The Textile and Clothing Industry of Bangladesh: Ina Changing World Economy”, CPD Dialog Report No. 18, Dhaka, Bangladesh, 2003,“Co ping with Post-MFA Challenges: Strategic Responses for Bangladesh RMG Sector”, CPD Dialog Report No. 55, Dhaka, Bangladesh.

Islam, Sadequl, 2001, the Textile and Clothing Indus try of Bangladesh in a Changing World Economy, CPD and the University Press Ltd.

9. Jahan, Sarwat, 2005, “The End of Multi-Fiber Arrangement: Challenges and Opportunities for Bangladesh”, WBI Policy Note.

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