present situation of rmg sector of bangladesh

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Present situation Present situation of RMG sector in of RMG sector in Bangladesh Bangladesh SUBMITTED To: SUBMITTED To: A.K. Nabil Ahmed A.K. Nabil Ahmed Lecturer , Lecturer , Dept: of AMT Dept: of AMT SUBMITTED BY: SUBMITTED BY: Md.Toufiquzzaman Chowdhury Md.Toufiquzzaman Chowdhury S.M Touhidul Wares S.M Touhidul Wares SUBMISSION DATE:16 June 2011 SUBMISSION DATE:16 June 2011 NATIONAL INSTITUTE OF FASHION TECHNOLOGY,BANGLADESH NATIONAL INSTITUTE OF FASHION TECHNOLOGY,BANGLADESH

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““Present situation of Present situation of RMG sector in RMG sector in BangladeshBangladesh””

SUBMITTED To:SUBMITTED To:A.K. Nabil Ahmed A.K. Nabil Ahmed

Lecturer ,Lecturer , Dept: of AMTDept: of AMT

SUBMITTED BY:SUBMITTED BY:Md.Toufiquzzaman ChowdhuryMd.Toufiquzzaman Chowdhury

S.M Touhidul WaresS.M Touhidul Wares

SUBMISSION DATE:16 June 2011SUBMISSION DATE:16 June 2011

NATIONAL INSTITUTE OF FASHION TECHNOLOGY,BANGLADESHNATIONAL INSTITUTE OF FASHION TECHNOLOGY,BANGLADESH

AcknowledgementAcknowledgement

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

With profound regard we gratefully acknowledge With profound regard we gratefully acknowledge our respected course teacher Mr.A.K.Nabil Ahmed our respected course teacher Mr.A.K.Nabil Ahmed for his generous help and day to day suggestion for his generous help and day to day suggestion

during preparation of the report. He isduring preparation of the report. He is so much an inspiration and guidance to us that we so much an inspiration and guidance to us that we

are, short of words in expression our gratitude.are, short of words in expression our gratitude.

We like to give thanks especially to our friends and We like to give thanks especially to our friends and many individuals, for their enthusiasticmany individuals, for their enthusiastic

encouragements and helps during the preparation encouragements and helps during the preparation of this report us by sharing ideas regarding thisof this report us by sharing ideas regarding this

subject .And finally, thanks to my group members as subject .And finally, thanks to my group members as he serious and prolific towards he serious and prolific towards

making this assignment. making this assignment. Once more time to Sir, we owe more than we can Once more time to Sir, we owe more than we can

mention……mostly for teaching us to see mention……mostly for teaching us to see the silver lining in every hard workthe silver lining in every hard work

Table of Content:Table of Content:

INTRODUCTIONINTRODUCTION

1.1 Abstract1.1 Abstract

The ready-made garment (RMG) industry of Bangladesh The ready-made garment (RMG) industry of Bangladesh started in the late 1970s and became astarted in the late 1970s and became a

prominent player in the economy within a short Period of prominent player in the economy within a short Period of time. The industry has contributed totime. The industry has contributed to

export earnings, foreign exchange earnings, employment export earnings, foreign exchange earnings, employment creation, poverty alleviation and thecreation, poverty alleviation and the

empowerment of women. The export-quota system and empowerment of women. The export-quota system and the availability of cheap labor are thethe availability of cheap labor are the

two main reasons behind the success of the industry. two main reasons behind the success of the industry. Shirts, T-shirts, trousers, sweaters andShirts, T-shirts, trousers, sweaters and

jackets are the main products manufactured and exported jackets are the main products manufactured and exported by the industry. Bangladesh exports itsby the industry. Bangladesh exports its

RMG products mainly to the United States of America and RMG products mainly to the United States of America and the European Union. The Readythe European Union. The Ready

Made Garments (RMG) sector plays a pivotal role in the Made Garments (RMG) sector plays a pivotal role in the economy of Bangladesh. This sectoreconomy of Bangladesh. This sector

accounts for approximately 76% of the total export accounts for approximately 76% of the total export earnings and nearly 10% of GDP.earnings and nearly 10% of GDP.

1.2 Introduction1.2 Introduction

Like other 3rd world countries Bangladesh is a developing country. Her Like other 3rd world countries Bangladesh is a developing country. Her economic developmenteconomic development

depends firstly on Agriculture and secondly on Industry. Although Bangladesh depends firstly on Agriculture and secondly on Industry. Although Bangladesh is not developedis not developed

in industry, it has been enriched in Garment industries in the recent past in industry, it has been enriched in Garment industries in the recent past years. For Bangladesh,years. For Bangladesh,

the readymade garment export industry has been the proverbial goose that the readymade garment export industry has been the proverbial goose that lays the golden eggslays the golden eggs

for over fifteen years now. Traditionally, the jute industry dominated the for over fifteen years now. Traditionally, the jute industry dominated the industrial sector of theindustrial sector of the

country until the 1970s. Since the early 1980s, the RMG industry has emerged country until the 1970s. Since the early 1980s, the RMG industry has emerged as an importantas an important

player in the economy of the country. In the field of Industrialization garment player in the economy of the country. In the field of Industrialization garment industry is aindustry is a

promising step. It is making significant contribution in the field of our export promising step. It is making significant contribution in the field of our export income and in theincome and in the

economical development of our country. At present the government of our economical development of our country. At present the government of our country earns billionscountry earns billions

of dollars by exporting ready-made garments products to other countries. We of dollars by exporting ready-made garments products to other countries. We have not achievedhave not achieved

this success over night; we have some elements that help us to achieve this this success over night; we have some elements that help us to achieve this success. At presentsuccess. At present

we are competing with our neighboring country; India and China. Though we we are competing with our neighboring country; India and China. Though we are earning aare earning a

handsome amount of profit each year from this sector, the ready-made handsome amount of profit each year from this sector, the ready-made garment sector isgarment sector is

suffering with a lot of problems. We should solve these negative situations by suffering with a lot of problems. We should solve these negative situations by ensuring properensuring proper

steps steps

1.3 Objective1.3 Objective Followings were the objectives of the studyFollowings were the objectives of the study..

Broad objective: To gather knowledge about the overall scenario of Ready-Broad objective: To gather knowledge about the overall scenario of Ready-Made Garments (RMG) Sector in Bangladesh.Made Garments (RMG) Sector in Bangladesh.

Specific objectives: To attain the broad objective following specific Specific objectives: To attain the broad objective following specific objectives were pursued .objectives were pursued .

¤To know briefly about economic significant of RMG.¤To know briefly about economic significant of RMG.

¤ To identify¤ To identify what factors are affecting an entrepreneur what factors are affecting an entrepreneur

¤ To identify the performance of an entrepreneur. ¤ To identify the performance of an entrepreneur.

1.4 Scope1.4 Scope

This report is on a wide exporting sector of Bangladesh. So, mainly we have This report is on a wide exporting sector of Bangladesh. So, mainly we have tried to focus on thetried to focus on the following factors. following factors.

¤Current scenario of ready-made garment industry. ¤Current scenario of ready-made garment industry.

¤Reasons for a healthy growth ¤Reasons for a healthy growth

¤ Reasons for having comparative advantages in the world market. ¤ Reasons for having comparative advantages in the world market.

¤ Economical and financial contribution of this industry in Bangladeshi economy. ¤ Economical and financial contribution of this industry in Bangladeshi economy.

¤ Beside these, we also brought several foreign benchmarks and statistics for doing the ¤ Beside these, we also brought several foreign benchmarks and statistics for doing the research work in a better way.research work in a better way.

1.5 Mythology1.5 Mythology

This report has been prepared on the basis of experience gathered through This report has been prepared on the basis of experience gathered through learning annual report. For preparing this report, I have also get learning annual report. For preparing this report, I have also get information from website of BGMEA, BKMEA Export Promotion Bureau and information from website of BGMEA, BKMEA Export Promotion Bureau and many Government and non government organization. I have presented my many Government and non government organization. I have presented my experience and finding by using different tables, which are presented in the experience and finding by using different tables, which are presented in the analysis part. The details of the work plan are furnished below:analysis part. The details of the work plan are furnished below:

Relevant data for this report has been collected primarily by direct Relevant data for this report has been collected primarily by direct investigations investigations

of different leasing company’s annual report and website. of different leasing company’s annual report and website.

The information and data for this report have been collected from The information and data for this report have been collected from secondary sources. The secondary sources of information are annual secondary sources. The secondary sources of information are annual reports, websites and different manuals.reports, websites and different manuals.

Data collected from secondary sources have been processed manually and Data collected from secondary sources have been processed manually and qualitative approach in general and quantitative approach in some cases qualitative approach in general and quantitative approach in some cases has been used throughout the study.has been used throughout the study.

Qualitative approach has been adopted for data analysis and interpretation Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base. So the report relies primarily on an taking the processed data as the base. So the report relies primarily on an analytical judgment and critical reasoning.analytical judgment and critical reasoning.

1.6 Literature Review

Several Organizations have analyzed aspects of the garment industry in Several Organizations have analyzed aspects of the garment industry in Bangladesh. Of thevarious aspects of the industry, the problems and the Bangladesh. Of thevarious aspects of the industry, the problems and the working conditions of female workers have received the greatest attention. working conditions of female workers have received the greatest attention. There are several studies including The Centre for Policy Dialogue (CPD), There are several studies including The Centre for Policy Dialogue (CPD), study by Debapriya Bhattacharya, Mustafizur Rahman and Ananya study by Debapriya Bhattacharya, Mustafizur Rahman and Ananya Raihan(2002) and International Finance Corporation (2007) study on this Raihan(2002) and International Finance Corporation (2007) study on this topic. Both of these studies use accepted survey and research methodology topic. Both of these studies use accepted survey and research methodology to analyze a wealth of data on the social and economic background, to analyze a wealth of data on the social and economic background, Contribution of the RMG sector. Professor Muzaffar Ahmad looks at the Contribution of the RMG sector. Professor Muzaffar Ahmad looks at the industrial organization of the sector and discusses robustness and long-industrial organization of the sector and discusses robustness and long-term viability of apparel manufacturing in Bangladesh. Wiigton (2000) term viability of apparel manufacturing in Bangladesh. Wiigton (2000) provides a good overview of this industry,especially the developments in provides a good overview of this industry,especially the developments in the early years.Nidhi Khosla writes on the women worker in Journal of the early years.Nidhi Khosla writes on the women worker in Journal of International Women’s Studies (Vol. 11 #1 November 2009). The International Women’s Studies (Vol. 11 #1 November 2009). The Bangladesh Planning Commission under the Trade and Industrial Policy Bangladesh Planning Commission under the Trade and Industrial Policy (TIP) project also commissioned several studies on the industry. Hossain (TIP) project also commissioned several studies on the industry. Hossain and Brar (2004) consider some labor-related issues in the garment and Brar (2004) consider some labor-related issues in the garment industry. Quddus (2006) presents a profile of the apparel sector in industry. Quddus (2006) presents a profile of the apparel sector in Bangladesh and discusses some other aspects of the industry. Quddus Bangladesh and discusses some other aspects of the industry. Quddus (2006) presents results from a survey of apparel entrepreneurs and (2006) presents results from a survey of apparel entrepreneurs and evaluates the performance of entrepreneurs and their contribution to the evaluates the performance of entrepreneurs and their contribution to the success of this industry. Islam and Quddus (2006) present an overall success of this industry. Islam and Quddus (2006) present an overall analysis of the industry to evaluate its potential as a catalyst for the analysis of the industry to evaluate its potential as a catalyst for the development of the rest of the Bangladesh economy.development of the rest of the Bangladesh economy.

DISCUSSIONDISCUSSION2.1 History:2.1 History:

Once upon a time the cloth of Bangladesh achieved worldwide fame. Once upon a time the cloth of Bangladesh achieved worldwide fame. Maslin and Jamdani cloth of our country were used as the Maslin and Jamdani cloth of our country were used as the luxurious garments of the royal figures in Europe and other luxurious garments of the royal figures in Europe and other countries. The British rulers in India didn’t develop our cloth countries. The British rulers in India didn’t develop our cloth industries at all. Rather they destroyed them and imported cloths industries at all. Rather they destroyed them and imported cloths from England. After the emergence of Bangladesh radical change from England. After the emergence of Bangladesh radical change has come to our garment sector. Garment industries started has come to our garment sector. Garment industries started working from the 10's of the late century.working from the 10's of the late century.

2.2 An Overview of the Bangladesh Ready-Made Garment 2.2 An Overview of the Bangladesh Ready-Made Garment Industry:Industry:

The RMG industry is the only multi-billion-dollar manufacturing and The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. Whereas the industry contributed export industry in Bangladesh. Whereas the industry contributed only 0.001 per cent to the country’s total export earnings in 1976, only 0.001 per cent to the country’s total export earnings in 1976, its share increased to about approximate 80 percent of those its share increased to about approximate 80 percent of those earnings in 2010.Bangladesh exported garments worth the earnings in 2010.Bangladesh exported garments worth the equivalent of $12348 Million in 2010, which was about 3.00 equivalent of $12348 Million in 2010, which was about 3.00 percent of the global total value ($276 billion) of garment exports. percent of the global total value ($276 billion) of garment exports. The country’s RMG industry grew by more than 15 percent per The country’s RMG industry grew by more than 15 percent per annum on average during the last 15 years. The foreign exchange annum on average during the last 15 years. The foreign exchange earnings and employment generation of the RMG sector have been earnings and employment generation of the RMG sector have been increasing at double-digit rates from year to year. Some important increasing at double-digit rates from year to year. Some important issues related to the RMG industry of Bangladesh are noted in issues related to the RMG industry of Bangladesh are noted in table 1table 1

Table 1. Important issues related to the Bangladesh ready-made garment industryTable 1. Important issues related to the Bangladesh ready-made garment industry

Year(s)Year(s) IssueIssue

1977-1980 1977-1980

Early period of growth.Early period of growth.

1982-1985 1982-1985

Boom days.Boom days.

1985 1985

Imposition of quota restrictions.Imposition of quota restrictions.

1990s 1990s

Knitwear sector developed Knitwear sector developed significantly.significantly.

1993-1995 1993-1995

Child labor issue and its solutionChild labor issue and its solution

2003 2003

Withdrawal of Canadian quota Withdrawal of Canadian quota restriction. restriction.

20052005 Phase-out of export-quota system.Phase-out of export-quota system.

Source:Source:

Compiled by the author from Quddus and Rashid (2000), Mainuddin (2000) andCompiled by the author from Quddus and Rashid (2000), Mainuddin (2000) and databases of the Bangladesh Garment Manufacturers and Exporters Association, and databases of the Bangladesh Garment Manufacturers and Exporters Association, and the Exportthe Export Promotion Bureau, Bangladesh Promotion Bureau, Bangladesh Currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 percent of Currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 percent of those those firms are locally owned with the exception of a few foreign firms located in export firms are locally owned with the exception of a few foreign firms located in export processing zones (Gonzales, 2002). The RMG firms are located mainly in three main processing zones (Gonzales, 2002). The RMG firms are located mainly in three main cities: the capital city Dhaka, the port city Chittagong and the industrial city cities: the capital city Dhaka, the port city Chittagong and the industrial city Narayangonj. Bangladesh RMG firms vary in size. Based on Bangladesh Garment Narayangonj. Bangladesh RMG firms vary in size. Based on Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data, Mainuddin (2000) found that Manufacturers and Exporters Association (BGMEA) data, Mainuddin (2000) found that in1997 more than 75 per cent of the firms employed a maximum of 400 employees each. in1997 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 Garment companies in Bangladesh form formal or informal groups. The grouping helps to share manufacturing activities, to diversify risks; horizontal as well as vertical to share manufacturing activities, to diversify risks; horizontal as well as vertical coordination can be easily found in such group activities. Ready-made garments coordination can be easily found in such group activities. Ready-made garments manufactured in Bangladesh are divided mainly into two broad categories: woven and 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 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 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 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 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 percent of the the early 1990s; such products currently account for more than 40 percent of the country’s total RMG export earnings (BGMEA website). Although various types of 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-garments are manufactured in the country, only a few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the major production-share (BGMEA shirts, trousers, jackets and sweaters, constitute the major production-share (BGMEA website; andante, 2001). Economies of scale for large-scale production and export-quota website; andante, 2001). Economies of scale for large-scale production and export-quota holdings in the corresponding categories are the principal reasons for such a narrow holdings in the corresponding categories are the principal reasons for such a narrow product concentration.product concentration.

2.3 Reason behind the Growth of RMG in Bangladesh:2.3 Reason behind the Growth of RMG in Bangladesh:

The prime reason why garment industries have come out to be the champion in the field of The prime reason why garment industries have come out to be the champion in the field of export is obviously the cheap labor. Women contribute to the working force in these export is obviously the cheap labor. Women contribute to the working force in these garment factories, as they are relatively cheaper than men.garment factories, as they are relatively cheaper than men.

2.3.1 Low cost labor:2.3.1 Low cost labor: As Bangladesh is an overpopulated country it is very easy for As Bangladesh is an overpopulated country it is very easy for the garment industries to hire labors at a lower rate. At present the government of our the garment industries to hire labors at a lower rate. At present the government of our country has announced minimum wage to the garment workers but the industries can still country has announced minimum wage to the garment workers but the industries can still earn a handsome amount of profit by exporting their product. Although it has increase but earn a handsome amount of profit by exporting their product. Although it has increase but comparatively it is still low.comparatively it is still low.

Source: Ministry of Labor and Employment, Bangladesh. July 26, 2010Source: Ministry of Labor and Employment, Bangladesh. July 26, 2010

ClassClass Existing WageExisting Wage Announce WageAnnounce Wage Increase in %Increase in %

Grade-1Grade-1 5,140.005,140.00 9,300.009,300.00 80.93%80.93%

Grade-2Grade-2 3,840.003,840.00 7,200.007,200.00 87.50%87.50%

Grade-3Grade-3 2,449.00 2,449.00 4,120.004,120.00 68.23%68.23%

Grade-4Grade-4 2,250.102,250.10 3,763.003,763.00 67.24%67.24%

Grade-5Grade-5 2,046.002,046.00 3,455.003,455.00 68.87%68.87%

Grade-6Grade-6 1,851.001,851.00 3,210.003,210.00 73.47%73.47%

Grade-7Grade-7 1,662.501,662.50 3,000.003,000.00 80.45%80.45%

ApprenticeApprentice 1,200.00 1,200.00 2,500.002,500.00 108.33%108.33%

2.3.2 Export-quota system2.3.2 Export-quota system::

The “export-quota system” in trading garment products played a significant The “export-quota system” in trading garment products played a significant role in the success of the industry. However, that quota system came to an role in the success of the industry. However, that quota system came to an end in 2004. Therefore, the competitiveness issue needs to be addressed, end in 2004. Therefore, the competitiveness issue needs to be addressed, with special attention given to the long-term sustainability of the industry. with special attention given to the long-term sustainability of the industry.

Unilateral restriction, short-term arrangement (STA), long term arrangement Unilateral restriction, short-term arrangement (STA), long term arrangement (LTA), Multi-fiber. Arrangement (MFA) and finally the WTO Agreement on (LTA), Multi-fiber. Arrangement (MFA) and finally the WTO Agreement on Textiles and Clothing (ATC) are the chronological steps through which the Textiles and Clothing (ATC) are the chronological steps through which the “export-quota system” was administered until it was finally abolished on 31 “export-quota system” was administered until it was finally abolished on 31 December 2004, making worldwide textile and garment trade quota-free.December 2004, making worldwide textile and garment trade quota-free.

2.3.3 Easy Communication:2.3.3 Easy Communication: It is very easy industries to collect raw materials from other countries and they It is very easy industries to collect raw materials from other countries and they

can easily export their produced goods to the other countries.can easily export their produced goods to the other countries.

2.3.4 Government Support: Government is supporting directly and indirectly the industries and monitors their activities so that they can perform properly. Government reduces tariff and supply production factors like electricity and water to them

2.4 Product Tree2.4 Product Tree

Bangladesh exports about 63 items to different apparel markets. Ready-made Bangladesh exports about 63 items to different apparel markets. Ready-made garments manufactured in Bangladesh are divided mainly into two broad garments manufactured in Bangladesh are divided mainly into two broad categories: woven and knit products. Shirts, T-shirts and trousers are the categories: woven and knit products. Shirts, T-shirts and trousers are the main woven products and undergarments, socks, stockings, T-shirts, sweaters main woven products and undergarments, socks, stockings, T-shirts, sweaters and other casual and soft garments are the main knit products.Woven and other casual and soft garments are the main knit products.Woven garment products still dominate the garment export earnings of the country. garment products still dominate the garment export earnings of the country. The share of knit garment products has been increasing since the early 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 1990s; such products currently account for more than 40 per cent of the country’s total RMG export earnings (BGMEA website).Although various types country’s total RMG export earnings (BGMEA website).Although various types of garments are manufactured in the country, only a few categories, such as of garments are manufactured in the country, only a few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the major shirts, T-shirts, trousers, jackets and sweaters, constitute the major production-share (BGMEA website; and Nath, 2001). It needs to be mentioned production-share (BGMEA website; and Nath, 2001). It needs to be mentioned here that Bangladesh produces a very limited categories of expensive and here that Bangladesh produces a very limited categories of expensive and fashion oriented garments. Economies of scale for large-scale production and fashion oriented garments. Economies of scale for large-scale production and export-quota holdings in the corresponding categories are the principal export-quota holdings in the corresponding categories are the principal reasons for such a narrow product concentration. Main apparel items reasons for such a narrow product concentration. Main apparel items exported from Bangladesh is shown in the tree – diagram drawn below:exported from Bangladesh is shown in the tree – diagram drawn below:

RMG

WOVEN KNITWEAR

‘T’ Shirt Sweater Polo shirtTrouser Shirt Jacket

2.5 Exporting Condition of Garments Industry:2.5 Exporting Condition of Garments Industry:The Ready-Made Garments (RMG) industry occupies a unique position in the BangladeshThe Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh

economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during the last 20 years. By taking advantage of an insulated market under the provision 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 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 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 time. The industry plays a key role in employment generation and in the provision of income to the poor. Nearly two million workers are directly and more than ten million inhabitants are 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 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 also played a significant role in the socio- units has grown from 180 to over 3600. The sector has also played a significant role in the socio-

economic development of the country. economic development of the country.

YEARYEAR WOVENWOVEN KNIT KNIT

SWEATERSWEATERTOTALTOTAL

1995-961995-96 1948.811948.81 598.32598.32 2547.132547.13

1996-971996-97 2237.952237.95 763.3763.3 3001.253001.25

2004-20052004-2005 3598.203598.20 2819.472819.47 6417.676417.67

2005-20062005-2006 4083.824083.82 3816.983816.98 7900.87900.8

2006-20072006-2007 4657.634657.63 4553.64553.6 9211.239211.23

2007-20082007-2008 5167.285167.28 5532.525532.52 10699.810699.8

2008-20092008-2009 5918.515918.51 6429.266429.26 12347.7712347.77

COMPARATIVE STATEMENT ON EXPORT OF RMG AND TOTAL EXPORT COMPARATIVE STATEMENT ON EXPORT OF RMG AND TOTAL EXPORT OF OF

BANGLADESH BANGLADESH::

YEARYEAR EXPORT OF RMG EXPORT OF RMG

(IN MILLION US$)(IN MILLION US$)TOTAL EXPORT TOTAL EXPORT

OF BANGLADESH OF BANGLADESH

(IN MILLION US$)(IN MILLION US$)

% OF RMG'S TO % OF RMG'S TO

TOTAL EXPORTTOTAL EXPORT

1983-841983-84 31.5731.57 811.00811.00 3.893.89

1984-851984-85 116.2116.2 934.43934.43 12.4412.44

2000-012000-01 4859.834859.83 6467.306467.30 75.1475.14

2001-022001-02 4583.754583.75 5986.095986.09 76.5776.57

2002-032002-03 4912.094912.09 6548.446548.44 75.0175.01

2003-042003-04

5686.095686.09 7602.997602.99 74.7974.79

2004-052004-05 6417.676417.67 8654.528654.52 74.1574.15

2005-062005-06 7900.807900.80 10526.1610526.16 75.0675.06

2006-072006-07 9211.239211.23 12177.8612177.86 75.6475.64

2007-082007-08 10699.8010699.80 14110.8014110.80 75.8375.83

2008-092008-09 12347.7712347.77 15565.1915565.19 79.3379.33

2.6 Contribution in National Income:2.6 Contribution in National Income:When the garment industries 1st started to When the garment industries 1st started to

export, the sector was not paid much export, the sector was not paid much attention but the situation has changed and at attention but the situation has changed and at

present it is earning the highest amount of present it is earning the highest amount of foreign currencies in our country.foreign currencies in our country.

Major Product Export from Major Product Export from Bangladesh:Bangladesh:

YearYear ProductProduct ExportExport %%

22

00

00

88

||

22

00

00

99

RMG RMG 12347.7712347.77 79.3379.33

Frozen FoodFrozen Food 454.53 454.53 2.922.92

Tea Tea 12.2912.29 0.080.08

Raw JuteRaw Jute 148.17148.17 0.950.95

Jute GoodsJute Goods 373.18373.18 2.402.40

Leather Leather 177.32177.32 1.141.14

OthersOthers 1508.061508.06 9.699.69

2.7 Problems behind Readymade Garments Industry:2.7 Problems behind Readymade Garments Industry:

2.7.1 Backward Linkage:2.7.1 Backward Linkage: Backward linkage means the use by one firm or industry of Backward linkage means the use by one firm or industry of

produced inputs from another firm or industry (Alan V Deardorff , 2001) That means produced inputs from another firm or industry (Alan V Deardorff , 2001) That means the finished garment relies on three steps; first level for converting fibers/cotton the finished garment relies on three steps; first level for converting fibers/cotton toyarns, second step for converting yarns to grey fabrics and the final step for toyarns, second step for converting yarns to grey fabrics and the final step for converting gray fabrics to dyed, printed of other finished fabrics.Out of three steps, converting gray fabrics to dyed, printed of other finished fabrics.Out of three steps, Bangladesh is only capable of knitting, finishing in knitwear sectors but far behind in Bangladesh is only capable of knitting, finishing in knitwear sectors but far behind in producing yarn, fabrics which is a major factor for woven section. Only success came producing yarn, fabrics which is a major factor for woven section. Only success came to accessories where 80% demand of our country was fulfilled.to accessories where 80% demand of our country was fulfilled.

The success of the governmentThe success of the government industry very much depends onindustry very much depends on how effectively RMG sector how effectively RMG sector

linkages may operate backwardlinkages may operate backward and forward. If the manufacturer has effective control over theand forward. If the manufacturer has effective control over the

supply of raw materials, supply of raw materials,Components and ancillary services needed to produce final product. Then the production is likelyComponents and ancillary services needed to produce final product. Then the production is likely to be interrupted. If the company develops an effective marketing service strategies that provide to be interrupted. If the company develops an effective marketing service strategies that provide right signal, and if marketing and distributing system as a whole are effective for having the right signal, and if marketing and distributing system as a whole are effective for having the products reach the target markets, then the sales revenue for the company is likely to be products reach the target markets, then the sales revenue for the company is likely to be maximized. It means that to minimize cost of production and maximize sales revenues both maximized. It means that to minimize cost of production and maximize sales revenues both backward and forward linkages need to be integrated. Here the issue of developing backward backward and forward linkages need to be integrated. Here the issue of developing backward linkages is discussed with reference to the desirability of having control over the supply of inputs linkages is discussed with reference to the desirability of having control over the supply of inputs of RMG industry, mainly, fabric, yarn and processing status (Siddique, 2004). of RMG industry, mainly, fabric, yarn and processing status (Siddique, 2004). These three steps are integrated into each other as shown in table 1. It shows that these three These three steps are integrated into each other as shown in table 1. It shows that these three steps are essential for backward linkage integration (BGMEA, January 2005) steps are essential for backward linkage integration (BGMEA, January 2005) Some other problems that the industries face Some other problems that the industries face

##Some other problems of RMG sectorSome other problems of RMG sector

Dependency on different countries for raw materials Dependency on different countries for raw materials • • Illiterate, unskilled and unsatisfied Workers Illiterate, unskilled and unsatisfied Workers • • Lacking of Resources Lacking of Resources • • Political Instability Political Instability • • Low Working Salary: Low Working Salary: • • Lack in Marketing Tactics Lack in Marketing Tactics • • M/C advancement is necessary M/C advancement is necessary • • Absence of easily on-hand middle management. Absence of easily on-hand middle management. • • Small number of manufacturing methods Small number of manufacturing methods • • Lack of training organizations for industrial workers, supervisors and Lack of training organizations for industrial workers, supervisors and managers managers • • Fewer process units for textiles and garments Fewer process units for textiles and garments • • Incompetent ports, entry/exit complicated and loading/unloading takes Incompetent ports, entry/exit complicated and loading/unloading takes much time much time • • Time-consuming custom clearance Time-consuming custom clearance

ANALYSISANALYSIS

3.1 SWOT Analysis:3.1 SWOT Analysis:

3.1.1 Strengths3.1.1 Strengths

1. The biggest foreign currency earning industry.1. The biggest foreign currency earning industry.

2. Ancillary services, fees, commission are more.2. Ancillary services, fees, commission are more.

3. RMG credit experts are available.3. RMG credit experts are available.

4. Competitors like China doesn’t have vertical integration.4. Competitors like China doesn’t have vertical integration.

3.1.2 Weaknesses 3.1.2 Weaknesses

1. Backward Linkage industry is absent.1. Backward Linkage industry is absent.

2. Automation is not cost effective in our country.2. Automation is not cost effective in our country.

3. External raw materials supply.3. External raw materials supply.

3.1.3 Opportunities3.1.3 Opportunities

1. Investment in Backward Linkage Industry.1. Investment in Backward Linkage Industry.

2. Liberalized Globalization will push to improve the quality of the 2. Liberalized Globalization will push to improve the quality of the RMG products.RMG products.

3. Composite plants will get advantage by reducing lead time.3. Composite plants will get advantage by reducing lead time.

3.1.4 Threats3.1.4 Threats

1. WTO agreement1. WTO agreement

2. Pressure on Compliance issues from consumer groups.2. Pressure on Compliance issues from consumer groups.

3. Negative image of Bangladesh in the international market for less concern 3. Negative image of Bangladesh in the international market for less concern on human and social issues.on human and social issues.

CONCLUSIONCONCLUSION

4.1 Recommendation:4.1 Recommendation: Bangladesh economy at present is more globally integrated than at any 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 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 realignments of the Garments and Clothing industry. The phase out was expected to have negative impact on the economy of Bangladesh.Recent expected to have negative impact on the economy of Bangladesh.Recent data reveals that Bangladesh absorbed the shock successfully and indeed data reveals that Bangladesh absorbed the shock successfully and indeed RMG exports grew significantly both in FY07 and (especially) in FY08. Due RMG exports grew significantly both in FY07 and (especially) in FY08. Due to a number of steps taken by the industry, Bangladesh still remains to a number of steps taken by the industry, Bangladesh still remains competitive in RMG exports even in this post phase-out period. Our competitive in RMG exports even in this post phase-out period. Our Garments Industries can improve their position in the world map reducing Garments Industries can improve their position in the world map reducing the overall problems. Such as management labor conflict, proper the overall problems. Such as management labor conflict, proper management policy, efficiency of the manager, maintainable time schedule management policy, efficiency of the manager, maintainable time schedule for the product, proper strategic plan etc. Government also have some for the product, proper strategic plan etc. Government also have some responsibility to improve the situation by providing- proper policy to responsibility to improve the situation by providing- proper policy to protect the garments industries, solve the license problem, quickly loading protect the garments industries, solve the license problem, quickly loading facility in the port, providing proper environment for the work, keep the facility in the port, providing proper environment for the work, keep the industry free from all kind of political problem and the biasness. Credit industry free from all kind of political problem and the biasness. Credit must be provided when the industry fall in need. To be an upper position 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 holder in the world Garments Sector there is no way except follow the above recommendations. We hope by maintaining proper management and above recommendations. We hope by maintaining proper management and policy strategies our country will take the top position in future.policy strategies our country will take the top position in future.

Optimists see opportunities in challenges; pessimists see only Optimists see opportunities in challenges; pessimists see only

challenges in opportunities. challenges in opportunities.

With MFA phase-out US market for apparels is going expand With MFA phase-out US market for apparels is going expand dramatically asdramatically as

uncompetitive US firms are compelled to make their exit. There uncompetitive US firms are compelled to make their exit. There will be enormouswill be enormous

opportunities for competitive players to make new breakthroughs opportunities for competitive players to make new breakthroughs in US market.in US market.

Bangladesh’s objective should be to retain the current share of Bangladesh’s objective should be to retain the current share of 2.5% in US market during the first 3 years of phase-out (2005-8). 2.5% in US market during the first 3 years of phase-out (2005-8). Then enhance the market share to 3% and above. Then enhance the market share to 3% and above.

Bangladesh should take the strategy of cautious OptimismBangladesh should take the strategy of cautious Optimism

ReferencesReferences http://www.bgmea.com.bd/http://www.bgmea.com.bd/ http://www.bkmea.com/http://www.bkmea.com/ http://www.epb.gov.bd/http://www.epb.gov.bd/ http://www.bbs.gov.bd/http://www.bbs.gov.bd/ http://www.mincom.gov.bd/http://www.mincom.gov.bd/ http://www.btmadhaka.com/http://www.btmadhaka.com/ http://www.epzbangladesh.org.bdhttp://www.epzbangladesh.org.bd http://www.bangladesh-bank.orghttp://www.bangladesh-bank.org// http://www.bangladeshknitwear.com/http://www.bangladeshknitwear.com/ http://www.nbr-bd.org/http://www.nbr-bd.org/ http://www.fbcci-bd.org/http://www.fbcci-bd.org/ http://www.ideas.repec.org/p/pdb/opaper/50.htmlhttp://www.ideas.repec.org/p/pdb/opaper/50.html https://www.cia.gov/library/publications/the-world-factbook/geos/bg.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/bg.html http://www.en.wikipedia.org/wiki/Bangladeshi_RMG_Sectorhttp://www.en.wikipedia.org/wiki/Bangladeshi_RMG_Sector