Contribution of RMG sector to the Bangladesh economy Page |1

TABLE OF CONTENT
PART TOPICS Page no.

1 Background Of The Study

2
2 Economics Sector Analysis Of Bangladesh:
3
ECONO,IC SECTORS OF BANGLADESH
3
ECONOMIC GROTH BY THE SECTORS
4
3 CONTRIBUTION OF RMG IN ECONOMY OF
BANGLADESH:
5
Bangladesh RMG export in GDP
5
Comparative statement of RMG export and total export
6
Comparative statement of RMG export and total export in
various year
7
Bangladesh RMG export to world
8
4 Social impact:
9
Employment
10
Participation of women
10
Savings
11
Child labor
12
Population control
12
5 Sectorial Contributions
13
6 Problems
16
7 Prospects
21
8 Recommendation
23
9 Concluding remarks
24

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BACGROUND OF THE STUDY:

At independence in 1971, most observers of the newly emerged country took a pessimistic view about the
developmental prospect of Bangladesh. Many thought that the country would remain permanently locked
in a below poverty level equilibrium trap. Although there is little room for complacency Bangladesh has
come a long way from there. About two-fifths of the economy is now connected with the global economy
through exports, imports, factor and commodity markets; the degree of openness of the economy1
currently stands at 40%. Bangladesh can now rightfully claim that she has graduated from a
predominantly aid receiving nation to a trading nation.

The export-oriented RMG sector has made crucial contribution to this abovementioned transformation of
the Bangladesh economy. The role of our RMG entrepreneurs, domestic fiscal and financial, institutional
policy support and incentives put in place by successive governments, substantial RMG-supportive
linkage activities within the domestic economy and global market opportunities combined to create a
story which is, to be honest and true, unparalleled in the developing world. When jute and jute goods
were losing their traditional markets, with the prospect of drastic fall in forex earnings it is the RMG
sector which came in first to replace it, and then to overtake it. While traditional export sector could not
yield expected results, the RMG sector gradually injected dynamism in the export as well as in the
domestic economy though backward and forward linkage economic activities.

The export-oriented readymade garments (RMG) sector in Bangladesh started its journey in late 1970s as
a small non-traditional sector of export. Bangladesh exported RMG worth only US$ 69 thousand when
Reaz Garments exported its first consignment to USA in 1978. By FY2002, within a span of about two
decades exports have gone up to US$4.5 billion. Over the past decade alone, the sector registered a
phenomenal growth rate of 15 percent perineum, which is impressive by any standard2. In fact, this was
an exceptionally high growth rate for an emerging industry anywhere in the world. The industrial base
which sustained such high growths also enjoyed a robust expansion, from less than 50 factories in 1983 to
more than 3,400 in 2002, with the number of RMG workers reaching approximately 1.5 million.

Despite many difficulties faced by the sector over the past years, it continued to show robust performance,
competitive strength and, of no less importance, social commitment. RMGs contribution to Bangladesh
economy is well-known, well-appreciated and well-respected. However, often times the magnitude of its
multiplier impact and implications will justify the support that this sector has been given over the past
years and also the support it is currently seeking from the government?

In FY2002 Bangladesh exported RMG products worth 4.5 billion US dollars. Her share in total US
imports of apparels was 3.2%; in EU it was 3.3% and in Canada it was 3.0%. Bangladesh is known in
these countries as a small country with a strong presence. Everywhere, RMG serves as a flagship product
of our country, inducing peoples interest in Bangladesh both as a tourist and investment destination.
These are the impacts which are difficult to quantify, yet without which the country perhaps would not

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have been able to project itself to a trajectory of high growth and higher standards of living. Thus, RMGs
contribution to Bangladesh, both direct and indirect, needs to be recognized for what it is. In the
following pages, an attempt is made to quantify the key role that RMG has come to play in the economy
of Bangladesh. The RMG sector has also played a significant role in the social metamorphosis in a
broader context. This paper attempts to qualify aspects such as women empowerment, population control,
education, environmental awareness, elimination of child labor which contributed to overall improvement
in the HDI (Human Development Index) Indicators. It should be noted that the study is not exhaustive,
and can be further improved upon.

ECONOMIC SECTORS ANALYSIS OF BANGLADESH

Bangladesh has three major economic sectors thats are agriculture sector, manufacturing and industry,
and powering and energy sector. Manufacturing and industrial sector contain-RMG and textile, small
medium enterprise and the export. The economy of Bangladesh contributed by these sectors. All these
sectors contributed in the economy but comparatively industrial sector contributed more than other
sectors. Now we are present the contribution of these sectors in the economy

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From the following chart we can see contribution of the economic sectors during 2009-20014. And it is
cleared that the contribution of industrial sector is more than other sectors.

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CONTRIBUTION OF RMG IN ECONOMY OF

BANGLADES:

BANGLADESH RMG EXPORT IN GDP:

From the following pie chart we see the contribution of RMG out of total export of Bangladesh of fiscal
year 2014. We can see that Bangladesh export frozen food, jute product, leather, chemical product
chemical product, raw jute, agri product, tea and other but 75.65% out of total expert is RMG product.

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Comparative statement of RMG export and total export of

Bangladesh

From the following data we see the comparative statement of total export and RMG export of Bangladesh
during the fiscal year 2006-2007 to 2012-2013.thes chart show that the major export out of total export is
RMG product during fiscal year 2006 to now. The export contribute to Bangladesh economy a lot and the
RMG is the major part of total export of Bangladesh.

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COMPARATIVE STATEMENT OF RMG EXPORT ANG

TOTAL EXPORT IN VARIOUS YEARS:

From the following graph we see the portion of RMG export out of total export during fiscal year 2006-
2007 to 2012- 2013. We see that in fiscal year 2006-2007 RMG product export is 75.64% out of the total
export. In fiscal year 2007-2008 RMG product export is 75.83% out of the total export. In fiscal year
2008-2009 RMG product export is 79.33% out of total. In fiscal year 2009-2010 RMG product export is
77.12% out of total. In fiscal year 2010-2011 RMG product export is 78.15% out of total. In fiscal year
2011-2012 RMG product export is 78.6% out of total. And in fiscal year 2012-2013 RMG product export
is 79.63% out of total export. It is cleared that the RMG product export is the major part of total export
thus RMG sector keep contribution on economy of Bangladesh.

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BANGLADESH RMG EXPORT TO WORLD

The main customers of Bangladesh RMG product are EU, USA and Canada. The above chart show that
how much amount of product export to those countries in each fiscal year. Bangladesh earn a lot of
foreign currency from these three countries that contribute to the economy of Bangladesh.

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SOCIAL IMPACT OF THE RMG SECTOR

RMG sector of Bangladesh impact on the five major social sectors i.e. employment, women employment,
population control, savings and child labor.

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EMPLOYMENT

From the above graph we see that the total no. of RMG factory increase day after day from fiscal year
2005-2006 to 2010- 2011.This increasing no. of factory create a great amount of employment sectors for
the country of Bangladesh.

PARTICIPATION OF WOMEN IN THE GARMENTS

SECTOR

Garment sector is the largest employer of women in Bangladesh. The garment sector has provided
employment opportunities to women from the rural areas that previously did not have any opportunity to
be part of the formal workforce. This has given women the chance to be financially independent and have
a voice in the family because now they contribute financially. In 2014, the industry provided jobs for 4.5
million people, 80% of whom were women.

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20%

80%

However, the women workers are facing many problems. Most women come from low income families.
Low wage of women workers and their compliancy have enabled the industry to compete with the world
market. Women are paid far less than men mainly due to their lack education. Women are reluctant to
unionize because factory owners threaten to fire them. Even though trade unionization is banned inside
the Export Processing Zones (EPZ), the working environment is better than that of the majority of
garment factories that operate outside the EPZs. But, pressure from buyers to abide by labor codes has
enabled factories to maintain satisfactory working conditions. In recent times, garment workers have
protested against their low wages. The first protests broke out in 2014, and since then, there have been
periodic protests by the workers. This has forced the government to increase minimum wages of workers.

Savings
Regular earning enables a large number of the garment workers to go for some savings. Workers
investments on family pension schemes etc. create savings. A BIDS survey conducted in the early 1990s
found that 21 percent of both male and female workers aged 15 years and above had their own bank
accounts. A higher proportion of workers (30 percent) had bank accounts in the EPZ. Findings showed
that women are on average better savers than men and save about 7.6 percent of their otherwise small
income.

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Child Labor
In recent years, international debate on child labor has intensified. The elimination of child labor is also
among the core labor standards in the ILO Convention. The Harkin Bill placed at the US Senate entitled
The Child Labor Deterrence Act of 1993 which called for the elimination of child labor in the export
oriented manufacturing and mining industries. As a consequence many garment industries had to retrench
child workers from their factories. In many countries these retrenched children ended up in more
strenuous and less-remunerative jobs, or worst, turned to begging in the street. The Bangladesh RMG
sector set a unique example through collective efforts which eventually led to the development of a
safety-net programmed for the child labors. The BGMEA/ILO/ UNICEF Child Labor Project in the
garment industry of Bangladesh, funded by the US Development of Labor was the first of a series of child
labor programmers executed by the International Program on the Elimination of Child Labor of the ILO.
This project, initiated in 1995, is based on a Memorandum of Understanding (MOU) signed by the
BGMEA and two international organizations, the ILO and UNICEF, with the aim of progressively
phasing out child labor from more than 2,500 factories that are members of the association.

The key elements of the MOU were:

(a) A fact-finding survey to determine the extent of child labor in the garment industry;

(b) The establishment of an education programmer in which identified child workers should be enrolled;

(c) The establishment of a monitoring and verification system;

(d) The provision of income compensation in the farm of a monthly stipend of Tk. 300, the equivalent of
(at that time) US$ 7. The costs are to be shared by on fifty-fifty basis by BGMEA, the ILO and other
donors.

Many of the retrenched child workers have been placed in schools and are receiving a monthly stipend.
Football manufacturing industry of Pakistan has been following the globally acclaimed BGMEA Model
of Child Labor Elimination. BGMEA has so far spent over 600,000 US dollars for the project.
Successfully addressing of this issue has created a very favorable image about Bangladesh abroad and has
promised continued market access for the sector.

Population Control
Employment opportunities especially for women created positive impact on family planning and
population control in the country. Independent working-women are getting more conscious about the
advantage of a small family, and are exposed to modern family planning methods. Working adolescent
girls tend to avoid early marriage as they have their own source of income and are self-dependent. The
mean age at marriage for girls working in RMG factories tend to be higher than the national average.

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SECTORAL CONTRIBUTIONS

Growth of RMG sector has spawned a whole new set of linkage industries and facilitated expansion of
many service sector activities. The RMG industry not only propelled the growth of spinning, weaving,
dyeing and finishing industries, production of accessories and spare parts, but also rendered large
externalities by contributing to other economic activities in such areas as banking, insurance, real estate,
packaging, hotels and tourism, recycling, consumer goods utility services and transportation. That
describe below:

Banking and Insurance

Growth of the RMG sector and the related activities have contributed a lot to the robust growth of the
financial sector in Bangladesh. In FY 2002 the banking sector earned about 37 million dollars from
business with the RMG sector in the form of interest and charges and L/C charges. More than one-tenth
of the commercial banks asset portfolio belongs to the RMG and textile sector in the country [Appendix
table 2]. In FY 2001 commercial banks lent Taka 4400 crore to the textile sector, while the amount lent to
the woven-RMG sector was Taka 812 crore. The export financing business of the commercial banks is
largely dependent on the textile and RMG sectors. The RMG sector received Taka 2175 crore as export-
finance in FY 2001 which was 46.14% of the total export financing portfolio of the banks. A World Bank7
survey revealed that almost all firms (98%) are the clients of the commercial banks for working capital
and procurement of machines and equipment (57%).

The RMG sector has also contributed to the growth of the countrys insurance sector. On average, every
year the premium paid by the RMG sector to the insurance companies was about 6 million dollars. All
firms have their machines and plants insured and, additionally, 87% of importers of input and 15% of the
RMG exporters get their imports/exports insured.

Shipping and Logistics

The RMG sector has contributed to the shipping business in Bangladesh and stimulated setting up of
several container yards, expansion of port facilities to handle large container carrying trains, increase of
cargo handling and storage facilities. RMG manufacturers also extensively use services of Clearing &
Forwarding Agents for the purpose of customs clearance of inputs and finished goods. It is estimated that
port usage fees earned from the RMG sector account for more than 40% of the income of the port
authority. RMG sector contributed about US$65 million in FY2002 to earnings of the Shipping business
of the country by way of port charges, C&F Agents commissions, freight charges, forwarding charges etc.

Transport Communication

The growth and development of inland transport services to a considerable extent owe to the growth of
the RMG industry. Both wheel transport service and railway service are widely used by RMG sector for

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activities related to manufacturing and cargo movement. The concept of covered van emerged in
Bangladesh for safe transportation of the RMG products in particular. In 2002 the inland transport
industry received about 27.

Contribution to Government Exchequer

The RMG sector contributes to the government exchequer both directly and indirectly. In FY 2002 the
sector paid 6.3 million dollars as stamp and postage, license renewal fee etc.

Payments made for visa form, license form, GSP form and other forms to the Export Promotion Bureau
amounted to 58.85 million dollars in FY2001 [See Appendix Table 6 and 7]. The sector also paid USD 2.4
million to the government as direct taxes in FY 2002. 3 million dollars as revenue from the RMG sector.

Professional Services

The RMG sector extensively uses professional services from CA firms, legal agencies, business
consultants. In FY 2002 total payment for professional services is estimated at 3.61 million dollars.

Engineering Sector

The RMG industry paid 14.2 million dollars to the engineering sector which included payments to
repairing and maintenance service industry (USD 4.29 million), electrical engineering (USD 4.38
million), transport vehicle maintenance service ( USD 2.87 Million), and machine tools service (USD
2.63 Million).

Utility Services

Payment of Electricity bill by the RMG industry is estimated to be 14.74 million dollars in FY2002.
Utility payments for gas, WASA etc. amounted to an additional 3.75 million dollars.

Information and Communication Technology

The RMG sector also plays a catalytic role in the growth of the countrys ICT sector. The services
consumed by the RMG industry generated revenue for the ICT sector. Payments for ICT services which
include communication, hardware and software services is estimated at 9.88 million dollars in FY 2002

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Real Estate

Demand for real estate development by the garment industry to accommodate offices and factories of
over 3400 garment units has generated a lot of activities in the Construction Industry. The RMG
industries paid approximately 26.24 million dollars as factory, office and garage rent in FY 2002.

Hotel and Tourism

About 1000-1500 overseas apparel buyers and their representatives visit Bangladesh every year for
business purpose. In FY2002 the RMG industry created a business of approximately 4.42 million dollars
for the countrys tourism industry

Waste Recycling Industry

Approximately 0.2 million people are engaged in waste (mainly, the waste out prices of fabrics) recycling
industry of the country which get their materials from the RMG industries. With these waste materials,
they are making stuff toys, patterns, quilts, cushions etc.

Emerging Consumer Market

The 1.6 million workers in the industry have created a large demand for consumer goods. A regular
source of earning increases the basic consumption needs such as improved diet, better healthcare,
improvements in family utensils and housing conditions etc. The sector has created an increasing demand
for consumption of low cost commodities, cosmetics items, dresses, footwear, fast food and other
products. A whole industry has been created to service this growing demand and created employment
opportunities for hundreds of thousands of people.

Problems surrounding readymade garments sector:

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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

1. 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

2. Unskilled workers:

Most of the illiterate women workers employed in garments are unskilled and so their products often
become lower in quality.

3. 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.

Most of the garment factories in our country lack the basic amenities where our garment workers sweat
their brows from 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:

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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, 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.

Women work mainly as helpers, machinists and less frequently, as line supervisors and quality
controllers. There are no female cutting masters. Men dominate the administrative and management level
jobs. Women are discriminated against in terms of access to higher-paid white collar and management
positions.

When asked why they prefer to employ women foe sewing, the owner and managers gave several
reasons. Most felt that sewing is traditionally done by women and that women are more patient and more
controllable than men.

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:

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Insufficiency of loan in time, uncertainly of electricity, delay in getting materials, lack of communication,
problem in taxes etc. Often obstruct the industry. In the world market 115 to 120 items of dress are in
demand whereas 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:

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, Bangladeshs
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 oclock. Sometimes they work until 3 oclock in
the morning and report back to start work again five hours later ar 8 oclock. 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.

For four to five workers there is one common latrine and a kitchen for which they have to pay from Tk.
=2000 to Tk.=2500/-.They share this amount among themselves to minimize the accommodation
expense.

One cannot believe their eyes in what horrible condition they have to pass out their time after almost
whole day of hard work in the factory. After laborious job they come into their roost, cook their food and
have their dinner or lunch in unhygienic floor or bed and sleep where they take their food. They share the
single bed or sleep on the floor.

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The owners of these factories must not treat the workers as animals. The owners of these factories who
drive the most luxurious car and live in most luxurious house do ever think that these are the workers who
have made their living so juicy. Will these selfish owners ever think of these workers of their better living
for the sake of humanity by providing better accommodation for these workers in addition to providing
with the job?

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

Machine layout is often staggered

Lack of signage for escape route

No provision for emergency lighting

Doors, opening along escape routes, are not fire resistant

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

Adequate doors as well as adequate staircases are not provided to aid quick exit

Fire exit or emergency staircase lacks proper maintenance

Lack of proper exit route to reach the place of safety

Parked vehicles, goods and rubbish on the outside of the building obstruct exits to the open air

Fire in a Bangladesh factory is likely to spread quickly because the principle of compartmentalization is
practices

10. Political crisis:

Garments industries often pay dearly for political unrest, herbal and terrorism etc.

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The international market has withdrawn quota advantage over garments export form Bangladesh since
December 2005.

Bangladesh has to advance cautiously for getting better position of her garments in the world market.
Finally destruction of twin tower in 11 September 2001. Invasion of Afghanistan and Iraq and depression
in world Economy have seriously affected the export trade of Bangladesh.

11. 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 per cent on average
in the United States within a year, from $6.23 per sq metre in December 2001 to $3.37 per sq metre 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.

12. Lead time

Lead time refers to the time required for supplying the ordered garment products after the export order
has been received.

In the 1980s, the usual lead time in the garment industry was 120-150 days for the main garment supplier
countries of the world; it has been reduced to 30-40 days in the current decade.

However, in this regard the Bangladesh RMG industry has improved little; for example, the average lead
time is 90-120 days for woven garment firms and 60-80 days for knit garment firms. In China, the
average lead time is 40-60 days and 50-60 days for woven and knit products respectively; in India, it Is
50-70 days and 60-70 days for the same products respectively. Bangladesh should improve its average
lead time to compete in the international market.

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Prospects of the RMG Industry

Despite many difficulties faced by the RMG industry over the past years, it continued to show its robust
performance and competitive strength. The resilience and bold trend in this MFA phase-out period partly reflects
the imposition of safeguard quotas by US and similar 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 facility, market and product diversification, cheap labor,
increased backward integration, high level of investment, and government support are among the key
factors that helped the country to continue the momentum in export earnings in the apparel sector. Some of
these elements are reviewed below

Market Diversification

FY07, a successful turnaround was observed in exports to third countries, which having a
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 review from EU and US. In 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 points out that Bangladesh has
not been able to exploit fully the duty free access to EU that it enjoys. While this is pointed out to be due
to stringent rules of origin (ROO) criteria, the relative stagnation in exports to EU requires further
analysis.

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 globalized
economy and ever-changing fashion world, product diversification is the key to continuous
business success. Starting with a few items, the entrepreneurs of the RMG sector have also been
able to diversify the product base ranging from ordinary shirts, T-shirts, trousers, shorts, pajamas, ladies
and childrens 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.

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Backward Integration

RMG industry in Bangladesh has already proved itself to be a resilient industry and can be a catalyst for
further industrialization in the country. However, this vital industry still depends heavily on imported
fabrics. After the liberalization of the quota regime some of the major textile suppliers Thailand,
India, China, Hong Kong, Indonesia and Taiwan increased their own RMG exports

If Bangladesh wants to enjoy increased market access created by the global open market economy it has
no alternative but to produce textile items competitively at home through the establishment of
backward linkage with the RMG industry. To some extent the industry has foreseen the need
and has embarked on its own capacity building

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 i s encouraging, although the uncertainties before the MFA
phase-out period caused a sluggish investment scenario. In part the momentum in the post-MFA
phase-out period is indicative of the efforts underway towards capacity building through backward
integration. This is evident in the pace of lending to the RMG sector and in the rising import share of
RMG related machinery. However further progress would be necessary to improve and sustain
competitiveness on a global scale.

Policy Regime of Government

Government of Bangladesh has played an active role in designing policy support to them sector that
includes back-to-back L/C, bonded warehouse, cash incentives, export credit guarantee scheme, tax
holiday and related facilities. At present government operates a cash compensation scheme through which
domestic suppliers to export-oriented RMG units receive a cash payment equivalent to 5 percent of the
net FOB value of exported garments. 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

Infrastructural Impediments

The existence of sound infrastructural facilities is a prerequisite for economic development. In

Bangladesh, continuing growth of the RMG sector is dependent on the development of a strong backward
linkage in order to reduce the lead time. However, other factors constraining competitiveness of
Bangladeshs RMG exports included the absence of adequate physical infrastructure and utilities

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Labor Productivity

The productive efficiency of labor is more important determinant for gaining comparative advantage than
the physical abundance of labor. In Bangladesh, the garment workers are mostly women with little
education and training. The employment of an uneven number of unskilled labors by the garment
factories results in low productivity and comparatively more expensive apparels. Bangladesh labor
productivity is known to be lower when it compared with of Sri Lanka, South Korea and Hong Kong.
Bangladesh must look for ways to improve the productivity of its labor force if it wants to compete
regionally if not globally. Because of cheap labor if our country makes the labor productivity in the apex
position, then we think the future of this sector is highly optimistic

Research and Training

The country has no dedicated research institute related to the apparel sector. RMG is highly fashion
oriented and constant market research is necessary to become successful in the business. BGMEA has
already established an institute which offers bachelors degree in fashion designing and
BKMEA is planning on setting up a research and training institute. These and related initiatives need
encouragement possibly intermediated by donor-assisted technology and knowledge transfer. A
facilitating public-sector role can be very relevant here.

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 a 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 overall problems. Such as management labor conflict,
proper management policy, 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 problem 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.

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CONCLUDING REMARKS

The above analysis brings out, in a very succinct manner, the increasingly crucial role the export-oriented
RMG sector of Bangladesh has come to play in the economy and society of Bangladesh. In its turn, the
BGMEA, as the apex body of all entrepreneurs in the RMG sector, takes all possible measures to promote
the interest of the workers and the sector. BGMEA strives to promote the cause of the sector and raise
public awareness about the important role the sector is playing in the life of the country. BGMEA hopes
that appreciation of the role of the sector will enable policy makers to undertake further initiatives in
order to enable the sector to achieve yet greater heights to the benefit of the country and its people.

REFERENCES:
1. CPD-IRBD Database

2. National Board of Revenue

3. Scheduled Bank Statistics (different years)

4. Export Promotion Bureau

5. Economic Trends, Statistics Department Bangladesh Bank (different issues)

6. Bangladesh Bank Bulletin (different issues)

7. BGMEA

8. EPB

9. Bangladesh bureau of statistics

10. RDTI cell

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