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RMG Industry of Bangladesh (Ready-Made Garments Industry)

RMG Industry of Bangladesh (Ready-Made Garments Industry)

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1. INTRODUCTION
The Ready –Made Garments (RMG) sector of Bangladesh has emerged as the biggest earner of foreign currency. The RMG sector has experienced an exponential growth since the 1980s. The sector contributes significantly to the GDP. It also provides employment to around 4.2 million Bangladeshis. An overwhelming number of workers in this sector are women. This has affected the social status of many women coming from low income families. Bangladesh-origin products met quality standards of
1. INTRODUCTION
The Ready –Made Garments (RMG) sector of Bangladesh has emerged as the biggest earner of foreign currency. The RMG sector has experienced an exponential growth since the 1980s. The sector contributes significantly to the GDP. It also provides employment to around 4.2 million Bangladeshis. An overwhelming number of workers in this sector are women. This has affected the social status of many women coming from low income families. Bangladesh-origin products met quality standards of

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Published by: Mohammad Shaniaz Islam on Apr 09, 2011
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1. INTRODUCTION1. INTRODUCTION
The Ready –Made Garments (RMG) sector of Bangladesh has emerged as the biggestearner of foreign currency. The RMG sector has experienced an exponential growth sincethe 1980s. The sector contributes significantly to the GDP. It also provides employmentto around 4.2 million Bangladeshis. An overwhelming number of workers in this sector are women. This has affected the social status of many women coming from low incomefamilies. Bangladesh-origin products met quality standards of customers in NorthAmerica and Western Europe, and prices were satisfactory. Business flourished rightfrom the start; many owners made back their entire capital investment within a year or two and thereafter continued to realize great profits. Some 85 percent of Bangladeshi production was sold to North American customers, and virtually overnight Bangladesh became the sixth largest supplier to the North American market.After foreign businesses began building a ready-made garment industry, Bangladeshicapitalists appeared, and a veritable rush of them began to organize companies in Dhaka,Chittagong, and smaller towns, where basic garments--men's and boys' cotton shirts,women's and girls' blouses, shorts, and baby clothes--were cut and assembled, packed,and shipped to customers overseas (mostly in the United States). With virtually nogovernment regulation, the number of firms proliferated; no definitive count wasavailable, but there were probably more than 400 firms by 1985, when the boom was peaking.After just a few years, the ready-made garment industry employed more than 200,000 people. According to some estimates, about 80 percent were women, which was never noticed previously in the industrial work force. Many of them were woefully underpaidand worked under harsh conditions. The net benefit to the Bangladeshi economy wasonly a fraction of export receipts, since virtually all materials used in garmentmanufacture were imported; practically all the value added in Bangladesh was fromlabor.1
 
2. RMG SECTOR IN BANGLADESH2. RMG SECTOR IN BANGLADESH
The RMG industry cuts and stitches the finished product into apparel, which is thenmarketed. Bangladesh entered the export market of apparels in 1978 with only 9units and earned only $0.069 million. During the last two decades this sector hasachieved a phenomenal growth, due to policy support of the government anddynamism of the private sector entrepreneurs. Now the number of RMG units isaround 4,000 and the export earnings have reached at $6.40 billion. For the moment,2.0 million garment workers are working in the RMG units, of whom 80 per cent arewomen. RMG roughly covers 76 per cent of the total export of the country and is thehighest earning industry in the economy. Study shows that the RMG sector andrelated upstream and downstream activities are estimated to contribute an income of about $ 5.0 billion which is equivalent to about 9.0 per cent of Bangladesh's currentGDP. RMG business started in the late 70s as a negligible non-traditional sector witha narrow export base and by the year 1983 it emerged as a promising export earningsector. Over the past one and half decade, RMG export earnings have increased bymore than 8 times with an exceptional growth rate of 16.5 percent per annum. InFY06, earnings reached about 8 billion USD, which was only less than a billion USDin FY91. Excepting FY02, the industry registered significant positive growththroughout this period.
 Figure: Trend of RMG Export Volume, Export Growth and Contribution to GDP 
2
 
 Source:
Export Promotion Bureau (EPB) and Economic Trends, Bangladesh Bank In terms of GDP, RMG’s contribution is highly remarkable; it reaches 13 percent of GDPwhich was only about 3 percent in FY91. This is a clear indication of the industry’scontribution to the overall economy. It also plays a pivotal role to promote thedevelopment of other key sectors of the economy like banking, insurance, shipping, hotel,tourism, road transportation, railway container services, etc. A 1999 study found theindustry 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. The sector has created jobs for about two million people of which 80 percent arewomen who mostly come from rural areas. The sector opened up employmentopportunities for many more individuals through direct and indirect economic activities,which eventually helps the country’s social development, woman empowerment and poverty alleviation.
3. FACTOR ENDOWMENT3. FACTOR ENDOWMENT
Factor conditions for Bangladeshi Clothing industry are skilled human resources and vastlabor force, government supports for textile and clothing technological upgrades, creationof textile and clothing villages, special economic/export processing zones, duty reductionfor the import of inputs/machines, incentive for use of local inputs, income tax reduction,and international supports like GSP, GSP+, duty free access etc.
3.1. Labor
RMG is a labor intensive industry. Since Bangladesh is a labor-abundant country, it islogical for Bangladesh to demonstrate its comparative advantage in clothing. Because of the abundance of labor, the labor cost of Bangladesh is also very low compared to theother developing countries. The wages paid to RMG workers in Bangladesh are the3

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