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Present Situation of RMG Sector of Bangladesh

Present Situation of RMG Sector of Bangladesh

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´Present situation of RMG sector in Bangladeshµ Bangladeshµ

SUBMITTED To:
A.K. Nabil Ahmed Lecturer , Dept: of AMT

SUBMITTED BY:
Md.Toufiquzzaman Chowdhury S.M Touhidul Wares

SUBMISSION DATE:16 June 2011 NATIONAL INSTITUTE OF FASHION TECHNOLOGY,BANGLADESH

Acknowledgement
At first we desire to express our deepest sense of gratitude of almighty Allah. With profound regard we gratefully acknowledge our respected course teacher Mr.A.K.Nabil Ahmed for his generous help and day to day suggestion during preparation of the report. He is so much an inspiration and guidance to us that we are, short of words in expression our gratitude. We like to give thanks especially to our friends and many individuals, for their enthusiastic encouragements and helps during the preparation of this report us by sharing ideas regarding this subject .And finally, thanks to my group members as he serious and prolific towards making this assignment. Once more time to Sir, we owe more than we can mention««mostly for teaching us to see the silver lining in every hard work

Table of Content: .

The industry has contributed to export earnings. The export-quota system and exportthe availability of cheap labor are the two main reasons behind the success of the industry. . foreign exchange earnings. Shirts. employment creation. Bangladesh exports its RMG products mainly to the United States of America and the European Union. The Ready Made Garments (RMG) sector plays a pivotal role in the economy of Bangladesh. poverty alleviation and the empowerment of women.INTRODUCTION 1. T-shirts. trousers. sweaters and Tjackets are the main products manufactured and exported by the industry. This sector accounts for approximately 76% of the total export earnings and nearly 10% of GDP.1 Abstract The ready-made garment (RMG) industry of Bangladesh readystarted in the late 1970s and became a prominent player in the economy within a short Period of time.

Since the early 1980s. the RMG industry has emerged as an important player in the economy of the country.2 Introduction Like other 3rd world countries Bangladesh is a developing country. It is making significant contribution in the field of our export income and in the economical development of our country. it has been enriched in Garment industries in the recent past years. At present we are competing with our neighboring country. we have some elements that help us to achieve this success. Traditionally. At present the government of our country earns billions of dollars by exporting ready-made garments products to other countries. In the field of Industrialization garment industry is a promising step. For Bangladesh. Though we are earning a handsome amount of profit each year from this sector.1. the ready-made readygarment sector is suffering with a lot of problems. the jute industry dominated the industrial sector of the country until the 1970s. We readyhave not achieved this success over night. Her economic development depends firstly on Agriculture and secondly on Industry. Although Bangladesh is not developed in industry. We should solve these negative situations by ensuring proper steps . India and China. the readymade garment export industry has been the proverbial goose that lays the golden eggs for over fifteen years now.

¤ To identify what factors are affecting an entrepreneur ¤ To identify the performance of an entrepreneur. So. mainly we have tried to focus on the following factors. . ¤ Beside these.   Broad objective: To gather knowledge about the overall scenario of ReadyReadyMade Garments (RMG) Sector in Bangladesh.1. ¤Current scenario of ready-made garment industry.4 Scope This report is on a wide exporting sector of Bangladesh. ready¤Reasons for a healthy growth ¤ Reasons for having comparative advantages in the world market. ¤ Economical and financial contribution of this industry in Bangladeshi economy. 1. Specific objectives: To attain the broad objective following specific objectives were pursued .3 Objective Followings were the objectives of the study. ¤To know briefly about economic significant of RMG. we also brought several foreign benchmarks and statistics for doing the research work in a better way.

BKMEA Export Promotion Bureau and many Government and non government organization.1.  The information and data for this report have been collected from secondary sources.5 Mythology This report has been prepared on the basis of experience gathered through learning annual report. I have presented my experience and finding by using different tables. I have also get information from website of BGMEA. So the report relies primarily on an analytical judgment and critical reasoning. websites and different manuals. Data collected from secondary sources have been processed manually and qualitative approach in general and quantitative approach in some cases has been used throughout the study. The secondary sources of information are annual reports.   . which are presented in the analysis part. For preparing this report. Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base. The details of the work plan are furnished below:  Relevant data for this report has been collected primarily by direct investigations of different leasing company¶s annual report and website.

Contribution of the RMG sector. Mustafizur Rahman and Ananya Raihan(2002) and International Finance Corporation (2007) study on this topic. Both of these studies use accepted survey and research methodology to analyze a wealth of data on the social and economic background. the problems and the working conditions of female workers have received the greatest attention.6 Literature Review Several Organizations have analyzed aspects of the garment industry in Bangladesh. Professor Muzaffar Ahmad looks at the industrial organization of the sector and discusses robustness and long-term longviability of apparel manufacturing in Bangladesh. Islam and Quddus (2006) present an overall analysis of the industry to evaluate its potential as a catalyst for the development of the rest of the Bangladesh economy. . study by Debapriya Bhattacharya. Quddus (2006) laborpresents a profile of the apparel sector in Bangladesh and discusses some other aspects of the industry.especially the developments in the early years. There are several studies including The Centre for Policy Dialogue (CPD). Hossain and Brar (2004) consider some labor-related issues in the garment industry. Wiigton (2000) provides a good overview of this industry. 11 #1 November 2009). Of thevarious aspects of the industry. Quddus (2006) presents results from a survey of apparel entrepreneurs and evaluates the performance of entrepreneurs and their contribution to the success of this industry.Nidhi Khosla writes on the women worker in Journal of International Women¶s Studies (Vol. The Bangladesh Planning Commission under the Trade and Industrial Policy (TIP) project also commissioned several studies on the industry.1.

Maslin and Jamdani cloth of our country were used as the luxurious garments of the royal figures in Europe and other countries. Whereas the industry contributed only 0. which was about 3. The British rulers in India didn¶t develop our cloth industries at all. Garment industries started working from the 10's of the late century. Rather they destroyed them and imported cloths from England.00 percent of the global total value ($276 billion) of garment exports.Bangladesh exported garments worth the equivalent of $12348 Million in 2010.1 History: Once upon a time the cloth of Bangladesh achieved worldwide fame. its share increased to about approximate 80 percent of those earnings in 2010.2 An Overview of the Bangladesh Ready-Made Garment ReadyIndustry: The RMG industry is the only multi-billion-dollar manufacturing and multi-billionexport industry in Bangladesh. Some important doubleissues related to the RMG industry of Bangladesh are noted in table 1 . 2.DISCUSSION 2.001 per cent to the country¶s total export earnings in 1976. The foreign exchange earnings and employment generation of the RMG sector have been increasing at double-digit rates from year to year. After the emergence of Bangladesh radical change has come to our garment sector. The country¶s RMG industry grew by more than 15 percent per annum on average during the last 15 years.

Important issues related to the Bangladesh ready-made garment industry ready- Year(s) 19771977-1980 19821982-1985 1985 Issue Early period of growth. 1990s 19931993-1995 2003 2005 PhasePhase-out of export-quota system. Boom days. export- . Knitwear sector developed significantly.Table 1. Imposition of quota restrictions. Child labor issue and its solution Withdrawal of Canadian quota restriction.

T-shirts. sweaters and other casual and soft garments Tare the main knit products. constitute the major production-share (BGMEA website. The grouping helps to share manufacturing activities. Garment companies in Bangladesh form formal or informal groups. and the Export Promotion Bureau. only a few categories. The RMG firms are located mainly in three main cities: the capital city Dhaka.Source: Compiled by the author from Quddus and Rashid (2000). The share of knit garment products has been increasing since the early 1990s. Ready-made garments Readymanufactured in Bangladesh are divided mainly into two broad categories: woven and knit products. . such products currently account for more than 40 percent of the country¶s total RMG export earnings (BGMEA website). T-shirts and trousers are the main woven products and Tundergarments. Bangladesh RMG firms vary in size. 2002). stockings. Economies of scale for large-scale production and export-quota holdings largeexportin the corresponding categories are the principal reasons for such a narrow product concentration. Mainuddin (2000) found that in1997 more than 75 per cent of the firms employed a maximum of 400 employees each. Based on Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data. Ttrousers. such as shirts. the port city Chittagong and the industrial city Narayangonj. there are more than 4. jackets and sweaters. horizontal as well as vertical coordination can be easily found in such group activities. More than 95 percent of those firms are locally owned with the exception of a few foreign firms located in export processing zones (Gonzales. to diversify risks. T-shirts. Although various types of garments are manufactured in the country. Bangladesh Currently. 2001). Shirts.Woven garment products still dominate the garment export earnings of the country. productionandante.000 RMG firms in Bangladesh. socks. Mainuddin (2000) and databases of the Bangladesh Garment Manufacturers and Exporters Association.

00 3.00 1.851.300.00 80.455. July 26.00 9. Source: Ministry of Labor and Employment.00 1.3.140.840.1 Low cost labor: As Bangladesh is an overpopulated country it is very easy for the garment industries to hire labors at a lower rate.87% 73.93% 87.500.00 2.00 4.50% 68. Although it has increase but comparatively it is still low.33% .046.449.45% 108.2.250. as they are relatively cheaper than men.000.23% 67.00 7.00 2.00 2.00 3.10 2.00 3.00 3.763. 2010 Class Existing Wage Announce Wage Increase in % GradeGrade-1 GradeGrade-2 GradeGrade-3 GradeGrade-4 GradeGrade-5 GradeGrade-6 GradeGrade-7 Apprentice 5. 2.210.662.3 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 export is obviously the cheap labor.120. Women contribute to the working force in these garment factories. Bangladesh.00 3.47% 80. At present the government of our country has announced minimum wage to the garment workers but the industries can still earn a handsome amount of profit by exporting their product.24% 68.200.50 1.200.

quota- 2. long term arrangement short(LTA).2.2 Export-quota system: Exportsystem: The ³export-quota system´ in trading garment products played a significant ³exportrole in the success of the industry. 2. Government reduces tariff and supply production factors like electricity and water to them .4 Government Support: Government is supporting directly and indirectly the industries and monitors their activities so that they can perform properly.3.3. Therefore. Arrangement (MFA) and finally the WTO Agreement on MultiTextiles and Clothing (ATC) are the chronological steps through which the ³export³export-quota system´ was administered until it was finally abolished on 31 December 2004. Multi-fiber. that quota system came to an end in 2004. the competitiveness issue needs to be addressed.3 Easy Communication: It is very easy industries to collect raw materials from other countries and they can easily export their produced goods to the other countries.3. with special attention given to the long-term sustainability of the industry. However. short-term arrangement (STA). making worldwide textile and garment trade quota-free. longUnilateral restriction.

T-shirts and trousers are the Tmain woven products and undergarments. and Nath. stockings. trousers.4 Product Tree Bangladesh exports about 63 items to different apparel markets.Woven garment products still dominate the garment export earnings of the country. such as shirts. Shirts. constitute the major Tproductionproduction-share (BGMEA website. Economies of scale for large-scale production and largeexportexport-quota holdings in the corresponding categories are the principal reasons for such a narrow product concentration.Although various types of garments are manufactured in the country. T-shirts. The share of knit garment products has been increasing since the early 1990s. It needs to be mentioned here that Bangladesh produces a very limited categories of expensive and fashion oriented garments. 2001). jackets and sweaters. socks. Main apparel items exported from Bangladesh is shown in the tree ± diagram drawn below: RMG WOVEN KNITWEAR Trouser Shirt Jacket µT¶ Shirt Sweater Polo shirt .2. such products currently account for more than 40 per cent of the country¶s total RMG export earnings (BGMEA website). only a few categories. T-shirts. sweaters Tand other casual and soft garments are the main knit products. Ready-made Readygarments manufactured in Bangladesh are divided mainly into two broad categories: woven and knit products.

5 Exporting Condition of Garments Industry: The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh Readyeconomy. .63 5167.77 2.25 6417.51 2547.3 2819.8 12347.32 763.98 4553.13 3001.23 10699.20 4083.28 5918. it attained a high profile in terms of foreign exchange earnings.6 5532. the number of manufacturing units has grown from 180 to over 3600.81 2237. It is the largest exporting industry in Bangladesh.26 TOTAL 19951995-96 19961996-97 2004-2005 200420052005-2006 20062006-2007 20072007-2008 2008-2009 2008- 1948. exports.8 9211.82 4657. The sector has also played a significant role in the sociosocioeconomic development of the country.YEAR WOVEN KNIT SWEATER 598. 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 indirectly associated with the industry. industrialization and contribution to GDP within a short span of time. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT.47 3816.95 3598.67 7900. which experienced phenomenal growth during the last 20 years.52 6429. Over the past twenty years.

80 12347.57 116.57 75.86 14110.64 75.99 % OF RMG'S TO TOTAL EXPORT 3.09 6548.01 74.67 7900.33 .14 76.44 7602.16 12177.52 10526.77 8654.19 74.80 15565.83 4583.83 79.75 4912.00 934.2 4859.09 TOTAL EXPORT OF BANGLADESH (IN MILLION US$) 811.89 12.06 75.43 6467.15 75.80 9211.44 75.30 5986.09 5686.79 19831983-84 19841984-85 20002000-01 20012001-02 2002-03 20022003-04 20032004-05 200420052005-06 20062006-07 20072007-08 2008-09 2008- 6417.COMPARATIVE STATEMENT ON EXPORT OF RMG AND TOTAL EXPORT OF BANGLADESH: YEAR EXPORT OF RMG (IN MILLION US$) 31.23 10699.

17 373.77 % 79.32 1508.  Major Product Export from Bangladesh: Year Product RMG Frozen Food Tea Raw Jute Jute Goods Leather Others Export 12347.33 2 0 0 8 | 2 0 0 9 454.2.08 0.6 Contribution in National Income: When the garment industries 1st started to export.92 0.40 1. the sector was not paid much attention but the situation has changed and at present it is earning the highest amount of foreign currencies in our country.53 12.18 177.14 9.29 148.06 2.95 2.69 .

. 2001) That means the finished garment relies on three steps. Only success came to accessories where 80% demand of our country was fulfilled. first level for converting fibers/cotton toyarns.2. fabrics which is a major factor for woven section. finishing in knitwear sectors but far behind in producing yarn.7.Out of three steps. second step for converting yarns to grey fabrics and the final step for converting gray fabrics to dyed.1 Backward Linkage: Backward linkage means the use by one firm or industry of produced inputs from another firm or industry (Alan V Deardorff . printed of other finished fabrics.7 Problems behind Readymade Garments Industry: 2. Bangladesh is only capable of knitting.

If the company develops an effective marketing service strategies that provide right signal. fabric. If the manufacturer has effective control over the supply of raw materials. Components and ancillary services needed to produce final product. Here the issue of developing backward linkages is discussed with reference to the desirability of having control over the supply of inputs of RMG industry.The success of the government industry very much depends on how effectively RMG sector linkages may operate backward and forward. 2004). It means that to minimize cost of production and maximize sales revenues both backward and forward linkages need to be integrated. then the sales revenue for the company is likely to be maximized. 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. yarn and processing status (Siddique. mainly. January 2005) Some other problems that the industries face . Then the production is likely to be interrupted. and if marketing and distributing system as a whole are effective for having the products reach the target markets.

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

4.ANALYSIS 3. 3. commission are more. 2. Competitors like China doesn¶t have vertical integration. Ancillary services.3 Opportunities 1.2 Weaknesses 1.1 Strengths 1. Backward Linkage industry is absent. 2. The biggest foreign currency earning industry. External raw materials supply.1 SWOT Analysis: 3.1. fees. Automation is not cost effective in our country. .1. 3.1. Liberalized Globalization will push to improve the quality of the RMG products. 3. Composite plants will get advantage by reducing lead time. 2. Investment in Backward Linkage Industry. RMG credit experts are available. 3. 3.

Negative image of Bangladesh in the international market for less concern on human and social issues.1. 3. WTO agreement 2.3.4 Threats 1. . Pressure on Compliance issues from consumer groups.

Bangladesh still remains competitive in RMG exports even in this post phase-out period.Recent data reveals that Bangladesh absorbed the shock successfully and indeed RMG exports grew significantly both in FY07 and (especially) in FY08. solve the license problem. Credit must be provided when the industry fall in need. efficiency of the manager. proper management policy. proper strategic plan etc.CONCLUSION 4. Government also have some responsibility to improve the situation by providing. The phase out was expected to have negative impact on the economy of Bangladesh.proper policy to protect providingthe garments industries. The MFA phase-out will lead to more efficient global phaserealignments of the Garments and Clothing industry. maintainable time schedule for the product. . To be an upper position holder in the world Garments Sector there is no way except follow the above recommendations. Such as management labor conflict. quickly loading facility in the port. Due to a number of steps taken by the industry.1 Recommendation: Bangladesh economy at present is more globally integrated than at any time in the past. keep the industry free from all kind of political problem and the biasness. Our phaseGarments Industries can improve their position in the world map reducing the overall problems. We hope by maintaining proper management and policy strategies our country will take the top position in future. providing proper environment for the work.

   With MFA phase-out US market for apparels is going expand phasedramatically as uncompetitive US firms are compelled to make their exit. There will be enormous opportunities for competitive players to make new breakthroughs in US market. Bangladesh¶s objective should be to retain the current share of 2. phase(2005Then enhance the market share to 3% and above.5% in US market during the first 3 years of phase-out (2005-8). pessimists see only challenges in opportunities. Bangladesh should take the strategy of cautious Optimism   . Optimists see opportunities in challenges.

html https://www.bd/ http://www.gov/library/publications/the-worldhttps://www.org/ http://www.epb.mincom.epzbangladesh.gov.en.bangladesh-bank.btmadhaka.com/ http://www.bd/ http://www.bd/ http://www.fbcci-bd.gov.ideas.repec.fbccihttp://www.org.bangladeshknitwear.bbs.org/p/pdb/opaper/50.bangladeshhttp://www.com/ http://www.gov.gov/library/publications/the-worldfactbook/geos/bg.bgmea.nbr-bd.org/wiki/Bangladeshi_RMG_Sector .bd http://www.nbrhttp://www.com.bd/ http://www.cia.com/ http://www.org/ http://www.org/ http://www.html http://www.cia.wikipedia.bkmea.References               http://www.

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