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Date of Submission: July 11, 2012





Name Abu Bakar siddique

ID 100261155

Program BBA,7A

Tamanna Jarin Department of Business Administration Northern University Bangladesh.




I do hereby declare that report problems and prospects of production of operation management of garments sector of Bangladesh submitted by me to Tamanna Jarin, lecturer in DBA, Northern University Bangladesh, Khulna campus, Khulna for the degree of Bachelor of Business Administration is an original work. All the related information of the report will be strongly maintained confidentially and only will be used for educational purpose. I tried to my best to prepare this report as early as possible.



Date: July11, 2012 To Tamanna Jarin, Department of Business Administration. Northern University Bangladesh. Khulna Campus, Khulna. Subject: Submission of the report on problems and prospects of production of operation management of garments sector of Bangladesh

Dear Mam, With due respect, it is stated that we are submitting our report on problems and prospects of production of operation management of garments sector of Bangladesh This is the requirement for obtaining the course of Operation management offered by course teacher of Northern University Bangladesh, Khulna Campus. It was pleasure experience on our part to go through the processes, which reiterate my classroom knowledge. Despite my insufficient knowledge, I hope the report has attained its purpose to a considerable extent. Thanking you for your valuable advice and cooperation.

Yours Sincerely, ---------------------------ABU BAKAR SIDDIQUE ID: 100261155 Bachelor of Business Administration Northern University Bangladesh. Khulna,Kampus




At first I desire to express our deepest sense of gratitude of almighty Allah. With profound regard I gratefully acknowledge our respected course teacher Tamanna Jarin, Lecturer, Department of Business Administration, Faculty of Business, Northern University Bangladesh. Khulna Campus, Khulna help and day to day suggestion during preparation of the report. I like to give thanks especially to our friends and many individuals, for their enthusiastic encouragements and helps during the preparation of this report me by sharing ideas regarding this subject and for their assistance in typing and proof reading this manuscript. Without helping it would not be possible to prepare. So, Again I like to give thanks all of you for helping me to do it perfectly.


RMG = Ready-Made Garments. MFA = Multi Fiber Agreement. ATC = Agreement on Textile and Clothing. GoB = Government of Bangladesh. HDI = Human Development Index. U N D P = United Nations Development Project. GDP = Gross Development Profit.

WTO = World Trade Organization. EU = European Union. USA = United State of America.


NORTHERN UNIVERSITY BANGLADESH Contents Title Student declaration Letter of transmittal Acknowledgement Abbreviation Table of Contents Executive Summary CHAPTER 1: INTRODUCTION 1.1. Purpose of the Report 1.2. origin of the report 1.3. Objectives of the Report 1.4. Sources of Data and Methodology 1.5. Scope of the Report 1.6. Limitations of the Report CHAPTER 2: OVERVIEW OF THE STUDY 2.1. Key concept of topic 2.2. Definition of production 2.3. Definition of operation 2.4. Importance of production 2.5. Importance of operation 2.6. The Bangladesh Garment Industry 2.7. Contribution of the RMG Industry 2.8. Exporting Condition of Garments Industry 2.9. The Bangladesh Garment Industry: Challenges of the 21st century 11

Page no i iii iv v vi vii ix

1-3 1 1 1 2 2 3

4-11 4 4 4 4 5 6 7 9






13 16


4.1. Strength 4.2. Weakness 4.3. Opportunity 4.4. Threats CHAPTER 5:

21 22 23 25


27-29 27 28 29-30

The phase-out of the quota is likely to have particular significance for the export of Bangladesh apparels to the US market. MFAs impacts are not much related to a question of our $2 billion exports to the USA; or the $5 billion worth of exports made by Bangladesh globally. Rather, it is a question of how Bangladeshs entire economy wills is affected by the issue of quota phase out. RMG exports constitute about 75% of Bangladeshs annual export and provide direct employment to 1.5 million females and indirectly an additional 8 to 10 million people. The global clothing trade is evolving on viii

NORTHERN UNIVERSITY BANGLADESH a continuous basis and that the phase out of quota restrictions and forming of trade blocs has become a reality. Moreover Bangladesh is convulsed by fierce class struggles, centered on the countrys garment industry. Many tens of thousands of workers have gone on strike, blocked roads, attacked factories and other buildings, demonstrated, fought the police and rioted in the streets. Every day comes news of fresh strikes in a variety of industries mainly the ready-made garment (RMG) sector, but also mill workers, river transport workers, rail workers, journalists, lecturers and teachers. The revolt began on 20 May2006 with garment workers strikes in the Bangladeshi capital Dhaka beginning in a small number of factories over issues including the arrest of worker activists and non-payment of wages. By23 May2006 this struggle had been generalized, with action at a much larger number of factories and demonstrations across the city. A massive army and police presence around garment factories, in some cases completely blockading and creating check points for entry to Export Processing Zones, temporarily calmed things; but strikes continued to take place at numerous factories, leading to solidarity strikes from nearby workplaces.

The tremendous success of readymade garment exports from Bangladesh over the last two decades has surpassed the most optimistic expectations. Today the apparel export sector is a multi-billion-dollar manufacturing and export industry in the country. The overall impact of the readymade garment exports is certainly one of the most significant social and economic developments in contemporary Bangladesh. With over one and a ha l f mi l l i o n w o m e n


NORTHERN UNIVERSITY BANGLADESH w o r k e r s e mp l o y e d i n s e mi - s k i l l e d a n d s k i l l e d j o b s p r o d u c i n g clothing for exports, the development of the apparel export industry has had farreaching implications for the society and economy of Bangladesh.

1.1. Purpose of the Study:

The report is required course for the students who are studying BBA (Bachelor of Business Administration) of Northern University Bangladesh under the course titled Operation Management

1.2. Origin of the report:

For the assessment, both primary and secondary data was c o l l e c t e d . F o r t h i s w e interviewed one garments company through using a structured questionnaire. Personal interview technique was applied while fill up the questionnaire on respondents. And I also analysis some report of various garment industries.

1.3. Objectives of the Study:

Broad Objective: The main objective of this study is problems and prospects of garments sector of Bangladesh.

Specific Objective: To present an overview of key concept relating problems. To study the definition of various problems. To study the classification of problems and prospects. To study the prospects of Bangladesh. To study the challenges of development of Bangladesh. x

NORTHERN UNIVERSITY BANGLADESH To study the effect of global in Bangladesh.

1.4. Sources of Data and Methodology:

The report was fully exploratory in nature. Data have been collected from secondary sources. Ms-Word and other required computer program were used to process The theoretical part of this report has been collected from text that I Most of the parts are collected from internet in different website.

the Quantitative data on which final report was prepared. studied in our program.

1.5. Scope of the study:

This study has focused upon the various problems regarding with the garments company and the prospect of these industries. We have taken 5 garments company to gather data on the present situation of the garments industries as well as problem regarding and the future of the industries

1.6. Limitations of the Report:

Since our study is based on both primary and secondary data, there is a possibility of g e t t i n g f a k e i n f o r ma t i o n . I f t h e s u r v e y e d p e r s o n n e l p r o v i d e u s w i t h a n y f a b r i c a t e d information about their Opinion of their organization, then the report findings may be erroneous. Above all, this study is weak in some points. The notable ones are an Opinion of their organization, and then the report findings may be erroneous. Above all, this study is weak in some points. The notable ones are as under: The survey was conducted in a very short time so we were not able to collect more information. This survey made on crisis situation of Bangladesh, so it was difficult to collect more samples. xi


Only the big and the reputed Garments Company consider here as sample. The questionnaire contains some questions that, if answered properly, might damage the companys image. In this type of questions, the respondents might provide socially acceptable answers. This risk was unavoidable. Another limitation of this study is the persons private information were not disclosing some, data and information for obvious reasons, which could be very much useful. Lack of experience in this field. Lack of proper authority to conduct the interview program. And I also say that lack of proper time.




2.1. Key concept of topic:

Problems and prospects of production of operation management of garments sector of Bangladesh It is most vital part for business of a country. The major key concepts are Problems and prospects

2.2. Definition of Production:

The processes and methods employed to transform tangible inputs (raw materials, semi finished goods, or subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services.

2.3. Definition of Operation:

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

2.4. Importance of production:

It needs no exaggeration to say that production makes significant contribution to society well being. The standard of living of people depends on production of goods and services. The More production higher, the standard of living of the people is better. Alexander Solzhenitsyn in hi novel August 1914 beautifully sums up the importance of production. One of the characters in the work in Suyataslav Iakintovich Obodovsky, a former anarchist, who maintains the following position :As for industry, anyone who has created something with his owns hands knows that production is neither capitalist nor socialists but one thing only, it is what creates national wealth ,the common national basis without which no country can exist. Production function can offer competitive advantage to a firm in the following areas: 1. Shorter new-product lead time. 2. More inventory turns. 3. Shorter manufacturing lead time. 4. Higher quality. xiii

NORTHERN UNIVERSITY BANGLADESH 5. Greater flexibility. 6. Better customer service. 7. Reduced wastage. Many causes that deny competitive advantages to any firm can be attributed to manufacturing function specifically to poor quality and reliability, delayed deliveries, high production costs and lack of adequate inventory at the right time.Economic prosperity and a greater standard of living of Japanese may be attributed to high productivity. It may be stated that the production function offers vast scope for achieving productivity with effective management of materials and lead time, and with better control of cost, a firm will be able to bring out more output from a given input at reasonable cost.

2.5. Importance of operation:

To be able produce professional managers capable of fulfilling strategic roles within business and government enterprises the need for the practice of operations management cannot be forgone. Operations management is very important in business operations since it forms the heart of the organization by controlling the system of operation. Operations products management services. deals Like with the design, and operation, and improvement of the systems that create and deliver a fir ms primary and marketing finance, operations management is a functional field of business with clear management responsibilities. Guinness Ghana limited is accompanying in which produces alcoholic and nonalcoholic beverages such as Guinness and Malta Guinness respective. So, operation is one of the most important matters in business.

2.6. The Bangladesh Garment Industry:

For Bangladesh, the readymade garment export industry has been the proverbial goose that lays the golden eggs for over fifteen years now. Sector now dominates the modern economy in export earnings, secondary impact and xiv

NORTHERN UNIVERSITY BANGLADESH employment generated. The events in1998 serve to highlight the vulnerability of this industry to both internal and external shocks on the demand and supply side. Given the dominance of the sector in the overall modern economy of Bangladesh, this vulnerability should be a matter of some concern to the policymakers in Bangladesh. Although in gross terms the sectors contributions to the countrys export earnings is around 74 percent, in net terms the share would be much less p a r t i a l l y b e c a u s e t h e b a c k w a r d l i n k a g e s i n t e x t i l e h a v e b e e n s l o w t o d e v e l o p . T h e dependence on a single sector, no matter how resilient or sturdy that sector is, is a matter of policy concern. We believe the policymakers in Bangladesh should work to reduce this dependence by moving quickly to develop the other export industries using the lessons learned from the success of apparel exports. Support for the apparel sector should not be reduced. In fact, another way to reduce the vulnerability is to diversify the product and the market mix. It is heartening to observe that the knit products are rapidly gaining share in overall garment exports as these products are sold in quota-free markets and reflect the strength of Bangladeshi producers in the fully competitive global apparel markets. Preliminary data and informal evidence indicate that this sector seems to have weathered the devastating floods relatively well. The industry is one hundred percent export-oriented and therefore insulated from domestic demand shocks; however, it remains vulnerable to domestic supply shocks and the smooth functioning of the banking, transportation another forward and backward linkage sectors of the economy. The Dhaka-Citation road remains the main transportation link connecting the production units, mostly situated in and around Dhaka and the port in Citation, where the raw material and the finished products are shipped in and out. Despair increased dependence on air transportation, trucks remain the main vehicles. For transporting raw materials and finished products for Bangladesh garment exports. The floods disrupted the normal flow of traffic on this road. Eventually, this road link was completely severed for several days when phase of the floods. This declining of the road connection between Dhaka large 6 the Sections of the road went under water for a few weeks during the latter port in Citation was as serious threat as one can imagine for the garment exporters. xv

NORTHERN UNIVERSITY BANGLADESH The industry responded by calling upon the Bangladesh navy to help with trawlers and renting a plane from Thai Air that was used to directly fly garment consignments from the Dhaka airport to the Citation airport several times a day.

Pic ture: Garments products of Bangladesh

2.7. Contribution of the RMG Industry:

RMG business started in the late 70s as a negligible non-traditional sector with a narrow export b a s e a n d b y t h e y e a r 1 9 8 3 i t e me r g e d a s a p r o mi s i n g e x p o r t e a r n i n g s e c t o r ; p r e s e n t l y i t contributes around 75 percent of the total export earnings. Over the past one and half decade, RMG export xvi

NORTHERN UNIVERSITY BANGLADESH earnings have increased by more than 8 times with an exceptional growth rate of 16.5 percent per annum. In FY06, earnings reached about 8 billion USD, which was only less than a billion USD in FY91. Excepting FY02, the industry registered significant positive growth throughout this period

In terms of GDP, RMGs contribution is highly remarkable; it reaches 13 percent of GDP which was only about 3 percent in FY91. This is a clear indication of the industrys contribution to the overall economy. It also plays a pivotal role to promote the development of other key sectors of the economy like banking, insurance, shipping, hotel, tourism, road transportation, railway container services, etc. A 1999 study found the industry supporting approximately USD 2.0 billion worth of economic activities (Bhattacharya and Rahman), when the value of exports stood at a little over USD 4.0 billion. One of the key advantages of the RMG industry is its cheap labor force, which provides a c o mp e t i t i v e e d g e o v e r i t s c o mp e t i t o r s . T h e s e c t o r h a s c r e a t e d j o b s f o r a b o u t t w o million people of which 70 percent are women who mostly come from rural areas. The sector opened up employment opportunities for many more individuals through direct and indirect economic activities, which eventually helps the countrys social development, woman empowerment and poverty alleviation.

2.8. Exporting Condition of Garments Industry


NORTHERN UNIVERSITY BANGLADESH The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which Experienced phenomenal growth during the last 20 years. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a key role unemployment generation and in the provision of income to the poor. Nearly two million workers are directly and more than ten million inhabitants are indirectly associated with the industry. Over the past twenty years, the number of manufacturing units has grown from 180 to over 3600. The sector has also played a significant r o l e i n t h e s o c i o - economic development of the country. The Agreement on Textile and Clothing (ATC) introduced in 1994, aimed at bringing textiles and clothing within the domain of WTO rules by abolishing all quotas by the end of 2004. It provides an adjustment period of 10 years, so that countries affected byt e MF A could take the necessary steps to adjust to the new trading e n v i r o n me n t . Liberalization of trade following the Uruguay Round agreement presents opportunities as well as challenges for a developing country like Bangladesh in RMG sector. In the Post-Uruguay Round period, traditional instruments of trade policy such as tariffs, quotas, and subsidies will become less feasible and less relevant. In a liberalized trade rgime, competition among textiles and clothing exporting countries is likely to become intense. The objective of this paper is to identify the prospects of RMG industry after the MFA phase out by analyzing the current scenario along with different policy measures and the available options in order to be more competitive in the new regime. The export made by Garments Industries of Bangladesh is improving year after year except some of the year. Strike, layout, shutdown of company, political problem, economic problem, inflation etc. are the prime cause of decreasing export in this important sector. But above it, Readymade Garments Industries is the leading sector inexpert sector. Year USA % xviii

NORTHERN UNIVERSITY BANGLADESH 1991-92 624.16 32.49 1997 98 2547.13 14.1 2002 03 4859.83 11.7 003 04 4583.75 5.6 2004 05 4912.12 7.2 2005 06 5686.09 15.8 2006 - 07 6198. 53 17. 5 2007 08 5253. 36 13. 89 2008 09 7152. 26 19. 5 2009 10 7413. 01 21. 24 20010 11 7502. 11 23. 12 Figure: Year Export by the garments industries (in US $ million) Position of Bangladesh is exporting product in USA is not very satisfactory but this situation is better than any other condition of the previous time. But if our Government take some essential law and break out the wall of biasness then the position of Bangladesh in Garments sector in would.

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

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



Readymade Garment (RMG) Industry occupies a dominant position in the exportmanufacturing sector of Bangladesh. The advent of the RMG sector happened during the early 80s in Bangladesh. Since then, due to supportive policies of the Government of Bangladesh (GoB), this industry has experienced a significant growth. In 1988, the export-oriented RMG sector overtook the traditionally dominant jute sector in terms of gross export accruals. And since then this sector has continued to consolidate it predominant position in the export basket of Bangladesh. According to data of 20032004 financial year, the export earnings of the RMG sector was 5686.09 million US dollars, which constituted 74.79 percent of total export earnings. The industry, which started with only a few factory units during 1980s, now boasts 4094 factory units employing around 1.5 million workers. The garments products of Bangladesh include both knit and woven wear. Share of knitwear in the total production of garment in Bangladesh is steadily increasing over time. At present, knit wear accounts for about 33 percent of the total production. Of the woven wears, high-value products are shirts, jackets, coats, blouses, sportswear and many more casual and fashion apparels. Recent data shows that production of these high value items either decreased over the years or increased at a very nominal rate compared to other basic low value-added items such as trousers or shorts. Thus, product diversification in the Bangladesh garment industry has been rather slow and products are mainly low value-added or low-fashion items. Of all the produced items in 2001-2, around 40 per cent were exported to USA markets and 53 per cent were exported to the EU markets, with Germany being the highest imported or Bangladeshi garments. However, data of 2003-4 shows that exports to EU has increased to 65 per cent.

2.9.1. Faces the Challenge of Globalization:

Bangladesh faces the challenge of achieving accelerated economic growth and alleviating the massive poverty that afflicts nearly two-fifths of its 135 million people. To meet this challenge, market-oriented liberalizing policy reforms xx

NORTHERN UNIVERSITY BANGLADESH were initiated in themid-1980s and were pursued much more vigorously in the 1990s. These reforms were particularly aimed at moving towards an open economic regime and integrating with the global economy. During the 1990s, notable progress was made in economic performance. Along with m a i n t a i n i n g e c o n o m i c s t a b i l i z a t i o n w i t h a s i g n i f i c a n t l y r e d u c e d a n d d e c l i n i n g dependence on foreign aid, the economy appeared to begin a transition from stabilization to growth. The average annual growth in per capita income had steadily accelerated from about 1.6 per cent per annum in the first half of the 1980s to 3.6 percent by the latter half of the 1990s. This improved performance owed itself both to a slowdown in population growth and a sustained increase in the rate of GDP growth, which averaged 5.2 percent annually during the second half of the 1990s. During this time, progress in the human development indicators was even more impressive. Bangladesh was in fact among the top performing countries in the 1990s, when measured by its improvement in the Human Development Index (HDI) as estimated by the United Nations Development Project ( U N D P ) . I n t e r m s o f t h e i n c r e a s e i n t h e v a l u e o f H D I b e t w e e n 1 9 9 0 a n d 2 0 0 1 , Bangladesh is surpassed only by China and Cape Verde. While most low-income countries depend largely on the export of primary commodities, Bangladesh has made the transition from being primarily a jute-exporting country to ga r m e n t exporting one. This transition has been dictated by the country's r e s o u r c e endowment, characterized by extreme land scarcity and a very high population density, making economic growth dependent on the export of laborintensive manufactures. In the wake of the 2001 global recession, Bangladesh's reliance on foreign countries as market for exports and as a source of remittances has become obvious. If Bangladesh is to become less vulnerable to the economic fortunes of others, it will need to strengthen its domestic economy, creating jobs and markets at home. A strong domestic sector and a n i m p r o v e d o v e r a l l i n v e s t me n t e n v i r o n me n t w i l l p r o v i d e a mo r e s t a b l e s o u r c e o f income - like what the garment industry has provided so far - and will rekindle and sustain Bangladesh's economic growth.




3.1. Problems:
The garment industry of Bangladesh has been the key export division and a main source of foreign exchange for the last 25 years. National labor laws do not apply in the EPZs, leaving BEPZA in full control over work conditions, wages and benefits. Garment factories in Bangladesh provide employment to 40 percent of industrial workers. But without the proper laws the worker are demanding their various wants and as a result conflict is began with the industry. Low working salary is another vital fact which makes the labor conflict. Worker made strike, layout to capture their demand. Some time bonus and the overtime salary are the important cause of crisis. Insufficient government policy about this sector is a great problem in Garments Company.There is some other problems which are associated with this sector. Those arelack of marketing tactics, absence of easily on-hand middle management, a small number of manufacturing methods, lack of training organizations for industrial workers, supervisors and managers, autocratic approach of nearly all the investors, fewer process units for textiles and garments, sluggish backward or forward blending procedure, incompetent ports, entry/exit complicated and loading/unloading takes much time, time-consuming custom clearance etc. There are many types of reasons for which problems are created or raised in the garments industry which is below: Raw materials: Bangladesh imports raw materials for garments like cotton,
thread color etc. This dependence on raw materials hampers the development of garments industry. Moreover, foreign suppliers often supply low quality materials, which result in low quality products



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

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

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

poverty and ignorance the owners forced them to work in unsafe and
unhealthy work place overcrowded with workers beyond capacity of the factory floor and improper ventilation. Morning to evening to earn our countries the major portion of our foreign exchange. Anybody visiting the factory the first impression he or she will have that these workers are in a roost. Improper ventilation, stuffy situation, filthy rooms are the characteristics of the majority of our factories. The owners profit are the first priority and this attitude has gone to such an extent that they do not care about their lives.

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

are associated with this sector. Those are- lack of marketing tactics, absence of easily on-hand middle management, a small number of manufacturing methods, 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, timeconsuming custom clearance etc.

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

are allocated largely on the basis of gender. This determines many of the working conditions of women workers. All the workers in the sewing section are women, while almost all those in the cutting, ironing and finishing sections are men. Women workers are absorbed in a variety of occupations from cutting, sewing, inserting buttons, making button holes, checking, cleaning the threads, ironing, folding, packing and training to supervising.

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

categories of workers. According of Minimum Wage Ordinance 1994, apprentices helpers are to receive Tk500 and Tk930 per month respectively. Apprentices are helpers who have been working in the garment industry for less than three months. After three months, Apprentices are appointed as helpers. Often female helpers are discriminated against in terms of wages levels, and



these wages are also often fixed far below the minimum wage rate. A survey conducted in 1998 showed that 73% of female helpers, as opposed to 15% of their male counterparts, did not receive even the minimum wage.

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

delays in getting materials, lack of communication, and problem in taxes etc.
Often obstruct the industry. In the world market 115 to 120 items of dress are in demand where as Bangladesh supplies only ten to twelve items of garments. India, south Korea, Hong Kong, Singapore, Thailand, Taiwan etc, have made remarkable progress in garments industries. Bangladesh is going to challenge the garments of those countries in the world market.

7. Unit labor cost: Unit labor cost: Bangladesh has the cheapest unit labor cost
in South Asia. It costs only 11 cents to produce a shirt in Bangladesh, whereas it costs 79 cents in Sri Lanka and 26 cents in India. Clearly, 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 are 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.

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

for their arrogance factory doors used to be kept locked for security reason defying act Safety need for the worker is mandatory to maintain in all the organization. But without the facility of this necessary product a lot of accident is occur incurred every year in most of the company. Some important cause of the accident are given below-



Routes are blocked by storage materials Lack of signage for escape route Doors, opening along escape routes, are not fire resistant Doors are not self-closing and often do not open along the direction of

Ire exit or emergency staircase lacks proper maintenance 13. Price competitiveness: China and some other competitors of
Bangladesh have implemented sharp price-cutting policies in exporting garment products over the last few years, but Bangladesh has failed to respond effectively to such policies. China was able to drop the export price of 29 garment categories by 46 per cent on average in the United States within a year, from $6.23 per sq meter in December 2001 to $3.37 per sq meter in December 2002. Bangladesh needs to respond to such price-cutting policies of its rivals in order to remain competitive in the quotafree global market.

3.2. Prospects:
Bangladeshi Garment Industry is the largest industrial sector of the country. Though the history of Readymade Garment Industry is not older one but Bangladeshi clothing business has a golden history. Probably it started from the Munhall age in the Indian subcontinent through Dhaka Muslin. It had global reputation as well as demandable market around the globe especially in the European market. After industrial revolution in the west they were busy with technological advancement & started outsourcing of ready made garments to meet up their daily demands. Many LDCs took that chance & started ready made garment export at that markets. As an LDC Bangladesh took this chance enjoyed quota & other facilities of them. Thus ready made garment industry started to contribute in our economy from late eighties (1977). xxv


The history of the garment industry dates back to 1977 when the first consignment was exported to then West Germany by Jewel Garments. The number of units, however, remained a meager 46 until the end of 1983. From a humble beginning the sector has thus made phenomenal growth over the last two decades, the number of units growing to around 4500. The RMG industry achievement is noteworthy, particularly for a country plagued with poor resource endowments and adverse conditions for industrialization. Exports increased from approximately 32 million US dollars in 1983/84 to 1.4 billion dollars in 1992/93. In 1987/88, the RMG export share surpassed that of raw jute and allied products. The figure further rose to 5.7 billion dollars in 2003/04, representing a contribution of about 75 percent of the country's total export earnings in that year. The employment generated by the sector is estimated to be around 1.5 million workers. Several factors account for the outstanding successes of the RMG industry in Bangladesh. At the same time this industry had faced & till facing many problems also. These problems & prospects of RMG industry in Bangladesh is my topic to find out as well as to make critical analysis on these. The importance of my study has been raised up by recent labor unrest in RMG sector. Despite many difficulties faced by the RMG industry over the past years, it continued to show its robust performance and competitive strength. The resilience and bold trend in this MFA phase-out period partly reflects the imposition of safeguard quotas by US and similar restrictions by EU administration on China up to 2008, which has been the largest supplier of textiles and apparel to USA. Other factors like price competitiveness, enhanced GSP facil ity, ma rket and produc t diversificat ion, cheap labor , i n c r e a s e d backward integration, high level of investment, and government support are among the key factors that helped the country to continue the momentum in export earnings in the apparel sector. Some of these elements are reviewed below;

3.2.1. Market Diversification:


NORTHERN UNIVERSITY BANGLADESH Bangladeshi RMG products are mainly destined to the US and EU. Back in 1996-97, Bangladesh was the 7th and 5th largest apparel exporter to the USA and European Union respectively. The industry was successful in exploring the opportunities in markets away from EU and US. In FY07, a successful turnaround was observed in exports to third countries, which having a negative growth in FY06 rose three-fold in FY07, which helped to record 23.1 percent overall export growth in the RMG sector. It is anticipated that the trend of market diversification will continue and this will help to maintain the growth momentum of export earnings. At the same time a recent WTO review points out that Bangladesh has not been able to exploit fully the duty free access to EU that it enjoys. While this is pointed out to be due to stringent rules of origin (ROO) criteria, the relative stagnation in exports to EU requires further analyst

3.2.2. Product Diversification:

The growth pattern of RMG exports can be categorized into two distinct phases. During the initial phase it was the woven category, which contributed the most. Second phase is the emergence of knitwear products that powered the recent double digit (year-on-year) growth starting in FY04. In the globalize economy and everchanging fashion world, product diversification is the key to continuous business success. The entrepreneurs of the RMG sector have also been able to diversify the product base ranging from ordinary shirts, T-shirts, trousers, shorts, pajamas, ladies and 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

3.2.3. Backward Integration:

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

NORTHERN UNIVERSITY BANGLADESH Hong Kong, Indonesia and Taiwan increased their own RMexports,

Figure: Trend to back-to-back linkage

3.2.4. Flow of Investment:

It is plausible that domestic entrepreneurs alone may not be able to develop the textile industry by establishing modern mills with adequate capacity to meet the growing RMG demand. It is important to have significant flow of investment both in terms of finance and technology. Figure 3 indicates that the investment outlook in this sector is enco uraging, 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 towa rds capacity building thro ugh backward integration. This is evident in the pace of lending to the RMG sector and in the rising import share of RMG related machinery. However further progress would be necessary to improve and sustain competitiveness on a global scald.



3.2.5 Policy Regime of Government:

Government of Bangladesh has played an active role in designing policy support to the RMG sector that includes back-to-back L/C, bonded warehouse, cash incentives, export credit guarantee scheme, tax holiday and related facilities. Scheme through whi ch domestic supplier s to export- oriented RMG units receive a cash payment equivalent to 5 percent of the net FOB value of exported garments. At the same time, income tax rate for textile manufacturers were reduced to 15 percent from its earlier level for the period up to June 30, 2008. The reduced tax rates and other facilities are likely to have a positive impact on the RMG sector

3.2.6. Research and Training:

His country has no dedicated research institute related to the apparel sector. RMG is highly fashion oriented and constant market research is necessary to become successful in the business. BGMEA has already established an institute which offers bachelors d e g r e e i n f a s h i o n d e s i g n i n g a n d B K M E A is planning on setting up a research and training institute. These and relate initiative Sneed encour agemen t possibly intermediated by donor-assi sted.




4.1. Strength:
RMG is the leading industry in Bangladesh. It is basically a labor-intensive industry and it needs limited financial investment and relatively simple technology compared to other high technical industries. The success story of Garment Industry in Bangladesh is the story as to how the readymade garments starting in the late seventies as an insignificant non-traditional item of export. In 1998-99 this sector has earned 4019.98 million US$ through exporting which is75.67% of the total export (Redwan, 1995).The tremendous success of Readymade Garment (RMG) exports from Bangladesh over last two decades has surpassed the most optimistic expectations. At present Bangladesh is the 6th largest exporter to USA and in 1997 Bangladesh becomes 18th largest exporter in the world. Now Bangladesh ranks first export of T-shirts to Europe (BGMEA, 1997-98) The overall impact of the readymade garment export industry is certainly one of the most significant social end economic developments in contemporary Bangladesh. The remarkable achievement of RMG sector is now exposed to each and every country. Despite these impressive achievements and the probable challenges in the near future, if properly managed, the prospects for further expansion and growth for this sector remain bright. There are some major threats still exits in this sector but Bangladesh has the ability to overcome these threats. Readymade Garment (RMG) industry holds a key position in the economy of Bangladesh interims of foreign exchange earning, employment generation and poverty alleviation. Right now RMG sector is the highest foreign currency earner in Bangladesh. Apart from contributing to huge foreign exchange earnings, RMG industry has become the largest source of employment generation. Around 2 million people are presently involved of whom 90% are distressed women the RMG industry


NORTHERN UNIVERSITY BANGLADESH of Bangladesh. In addition a rough estimate shows that the sector through linkage effects is currently generating about US$ 2 billion worth of domestic economic activities (Bhattacharya, 2000)RMG industry is the most important sector for the economy of Bangladesh. It accounts for 75.14% in 2000-2001 of the country total export earnings (BGMEA Newsletter, 2001) About1.5 million workers of whom 90% are distressed women are engaged in about 3200 garment factories as on June 2000(BGMEA, 1997-98).It is largest manufacturing sector contributing about 5% to the GDP.

4.2. Weakness:
In RMG sector, value-addition is 30% only because a RMG unit has to import 70% of the total value of the product. The low value added represented that the backward linkage industries such as fabrics and accessories, which directly feed into the garment sector, have not satisfactorily developed. The weakest point of the Bangladeshi apparel industry is that it is still at the mercy of the exterior suppliers of its main raw materials namely the fabrics. Right now Bangladesh has very limited capacity to produce fabrics required by the RMG factories. Her competitors India, Pakistan, Thailand, Malaysia and other countries have their textiles mills that can produce quality fabrics for the respective apparel industries. This sector will remain in intense competition in the context; it is very necessary to find out opportunities and challenges of RMG industry of Bangladesh in order to face firm competition in the free market environment. Japan is one of the potential markets for exports from Bangladesh. Quality and fashion conscious Japan is importing readymade garments from Bangladesh at an increasing rate even though this increase is very negligible. An extremely large program has to be taken to increase the exports. There exists supportive policy environment in the RMG sector of Bangladesh. The package of textile sector incentive has been aimed at primarily to boost up the exporters. Government has extended some major incentives and facilities for the local and foreign investors to help increase investment in the country for all industrial sectors including textiles and clothing Still there are some threats existing in our RMG sector.


NORTHERN UNIVERSITY BANGLADESH According to the Ministry of Textiles, the local fabric manufacturers currently supply less than 19% of total woven fabric requirement. About 70% of the total fabric requirement of the knit sector is domestically produced as reported by the BTMA. Textile policy 1995 envisages established of 246 spinning mills with 25000spindles each, 481 weaning mills each with capacity to produce 17 million meters of fabrics, 481dyeing-printing-finishing units each with same capacity for yarn and woven fabric by the year 2005. The findings show that the workers needed significantly shorter time to produce a shirt of a given specification than the time.

4.3. Opportunity:
The hundred percent export-oriented RMG industries have experienced phenomenal growth during the last 15 years. Within a very short period of time, it has attained great importance in terms of its contribution to GDP, foreign exchange earnings and employment and also as a vehicle of social changes. The export earning data of Bangladesh, shows that in 19884-85, ready-made garment sector earned 12.39 % ( $116 million) of the total export. This was raised to 36.46 %($471 million) in 198990. This share rapidly went up to 53.36 %($1064 million) in 1991-92. Surprisingly, the share showed no increase for the last three years. Bangladesh garments products are facing various barriers and difficulties in the international market. Garments contribution to the total export earning remained constant at around 52% for the last two years (52.84%) in 1994-95 and 52.63% in 1995-96. This stagnant situation demands immediate attention of the international market researcher and the government as well. This research therefore, attempts to assess the present status of the RMG sector and suggests strategies to overcome the present crises. The most youthful export sector in Bangladesh, the RMG industry, has been earning over 60% of the foreign currency for the country during the last few years. In 1995, it contributed 66% to the nations total earning from export. The membership of BGMEA, which started with 19 (Nineteen) in early 1983, has reached 2383, as on August 31, 1996, increasing by 25% each year. Garment export in value has been increasing on an average by 27% each year. As the rate of increase (20%) per year, is


NORTHERN UNIVERSITY BANGLADESH expected to continue through the MFA phasing out transition, growth prospect of apparel industry looks brighter (The Daily Sang bad: 1996). Bangladesh has opportunities of expanding the market through the following strategies. i) Cost Effective Strategy ii) New Product Development and Diversification Strategy iii) Market Diversification Strategy Combined together these three strategies calls for total quality management (TQM) approach.

4.3.1. Cost Effective Strategy:

It has three ways to calculate cost effective strategy. These are given below: a. Backward Integration b. Labor Productivity Improvement c. Productivity of Bangladesh RMG Industry Increasing

4.3.2. Product Diversification Strategy:

An analysis of the product mix of the apparel industry reveals that, so far, Bangladesh has been able to export very limited categories of products. The factories of Bangladesh produce shirts, jackets, trousers and other garment; the shares of these categories in the total production are estimated as follows: Category Share (%)

Shirts 60.00 Jackets 11.00 Knits 10.00 Trousers 7.00 Others 11.50

As the above figure indicates, Bangladesh has concentrated in the production and export of shirts. This means that there is a scope and actually a need of structural xxxiii

NORTHERN UNIVERSITY BANGLADESH change in product mix. Exporters are producing mostly those items on which quotas are available. Besides, the products served mainly low and medium end markets. The reason for this is the buyers decision to buy low priced items from Bangladesh. This relatively narrow base of products may in future limit the market share and the competitive edge of Bangladesh. Most of its competitors have much broader product mix.

4.3.3. Market Diversification Strategy:

Bangladesh has concentrated only in a few markets. It has eyed for mostly USA, Canada and Europe. About 46% of its total apparel exports go to the US markets and 14% to Canada. The rest 40% go to EU and other European markets. The competitors of Bangladesh, for example, India has continued to expand its trade, diversify its markets and change product mix of its exports. As the recent performances indicate, the production and marketing capabilities of Bangladesh have increased substantially. But still it lacks the core competence necessary to stay in a highly competitive market which one can anticipate in post MFA period. If it wants to maintain its world market share and competitive edge, it needs to diversify its products and markets.









Many industry analysts have pointed out in the past and predicted some critical threats, which could affect the garment industry of Sri Lanka, for the past 20 years and these have become a reality now. Failure to implement appropriate timely measures to effectively deal with such threats has driven the industry into turmoil thereby putting the livelihoods of many hundreds of thousands of people directly at risk. The government has a right to deny unnecessary foreign interference in the internal affairs of the country but it should endeavor to settle any differences by diplomatic


NORTHERN UNIVERSITY BANGLADESH means and if its not possible, it needs to take adequate remedial steps to ameliorate any unfavorable implications on society and the industry itself.It was reported that the garment exporters will have to absorb an additional duty of nearly 8%-10% on their exports if the current GSP+ scheme is terminated. This will inevitably increase the selling prices of our garments in the European market, thereby making them uncompetitive when compared to some other low-cost garment exporters like China and those countries, which will continue to be part of GSP+. Currently, even with these GSP+ duty concessions, most garment exporters are still faced with enormous difficulty in remaining competitive and profitable due to the intensifying industry competition and the strength of bargaining power of buyers (direct buyers and buying offices), who set prices. Eventually this would reduce the demand for Sri Lankan garments in foreign markets thereby depriving the country of some of its foreign exchange earnings. On the other hand, since these shares do not carry residual rights on the assets of the firm (unlike ordinary shares), in consideration of the time value of the redemption value (present value), this would effectively have some characteristics of a government grant (assuming no premium on redemption). As in the case of any other preference shares, these shares would also require the firms to pay preference dividends to the government out of their profits (if profitable) before paying dividends to ordinary shareholders. Generally preference shares rank below ordinary shares and above debt finance in terms of the return expected by investors in consideration of their risks. In consideration of all these factors, these funds would be a very low-cost source of finance with least strains on their costs (profitability) and their cash flows. The magnitude of the benefits would be determined by the conditions of the share issue including the dividend rates, the premium on redemption, if any, and whether these shares will be subject to accumulation of dividends. Firms issuing these shares will continue to show the amount received from the government as a liability (preference share capital effectively represents debt rather than equity) in their balance sheets. Assuming the government will not request their redemption in the foreseeable future and no obligation to pay dividends on these shares, still they would not be able to treat the funds as a revenue (or reduction in costs) unless the government explicitly waives xxxv

NORTHERN UNIVERSITY BANGLADESH its rights. Instead they can use those cash resources to finance their working capital needs, long term investments or discharge other costly or maturing liabilities with no worries over the cost and the repayment of the new finance. This will effectively reduce the cost of financing and hence, can be treated as a cheaper source of finance. On the other hand, its questionable as to what extent and how these funds (even if the government relinquishes its rights) will be able to provide a cushion against such impediments in the long term. Though this may be viable in the short term, it seems sensible to focus on increasing the scale benefits, long-term cost reduction.


5.1. Recommendation:
Bangladesh economy at present is more globally integrated than at any time in the past. The MFA phase-out will lead to more efficient global realignments of the Garments and Clothing industry. The phase out was expected to have negative impact on the economy of Bangladesh. Recent data reveals that Bangladesh absorbed the shock successfully and indeed RMG exports grew significantly both in FY06 and (especially) in FY07. Due to number of steps taken by the industry, Bangladesh still remains competitive in RMG exports even in this post phase-out period. Our Garments Industries can improve their position in the world map by reducing the o v e r a l l p r o b l e ms . S u c h a s m a n a g e me n t l a b o r c o n f l i c t , p r o p e r ma n a g e me n t p o l i c y , 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 xxxvi

NORTHERN UNIVERSITY BANGLADESH the port, providing proper environment for the work, keep the industry free From all kind of political problems and the biasness Credit must be provided when the industry fall in need. To be an upper position holder in the world Garments Sector there is no way except follow the above recommendations. We hope by maintaining proper management and policy strategies our country will take the apex position in future

5.2. Conclusions:
Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during the last 25 years. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a key role in employment generation and in the provision of income to the poor. To remain competitive in the post-MFA phase, Bangladesh needs to remove all the structural impediments in the transportation facilities, telecommunication network, and power supply, management of seaport, utility services and in the law and order situation. The government and the RMG sector would have to jointly work together to maintain competitiveness in the global RMG market. Given the remarkable entrepreneurial initiatives and the dedication of its workforce, Bangladesh can look forward to advancing its share of the global RMG market.




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