Introduction

The garment industry has played a pioneering role in the development of industrial sector of Bangladesh. The textile and clothing sector now stands at a crossroads. Trade in RMG & Textile sector has undergone a fundamental change as MFA quota system has been out on December 31, 2004. Though it took a rather late start i.e., in 1976 but it soon established its reputation in the world market within a short span of time. Resultantly garment is now one of the main export items of the country. Besides, enriching the country's economy it has played a very important role in alleviating unemployment. At present there are more than two thousand one hundred garment factories in the country employing more than 10 million labors. Once Sri-Lanka was leader in this field in South Asia and India was its competitor. After a bloody civil war resulting in the quick demise of the garments industry of Sri-Lanka and India, the international buyers and investors diverted their attention towards Bangladesh. As a result the garments industry of Bangladesh expanded with unprecedented success.

Objective of the study

The objective of the study is to analysis the export performance of RMG sector in Bangladesh and how this export is contributing in our countrys economy.

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Over view
BACKGROUND OF RMG INDUSTRY
The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. Whereas the industry contributed only 0.001 per cent to the countrys total export earnings in 1976, its share increased to about 75 per cent of those earnings in 2005. Bangladesh exported garments worth the equivalent of $6.9 billion in 2005, which was about 2.5 per cent of the global total value ($276 billion) of garment exports. The countrys RMG industry grew by more than 15 per cent per annum on average during the last 15 years. The foreign exchange earnings and employment generation of the RMG sector have been increasing at double-digit rates from year to year. Some important issues related to the RMG industry of Bangladesh are noted in table 1. YEAR 1977-8 1982-85 1985 1990S 1993-95 2003 2005 ISSUE Early period of growth Boom days Imposition of quota restrictions Knitwear sector developed significantly Child labor issue and its solution Withdrawal of Canadian quota restriction Phase-out of export-quota system

Currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 per cent of those firms are locally owned with the exception of a few foreign firms located in export
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processing zones. The RMG firms are located mainly in three main cities: the capital city Dhaka, the port city Chittagong and the industrial city Narayangonj. Bangladesh RMG firms vary in size. Based on Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data, in 1997 more than 75 per cent of the firms employed a maximum of 400 employees each. Garment companies in Bangladesh form formal or informal groups. The grouping helps to share

manufacturing activities, to diversify risks; horizontal as well as vertical coordination can be easily found in such group activities. Ready-made garments manufactured in Bangladesh are divided mainly into two broad categories: woven and knit products. Shirts, T-shirts and trousers are the main woven products and undergarments, socks, stockings, T-shirts, sweaters and other casual and soft garments are the main knit products. Woven garment products still dominate the garment export earnings of the country. The share of knit garment products has been increasing since the early 1990s; such products currently account for more than 40 per cent of the countrys total RMG export earnings. Although various types of garments are manufactured in the country, only a few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the major production-share. Economies of scale for large-scale production and export-quota holdings in the corresponding categories are the principal reasons for such a narrow product concentration.

Facts and Figures

In the 1980s, there were only 50 factories employing only a few thousand people. Currently, there are 4490 manufacturing units. The RMG sector contributes around 75 percent to the total export earnings. In 2007 it earned $9.35 billion. This sector also contributes around 13 percent to the GDP, which was only around 3 percent in 1991. Of the estimated 10 million people employed in this sector, about 50 percent of them are women from rural areas. USA is the largest importer of Bangladeshi RMG products, followed by Germany, UK, France and other E.U countries. In fact, Bangladesh is the 6th largest supplier of apparels in the US market.

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CONTRIBUTION OF THE RMG INDUSTRY:

RMG business started in the late 70s as a negligible non-traditional sector with a narrow export base and by the year 1983.From the year1995 to 2005 export growth rate has reached to 11 billion. Figure 1: Trend of RMG Export Volume, Export Growth and Contribution to GDP

export million USD

12000 10000 8000 6000 4000 2000 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 20051996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

data 3472.6 3882.4 4418.3 5161.2 5312.9 6467.3 5986.1 6548.4 7603 8654.5 10526

Development of the Export of RMG Sector:

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. One of the key advantages of the RMG industry is its cheap labor force, which provides a competitive edge over its competitors. The garment industry is by far the countrys most important manufacturer, earning around $5 billion annually and accounting for about two thirds of all exports. Bangladesh has about 2,500 garment factories with up to 10 million livelihoods dependent on it directly or indirectly. About 80 per cent of garment workers are women. The sector opened up employment opportunities for many more individuals through direct and indirect

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economic activities, which eventually helps the countrys social development, woman empowerment and poverty alleviation.

Table: Comparative Statement on Export of RMG & Total Export of Bangladesh

YEAR EXPORT OF RMG (IN MILLION US$) 2547.13 3001.25 3781.94 4019.98 4349.41 4859.83 4583.75 4912.09 5686.09 6417.67 7900.80 TOTAL EXPORT OF BANGLADESH (IN MILLION US$) 3882.42 4418.28 5161.20 5312.86 5752.20 6467.30 5986.09 6548.44 7602.99 8654.52 10526.16 % OF RMG'S TO TOTAL EXPORT 65.61 67.93 73.28 75.67 75.61 75.14 76.57 75.01 74.79 74.15 75.06

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Exporting Condition of Garments Industry:

RMG 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 Fibre 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. Over the past twenty years, the number of manufacturing units has grown from 180 to over 3600. The sector has also played a significant role in the socio- economic development of the country.
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Table: Growth rate of garments in Bangladesh:

Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 No of Factory 2353 2503 2726 2963 3200 3480 3618 3760 3957 4107 Compound Growth rate in % 5.23 5.65 5.89 5.93 7.96 5.12 3.48 2.75 2.80 1.6

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 in export sector. Over the last thirty years, international trade and investment in the global textile and garment (T&G) sectors has been influenced by Multi-Fiber Agreement (MFA) quantitative restrictions (quotas) applied by the major developed country importers (the United States, the European Union, Canada and Norway) on T&G exports from (predominantly) developing countries. MF Quotas were negotiated bilaterally and applied on a discriminatory basis to some exporting countries but not to others, thus differing from country to country in both product coverage and the degree of restrictiveness. From 1 January 2005 all such quantitative restrictions on the trade in textiles and clothing were phased out, and finally abolished. Historically speaking that as per requirement of The ATC, all MFA quotas on T&G products be removed over a ten-year transition period split into three phases and ending on 1 January 2005, thus finally incorporating international T&G trade into general GATT rules that prohibit discriminatory measures and call for the reduction and elimination of quantitative restrictions. The quota system under the MFA has distorted international T&G trade and has resulted in global welfare losses since quota limits on the exports of selective producers have prevented an allocation of resources to the most efficient T & G producers and prevented prices in quota protected developed country markets
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from falling.

VALUE AND QUANTITY OF TOTAL APPAREL EXPORT YEAR TOTAL APPAREL EXPORT IN MN.US$ WOVE N 1995-96 1996-97 1997-98 1998-99 19992000 20002001 20012002 20022003 20032004 20042005 20052006 1948.81 2237.95 2844.43 2984.96 3081.19 3364.32 3124.82 3258.27 3538.07 3598.20 4083.82 KNIT 527.91 566.7 641.22 763.32 943.15 1018.6 4 941.1 1075.4 5 1531.7 1 1926.3 5 2772.9 7 SWEATE R 70.41 196.60 296.29 271.70 325.07 476.87 517.83 578.37 616.31 893.12 1044.01 TOTA L 2547.13 3001.25 3781.94 4019.98 4349.41 4859.83 4583.75 4912.09 5686.09 6417.67 7900.8 TOTAL APPAREL EXPORT IN MN.DZ WOVE N 48.82 53.45 65.59 64.79 66.63 71.48 77.05 82.83 90.48 92.26 108.82 KNIT 23.18 27.54 32.60 36.66 45.27 52.54 63.39 69.18 91.60 120.13 165.02 TOTAL 72.00 80.99 98.19 101.45 111.90 124.02 140.44 152.01 182.08 212.39 273.84

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Major country wise export scenario of garments product from Bangladesh:

The major destination of our RMG products is EU, USA, Canada, Japan, Australia Belgium, France, Germany, and Poland. Bangladesh is currently the 4th largest apparel exporting country to the US market, trailing behind only China, Vietnam and Indonesia.

Table: Major Country wise export documents

Fiscal year 19951996 19961997 19971998 19981999 19992000 20002001 20012002 20022003 20032004 20042005 USA 1965.78 2167.45 2496.55 2388.67 2432.21 2500.42 2218.79 2155 1966.58 2412.05 Germany 543.98 612.33 689.23 759.98 692.34 789.88 681.44 820.72 1298.54 1353.8 UK 312.56 359.98 412.43 499.12 538.17 598.18 647.96 778.26 898.21 943.17 France 112.43 198.47 212.17 398.54 289.56 365.99 413.69 418.51 552.96 626.17 Belgium 98.34 117.66 138.98 198.78 234.78 253.91 211.39 289.48 326.95 325.43 Italy 87.45 119.76 198.45 167.67 235.56 259.73 262.31 258.99 315.93 369.18 Poland 5.57 6.03 38.34 43.49 44.56 48.32 76.12 66.32 75.49 98.12 Spain 141.66 136.98 253.49 404.23 385.55 595.92 545.43 514.32 613.32 895.17 Korea Rep 10.34 15.2 21.32 18.43 11.56 21.17 36.12 26.12 41.32 46.98 Sweden 49.18 54.98 93.91 125.74 129.89 206.86 189.34 176.21 267.34 325.12

Source: Export Promotion Bureau

Here are some graphs shown below-

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USA
3000 2500 2000 1500 1000 500 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

USA 1966 2167 2497 2389 2432 2500 2219 2155 1967 2412

Germany
1600 1400 1200 1000 800 600 400 200 0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Germany 543.98612.33689.23759.98692.34789.88681.44820.721298.51353.8

UK
1000 800 600 400 200 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

UK 312.56 359.98 412.43 499.12 538.17 598.18 647.96 778.26 898.21 943.17

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France
700 600 500 400 300 200 100 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

France 112.43 198.47 212.17 398.54 289.56 365.99 413.69 418.51 552.96 626.17

Belgium
350 300 250 200 150 100 50 0

1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Belgium 98.34 117.66138.98198.78234.78253.91211.39289.48326.95325.43

Italy
400 350 300 250 200 150 100 50 0

1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Italy 87.45 119.76 198.45 167.67 235.56 259.73 262.31 258.99 315.93 369.18

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Poland
120 100 80 60 40 20 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Poland 5.57 6.03 38.34 43.49 44.56 48.32 76.12 66.32 75.49 98.12

Spain
1000 800 600 400 200 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Spain 141.66136.98253.49404.23385.55595.92545.43514.32613.32895.17

Korea Rep
50 40 30 20 10 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Korea Rep 10.34 15.2 21.32 18.43 11.56 21.17 36.12 26.12 41.32 46.98

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Sweden
350 300 250 200 150 100 50 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 20041996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Sweden 49.18 54.98 93.91 125.74129.89206.86189.34176.21267.34325.12

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Problems:
Lack of marketing tactics The country is deficient in creativity Absence of easily on-hand middle management A small number of manufacturing methods Low acquiescence: there is an international pressure group to compel the local producers and the government to implement social acquiescence. The US GSP may be cancelled and purchasing from US & EU may decrease significantly M/c advancement is necessary. The machinery required to assess add on a garment or increase competence are missing in most industries. 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 Speed money culture Time-consuming custom clearance Unreliable dependability regarding Delivery/QA/Product knowledge Communication gap created by incomplete knowledge of English Subject to natural calamities

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Compliance Issue:
In addition to speedy supply, the social dimensions of the RMG industry are getting more attention from consumers, social workers, welfare organizations and brand name international buyers. Currently, many international buyers demand compliance with their code of conduct before placing any garment import order. Although Bangladesh was able to solve the problem of child labor very successfully in the mid-1990s, the countrys performance in improving the factory working environment is not yet satisfactory. Informal recruitment, low literacy levels, wage discrimination, irregular payment and short contracts of service are very common practices in the RMG factories in Bangladesh. It is true that the country still enjoys some comparative advantage in manufacturing garment products based on low labor costs However, such advantages cannot be sustained forever nor can they be expected from a humanitarian perspective. Labor organizations, social welfare organizations and humanitarian organizations are raising their voices against such low wages, which are considered labor exploitation. Rented factory premises, narrow staircases, low roofs, closed environments, absence of lunch rooms, unavailability of clean drinking water and no separate toilets or common rooms for female workers are other concerns in the garment factories of Bangladesh, Bangladesh RMG firms need to deal with these issues in order to remain competitive in the global market.

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Opportunity:
EU is willing to establish industry in a big way as an option to china particularly for knits, including sweaters Bangladesh is included in the Least Developed Countries with which US is committed to enhance export trade Sweaters are very economical even with china and is the prospect for Bangladesh If skilled technicians are available to instruct, prearranged garment is an option because labor and energy cost are inexpensive. Foundation garments for Ladies for the FDI promise is significant because both, the technicians and highly developed machinery are essential for better competence and output Japan to be observed, as conventionally they purchase handloom textiles, home furniture and garments. This section can be encouraged and expanded with continued progress in quality Considerable Qualified/keen to learn workforce available at low labor charges. The recommended minimum average wages (which include Travelling Allowance, House Rent, Medical Allowance, Maternity Benefit, Festival Bonus and Overtime Benefit) in the units within the Bangladesh Export Processing Zones (BEPZ) are given as below; on the other hand, outside the BEPZ the wages are about 40% lower: Energy at low price Easily accessible infrastructure like sea road, railroad, river and air communication Accessibility of fundamental infrastructure, which is about 3 decade old, mainly established by the Korean, Taiwanese and Hong Kong Chinese industrialists. FDI is legally permitted Moderately open Economy, particularly in the Export Promotion Zones

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GSP under EBA (Everything But Arms) for Least Developed Country applicable (Duty free to EU)

Improved GSP advantages under Regional Cumulative Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful track

Investment assured under Foreign Private Investment (Promotion and Protection) Act, 1980 which secures all foreign investments in Bangladesh

OPIC's (Overseas Private Investment Corporation, USA) insurance and finance agendas operable

Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under which protection and safety measures are available

Adjudication service of the International Centre for the Settlement of Investment Dispute (ICSID) offered

Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD & Cellular services

Weakness of currency against dollar and the condition will persist to help exporters Bank interest at 7% for financing exports Convenience of duty free custom bonded ware house Readiness of new units to enhance systems and create infrastructure accordant with product growth and fast reactions to circumstances

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Conclusion & 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 textile 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 FY05 and (especially) in FY06. Due to a number of steps taken by the industry, Bangladesh still remains competitive in RMG exports even in this post phase-out period. Cheap labor is no longer seen to be a mainstay of comparative advantage. The need for establishing strong backward linkage was appropriately realized and accordingly necessary steps were taken by all quarters of the RMG industry, which has been reflected in the decreased pattern of back-to-back import supported by increased domestic value addition. However further progress is in order, and a strong public sector role is necessary to mediate the establishment of textile mills with global standards. An appropriate policy regime is needed to encourage the importation of technology, intermediate and raw materials, so that the local industries get a chance to reduce its average cost to international level and narrow the lead time. Presently, Bangladeshs apparel sector operates mainly at the lower-end segment of the international market. Although knitwear products achieved tremendous growth but these are lowvalue products with small profit margins. Bangladesh can enhance its value addition capacity substantially through diversification of apparel products and by moving into more value-added, high-priced, high-fashion products. Woven category can be more attractive via large capital investment. If cost effective investment can increase in the spinning and weaving sub-sectors, as it has been in the past few years, Bangladesh has the possibility of building a competitive exportoriented RMG sector with strong backward linkages in the textiles sector.

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Training is always considered as an effective instrument for upgrading skills and raising efficiency of human resource, which eventually ensures increased productivity. Some initiatives have been taken by the entrepreneurs of the relevant sector but much more needs to be done. Necessary steps should be taken both by the public and the private sectors, and development partners to establish appropriate fashion and technology institutes. Improvement in working conditions and organizational environment can also result in increased productivity, which eventually renders these enterprises more competitive. 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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REFERENCES
World Trade Organization, 2006, Trade Policy Review, Geneva. Bhattacharya, D, M. Rahman and A. Raihan, Contribution of the RMG Sector to the Bangladesh Economy, CPD Occasional Paper Series, Paper 50. Data Source Export Promotion Bureau Compiled by BGMEA Export Promotion Bureau, Bangladesh (EPB), <www.epbbd.com/>

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