An internship report

On

As a partial fulfillment of the degree of Master of Business Administration

Prepared By

Sourav Ahmmed

ID: 51530048

Dept. of Banking and Insurance

MBA (Evening) Program

University of Dhaka

Supervised By

Md. Asif Nawaz

Assistant Professor

Dept. of Banking and Insurance

University of Dhaka

Date of Submission: 7th November, 2017.

1
 Letter of Transmittal
7th November, 2017.

To

Md. Asif Nawaz

Assistant Professor

Department of Banking and Insurance

University of Dhaka

Subject: Submission of Project Report on “Contribution of RMG on Bangladesh’s

economy; and looking for sustainability dimension of RMG.”

Dear Sir,

It is my great pleasure to submit my report on “Contribution of RMG on Bangladesh’s

economy; and looking for sustainability dimension of RMG” that I was supposed to complete
for the fulfillment of my Master of Business Administration'. I have gone through many
obstacles during making this report. But the experiences I have achieved will definitely help me
in the years ahead. I have tried to describe my observation, learning and knowledge regarding
the RMG sector in Bangladesh. In spite of the several hard and bitter experiences, I put my all
efforts to make this report very meaningful.

I have tried consciously to show and translate my gained knowledge in writing this report. I have
enjoyed this project work and I will awfully happy through getting your valuable corrections, if
necessary.

Sincerely,

Saurav Ahmed

ID: 51530048

Department of Banking and Insurance

MBA (Evening) Program

University of Dhaka

2
 Acknowledgement
At the beginning, I would like to place my deep appreciation to almighty Allah for making me
able and giving opportunity to finish task in the planned time.

I would also like to place my appreciation to my honorable supervisor Md. Asif Nawaz sir for
helping, leading and supervising me in every aspect regarding my project work.

I am also thankful to Md. Sahinoor Alom, AGM of Crony Group for providing valuable
information regarding RMG sector.

I cannot but mention my special gratitude to my every respondent to give me support.

And it is none but me who is responsible for any mistake in this report.

Saurav Ahmed

ID: 51530048

Department of Banking and Insurance

MBA (Evening) Program

University of Dhaka

3
 Supervisor’s Certification
This is certified that the internship report on “Contribution of RMG on Bangladesh’s economy;
and looking for sustainability dimension of RMG” has been done by Saurav Ahmed (ID:
51530048) under my supervision. It’s also worth mentioning that to the best of my knowledge
the work reported herein does not from part of any other project report or dissertation on the
basis of which a degree or award was conferred on an earlier occasion on this or any other
candidate . He is found to be sincere and hardworking and permitted to submit the report. I wish
him every success in future.

Md. Asif Nawaz

Assistant Professor

Dept. of Banking and Insurance

University of Dhaka

4
 Declaration
I persuasively declare that the work shown in the report named “Contribution of RMG on
Bangladesh’s economy; and looking for sustainability dimension of RMG” is done by me as a
partial fulfillment of my MBA program. I had made the report under the supervision of Md. Asif
Nawaz, Assistant Professor of University of Dhaka. There is no denial that I had completed the
by myself. I had also tried to find out something new other than finding the conventional and
existing result related to RMG sector of Bangladesh. It’s is only me who is responsible for any
fault of the report either partially or fully.

This report is not submitted to anywhere else. This report is not copied from any sources.

…………………………………

Sourav Ahmmed

ID: 51530048

Dept. of Banking and Insurance

MBA (Evening) Program

University of Dhaka

5
 Executive Summary
Needless to say, RMG sector is considered as a great prospect for the economy of Bangladesh.
And it’s especially true for exporting. RMG positively effects on GDP, GNP, and economic
empowerment. Out of all it covers almost 80% export. 80% of the garments workers are now
women. It started its journey in 1970 with a very small investment, it has enriched in 1980 and in
1990 it has become the strongest and largest industry in Bangladesh. The worth mentioning
factors of the RMG sector of Bangladesh are the very cheap labor cost, government policy and
support, global trading agreement. All those belongings helped Bangladesh to achieve a bulk
share in in the international garment business. Now it has been earning largest foreign exchange.
The RMG sector defines 18 percent of total GDP of Bangladesh. After passing ten economic
years, it has achieved a number of various and potential buyers throughout the world in the field
of export oriented products.

However, there are certain things that need to be taken into consideration. Because of lack of
congenial atmosphere and adequate infrastructure, the Tazreen fire and the Rana Plaza collapse,
there is a great concern has come forward regarding the sustainability of the RMG sector in
Bangladesh in the long run. That is why, sustainability of RMG sector is the extreme necessity of
the growing economy of Bangladesh. We need to be concern about the occupational safety and
better and safe working condition of garments. Compliance, product innovation, inspection,
workers safety are very crucial for the maintaining the confidence of international buyers and for
acting as safeguard for the five million workers of RMG sectors. NGO, US government,
development partners, Government of Bangladesh, BGMEA, ILO, BKMEA, international
buyers, civil society, and private sectors decided to work together for the improvement of the
working condition of garments sectors in Bangladesh after the incidence. Without continuous
improvement by ensuring work safety, we will not be able to sustain in the international market
in the long run.

Within my research work, I will find the contribution of RMG sector in our economy and then I
will focus on the sustainability dimension to survive in the long run.

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 Table of contents
Serial No Contents Page No

Chapter 1 1.0 Introduction 2

Introduction 1.1 The issue of sustainability for RMG sector of 2
Bangladesh
1.2 Objective of the study 3
1.3 The research methodology 3
1.4 Rationale of the study 3
1.5 Scope and limitation 3
Chapter 2 2.0 An overview of the industry 5
Industry Analysis 2.1 Crucial Events 6

Chapter 3 3.0 Introduction 8

Contribution of RMG 3.1Macro Contribution 9-11
3.2Sectorial Contribution 12-14
3.3 Social impacts of the RMG sector 15
Chapter 4 4.0Introduction 17
Sustainability 4.1The question regarding the sustainability of 17
Bangladesh’s RMG sector
4.2What is sustainability? 17
4.3Sustainability of RMG sector of Bangladesh 18
4.4Problem statement 18
4.5Illustration of the problem 18
4.6Significance of the problem 19
4.7Framework of the study 20
Chapter 5 5.1 Discovering of the welfare status of the workers 22-26
Sustainability Dimensions of RMG

5.2TOWARDS SUSTAINABILITY: Vertical 27-28

extension (Product diversification)

5.3TOWARDS SUSTAINABILITY: Horizontal 29-31

Expansion (Market enlargement)

5.4 TOWARDS SUSTAINABILITY: SOCIO- 32-34

POLITICAL STABILITY
5.5 Summary of the four dimensions 35
Chapter 6 6.0 Findings 37
Findings, 6.1 Recommendation 38
recommendations and 6.2 Conclusion 39
conclusion
References 40

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 CHAPTER ONE
INTRODUCTION

8
1.0 Introduction

RMG sector is being considered as the backbone of the Bangladesh’s economy and acted as
catalyst in the way of development of the country. It is the source of creating jobs for millions of
people and earning billions of dollars. The “Made in Bangladesh” tag always makes us proud.
By achieving huge growth in the last 25 years, the RMG sector has been gained the position of
largest exporting industry in Bangladesh.

This sector is playing a key role in the field of employing generation and making income for the
poor. About four million workers are directly connected with and more than twelve million are
indirectly connected with the industry. The manufacturing units have increased from 180 to over
4000 within the last 25 years. In the sector of socio economic development, this sector has a
good role.

After the independence in 1971, Bangladesh was considered as one of the poorest countries in
the world. As the part of Pakistan, Bangladesh had no major industries because of the bad
policies of the government and discretionary attitude. So, with no natural resources, remaking the
war-ravaged country was so difficult. At that time, none other than RMG sector has been
contributing towards the economy of Bangladesh. It gains 81% of the total export earnings of
Bangladesh. It has occupied the place of jute and overtaken the place of jute.

However, we need to think in a long span, we need to sustain in the long run, we need to grab the
position of our pride within this sector. This important sector is needed to be made sustainable.

1.1 The issue of sustainability for RMG sector of Bangladesh

The word sustainability refers to the capability to be confirmed, sustained, upheld or supported.
It can be defined as the competence or ability of something to be upholding itself. Without
harming the potential for the near future, sustainability helps us to take what we need now.
Bangladesh faced many challenges to make RMG sector sustainable. These challenges include
political instability, limited product lines, and insufficient workers welfare activities. RMG
sector of Bangladesh are facing four challenges in terms of sustainability.

➢ Socio political stability

➢ An exploration for the welfare status of the workers of RMG sector
➢ Product diversification(Vertical extension)
➢ Market enlargement(Horizontal expansion)

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 1.2 Objective of the study

1. Finding the contribution of RMG sector towards our economy.

2. Exploring selected sustainability dimensions of RMG through focusing its recent
challenges, status and future potentials.
3. Finding solutions to regain positive image of the world towards our RMG sector.

1.3 The research methodology

➢ Primary sources: it includes reviewing crucial literature. It consists of periodicals,

journals, textbooks, annual reviews and other publications. Information can be collected
from Bangladesh Bank, Export Promotion Bureau of Bangladesh, BGMEA, BKMEA,
Research Organizations, Civil Society, ministry of commerce and many more.

➢ The in-depth interview: for collecting necessary information, in-depth interview can be
obtained or conducted with foreign buyers and buying house. By doing so, we will be
able to learn about their expectations.

1.4 Rationale of the study

The rationale of the study is divided into two branches. Firstly, learning the actual contribution
of RMG sector in our economy and what are the limitations, obstacles in the way of our
sustainability of RMG sector. Both of the topics are very crucial to know. Secondly, I am
assigned to do the report as my academic formalities.

1.5 Scope and limitation

Availability and accessibility of data secondary in nature is not sufficient to conduct the research.
There are also problems regarding collecting and utilizing the primary data. Within the study,
resource constraints and time were major obstacles. Workers welfare, exploring innovative
products, new market research, and socio economic and political stability were the area of
sustainability. Some area of these may not be covered within this very limited time frame.

10
 CHAPTER TWO
Industry Analysis

11
2.0 An overview of the industry

The RMG sector of Bangladesh has a target of gaining $50 billion within 2021. This target
seems attainable to most of the concerned persons. Income from RMG mainly comes from USA
and the EU countries. Canada is also a big market .The RMG sector has been considered as the
golden goose in the area of economic development. RMG sector has a very positive contribution
in employment, infrastructural and living standard of Bangladesh.

In Bangladesh, there are a good number of export processing zone (EPZ). The main objectives of
EPZ is attracting foreign capital investment, creating employment opportunities for the country’s
manpower, and earning huge foreign exchange. We have EPZ in the area of Dhaka, Comilla,
Chittagong, Mongla, Nilphamari, Pabna, Narayanganj.

The economy of Bangladesh has been increasing due to advancement of RMG sector of
Bangladesh. Next after china, Bangladesh now has stood second position in the field of exporting
RMG.

In 1980s, Bangladesh only had 50 factories with an employing capacity of a few thousand
people. Now, there are 4296 manufacturing units. Bangladesh has achieved a top position due to
competitive advantage of low wages. Here, the labor cost is very nominal. For making a Denim
shirt it costs $7.47 in USA but its only $1.3 in Bangladesh.

Bangladesh government has made an open door policy in order to stimulate rapid economic
growth of the country. And it’s BEPZA. It stands for Bangladesh Export Processing Zone
Authority. It is a government organ to promote, attract and facilitate the foreign investors. The
primary or the basic target of creating so is the making congenial atmosphere for the investors,
ensuring working safety for the investors.

Finally, in spite of attractive growth of our RMG industry, there are still challenges. Workplace
safety, better working conditions are the most obvious ones. It is high time; we went to new
market and new product. Socio political stability should be ensured within a very short span of
time.

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2.1 Crucial Events

There are some worth remembering events that had taken place in different time period in the history of
RMG sector of Bangladesh. Those events include the life cycle of RMG sector in Bangladesh, some
positive effects as well as negative effects.

Year Issue

1970-1980 Early period of growth

1982-1985 Boom days

1985 Imposition of quota restriction

1990 Development of knitwear sector

1993 Issuance of child labor a

2003 Canadian quota restriction withdrawal

2005 Quota restriction phase out

2006 Strike and riots by garments labor took place

2007-08 Stable growth

2012-13 Rana Plaza collapse and Tazreen Fashion fire

took place

2008-15 A bit continuous growth

2016-till now Continuous growth

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 CHAPTER THREE
Contribution of RMG

14
3.0 Introduction

After the independence in 1971, many people imposed a pessimistic view regarding the
development prospect of Bangladesh. Many believed that Bangladesh would permanently
remain locked within ‘below poverty level equilibrium trap’. In spite of having little
complacency, Bangladesh has come a long way. Through export, import, commodity market and
factor, almost two-fifths of the economy is now getting connected with the international
economy. The degree of openness of the economy is now 40%. It has now moved towards
trading nation from the aid receiving nation.

This rapid growing sector offers an astounding and unique competitive edge that supports very
profitable expansions into new strategic markets. It has already positioned highest in the growing
economy of Bangladesh. It has experienced a phenomenal growth during the last 25 years. This
industry is playing a very important role in every sector of the society.

It is export oriented RMG industry that has made that vital contribution to and the above
mentioned transformation of Bangladesh economy. The role of our RMG entrepreneurs,
institutional policy support and incentives, domestic fiscal and financial and others have played a
crucial role. The RMG sector not only injected dynamism in export but also contributed in the
domestic economy through backward and forward linkage of economic activities, while
traditional sector could not yield expected results.

The RMG sector is now the country’s most important manufacturer, earning about $5 billion
annually and is also generating about two thirds of the all exports. Now, in Bangladesh there are
almost 4000 garments factories and almost 10 million people depend on it directly or indirectly.

RMG sector has multi-dimensional effects in the area of finance, economy, society and many
more. And within my report I will try to disclose the effects of RMG sector.

15
3.1 Macro Contribution

The below table shows the export performance of RMG in Bangladesh over the last 8 years. It
depicts the contribution of RMG in total export.

FY Total Total RMG Total RMG Growth Contribution

Export(Billion Export Export(Billion % to the Export
$) Target(Billion $)
$)

2009 15.56 11.11 12.34 79.3

2010 16.2 13.8 12.49 1.21 77.09

2011 22.92 13.7 17.91 43.37 78.14

2012 24.28 19.5 19.08 6.53 78.58

2013 27.02 21.5 21.51 12.73 79.6

2014 30.17 24 24.48 13.85 81.17

2015 31.21 26.9 25.49 4.08 81.67

2016 34.24 29 28.09 10.2 82.03

3.1.0 Interpretations

Total exports of Bangladesh are largely depending on RMG sector. About 80% of exports are
covered by this area. Here, we can see an upward trend within the year. It is definitely a good
sign for the economy of Bangladesh. Starting from 2009 and ending in 2016 we can see a
positive change.

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Next to china, Bangladesh is now world’s second largest RMG just the hour. RMG is now
bringing more than 80% of the country’s total export. China is now losing its attractiveness and
the buyers all over the world are shifting to other sources. The buyers are thinking about the
capacity, price, quality and the risk. In spite of having some limitations, Bangladesh is standing
at a higher position here.

Bangladesh is now offering two foremost advantages –price and the capacity. Over the last
decades, it has achieved two digit growths. It has a plan of achieving USD 50 billion within
2021.

So, RMG constitute the following advantages

• 4.5 million People are now employed by the sector.

• Of the total workforce, almost 3 million are women
• In backward and forward linkage of industries, 4 million people are working.
• For livelihood 40 million people depend.
• At the present, the poverty level in Bangladesh has dropped from 49.8% to 40%, and the
contribution of the RMG sector in this regard is one third.

17
The following diagram shows the performance of RMG sector of Bangladesh in GDP. Partially it
varies year to year. But in average it’s 80% of the total GDP.

The above diagram shows the comparative contribution in export of RMG. Apart from RMG
products, there are a good number of items that contribute in total GDP by exporting. Those
common items include frozen food, jute goods, leather, chemical products, agricultural products,
tea and others. But it’s worth mentioning that, only RMG export contributes almost 80 percent
out of 100 percent export GDP.

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3.2 Sectorial Contribution

3.2.0 The linkage of backward and forward

The activities of RMG sector is spread over in both forward and backward indirectly in nature. It
has facilitated many service sector activities. To formulate the idea, the RMG sector is not only
linked to spinning, weaving, dyeing and finishing, but also more than that. For example, real
estate, banking, insurance, hotels and tourism, packaging, recycling, consumer goods utility
services and transportation all are very connected with the RMG.

The RMG industry has a backward linkage with the textile sector for providing yarn, fabrics and
other things. It has also good backward linkage with the supplying sectors of gas, electricity,
spare parts and machinery. It also has the forward linkage with the communication, transport,
trade services, banking and insurance. Apart from, there is also subcontracting linkage with
others. In terms of bringing the manufacturers and buyer for the finished goods, buying house
plays a good role.

3.2.1 Bank and insurance

Financial sector now has been accelerated because of the rapid growth of RMG sector and
related activities. For example, in the fiscal year of 2002, 37 million USD had been earned by the
banking sector in the form of LC and interest charges while having business with the RMG
sector.

In the country, more than 10% of the commercial banks asset portfolio is belong to textile and
RMG sector. Commercial banks lent taka 4400 crore to the textile sector and taka 812 crore to
the woven-RMG sector in 2001. The financing business of export is largely depending on the
textile and RMG sector. A survey conducted by the World Bank Revealed that about all firms
(98) are the clients of commercial banks for working capital and the procurement of machines
and equipment (57%).

The growth of the country’s insurance sector is also a result of RMG sector expansion. About 6
million USD is paid as premium to the insurance companies by the RMG sector in every year.
Almost all the firms have plants and machines insured. Apart from, importers and exporters get
consecutively 87% and 15% of their things insured.

3.2.2 Shipping and Logistics

The shipping business of Bangladesh has been expanded by RMG sector and it has stimulated
the setup of several container yards. That container can handle and store large quantity of cargo.
The manufacturers of RMG also use the service of clearing and forwarding agents with a view to
customs clearance for inputs and finished goods. It has been estimated that port authority earn
more than 40% of their income from the RMG sector. Just the moment every fiscal year the

19
shipping business earn almost 100 million USD by port charges, C& F agent commission, freight
charges, forwarding charges and many more.

3.2.3 Transport communication

The inland transport service has been expanded to a considerable stage because of the growth of
RMG sector. For the activities related to manufacturing and cargo movement of RMG, both
railway service and wheel transport are widely used. For safe transportation of RMG products in
particular, the concept of covered van has been emerged. Every year the inland transport
authority received almost 50 million USD as revenue from the RMG sector.

3.2.4 Contribution to the Government Exchequer

Both directly and indirectly, RMG sector is contributing to the government exchequer. Every
year this sector pays millions of USD as stamps, postage, license renewal fee etc. Almost 100
million USD is earned every year as payments made for visa renewal, visa form, GSP form,
license form and other forms to the Export Promotion Bureau. Millions of USD is paid in the
form of taxes to the government by RMG sector.

3.2.5 Professional services

It’s very usual for RMG to take professional services from legal agencies, business consultants;
CA firms’ .Every year RMG sector now pays 5 million USD as the payment for professional
services.

3.2.6 Engineering sector

On an average every year RMG sector pays 20 million USD to the engineering sector .These
include the payment to maintain ace and repairing service industry (USD 5 million), electrical
engineering (7 million USD), transport vehicle maintenance service (USD 4 million), and
mechanic tools service(USD 4 million).

3.2.7 Utility services

Payment for electricity bill for RMG sector is estimated to be more than 17 million USD.
Payments for gas, WASA are estimated to be additional 5 million USD.

3.2.8 Information and communication Technology

Just the hour, RMG sector is playing as catalyst for the development and growth of country’s
ICT sector. ICT sector earns huge revenue every year from the RMG sector. Communication,
hardware and software can earn revenue estimated to be 12 million USD every year.

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3.2.9 Real estate

For the purpose of accommodating offices and factories numbered over 4000 garments, the
demand for real estate development has been accelerated by the RMG. More than 30 million
USD has been earned in a name of factory, office and garage rent.

3.2.10 Hotel Tourism

For business purpose, almost 3000 overseas apparel buyers and their representatives visit in
Bangladesh every year. Every year hotel and tourism industry earned on an average more than 5
million USD from the persons related to RMG.

3.2.11 Waste recycling industry

Approximately 0.2 million people are engaged with wastage recycling industry of RMG. They
get their materials from the industry. From these wastage materials, toys, patterns, quilt, cushions
are produced.

3.2.12 Emerging consumer market

A large demand for consumer goods has been created by the millions of workers of the RMG
industry. The regular way or source has increased the basic consumption needs like improved
diet, better healthcare, and improvements in family utility and housing conditions. Also the
demand for cosmetics items, footwear, fast food, dress has been accelerated. In sum, the RMG
sector is playing a vital role for the creating of employment opportunities of hundreds of
thousands of people.

21
3.3 Social impacts of the RMG sector

3.3.0 Women Empowerment

There is no deny that when women participate in income generation activities, they often get a
better status within the family and considerable freedom. Only a job ensures an equitable access
to the household resources and at the same time larger investment on female human capital in
both health and education. Transportation, communication, safety all are ensured by the
employment opportunity of woman and also makes a demand for policy access to those areas.
This employment opportunity creates the demand for education and health. Income of women
reduces their vulnerability as now they are less depending on male. It also reduces the domestic
violence against women. Now poor people often get sympathy in terms of getting help from
women as they are good savers now.

Many poor women now can get directly the access to cash income for the first time by the RMG.
This notion is also supported by much research. Many surveys also show that women now are
taking responsibilities like paying for house rent and school expenses for their children, brother
and sister. Despite having lower income, the female members spend same amount of money as
male members in terms of schooling expenses. Again, female workers are also spending for their
marriage from their earnings thus reducing the burden for their families. By this way woman are
participating in household decision making.

3.3.1Savings

Earning at a regular basis enables both the male and female garment workers to go for savings. It
is shown that more than 50 percent of both male and female workers aged 15 or more than that
has bank account. A higher percent of workers in EPZ have bank Account. Findings show that
women are better savers than the men.

3.3.2 Child labor

Child labor is one of the debatable issues for all time. Because of the pressure from nationally
and internationally, many garments have to retrench child workers from their work forces.

3.3.3 Population control

In the field of family planning and population control, the opportunity of employment has
created a positive impact in the country. Independent women are now more conscious about
maintaining small family and modern planning methods. These independent female tend to avoid
early marriage. The average age of workers of RMG sector for marrying is higher than that of
average people.

22
 CHAPTER FOUR
Sustainability

23
4.0 Introduction

From the previous part of the report we have seen that RMG sector has a multidimensional
contribution in our economy and the society as a whole. In the recent past, it has contributed a
lot, at the present it is contributing a lot. But the most important question is will RMG be able to
continue or maintain the same trend of positivity? Within this part of my report I will try to find
out the answer of the question through finding out the sustainability of the RMG sector.

4.1The question regarding the sustainability of Bangladesh’s RMG sector

Two major accidents (The Tazreen fire and Rana Plaza Collapse) have made us conscious about
the issue of workplace safety and also led all concerned bodies to act accordingly. For the
improvement of building and fire safety, a good number of platforms like Bangladesh Accord for
the safety of building and fire, Alliances for Bangladesh Worker Safety, National Plan Action
have been created. All the members of BGMEA and BKMEA are working together to carry out
the action plans recommended by the Accord, Alliance, and National Plan Action by even
investing a large sum of money. Moreover, the factories set up in an unplanned way and fragile
building has started reallocating to safer place.

There is no deny that ensuring workplace safety is a big deal and will take time to achieve, but it
is also believed that the Gov. of Bangladesh, BGMEA, BKMEA will be able to do so through
getting the development partners like global brands and international development partners.

Bangladesh has come a long way starting from very nominal place and is now one of the10 new
emerging countries in the world. There are certain issues that reflect the strength of Bangladesh
like 6% average GDP growth, strong performance of export and remittance, strong foreign
currency reserve etc. However, rather than being over satisfied by the glory, everyone should
work hand to hand to maintain the sustainability of the RMG sector.

4.2 What is sustainability?

The word sustainability means the capability to be upheld, supported, sustained and confirmed.
It’s all about what we need now without endangering the potential of future needs. The next
figure indicates the three pillar of sustainability. There should be a harmony in economy, society
and environment. The below picture shows the elements of sustainability.

24
4.3 Sustainability of RMG sector of Bangladesh

Making RMG sustainable is big challenge for Bangladesh. These challenges related to limited
product lines, insufficient employee welfare activities, untapped market, and political instability.
Those four problems are very crucial ones. Finally, the sustainability dimension of RMG sector
can be divided into

➢ A finding of the betterment status of the RMG sector

➢ Vertical extension (Product diversification)
➢ Horizontal extension(Market enlargement)
➢ Socio-political stability.

4.4 Problem statement

We can find the differences in opinion regarding the sustainability of the RMG sector. Some
people emphasize more on the action of private sector while other thinks of public sector. Some
people are also on behalf of the combination of the both.

However, the combined effort from both public and private sector is important for making the
sector sustainable. Stakeholders like donor agencies, buyers, and development partners like WB,
IMF, and WTO all should be come forward for the sustainability of the potential sector of
Bangladesh.

Finally, sustainability of RMG can be pointed as a capacity to be sustained or maintained itself in

the hostile situation of World market.

4.5 Illustration of the problem

For both private and public sector of the country, sustainability of RMG is a big deal.
Government needs to pay more attention for the development of the sector because of the high
importance of the RMG sector. Just the moment Generalized Systems of Preference (GSP) and
Duty free and quota free are denied in USA. In RMG sector, USA is the largest buyer. It is a
very bad signal for Bangladesh. Both Rana Plaza collapse and Tazreen Fashion fire have brought
the issue of workers welfare. Government and public sector, international agencies, development
partners, buyers, civil society all should come forward to handle the problem of sustainability.

25
4.6 Significance of the problem

The reality within which the RMG sector is going through is very important for the sector and
the economy as a whole. Cancelling DFQF (Duty and Quota Free) and GSP by USA for the
Bangladeshi RMG exporters is a big issue and challenge.

Importers and the development partners are creating obstacles for RMG sector by setting poor
standard of compliance. The problem is very significant because the contribution of RMG is
spread over economy, society, and different other sectors.

The below diagram shows the problems faced by the RMG sector in global market place in a nut
shell.

Those problems can be internal (energy crisis, high bank interest rate, remediation cost, Euro
price falling) and external (incapable port, lack of policy, lack of product market diversification.

26
 4.7 Framework of the study

Sustainability dimensions:

1. The welfare of the RMG workers

Sustainability of the RMG 2. Vertical extension for breaking through product
sector of Bangladesh diversification
3. Horizontal expansion through market enlargement
4. Socio-political stability.
.

Challenges:

1. Insufficient workers welfare activities and inadequate workplace safety

2. Lack product diversification. More dependency on low end products only.
3. Dependence on specific markets, especially the markets of USA and EU.
4. Instability in terms of Socio-political relationship.

Solving the challenges for ensuring sustainable RMG sector

1. Enhancement of workplace safety and workers welfare activities

2. Minimize dependency on low end products. Along with current products high end
products should also be made.
3. Nontraditional market also should be found out along with traditional ones.
4. Socio-polical instability should be minimized with firm hand. Good governance
CHAPTER FIVE
should be practiced and ensured.

27
 CHAPTER FIVE
Sustainability Dimensions

28
5.1 Discovering of the welfare status of the workers of RMG

5.1.0 Introduction

Within this chapter I will try to find out the present status and situation of the welfare of the
workforce of the RMG sector of Bangladesh. Workplace safety and workforce welfare are great
concern. Especially, ‘Rana Plaza’ collapse has opened the eyes of the government, private sector,
development partner, NGO, civil society, USA and EU.

Bangladesh is considered to be developing economy that has surplus of unproductive labor.

These workers are attached to a growing manufacturing sector named by RMG where higher
salary is offered. But there are some bad realities like working environment, gender
discrimination, conspiracy, owner-worker relations, wage, unfavorable socio-economic condition
etc.

5.1.1Present situation

After the loss of 1135 lives at Rana Plaza collapsed on 24 April 2013, bad image regarding RMG
sector of Bangladesh had been created worldwide. This accident happened just few months after
the fatal fire of Tazreen Fashion where 112 persons died. Both of the incidents called for
improving occupational safety and working condition of RMG industry. The government of
USA cancelled GSP facility for Bangladesh on 27 June 2013. The GSP is nothing but
preferential tariff system that facilities quota free entry decided by the WTO. Losing the facility
of GSP will cost millions of dollar for Bangladesh. It also influenced EU to take similar action.
Needless to say, it costs a lot for Bangladesh. In both USA and EU also cancelled
DFQF.Compliance enhancement is very crucial now. If we fail comply with fire and factory
safety, time is not so far when brands and buyers will not buy from us.

5.1.2 The incident of Rana Plaza collapse

Rana Plaza (9 storied building) was located at Savar in Dhaka. There were 5 garment factories.
All were located at the upper floor of the building. At collapse morning, the world had seen
worst ever factory disaster in modern time.

The people from all stage of life and the government rushed to the spot for rescue operation that
took 19 days. Bangladesh army, BGB, RAB, trained volunteers, medical teams, fire fighters,
local people, doctors and student from adjacent area went to the spot. Here, 2438 persons were
rescued and 1135 were died.

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5.1.3Rescue initiatives

The rescue operation was conducted into two phases. The first phase was carried out aimed at
rescuing alive victims inside the rubble. The second phase was conducted with the help of heavy
equipment to find out dead bodies. It took 135 hours to complete first phase until the phase of
last survivor. Some of the rescuers went down more than 70 feet through the holes in search of

30
the survivors. Individuals, government and organizations tried their level best to get a single
person alive as long as possible to supply oxygen, water, saline and food. Many rescuers were
injured and one of them died.

When it was felt that there is no person alive, the second phase was conducted with the heavy
equipment. It was continued until the recovery of all dead bodies.

5.1.4Players engaged in solving problems

The following players were engaged in solving the problem of Rana Plaza collapse in the field of
rescue activities, providing treatment, providing compensation, rehabilitation, providing action
against those responsible for the collapse, and many more. The below table shows name of the
institutions helped after the incidence of Rana Plaza.

Serial Name of the institutions

1 Government of Bangladesh

2 International Labor Organization

3 Employers Association

4 Workers Association

5 Accord on fire and building safety

6 Alliance for Bangladesh’s workers safety

7 Development partners

8 Non-government organization

9 Civil society

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5.1.5 Major action plans that should be taken regarding workers welfare

Area Action Plans

Compliance As per the instruction of ILO, government of

USA and EU, Accord and Alliance,
Bangladesh has to carry out the remedies.

Ensuring safety of RMG plants The government of Bangladesh, the local and
international stakeholders need to carry out
structural, fire and electrical safety.

Strengthening the labor inspectorate Department of Inspections of Factories and

Establishments (DIFE) should be rebuilding by
the government of Bangladesh. The
transparency and the accountability also should
be ensured.

Strengthening the fire service The Fire Service and the Civil Defense
Department needs to make strong initiatives
ads per the present requirement.

Beyond inspections RMG sector inspection is a vital step in the

field of ensuring safety.

Enhancing occupational health and safety It’s a big challenge. Training, education,
support are needed.

Starting a better work program It’s needed for improving working condition
and promoting competitiveness in the
international garment industry.

Establishing injury insurance scheme It’s very much needed in case of work hazards.
It will also reduce the financial risk of
employers.

Coordination and collaboration BGMEA, BKMEA, Government of

Bangladesh, USA, and EU, civil society,
Accord, Alliance all should ensure
collaboration and coordination.

Enhancing the right of workers Special emphasize is to be given for ensuring

the rights of workers.

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5.1.6 Summary (objectives) of workers welfare : the below table shows the objectives of the
employee welfare.

Ensuring safety in the RMG factories means to ensure workers welfare in getting sustainable
RMG sector in our country. As BGMEA, BKMEA, Government of Bangladesh, USA, and EU,
civil society, Accord, Alliance, NGO are working together, this sector will be safe soon.
Collaboration and cooperation within or between stakeholders are needed. Improving skills and
literacy, implementing labor and work safety guidelines, making safety nets all are needed also
for the betterment of worker and consumers.

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5.2 TOWARDS SUSTAINABILITY: Vertical extension (Product diversification)

5.2.0 Introduction

This chapter will find out the present situation and status of RMG products of Bangladesh.
Endeavor is also there for finding how RMG products of our country can be diversified and
moved to high value garments. Bangladesh mainly produces T-Shirts, Sweaters, trousers, Men’s
and women shirts. We should focus on high end products like suits, lingerie for the sustainable
growth of our apparel industry. Bangladesh needs to go for more complexes and fashionable
and sophisticated items.

5.2.1 Safeguard or inability

Bangladesh had not been shaken by the world economic crisis in 2007-08 because its economy is
not well congregated with its giant business parents as well as it produces low value products. So
we should not be so much satisfied. Bangladesh needs to be grown and coordinated with its
trading partners. Otherwise we will remain back bench in all our whole life in world economy
despite of having potentiality.

Bangladesh has some advantages in RMG sector.

Factors Percentage of diff. type Strengths

Low cost of production 81.54% Strength

Good quality 60% Strength

High turnover ratio 42.62% Strength

Simple technology (Labor) 43.08% Strength

Short payback period 23.08% Strength

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5.2.2Move to high value range

Bangladesh is traditionally operating the lowest value of product line. Because of high
competitiveness, low value and high volume buyers are attached to Bangladesh. Let’s see the
scenario of other countries.

Country Labor cost(USD per hour)

Bangladesh 0.22

Cambodia 0.33

Vietnam 0.38

India 0.51

China 0.55-1.08

Turkey 2.44

However, if wage rate is raised, the competitiveness of Bangladesh will seriously hamper if
necessary steps are not taken. Product innovation is needed that will increase the wage.

Diversification need for both products and market is one of the big challenges for Bangladesh. High end
products can be good solution. Low value RMG is mainly produced by Bangladesh which has the risk of
facing more competitors. In terms of acquiring more profit, it is a big hindrance. Bangladesh should not
rely on few products but it should diversify its products. A breakthrough is required.

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5.3 TOWARDS SUSTAINABILITY: HORIZONTAL Expansion (Market enlargement)

This chapter will disclose the current status of situation of RMG export market of Bangladesh.
Just the moment the main buyers of Bangladesh are from USA and EU. Dependency only to
those countries can be a great threat for the sustainability. Bangladesh should search for some
other destination.

The below image shows some name of active buyers of the RMG industry.

36
Now let’s find out some nontraditional destination or market for Bangladesh

Name of the country Potentials or suggestions

India It’s giant neighboring country. Statistics shows that India is a big
market for Bangladesh but here export of RMG is not increasing
because of some difficulties. There will be low transportation cost;
there will be also high demand low value RMG products.

China It is the world’s largest and fastest growing economy. It can be next
big export market for RMG. Chinas domestic RMG market is $310
billion USD.
Every year, china is losing its market share in RMG of the world
because of the scarcity of workers, high labor expenses. It’s better
news for us.

Russia In light of the Purchasing Power Parity, Russia is the sixth largest
economy. It is one of the biggest nontraditional destinations for RMG
of Bangladesh.
If Bangladesh can reduce the tariff barriers with Russia, the
dependency on USA and EU will be lower.

Thailand The trade within Bangladesh and Thailand is more than $1.2 billion,
but Bangladesh can only exports $100 million. The restriction should
be minimized in export. Thailand is very potential market for RMG.
Bilateral good relation is needed.

Brazil It can be a good destination with vibrant economy. Bangladesh should

find diplomacy regarding this factor.
Mexico Mexico has trillion dollar attractive economy and its market is free. It
has over 90 percent of free trade agreement with more than 50
countries. Bangladesh should sign bilateral agreement with Mexico.

It’s enjoying the highest sovereign bond rating among the Latin
Chile American countries. It has much trade agreement with many strong
countries. So singing bilateral agreement with Chile would be a wise
decision for Bangladesh.

Myanmar has 285 km common land border with the country. It can be
Myanmar a sustainable market for Bangladesh. It can be a potential market for
Bangladesh.
Africa is huge market for Bangladesh. Especially South Africa can be
more potential to use RMG products of Bangladesh. Economic
Africa diplomacy, positive venture make Africa more attractive.

37
The below table says about government intervention and real necessity of market diversification.

Aggressive economic diplomacy, reduced unnecessary bureaucracy, productivity and responsible

sourcing, forward and backward linkage, reduced lead time, modern textile industry are needed.
Finding nontraditional market beside traditional market is demand of time for the sustainability
of RMG sector of Bangladesh. Negotiations with those potential countries are very crucial.

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5.4 TOWARDS SUSTAINABILITY: SOCIO-POLITICAL STABILITY

5.4.0 Introduction

This chapter will find out the current situation and status of the socio-political situation of
Bangladesh which has a direct effect on the growth and sustainability of the country’s RMG
sector. Socio political stability means to congenial environment that a country is needed to
striving for. This stability is ensured by the administration of the country with the firm level of
commitment. It’s believed that government has a contract with the people to ensure peace and
tranquility within the country. Socio-political situation is required for the growth of economy of
a country. On the other hand, misgovernance leads to socio-political instability. Lack
institutional strength, malpractices, corruption, and intolerance in political culture are the sources
of instability in the country. Absent of transparency and accountability in the public sector is also
responsible for bringing so.

5.4.1 Present situation

For decades, Hartals have been an ultimate part of Bangladesh. It’s nothing but the showing
wicked activities of the political leaders in the name of democracy while occupying the state
power is the ultimate goal. The bad effects of Hartals are many. It is an obstacle in the way of
economic growth. And it’s especially true for a developing country like Bangladesh. People’s

39
life becomes messy. Local and international trade, investment, and all other economic activities
are hampered due to the immoral activities of the major political parties.

This political imbalance has cost TK 4.5 billion for the apparel industry in 2015. In 2013, this
same industry had to bear TK 5000 crore by air shipment and needed to offer discounts of TK
9000 crore. The daily production value of RMG sector in Bangladesh is TK 430 crore. The
supply of raw materials, transportation of goods is duly affected by this malpractice.

5.4.2 What could be the solution?

Dimensions Explanations

Socio-political dependability Peaceful transfer of power, democracy in true

sense, continuation of policy, tolerance in
political culture is very crucial factors for
ensuring Socio-political dependability.
Rule of law It’s a big deal for Bangladesh. At the same
time social justice should be ensured.
Strengthen institutions State and the government institutions should be
made stronger. They should work accordingly.
Better infrastructure Unavailability of gas and electricity,
inadequate infrastructure, bureaucratic
inefficiency are the major problem still. They
increase the cost of the production
Low rate funding For advancing the factories, low rate of
funding is very important.
Low interest rate In comparison with the interest rate of other
countries, the interest rate of Bangladesh
should be lower. Otherwise, production cost
will go up.

Image building and brand development
Public good and public bad
It can play a vital role in value addition and
increasing reputation. Local and international
exhibition can be arranged, embassies of the
country can play a vital role.
Public good should be practice more. And
public bad should be avoided.

Governance improvement Overall improvement of the governance is very

fundamental necessity both for the economy
and the sustainability of the RMG sector.

40
The below picture shows how the socio- political sustainability effects the human density, equity of
different sectors of society, quality of life.

If the government of Bangladesh can offer good practice of government, no one will raise his
voice; the country as well as the economy will go to the positivity. Public media and social
media can be used for good governance.

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5.5 Summary of the four dimensions

The below table is nothing but the summary of the four sustainability dimensions discussed
previously. It says about the challenge and what could be the solutions.

Serial Sustainability Challenge Solutions

dimensions

1 Workers Insufficient welfare Enlargement of welfare activities

welfare. activities of workers and work place safety.
and inadequate work
place safety.
2 Product Limitation in product Dependency on specific low end
diversification diversification. Much products should be minimized.
dependent on low end High end products should be made.
products.
3 New market Dependency only on Together with traditional one,
exploration the USA and EU. nontraditional destination should
be found out

4 Socio-political Socio-political Stability within this sector should

stability instability be ensured. Good governance
should be practiced. Malpractice
should be banned.

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 CHAPTER SIX
FINDINGS, RECOMMENDATION AND
CONCLUSION

43
 Findings
1. The contribution of RMG sector is huge. It has positive contribution both in economy and
society.
2. The contribution of RMG can be divided into mainly three parts –macro contribution (it
indicates the contribution on economy by adding value in GDP), Sectorial contribution (it
says how different people of the society are being benefited through involving directly or
indirectly with the RMG) and social impact of RMG (it discloses societal benefits more
like women empowerment, population control etc.)
3. To maintain the contribution, all the concerned bodies should focus on sustainability
dimension. We already have negative image regarding working condition of RMG after
the incidence of Rana Plaza and Tazreen Fashion.
4. The owners of the garments often provide low wage to the workers which is not
proportionate to the standard of living.
5. We don’t have enough electricity, gas. This inadequacy leads to production hamper.
6. Bangladesh mainly produces T-Shirts, Sweaters, trousers, Men’s and women shirts. Our
concentration on product diversification is less. Higher variety would lead to higher profit
and vice versa.
7. Just the moment the main buyers of Bangladesh are from USA and EU. Our
concentration on market enlargement is less also.
8. We need to pay a higher amount of taxes in importing garments raw materials. It
ultimately increase our production cost.
9. Workers of RMG of Bangladesh are not well trained. There is no training ground.
10. The political situation of Bangladesh is not congenial for RMG sector. Unstable political
situation hampers our activities.
11. All the owners of the garments are not well educated. It creates problem. They even
don’t know about the scientific way of account keeping.
12. We don’t have advanced technology in all our garments. Compared with the developed
countries, we are lagged behind in production.
13. Sometimes government of Bangladesh creates polities that are not favorable for the RMG
sector.
14. Promotional activities of RMG are not so strong. That’s why we often sell fewer
products than other countries.

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 Recommendation
1. Development in the field of infrastructure is the first suggestion here. The infrastructure
includes gas, electricity, road and highways.
2. Products should be upgraded overtime to sustain in the competitive RMG platform.
Otherwise it will lose the buyer.
3. Producing only T-Shirts, Sweaters, trousers, Men’s and women shirts will not provide
long term sustainability. We should go for product diversification. Higher the product
diversification, higher the profit.
4. There are some mandatory factors for all manufacturing company and those include
health, security and safety. Today buyers are more concerned regarding these issues. So
those factors should be focused. In the long run those factors will bring profit, needless to
say.
5. Market diversification often means to risk diversification. Finding nontraditional market
beside traditional market is demand of time for the sustainability of RMG sector of
Bangladesh. Negotiations with those potential countries are very crucial. Market
segmentation is needed.
6. Production efficiency is very much crucial in this regard. In all sectors of the garments
computerized system should be upgraded. It will increase production capacity.
7. The political condition should be made congenial. Hartals (strike) should be banned
forever for the greater interest. All the political parties should work within the same
umbrella.
8. The total lead time in Bangladesh should be reduced to within 35(it’s the benchmark for
developed countries) days from 65 days.
9. The planning efficiency is very much crucial in the field of coordination between man,
machine, method and market. Those four elements are integral part for any
manufacturing company like RMG.
10. The unfavorable social image of RMG is needed to change. Many graduates are reluctant
to come to this sector because of the negative image of the RMG within the society. If
this situation continues, we will not get skilled employees. So it is high time we started
changing the outlook.
11. We should make our raw materials by own self because of higher tax rate. Importing raw
materials also increase lead time that leads to buyer’s dissatisfaction. Here, new job
opportunity will be created.
12. Compliance issues must be kept at a satisfactory level. Buyer’s code of conduct is also
important. Otherwise buyers will go to other countries.

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 Conclusion
Finally, the necessity of the contribution of RMG sector cannot even be counted on two hands
not only in the sector of economy but also in a good number of areas. Starting from its existence,
it has been generating huge amount of foreign currency. It has been contributing in both macro
and micro sector. There are a good number of people who depend on RMG sector directly or
indirectly. In poverty reduction it has direct impact. However, despite the advantages, RMG
sector of Bangladesh has a multidimensional drawbacks and challenge. It is always a wise
decision to think in a long span. Sustainability of RMG is a big issue. We need to think of this
sustainability with utter concentration after the incidence of Rana Plaza collapse and Tazreen
Fashion Fire. Without ensuring the dimension of sustainability, we cannot take advantages from
this sector in the near future. So, ensuring sustainability dimension is must. These dimensions
can be divided into four broad categories. Let’s see.

For the growing economy of Bangladesh, sustainability of RMG sector is needed badly. Some
practical actions are needed at this moment for making this sector sustainable. The welfare of the
workers came into at the middle of the discussion when the target is getting long terms
sustainability of this sector. This issue came into existence after Rana Plaza collapse. The
government of Bangladesh, USA, BKMEA, BGMEA, private sectors, ILO, NGO, international
buyers, civil society and other development partners promised to work together after this fata
industrial accident. Now it’s time to keep the promise fully. Safe environment is not only needed
for the factories but also needed for the workers. Secondly, Bangladesh RMG sector also think of
creating new products and encouraging foreign direct investment. We generally produce low
value RMG which is highly competitive. There is more risk. It cannot acquire more profit and
sustainability. It is not wise decision for Bangladesh to depend on only few products rather it
should it should expand its RMG products to face any kind of financial situation of the globe.

Thirdly, along with traditional destination, searching for nontraditional ones is demand of time
for the sustainability of the RMG sector of the country. If Bangladesh can get access to those
potential countries with an advantage of duty free access, it will be a great opportunity for
Bangladesh. Negotiation in every level is needed badly. Political commitment and aggressive
economic diplomacy will open and ease the door to get access to these non-traditional areas.
Delivery lags should be reduced by better logistics. Fourthly; State should ensure social justice
by establishing rule of law. Legislature, executive, and judiciary – these three should work their
assigned task accordingly. Social media as well as public media should work for the betterment
of the people. The practice of good governance can ensure socio-political stability and
malpractice only lead to instability. There are some fundamental areas that should be focused on-
socio-political dependability, rule of law, strengthen institutions, better infrastructure, image
building and brand development, low rate funding, low interest rate, governance improvement.

46
 References
• Bangladesh Bureau of Statistics, Available http://www.bbs.gov.bd/home.aspx access on
31/07/2015 at 9:20 am.
• Bangladesh Garment Manufacturers and Exporters Association of Bangladesh
(BGMEA),
available http://www.bgmea.com.bd/home/about/AboutGarmentsIndustry
• Bangladesh Garment Manufacturers and Exporters Association of Bangladesh
(BGMEA), available
• http://en.wikipedia
• Improving working conditions in the readymade garment industry, International Labor
• Organization http://www.ilo.org/dhaka/Whatwedo/Projects/WCMS_240343/lang--
• en/index.htm
• Lewis, W. Arthur (1954). "Economic Development with Unlimited Supplies of Labor",
• Manchester School of Economic and Social Studies, Vol. 22, pp. 139–91.
• www.ReadyMadeGannents
• www.world bank.org

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