Role of Trade and Ready-made Garments sector in Bangladesh's Economic

Development

The Beginning of the RMG sector in Bangladesh

The craft of weaving has been around in the Bengal Delta tradition for many years. When
Bangladesh's fabric reached international renown, Muslim and Jamdani clothes in particular,
or our country, were utilized as the luxury royal figures' clothing in Europe and certain other
nations. Indeed, British leaders have not developed the textile industry in the Indian
subcontinent at all. They were instead destroying them and importing textiles from England
[ CITATION MdT17 \l 1033 ]. The large-scale manufacturing of ready-made clothing
(RMG) in established factories in Bangladesh is a relatively recent phenomenon. Until the
early sixties, individual customers produced clothing according to the specifications given by
commercial consumers who furnished the clothes. Bangladesh was practically non-existent
until the 1960s in the home market for readymade clothing save for children who wore and
men's knitwear.

In Bangladesh, the RMG sector has been expanding mainly as more of an export-oriented
industry since the late 1970s but the local demand for RMG is growing rapidly as personal
disposable income increases and lifestyle changes. In employment contracts, exchange
profits, and contribution to GDP, the industry quickly became very important. More
significantly, the development of the RMG sector has led to the establishment of a strong
private sector by a group of entrepreneurs. Significant numbers of these entrepreneurs are
women. One of the earliest export-oriented clothing companies was founded by a female
entrepreneur, Boishakhi Garment in 1977. Many women occupy senior positions in the RMG
sector. The sector has seen fantastic development over the past 15 years. In 1978, just 9
clothing factories produced export profits of over $1 million. Some of these facilities were
quite tiny and manufactured clothing for local and international markets. Four of these
earliest and tiny units include Reaz Garments, Paris Garments, Baishakhi Garments, Jewel
Garments [ CITATION Isl16 \l 1033 ].

The pioneer, Reaz Garments, became a modest tailoring unit in around 1960 called Reaz
Store in Dhaka. It exclusively serviced local industries for about 15 years. In 1973, Reaz
Garments Ltd. changed its name to M/s and extended its activities into the international
market by selling 10,000 men's shirts for Franc 13 million toward a Paris-based company in
1978. It was Bangladesh's inaugural direct exporter of clothing. Desh Garments Ltd was
founded in 1979, its first non-equity joint venture in the clothing business. Desh worked in
technological and commercial cooperation with the South Korean Daewoo Corporation. This
was the first complete export-oriented business. It had about 120 operators, including three
women, trained in South Korea, which began its manufacturing in early 1980 with these
trained employees. In 1980, Yungones Corporation established a second South Korean
business to construct the first joint-venture equity garment plant with Trexim Ltd., a
Bangladeshi company. The new company, called Young ones Bangladesh, donated 51
percent of its stock. In December 1980, it shipped its first shipment of padded and unpadded
jackets to Sweden[ CITATION Lei19 \l 1033 ].

There were just 47 clothing manufacturing units till the end of 1982. The breakthrough was
place in 1984-85 once the number of clothing factories rose to 587. The frequency of RMG
plants in 1999 rose to about 2,900. Bangladesh is currently one of the world's 12 major
clothing exporters, the sixth-largest supplier of the US industry, and the fifth-largest provider
of EU T-shirt products. In the 1990s, the industry grew by about 22 percent.

Last 10 years activity of the RMG sector in Bangladesh

In the last 10 years, 75% of the RMG industry has been established in Dhaka. The remainder
is in Khulna and Chittagong. These industries employed around 500 thousand workers and 85
percent of them are ignorant females from rural areas.

About 76% of our export income originates from this industry. The multi-fiber agreement
was a gift for RMG to get established, progressively developed, and mature. While the quota
approached an end in 2004, many people anticipated the phase-out would lead to a major
upheaval in the exports. The major goods of Bangladesh are five: T-shirts, sweaters, pants,
ladies' and men's shirts. In addition, the RMG industry primarily reliant on two markets: the
EU and North America. Although they decreased our relationship between these two markets
from 93 percent to 85 percent in 2009 till 2014, they diversified their clothing export
destinations and focus entirely on high-end products such as suits, lingerie, for the sustainable
development of our clothing industry[ CITATION Ach21 \l 1033 ].
But the post-MFA age is another success tale. The industry overcomes post-MFA difficulties,
proving all the forecasts incorrect [ CITATION Mer15 \l 1033 ]. Now the clothing sector is
the largest export earner in Bangladesh with shipments worth over $24.49 billion during the
fiscal year of 2013-2014. Despite the epic expansion and bright future of our RMG sector,
problems remain. One of the greatest challenges that our RMG sector faced was to guarantee
safety at work and improved working conditions for the clothing workers. Two significant
catastrophes, the fire of Tazreen and the collapse of Rana Plaza, brought the problem of
safety at work to that same fore and prompted all actors to do so[ CITATION Cho17 \l
1033 ]. After the tragic events, many platforms were established to enhance the construction
and fire security of Bangladesh's clothing industry.

Approximately 36 listed firms in the Bangladeshi textiles industry concluded that their net
profit fell from more than BDT 1,252 crore to BDT 341 crore in 2018 in the period of 2011-
2018 timeframe. This number, given constant yearly inflation, represents a peek of the ill
sector. Given the important role of the RMG sector in fueling Bangladesh's development,
there was a major incentive to boost the industry.

However, guaranteeing safety at work in all clothing manufacturers is an enormous job and
takes time. The government of Bangladesh, BGMEA, and BKMEA will be in a position to
guarantee the safety of RMG and sustain the pace of social-economic development in the
country with the assistance of international brands and global development partners. The
progression of the sector appeared on an increasing trend, with a 0.2% increase, 8.7% growth,
and 11.49% growth correspondingly for fiscal years of 2016-17, 2017-18, and 2018-
2019[ CITATION Dha21 \l 1033 ].

Growth in Million ($)

Growth in Billion ($)
40
35
30
25
Million ($)

20
15
10
5
0
2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019-
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Axis Title

By 2019, US fashion firms are likely to increase their sourcing from Bangladesh. The RMG
industry of Bangladesh was characterized as the next hot area in clothing supply by
McKinsey, a worldwide management consultant. According to the Center for Policy Dialog
(CPD), the industry employs about 3.5 million individuals, 60.8 percent of whom are women.
The bulk of the country's exports from RMG comprise 84.21 percent of its total exports as of
2018-2019. There are about 4,621 operational garment manufacturers in Bangladesh as far as
factories are concerned[ CITATION The181 \l 1033 ].

One of Bangladesh's main export destinations in the United States of America. The conflict
between the USA and China was thus anticipated to imply a continuous expansion of
Bangladesh RMG exports, but this has not yet produced enough advantages. The worldwide
economic downturn in 2019 has resulted in a decrease in interest for Bangladesh RMG goods
and the resulting demand for textiles. Other nations have benefited considerably more from
the trade war in terms of output growth. Export competitiveness has been decreased by an
inflated exchange rate. The worldwide rise in high-speed trends has capitalized upon
customer convenience by digitizing and capturing some of Bangladesh's previously exported
clothing. Many of the foreign customers also have "near-shoring," which implies that they
purchase from a country near the end market directly.

RMG sector now in Bangladesh

There are now more than 5,000 garment manufacturers in the Bangladeshi RMG industry,
employing over 12 workers without a job, with 85% of the workforce being women.
According to BGMEA, however, there are around 4000 clothing plants in Bangladesh. The
RMG sector is now the biggest export earner in the nation with shipments worth more than
$24.49 billion during the previous financial year [ CITATION Ach21 \l 1033 ]. It is excellent
news for us because, in terms of ready-made clothing, Bangladesh is significantly ahead of all
other South Asian suppliers.

Although there are many kinds of clothing produced in Bangladesh, all prepared clothing is
divided into two major types, in which one is woven and the other is knitted. Woven items
include T-shirts, pants, and pants. Only T-shirts, Polo shirts, Undergarments, Socks,
Leggings, and Sweaters are part of the knitted goods. Woven textiles still dominate the
country's export revenues. BGMEA claims that the daily production of knitted items is rising
at a significant pace and approximately 40% of export profits from knitted goods are
currently accomplished.

The RMG industry in Bangladesh has several important elements which have encouraged this
sector's continuous development. Although it is a big surprise for so many, how Bangladesh's
RMG industry continues to demonstrate its strong performance in the globe. Although
Bangladesh's RMG industry has become the second-largest exporter of clothing, it faces
several difficulties. The main issues facing the RMG industry now are the absence of job
safety and workplace conditions for millions of clothing employees. This has become a major
problem for Bangladesh's next fiscal year. Political stability is another essential issue.
The Tazreen fire and the Rana Plaza collapse were two significant events in the RMG sector
of Bangladesh, highlighting safety in the workplace, leading all stakeholders to respond
appropriately. However, it is good news in the RMG sector that, in light of unfortunate
incidents, different platforms have been set up such as the Bangladesh Fire and Building
Safety Agreement, the Bangladesh Worker Safety Alliance, and the National Action Plan to
improve Bangladesh's clothing industry building and fire safety. In addition, BGMEA and
BKMEA work jointly to address issues of this kind. They also took the required measures
and spent a large sum of money.

Figure 1 Knitwear exports scenario of Bangladesh[ CITATION Tex21 \l 1033 ]

It is a major duty of the Bangladesh Government to guarantee the safety of the workplace in
all industrial firms. If we cannot, international customers would hesitate to purchase items
here, huge damage to the Bangladeshi RMG industry. We believe that the Government of
Bangladesh, BGMEA, and BKMEA will be able to guarantee the safety of the RMG sector
and sustain the pace of socio-economic growth in the country, via assistance from big brands
and international development partners.

The garment industry in Bangladesh has every possibility of staying one of the world's
biggest producers of RMG and continuing its remarkable narrative of development and
progress. But the clothing sector of the nation is experiencing headwinds and must take
strong action in many categories if it is to thrive. The difficulties will be addressed by
competing without privileged access to trade; meeting reduced demand from traditional client
markets; and making an essential move to growth and a more sustainable style of
procurement.

Bangladesh's lowest-developed to middle-income nation graduates in the next several years

are now ready to negotiate privileged access to Europe and other markets. Other tariffs would
severely upset the RMG industry, but leveling competition marketplaces may also result in a
much-needed emphasis on efficiency and investments in digitalization, automation, and
sustainable development. Some world leaders reduce Bangladeshi procurement when their
supplies approach a point of departure in their nation's dependence and supply chain risk
which is further enhanced by the pandemic and the loss of profitability in other product
categories. Nearshoring for more flexibility and speed is also more important. That said,
bigger and more sophisticated suppliers in Bangladesh may profit from improvements in
flexibility, efficiency, digitalization, environmental sustainability, welfare, and innovation.
To stay competitive, a large number of suppliers will have to invest in upgrading, vertical
integration, digitalization, and automation, to unleash speed and transparency.

Sustainability, with growing customer demand for ecologically friendly goods and worries
about climate change and social justice, is also becoming more essential. In 2020 Bangladesh
rated just 87 out of 115 countries in the Energy Transition Index of the World Economic
Forum. It will be a big task to make the Bangladesh RMG sector an environmentally-neutral
sector and a huge investment in renewable energies and the grid. Regulatory reforms will also
be introduced, particularly in the EU. Suppliers will have to boost R&D and innovation: to
promote product updates and diversity in areas such as technical materials and functional
innovations; and to achieve sustainability via circularity, novel fibers, and improved
operations.

COVID-19 has speeded up the consolidation of plants held in Bangladesh, which has
enhanced the polarization of sophisticated suppliers and small businesses affecting the
transformation capability of the whole sector. Political stability has a detrimental effect on
Bangladesh's RMG industry[ CITATION Sye21 \l 1033 ]. It will be a huge blow if it
continues, to ruin our most important industry. Political leaders should thus step out to
address such issues quickly. According to the McKinsey study, 86 percent of senior buying
managers at major European and U.S. clothing businesses expected to reduce their sources of
procurement in China in the next five years as profit margins and capacity restrictions fell. It
is the primary responsibility of the RMG industry to offer a great workplace for Bangladesh's
ready-made garment industry that has strengthened our economy, employed millions of
people, particularly females, pulled them out of the pit of chronic poverty, and gave them a
splendid existence.
In the last decade, Bangladesh's RMG industry has experienced remarkable development and
change, overcoming major barriers along the way. However, now it confronts a new set of
difficulties in the context of a worldwide pandemic and a changing global clothing supply
industry. In future years, industry, in collaboration with manufacturers, foreign buyers,
employee representatives, the government, and other stakeholders, need to adopt a more
integral transformation. During the constantly changing environment for international
purchasers, they are charged with working with increasingly sophisticated providers to create
demand-driven, sustainable supply chains. For this to happen, they need to establish deeper,
genuinely strategic relationships and push for overcoming the deflationary characteristics of
global retail clothing marketplaces in recent decades.
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