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Until early sixties, individual tailors made garments as per specifications provided by individual customers who supplied the fabrics. The domestic market for readymade garment, excepting children wears and men's knit underwear(genji) was virtually non-existent in Bangladesh until the sixties. Since the late 1970s, the RMG industry started developing in Bangladesh primarily as an export-oriented industry although, the domestic market for RMG has been increasing fast due to increase in personal disposable income and change in life style. The sector rapidly attained high importance in terms of employment, foreign exchange earnings and its contribution to GDP. In 1999, the industry employed directly more than 1.4 million workers, about 80% of whom were female. With the growth of RMG industry, linkage industries supplying fabrics, yarns, accessories, packaging materials, etc. have also expanded.
In addition, demand for services like transportation, banking, shipping and insurance has increased. All these have created additional employment. The total indirect employment created by the RMG industry in Bangladesh is estimated to be some 200,000 workers.
Garments factory workers at work In addition to its economic contribution, the expansion of the RMG industry has caused noticeable social changes by bringing more than 1.12 million women into labour force. The economic empowerment of these working girls/women has changed their status in the family. The attractive opportunity of employment has changed the traditional patriarchal hegemony of the fathers, brothers and husbands. Most working women/girls can now chose when to get married or become mothers. The number of early MARRIAGEs is decreasing; so is the birth rate; and the working girls tend to send their little bothers and sisters to school, as a result, the literacy rate is increasing. They can participate in family decision-making. Most importantly, the growth of RMG sector produced a group of entrepreneurs who have created a strong private sector. Of these entrepreneurs, a sizeable number is female. A woman
named Reaz Store in DHAKA. They acquired the expertise of mobilising resources to . the pioneer. there are many large firms. Four such small and old units were Reaz Garments. In 1973 it changed its name to M/s Reaz Garments Ltd. was established in 1960 as a small tailoring outfit. named Youngones Bangladesh. Another South Korean Firm. there were only 9 export-oriented garment manufacturing units. Reaz Garments. It served only domestic markets for about 15 years. the Baishakhi Garment in 1977. and with these trained workers it started its production in early 1980.entrepreneur established one of the oldest export-oriented garment factories. Jewel Garments and Baishakhi Garments. under which Bangladeshi entrepreneurs work as sub-contractors of foreign buyers. Within a short period. Desh had technical and marketing collaboration with Daewoo Corporation of South Korea. Paris Garments. However.000 pieces of men's shirts worth French Franc 13 million to a Paris-based firm in 1978. It was also the first hundred percent export-oriented company. It was the first direct exporter of garments from Bangladesh. It has grown by responding to orders placed by foreign buyers on C-M (Cut and Make) basis. The industry is based primarily on sub-contracting. During its early years. In 1978. It had about 120 operators including 3 women trained in South Korea. which generated export earnings of hardly one million dollar. and expanded its operations into export market by selling 10. in 1980. the first non-equity joint-venture in the garment industry was established in 1979. At present. Youngones Corporation formed the first equity joint-venture garment factory with a Bangladeshi firm. Some of these units were very small and produced garments for both domestic and export markets. Trexim Ltd. The hundred percent export-oriented RMG industry experienced phenomenal growth during the last 15 or so years. Desh Garments Ltd. situation has improved. About 90% of woven fabrics and 60% of knit fabrics are imported to make garments for export. It exported its first consignment of padded and non-padded jackets to Sweden in December 1980. Bangladeshi entrepreneurs got familiar with the world apparel markets and marketing. The RMG industry is highly dependent on imported raw materials and accessories because Bangladesh does not have enough capacity to produce export quality fabrics and accessories. Many women hold top executive positions in RMG industry. which do their own sourcing. Bangladeshi partners contributed 51% of the equity of thee new firm. the buyers supplied all the fabrics and accessories or recommended the sources of supply from which Bangladeshi sub-contractors were required to import the fabrics.
which was 3. The net foreign exchange earnings were. Malaysia.export-oriented RMG industries. in many cases.67% of the total export earnings of the country. Taiwan. By late 1980s. the traditionally large suppliers/producers of apparels followed a strategy of relocating RMG factories in countries. Initially Bangladesh was granted quota-free status.89% of the total export earnings of Bangladesh. the export earnings of the RMG sector were $5.900 in 1999. foreign buyers extended. application of MFA worked as a blessing for Bangladesh. Sri Lanka and India to USA and Canada. RMG exports replaced jute and jute goods and became the number one in terms of exports. JUTE and jute goods topped the list of merchandises exported from Bangladesh and contributed more than 50% of the total export earnings. the basic raw material of the industry. local banks provided part of the equity capital. The government assigned high priority to the development of RMG industry. Indonesia. On the other hand. To maintain competitive edge in the world markets. Under MFA. In some cases. To take advantage of this cheap source. The number of RMG factories shot up to around 2. which limited export of apparels from countries like Hong Kong. the sixth largest supplier in the US market and the fifth largest supplier of T-shirts in the EU market. Both external and internal factors contributed to the phenomenal growth of RMG sector. South Korea. Till the end of 1982. Thailand. Singapore. RMG exports earned only $0. As a least developed country. In 1998-99. however. until 1980. suppliers' credit under special arrangements. large importers of RMG like USA and Canada imposed quota restrictions. In the past. Bangladesh received preferential treatment from the USA and European Union (EU). which were free from quota restrictions and at the same . The industry has grown during the 1990s roughly at the rate of 22%. In 1983-84. only about 30% of the figures quoted above because approximately 70% of foreign exchanges earned were spent in importing the raw materials and accessories to produce the garments exported. when the number of garment factories increased to 587.9 billion. Foreign buyers found Bangladesh an increasingly attractive sourcing place. Bangladesh is now one of the 12 largest apparel exporters of the world. One external factor was the application of the GATT-approved Multifibre Arrangement (MFA) which accelerated international relocation of garment production. there were only 47 garment manufacturing units. which was 75.51 billion. which also facilitated import of quality fabric. The problem of working capital was greatly solved with the introduction of back-to-back letter of credit. The breakthrough occurred in 1984-85.
EXPORT PROCESSING ZONE facilities. the infrastructure in the country is deplorably underdeveloped. technologies used are not the latest. transportation and communication create serious bottlenecks. Buyers looked for alternative sources. South Korea and some other countries and in most factories. Since 1986. bonded warehouse facilities. They found Bangladesh as a promising country. the Uruguay Round negotiations envisaged the phasing out of . Canada and EU. etc. All these increase the lead-time to process an order. So RMG industry grew in Bangladesh. Sri Lanka. The countries. In addition. The government also took a number of pragmatic steps to streamline export-import formalities. created pressure to discontinue MFA by integrating textile and clothing industries into GATT system.e. The EU continued to grant Bangladesh quota-free status and GSP privileges. Canadian and European markets. which were adversely affected by quotas under MFA. USA and Canada allocated substantially large quotas to Bangladesh. As a result. RMG industry suffered setback in a number of countries in the 1980s. for example. The domestic policies of the government contributed to the rapid growth of this sector. Bangladesh emerged as a strong apparel supplier and became a powerful competitor for traditional suppliers in the US.time had enough trainable cheap labour. Labour productivity in the RMG sector of Bangladesh is lower than many of its competitors. the time from the date of receiving an order to the date of shipment. Problems in power supply. The domestic factor that contributed to the growth of RMG industry was the comparative advantage Bangladesh enjoyed in garment production because of low labour cost and availability of almost unlimited number of trainable cheap labour. concessionary rates of interest. Bangladesh has been increasingly subjected to quota restrictions by USA and Canada. Bangladeshi workers are not as efficient as those of Hong Kong. In addition to the fact that the industry is vulnerable because it is highly dependent on the imported raw materials. By 1985. i. Inadequate port facilities result in frequent port congestion. The application of MFA had negative impact on many garments exporting countries. There are several weaknesses of the RMG industry of Bangladesh. and some other countries of Southeast Asia experienced rapid increase in labour cost. which delays shipment. The government provided various kinds of incentives such as duty-free import of fabrics under back-to-back L/C. Some countries had internal problems. These privileges guaranteed Bangladesh assured markets for its garments in USA. Bangladesh was an ideal one as it had both cheap labour and large export quotas. cash export incentive.
The domestic production can meet about 40% of the demand for export quality knit fabrics. Bangladesh has taken some steps to face the new challenges. The domestic capacity meets less than 8% of the demand for woven fabrics of the exportoriented RMG industry. the position of Bangladesh in the world market will change as all countries including those under quota restrictions. the government of Bangladesh envisages the attainment of self-sufficiency in yarn production by establishing new spinning capacities. The production capacity of this sector increased substantially though not as much as was required. 371 weaving mills each with 125 looms. and 371 dyeing and finishing units each with capacity of processing 10 million meters of fabrics per annum. power looms and handloom sub-sectors. printing and finishing operations. For RMG sector. In the Fifth Five-Year Plan (1997-2002). The current requirement for fabrics is 4. and dyeing. will enjoy quota free status. The current requirement of yarn for both domestic and export-oriented RMG industry is about 590 million kg and this will increase to about 818 million kg by the year 2005.126 weaving and spinning mills including 142 ring spinning mills and 15 open-end spinning units in Bangladesh. Bangladesh will have to compete with a larger number of established and powerful suppliers of readymade garments. .MFA by the end of 2004. Such steps include removing infrastuctural bottlenecks. building additional supply capacity.000 million metres. spinning the yarn. the importers (Bangladeshi exporters of apparels) pay high interest and other charges. commissions. Of the total production of fabric. The establishment of composite mills or individual units of weaving.400 million meters and by 2005 it will increase to 6. These units produce mostly for the domestic markets. in addition to improving the cost advantages. While procuring through back-to-back L/C. These operations can be combined into one composite mill or they can be established as separate units. and increase in value-addition through backward integration. fees for the services of the middlemen involved. Currently. It is estimated that by 2005 Bangladesh will need 156 spinning mills each with 25. With the phasing out of MFA. use of cost reduction strategy.000 spindles. The RMG industry uses a small quantity of fabric woven in the handloom sub-sector. the backward linkages are weaving the fabric. only 25% are supplied by the modern mills. the rest of the domestically produced fabrics are supplied by the specialised units. Bangladeshi apparel exporters import fabrics at international prices using back-toback letter of credit. There are 1. spinning and processing will reduce lead time and increase value addition and employment.
however. The average price of Bangladesh-made shirts was $62. the US market becomes the second largest.77 respectively. Many firms now export some non-quota items as well. The USA as the largest importer country imported 43.08 respectively. $76. Bangladesh exported 52.26 and $74. To achieve the goals set in the Fifth Five-Year Plan.6%) and knitwears (14. The EU is the single most important destination of knitwear export from Bangladesh. Against this. Bangladesh offers attractive incentives to attract both local and foreign direct investment in RMG sector. These indicate that Bangladesh is actively engaged in the process of product diversification.34 and $134. if European Union is considered as a single market. In the last five years . trousers. Bangladesh is the largest exporter of men's and boys' cotton shirts in the US market.38% of its apparel exports to the EU in 1998-99. Exporters from Bangladesh produce mostly those items on which quotas are available. Of the individual members of the EU.04. In this market. it competes with India. The Dominican Republic sold the lowest priced shirts of the same category at $54. Although Bangladesh exports garments to some 30 countries. Mexican and Sri Lankan shirts were $81. They also organise annual Exhibition in Dhaka in which hundreds of foreign buyers participate. is very small. Prices of Indian. However.The government of Bangladesh has specified some goals in the latest national development plan for backward linkage industries. The factories in Bangladesh produce shirts. its exports are highly concentrated in two major markets.74 per dozen in 1998. The share of such items in the total quantity. Bangladesh was the sixth largest supplier of apparels in the US markets in the same year. in collaboration with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).79 per dozen. Bangladesh exports a very limited categories of products. The EU as a bloc has been importing from Bangladesh an increasing quantity of apparels. the prices of Hong Kong and Malaysia shirts were $107. This price was the second lowest. the USA and EU.24% of total garments exported from Bangladesh in 1998-99.8%) from Bangladesh and it is followed by the UK and France. Recently. with high concentration (about 60% of the total apparel exports) in the export of shirts of low price. and other garments. there are a few exceptions. Mexico and other Central American countries in the lower price segment. export of knitwear and sweaters has increased faster than that of woven wears. Sri Lanka. Some South Korean firms operating from Export Processing Zones of Dhaka and CHITTAGONG export padded jacket and trousers of higher value. jackets. undertakes various activities to promote Bangladeshi garments in foreign markets. Germany is the largest importer of both woven RMG (15. The Export Promotion Bureau. However.
The main reasons for this are the tariff and non-tariff barriers Bangladesh faces in these markets. To meet the international standard. The laid-off children were provided financial support so that they could attend schools until they attain the age of 15. ILO. or Indian markets although it imports a huge quantity of fabrics and yarn from these countries. Accordingly. Bangladesh has started exporting to India. Bangladesh responded positively to the international requirement of elimination of child labour from the garments sector. However. it has undertaken an elaborate programme to meet the challenges it is likely to face in the post-MFA world market. UNICEF and US Embassy. But factories located in the Export Processing Zones do not have trade unions. The workers are allowed to form and/or join trade unions. the workers of those factories receive higher remuneration and better benefit packages. etc of the garment factory workers. it took necessary measures to do so. Bangladesh has not yet been able to export sizeable quantity of apparels to Japan. Recently. Bangladesh recognises the fact that its economic security depends on the future of its RMG industry. Dhaka on 4 July 1994. South Korea and other new markets.Bangladesh's exports to the EU have grown by 174%. There are many active trade unions with CBAs in the garment industry. As a member of South Asian Association of Regional Cooperation (SAARC). Bangladesh has not been able to have market access to ASEAN. Under the Memorandum of Understanding jointly signed by BGMEA. working conditions. the industry with the help of BGMEA makes sure that the factories do not use any dyes including Azu dye that are hazardous to health. Bangladesh pledged to eliminate child labour by November 1996. The main reason for this phenomenal growth is the almost duty free (due to GSP privileges) and quota-free access to this market. The factory owners are required to abide by the laws that regulate minimum wages. Therefore. [Hafiz GA Siddiqi] . BGMEA and some NGOs jointly operate a number of schools for these children. Other export markets are small. Similarly. Japan and ASEAN countries are potentially large markets. Bangladesh has undertaken an elaborate programme to increase apparel exports to India and other member countries of SAARC. although it imports about 90% of the machinery from Japan to run the apparel industry. eco-labeling.