STUDENT'S NAME STUDENT’S ID

FATIMA RAHMAN TUKTUK 2023-3-10-xxx

AKHIFA JANNAT OISHI 2023-3-10-xxx
MIRAJ MAHMUD IMON 2023-3-10-xxx
SADIUZ ZAMAN 2023-3-10-xxx
ASIFUR RAHMAN 2023-3-10-363

COURSE TITLE: Introduction to business

INSTRUCTOR: Dewan Mehrab Ashrafi

INTRODUCTION:

The core of Bangladesh's national economy depends on the readymade garments (RMG)
industry. It can also be said that the RMG division is the mainstay of Bangladesh’s economy.
The RMG has enormous potential in a variety of areas, from international export profits to job
creation. The "Made in Bangladesh" label has given fame to the country from all over the world
and offers the promise of an even more sparkling future amidst growth and progress. It also
serves as a stimulant for national development. Despite the challenges the industry has
experienced recently, it has established a position for itself in the worldwide market, and its
strong performance is on the rise. According to newly disclosed Export Promotion Bureau (EPB)
figures, Bangladesh's (RMG) dissemination for the July to May fiscal year 2021–22 generated
$38.52 billion. RMG exports increased 34.87% over the first eleven months of FY 2021–22
compared to the same time the year before. Making sure that millions of workers have safer
workplaces and enhanced working conditions is the RMG sector's largest concern right now. The
Tazreen fire and Rana Plaza collapse, two significant incidents, have engaged all stakeholders
and thrust workplace safety to the foreground of conversation. Following the incident, the nation
as a whole, as well as the RMG industry, faced a significant problem due to the image issue. To
meet the demands and standards of the world, it is a laborious and enormous task to guarantee
workplace safety at all garment manufacturers. The most important obstacles for the industry,
outside of working safety, are establishing infrastructure and a competent workforce.
Bangladesh's garment industry has less productivity than other major competitors in the global
market due to political upheaval and compliance concerns. However, political steadiness is
precisely necessary for the industry to keep up its current rate of expansion in the days to come.
The RMG sector's crisis may be addressed with the assistance of worldwide varieties and growth
partners, opening the road for the nation's socioeconomic progress. It is the duty of all parties
involved to safeguard the interests of this sector, which has improved the nation's economic
standing by generating work for millions of people, particularly women, and rescuing them from
the depths of abject chronic poverty. To heal the industry's wounds and continue to improve the
sector for the nation, this research study examines the current state of the RMG sector along with
its opportunities and problems.

Objectives of the study:

The core objective of this term paper is to explore the prospects and reasons why Bangladesh is
lagging in the global high-end apparel market. The objectives include:
  To focus on the prospects of Ready made garments industry.

 To provide an overview of the barriers in the global high-end market.

 To offer some suggestions on how to overcome obstacles as effectively as feasible.

 To outline the RMG sector's current situation in Bangladesh.

Literature Review:

The literature review exhibits the overall scenario of the RMG sector in Bangladesh and its
contribution to the Bangladesh economy. Hossain and Jagit (1988) said that low-wage labor has
made Bangladesh one of the fastest-growing garment-exporting countries. Robbani (2000)
examined that the major portion of foreign exchange earnings came from the RMG sector, thus
it created a giant position in the economy. Rehman and Khundker (2001) stated that the RMG
sector started its journey in the late 1970s as a small non-traditional export, with a small worth
of US$69,000, and by FY2002, exports had gone up to US$4.5 billion. In the following years, the
sector developed into an exclusive growth rate of 15 percent per annum. Azad (2001) said that
the tremendous success of ready-made garment (RMG) exports from Bangladesh over the last
two decades has surpassed the optimistic expectation. The impact of the garment industry of
Bangladesh exceeds its considerable economic and financial success. The overall impact of the
ready-made garment export industry is certainly one of the most significant social and
economic developments in Bangladesh. Chowdhury, Ahmed, and Yasmin (2014) addressed the
challenges of unskilled labor with low productivity which results in increased per unit cost of
production. Rahman and Anwar (2007) highlighted weak and inadequate infrastructure, e.g.,
poor energy supply; and poor port facilities are the common challenges faced by the RMG
sector in Bangladesh. Haider (2007) said that the garment industry in Bangladesh, which
accounts for 75% of the country’s export earnings, was created only three decades ago. Berik
and Rodgers (2008) addressed the fact that Bangladesh RMG owners are very reluctant to
invest in training and development facilities, although it revealed that training costs are directly
offset by the productivity increase. Mohiuddin (2008) attempted to identify the prospects of
Bangladesh’s RMG industry in the post-MFA period by analyzing the current scenario, strengths,
and weaknesses of competitiveness in the world market in the coming years. Nuruzzaman and
Haque (2009) said that the recent years have dramatically changed the landscape of export
composition of the country. Clark and Kanter (2011) found that the efficiency level judged by
the productivity of Bangladesh RMG workers is not up to date or by the international level and
it is just one-fourth of that of Chinese workers owing to workers’ low literacy. Berg, Hedrick,
Kempf, and Tochtermann (2011) stated five major challenges for Bangladesh's RMG sector,
such as weak infrastructures, compliance issues, low supplier and labor efficiency, insufficient
backward linkage, and political & and economic volatility. Chowdhury et al. (2014) pointed out
major challenges as utility crises, such as oil and gas shortages, too much dependency on
imported raw materials, suppliers’ inefficiency, low labor productivity, high interest rate,
insufficient bank finance, and political unrest within the country. Hasan (2013) addressed that
the single biggest challenge of Bangladesh's RMG sector as the open competition emerged from
the withdrawal of the quota system under the MFA agreement and the sustainability of the
RMG sector under global market competition. Chowdhury et al.(2014) predicted that
Bangladesh will enjoy increasing growth rates as its labor cost is its comparative advantage
given the Chinese competitors are facing increased labor costs and unrest. (Mia, 2019). Mia, S.,
& Akter, M. (2019). Ready-made garments sector of Bangladesh: Its growth, contribution and
challenges. Economics, 7(1), 17-26.

Methodology:

This study follows an exploratory research design based on a quantified and qualitative
research approach. Whereas qualitative research is an unstructured, exploratory research
methodology based on small samples intended to provide insight & and understanding of the
problem setting (Malhotra and Dash, 2010). This research focused on different methods and
the least square method of trend analysis is one of them. Data required for this quantitative
and qualitative analysis were collected from primary sources and secondary sources like, face-
to-face interviews, project contracts and records, media reports and publications, and
documents and articles from relevant agencies, companies & and BGMEA. This study mainly
focused on three aspects: firstly, trend analysis and secondly, problems faced by this sector and
finally recommend some strategies. For trend analysis, three parameters such as factory,
workers, and export are considered. The problems faced by this sector are gathered through
face-to-face interviews with the chief executive body and workers. After exploring the problem
faced by these existing garments, this study recommends some strategies. Further to make the
study more broad-based & informative this research conducted informal interviews with an
expert in this area. This expert is the senior consultant, of project development, at the
Infrastructure Investment Facilitation Center (IIFC). Materials of the paper were presented
systematically for analytical purposes & and also to draw inferences therefrom. (Chowdhury,
2014)

Findings:

i. Challenges:

Over last three decades, the RMG industry has expanded dramatically. The history of RMG
sector of Bangladesh is fairly a recent one. Nonetheless it is a rich and varied story. Traditionally
the jute industry was the dominant sector. But after 1980’s, the RMG industry has emerged as an
important player in the economy of the country and has gradually replaced the Jute industry.

Bangladesh is not yet developed country but it has been enriched in garments industries through
past years. Garments industry is a promising step in the field of industrialization. The sector is
now dominating at export earnings, secondary impact and employment generated. Millions of
unemployed labor force has been employed through this sector. Especially, innumerable
uneducated women of this country have come under income segment which makes a great
contribution in the field of our export income.

Recent days, Bangladesh is exporting 35 types of garments products to about 31 countries

around the world. This sector is a 100% export-oriented country. (Labor and Management in
Development Journal, 2012)
For last 25 years the garments industry of Bangladesh has been the key export division and
known as a renowned source of foreign income. National labor laws do not apply in the EPZs,
leaving BEPZA in full control over work conditions, wages and benefits. Garment factories in
Bangladesh provide employment to 40% of industrial workers. But without the proper laws the
worker are demanding their various wants and as a result the conflict arises within the industry.
(http://nazifahmed.wordpress.com)

i.1 Raw Materials

Bangladesh has to import the necessary raw materials for garments like cotton, thread, color etc.
It’s well known that dependence on raw materials from import is a reason for hampering the
development of the industry. Beside this, if foreign suppliers are supplying low quality results in
low quality products.

i.2 Unskilled workers

Most of the women are illiterate who are being employed at garments. So they are unskilled and
often the reason for lower in quality of the products, creating problems while implementing any
new concept from root level and others problems also.

i.3 Improper Working Environment

Most of the workers in our country are poor and living under poverty line. The owners are taking
this as an advantage and forced them to work in unsafe and unhealthy work place overcrowded
with workers beyond capacity with improper ventilation. The garments factories are not building
up with proper facilities. Garments workers sweat their brows from morning to evening to earn
foreign currencies for our countries. But the working environment is very poor and unhealthy.
It’s really hampered the production quality and often the impression if any buyers are coming to
visit the factories. Also the problems must focus are improper ventilation, stuffy situation, filthy
rooms. These are the characteristics of the majority of our factories. It is happening as because
the owners’ first priority is the profit and it’s becoming so high that sometimes they are not even
caring about their lives. Rana Plaza and Tazreen Garments is the most recent example of their
greed.

i.4 Lack of Managerial Knowledge

There are some other problems which are associated with this sector. Those are- lack of
marketing tactics, absence of middle management, a small number of manufacturing methods,
lack of training organizations for industrial workers, supervisors and managers, autocratic
approach of nearly all the investors, few process units for textiles and garments, sluggish
backward or forward blending procedure, incompetent ports, entry/exit complicated and
loading/unloading takes much time, time-consuming custom clearance etc.

i.5 Gendered Division of Labor

Tasks are allocated largely on the basis of gender. This determines many of the working
conditions of women workers. In sewing section all are women on the other hands, cutting,
ironing and finishing sectors are men. Varieties of women working place is low. Women work
mainly as helpers, machinists and less frequently, as line supervisors and quality controllers.
There are no female cutting masters. Men dominate the administrative and management level
jobs. Women are discriminated against in terms of access to higher-paid white collar and
management positions.

i.6 Wages
For various categories of workers Bangladesh Government sets minimum wages. According of
Minimum Wage Ordinance 1994, apprentices’ helpers are to receive Tk500 and Tk930 per
month respectively. Those who work under garments industry less than three months are known
as apprentices. After 3 months they are appointed as helper. But the female helpers are
discriminated while set the wages. The wages is fixed far below level than minimum wage set by
the government. A survey conducted in 2008 showed that 73% of female helpers, as opposed to
15% of their male counterparts, did not receive even the minimum wage.

i.7 Unit Labor Cost

In south Asia, Bangladesh has the cheapest labor cost. It costs only 11 cents to produce a shirt in
Bangladesh, whereas it costs 79 cents in Sri Lanka and 26 cents in India. So the comparative
advantage of Bangladesh is cheapest labor costs actually. (Competitiveness of the Bangladesh
Ready-made Garment Industry in Major International Markets by Mohammed Ziaul Haider,)

i.8 Working Hours

Through the wages are low, but working hours are very long. The RMG section claims to operate
one eight-hour shift six days a week. But it often seems that those workers are working more
than 16 hours each day and have no break or off day in a week.

i.9 Poor accommodation facilities

Most of the garments workers are coming from poor family and remote areas, so they need to
rent a place near factory, stay together 4-5 persons in a room which is not so healthy for living
condition. For four to five workers there is one common latrine and a kitchen for which they
have to pay from Tk. 2000 to Tk. 2500. (A survey done at 2012 under the topic, Livings of RMG
labors).

They share this amount among themselves to minimize the accommodation expense. After
working almost in a horrible condition for such a long time, it’s really tough to believe how
tough the way they are living is. The owners of these factories must not treat the workers as
animals. The owners of these factories who drive the most luxurious car and live in most
luxurious house do ever think that these are the workers who have made their living so juicy.
Now the question is, they never thought for a long run like Toyota has done for their employees.
i.10 Safety Problems
The factory management often keeps the doors locked because of safety reason and security. But
the tragedy is this locked gate becomes the reason of tragedy like Tazreen garments. Ensuring
safety for the workers is essential for all organizations. Some important causes of accidents are
given below which indicates the safety problems are as follows:

Routes are blocked by storage materials

● Machine layout is often staggered

● Lack of signage for escape route

● No provision for emergency lighting

● Doors, opening along escape routes, are not fire resistant

● Doors are not self-closing and often do not open along the direction of escape

● Adequate doors as well as adequate staircases are not provided to aid quick exit

● Fire exit or emergency staircase lacks proper maintenance

● Lack of proper exit route to reach the place of safety

● Parked vehicles, goods and rubbish on the outside of the building obstruct exits to the open air

● Fire in a Bangladesh factory is likely to spread quickly because the principle of

compartmentalization is practiced.

ii. Prospects:
Forces behind the Development: The success story of the Readymade Garments sector of
Bangladesh is based on employment generation and increasingly high value addition, thus
smoothening the path for growth and development of the country. The apparel and garment
industry propels sectors such as banking, finance and insurance, cargo, shipping and transport,
entertainment and hospitality, research and education and a lot more. The mentioned
performance of the industry has been possible due to:

o The Government of Bangladesh has always been concerned about the sector's
growth and has played an active role as a catalyst to solve various complexities,
whenever intervention was necessary.

o The cheap but disciplined and regimented workforce has been key for the
success of this industry.

o The entrepreneur class has been dedicated and motivated to the country's
economic prosperity.

o The quality of the manufactured apparel, which has been increasingly recognized
by our international buyers and end users all over the world.

o Buyers' response has been encouraging through repeat orders. The industry has
been producing all sort of apparels for all seasons and has managed to get
repeat orders for every season.

o The import policy of Bangladesh has been flexible and friendly for import of
accessories.

o Although there are accountable anomalies, the financial institutions, both

nationalized and private, have been serving to assist this sector.

o Readymade garment industries have managed to maintain the confidence of the

buying class and others in the business.

o Although the backward linkage textile industry is not adequate for the needs of
the RMG industry, it has been supporting regular manufacturing and supply
systems to some extent.
iii. Remedies:

The goal of Bangladeshi RMG is to achieve 50 Billion export targets by the year 2021 which will
cover 8% of total apparel exports in the world market. Currently, the country holds
approximately 5% of that with 24 billion dollars exports. To conquer that target along with the
parallel target of emerging a middle-income country of government, necessary cohesive actions
should be taken.

Infrastructure

To create a sustainable industry, a strong infrastructure is a must. The government should play
a major role in creating better infrastructure through proper investment in roads, highways,
and port facilities. Dhaka Chittagong four-lane highways should be given top most importance;
along with the Chittagong port Mongla port should be utilized at their full capacity. The railroad
facility between Dhaka and Chittagong needs to be improved through proper yard layout,
storage facility, and wagon management. National Air Carrier (Biman) should extend their cargo
wing by giving priority to RMG export at reasonable freight. Deep seaports and specialized
industrial zones for RMG should be given pace.

Increased Productivity

through Research and Training Only cheap labor will not be the competitive advantage in
future. Along with cheap labor efficiency and productivity need to be increased. BGMEA along
with the government and other international organizations need to take the initiatives of
developing skills and expertise of workers, through investment in education and training
(Hassan, 2014). A dedicated research institute should be established related to the RMG sector
to conduct necessary research on contemporary fashions to cope up with the new technology
and trend. Mid level management training also necessary to eradicate the communication gap
and to ensure the flow of directions from top management to lower level (Khan, 2014).

Foreign Direct Investment (FDI)

RMG industries need foreign direct investment or investment in form of joint venture, strategic
alliance from technologically advanced companies for the product diversification for high value
and non- traditional products (Islam, 2015). To attract foreign investors, the government of
Bangladesh has to give exclusive incentives, such as no ceiling on investment, flexible revenue
transfer policy, tax holidays, tax exemption and duty free importation, income tax exemption
up to 3to 5 years for foreign investor (Razib, 2015).

Power and Energy

Consistent supply of energy is pre-requisition of the sustainable and lucrative industry;

government has to ensure sufficient energy supply (Islam, 2015). Apart from establishing new
plant government can encourage green energy or solar panels in a subsidized rate.
Encouragement should be given for establishing industry based private commercial power
plants. Subsidized rent base power plant need to be discourages.

Safety and welfare of workers

Workplace safety has attracted much importance for the sustainable industry (Islam, 2015). To
create positive stimulation and high workers involvement up gradation in labor law to
implementing effective labor inspection system, regular safety follow up of all garment
factories, placement of injured workers, ensuring occupational safety and health, introducing
group insurance facility are necessary (Reddy, 2014). The Accord and Alliance guideline of
workers and workplace safety should be followed accordingly (Wayss, 2014).

Political Stability

Over the years, RMG industry has suffered a lot due to the political instability. Therefore
political crisis has imposed a major challenge to RMG sector. All political activities need to be
kept aside from the business activities. Destructive political actions that increase the lead time
or hamper the supply chain such as strike should be banned by government. Mainstream
Political involvement other than trade union of factory workers should be controlled.

Market Diversification and Market Access

Bangladeshi Garments manufacturer and exporter should shift their concentration from the low
value end product such as t-shirt to high value product like suits, lingerie for more sustainability
of the industry (Hassan, 2014). Potential big markets with large buyer of medium income group
such as Russia, Brazil, Spain, Japan, Mexico and India can be a lucrative target for both high and
low value ended products. Markets with high annual income and low population can be
targeted with high value ended products such as turkey, Austria; Australia Etc. government
should play effective diplomatic strategy to ensure market access. Non- tariff barriers such visa
problems, embargo on specific product sources, transit problem need to be solved (Islam,
2015).

Tax Benefit

Bangladeshi RMG sector should enjoy the tax benefit as it is singularly holding 81% of the
export earnings. Government should continue the tax benefit of charging fixed 10% rather than
35% tax on apparel export income at least for the next 5 years. Withdrawal of value-added tax
waiver up to 100 instead of existing 80 per cent on utility bills can be considered to make the
VAT rebate process easier. Source tax rate should be stayed at 0.3% or could be lower rather
than 0.6% which has been passed in recent budget (Chowdhury, 2014).
Buyers Contribution

Buyers of Bangladeshi RMG should not always seek low price but also need to contribute
towards the development of the industry and workers. Buyers should help to enhance the
supply chain efficiency of the local garments, train local workers and operators with modern
technology and process ideas. Vital role can be played by the buyers in establishing workers and
factory safety. They can also play an important role in ensuring labor law and welfare of the
labor.

Need for trade diplomacy

Trade diplomacy of government should be more target and result oriented. Cohesive and
consensus measures should be perused by all public and private level business and political
groups like ministry of foreign affairs, foreign consulate and embassy of Bangladesh, export
promotion bureau, Business and trade association (BGMEA, BKMEA), Export promotion bureau
to avail the market access and trade benefits from foreign markets.