Chapter-One

1.1 INTRODUCTION

The ready-made garment (RMG) industry of Bangladesh started in the late

1970s and became a prominent player in the economy within a short

period of time. The industry has contributed to export earnings, foreign

exchange earnings, employment creation, poverty alleviation and the

empowerment of women.The export-quota system and the availability of

cheap labour are the two main reasons behind the success of the industry. In

the 1980s, the RMG industry of Bangladesh was concentrated mainly in

manufacturing and exporting woven products. Since the early 1990s, the knit

section of the industry has started to expand. Shirts, T-shirts, trousers,

sweaters and jackets are the main products manufactured and exported by

the industry.Bangladesh exports its RMG products mainly to the United States

of America and the European Union. These two destinations account for more

than a 90 per cent share of the country’s total earnings from garment exports.

The country has achieved some product diversification in both the United

States and the European Union. Recently, the country has achieved some

level of product upgrading in the European Union, but not to a significant

extent in the United States. Bangladesh is less competitive compared with

China or India in the United States and it is somewhat competitive in the

European Union.

The RMG industry of Bangladesh has expanded dramatically over the last

three decades. Traditionally, the jute industry dominated the industrial sector

of the country until the 1970s. Since the early 1980s, the RMG industry has

emerged as an important player in the economy of the country and has

gradually replaced the jute industry. The “export-quota system” in trading

garment products played a significant role in the success of the industry.

However, that quota system came to an end in 2004. Therefore, the

competitiveness issue needs to be addressed, with special attention given to

the long-term sustainability of the industry.

1

The role played by supportive government policy has also been noted in these

studies. Explosive growth of RMG exports is of course not so unique to

Bangladesh. The annual compound growth rate of RMG export industries in

Indonesia (31.2%), Mauritius (23.8%), and Dominican Republic (21.1%)

compares favorably with that of Bangladesh (21.50%) in knitwear section and

10.94% in woven section in FY 2007-2008.

2. AN OVERVIEW OF THE BANGLADESH READY-MADEGARMENT INDUSTRY

The RMG industry is the only multi-billion-dollar manufacturing and export

industry in Bangladesh. Whereas the industry contributed only 0.001 per cent

to the country’s total export earnings in 1976, its share increased to about 75

per cent of those earnings in 2005. Bangladesh exported garments worth the

equivalent of $6.9 billion in2005, which was about 2.5 per cent of the global

total value ($276 billion) of garment exports. The country’s RMG industry grew

by more than 15 per cent per annum on average during the last 15 years. The

foreign exchange earnings and employment generation of the RMG sector

have been increasing at double-digit rates from year to year. Some important

issues related to the RMG industry of Bangladesh are noted in tabl Currently,

there are more than 4,000 RMG firms in Bangladesh. More than 95 per cent

of those firms are locally owned with the exception of a few foreign firms

located inexport processing zones (Gonzales, 2002). The RMG firms are

located mainly in three main cities: the capital city Dhaka, the port city

Chittagong and the industrial city Narayangonj. Bangladesh RMG firms vary in

size. Based on Bangladesh Garment Manufacturers and Exporters

Association (BGMEA) data, Mainuddin (2000) found that in 1997 more than

75 per cent of the firms employed a maximum of 400 employees each.

Garment companies in Bangladesh form formal or informal groups. The

grouping helps to share manufacturing activities, to diversify risks; horizontal

as well as vertical coordination can be easily found in such group activities.

Ready-made garments manufactured in Bangladesh are divided mainly into

two broad categories: woven and knit products. Shirts, T-shirts and trousers

are the main woven products and undergarments, socks, stockings, T-shirts,

sweaters and other casual and soft garments are the main knit products.

2

Woven garment products still dominate the garment export earnings of the

country. The share of knit garment products has been increasing since the

early 1990s; such products currently account for more than 40 per cent

of the country’s total RMG export earnings (BGMEA website). Although

various types of garments are manufactured in the country, only a few

categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute

the major production-share (BGMEA website; and Nath, 2001). Economies of

scale for large-scale production and export-quota holdings in the rresponding

categories are the principal reasons for such a narrow product concentration.

1.2 Statement of the Problem :

The RMG sector rapidly attained high importance in terms of employment,

investment, foreign exchange earnings and its contribution to GDP.

In this report, I have tried to discover the prospects and problems of RMG

sector in Bangladesh and recommended some strategic suggestions for

further improvement. I have shown there economic contribution of this sector

in moving the wheels of Bangladesh economy. I have also brought on the

surface the strengths, weakness opportunities and threats of this sector for

cautious recommendations so that the sector can reach its desired position.

3

1.3 Objectives of the study :

To know the present scenario of RMG industries and Global

migration of RMG sector.

To know the current export situation of readymade garments

of Bangladesh.

To analyze the emergence and sustained growth rate of the

export rented RMG industry of Bangladesh.

The paper attempts to answer the question by analyzing the

problems and then explaining how the RMG industry

managed to overcome many of the problem which ensured its

healthy growth.

Another objective of this paper is to analyze the role of

supportive government policies in promoting the growth of

the RMG industry in Bangladesh.

4

1.4 Scope of the study :

In this study an attempt has been made using mostly secondary

sources of information’s.

A major objective of this paper is to analyze the emergence and

sustained growth to date of the export-oriented RMG industry of

Bangladesh, paying particular attention to the governance aspects of

such growth. As indicated above, the rise of the RMG industry in

Bangladesh occurred during a time when the economy's health was

in poor shape and it was plagued by various problems, both

structural and policy-induced in nature, which constrained, among

other things, growth of manufacturing industries in the country. How

did the RMG industry overcome these problems and flourish while

growth of most other industries was stymied by these unfavorable

factors, many of which had their roots in poor governance? The

paper attempts to answer this question by analyzing the problems of

governance which industries in general suffered from and then

explaining how the RMG industry managed to overcome many of

these problems which ensured its healthy growth.

Most of the information collected from books, journal, paper

cutting and different BGMEA report, internet etc. Present export

position, problems government policies and recommendation are

discussed in this report.

1.5 Research Methodology of the study :

5

This study is based on mainly secondary information to

know the prospects of Readymade Garments industry in Bangladesh.

.

1.6 Definition :

Ready made garments (RMG) is a finished product used by

the consumers as a from of attire. The concept of textile complex or

textile chain includes the ginning of fiber spinning yarn weaving

fabrics and operation like dyeing processing printing finishing the

fabric and finally making the Readymade Garment (RMG). The final

product is garment apparel.

The garment industry has been classified in the international

standard classification of the United Nation as those establishments

which out and for stitch make up garments out of woven or knitted

fabrics without being involved in the manufacture of fabrics. The

term garments is used interchangeably with apparel and clothing.

The garment includes ready made woven garment as well as

knitwear and hosiery.

1.7 Limitation :

Time is inadequate for an effective research work.

6

Lack of updated information’s.

Lack of related books in Library.

Shortage of research materials.

7

Chapter –Two

Main Body

2.1 Global Migration of the RMG sector:

Since clothing is a basic need the textile and garment industries

when development at the very early stage of human history. In all

countries at beginning garments used to be made at home mostly by

female members of the family. In 1700 a single London merchant

reportedly kept on thousand suits in stock. However the organized

RMG factories emerged in the early 19th century in Britain. The

RMG industry was then developed in several other Empower

countries include ding Germany. The first large scale production of

ready to wear Garment (military uniform) in USA started in

Philadelphia in 1812.

The apparel industry all over the world grew with economic and

social development In Asia Japan was the first country where large

scale organized apparel industry was developed for both domestic

and export markets. As the rich country went for out smoking the

export oriented apparel industry grew in developing and least

developed countries.

The apparel industry experienced migrated from one country to

another and from one region to another for various reasons.

Three most important reasons are.

Dynamics of wage differentials

8

Availability of quotas under on MFA

Preferential market Access under special conditions other

than MFA.

2.2 Contribution of RMG export in the national export earning:

In FY 2007-2008 total expert from Bangladesh was US $ 14.11

billions and RMG export values was 10.69 billions so the share of

RMG in national export was 75%.

9

Following is the table showing contribution of RMG export in the

national export earning.

Contribution of RMG Export in the national export earnings :

Table-1

Year (Fiscal

year wise)

July-June

Export of

apparel items

form Bang.

(Value in

million us)

Export of apparel

items form Bang.

(Value in million

us)

Percentage share

of RMG in

National export

(%)

Growth

rate

1989-1990 624.16 1923.70 32.45

1990-1991 866.82 1717.55 50.47 38.88

1992-93 1445.02 2382.89 60.64 22.19

1993-94 1555.79 2533.90 61.40 7.67

1994-95 2228.35 3472.56 64.17 43.47

1995-96 2547.13 3882.42 65.61 14.11

1996-97 3001.25 4418.28 67.93 17.83

1997-98 3781.94 5161.20 73.28 26.01

1998-99 4019.98 5312.86 75.67 6.29

1999-02 4349.41 6467.30 75.61 8.19

2000-01 4859-83 6467-30 75.17 11.74

2001-02 4583.75 5986.09 76.57 -5.68

2002-03 4912.12 6548.44 75.01 7.21

2003-04 5686.09 7602.99 74.79 15.83

2004-05 6417.72 8654.52 74.15 12.91

Source: Export Promotion Bureau

In FY 2007-08 Growth performance of Bangladesh RMG sector has

increased rapidly which is shown in the following figure.

10

Figure-1

Under the existing condition RMG industry’s contribution to

national economy is notable contrary to a partial perception that is

spent as much as it earned in foreign exchange. Here is a brief

description of value addition and contribution of RMG to national

economy, which shows it’s predominating in export field.

By 2004-05 exports had reached us 6.4 billion. The average growth

rate of export during 1990-91-1997/98 was almost 26% per year.

However the growth rate of export declined in the 1998/99-2004/05

mainly due to exogenous factors like flood in 1998/2001 political

unrest and the 9/11 incidents in the US the following year. The share

of garments export in total export earning of Bangladesh climbed

from 32.45 percent in 1989-90 to 76.57 percent in 2001-2002 and

hands staged around this level since then.

11

In 2004-05 fiscal year total export earnings from garments

industries was 6417.67 million which 12.717 of Bangladesh

GDP.

Readymade Garment (RMG) industries have generated direct

employment opportunities for 2.5 million worker of which 80%

is female workers. Besides mire than 0.8 million worker are

engaged in accessory in duties related to the garment industries.

12 million people are indirectly dependent on the RMG

industries.

With the growth of RMG industries the business of banks

insurance hotels tourism transport buying house C & F Shipping

and many other accessory operations have flourished to a great

extent.

The RMG sector disburses 3.2 million as officers and

employees.

Garment industries pay us 35-50 million as interest of L/C

charge to the banking sector.

Insurance sector the premium earning from RMG sector amount

to us 5.83 million.

The RMG sector pays us 62.33 million to the shipping business.

It pays Us$ 26.17 million to the domestic transportation sector.

It generates revenue earning in the forms of postages, license

and renewal fees to the tune of US$ 6.17 million.

It contributes US$ 2.33 million as direct tax to the national

exchanger.

The RMG industry pays an amount US$ 13.67 million to the

engineering sector.

12

The RMG industries pay Us$ 3.67 million as and WASA bills.

The information technology sector gets US$ 9.5 million from

the RMG sector.

The hotel and tourism sector earns US$ 4.33 million from RMG

sector.

The sector generates, US$ 25 million as earning for the real

estate sector as office and factory rent.

13

2.3 Current position and Growth of RMG sector in

Bangladesh

Table – 2

Growth of RMG industry in Bangladesh

Fiscal year Number of RMG Industry

1977-78 9

1979 22

1980 47

1984-85 632

1985-86 744

1989-90 804

2000 3000

2005 3560

2008 4500

Source: Social Compliance Section BKMEA.

14

Figure-2

The number of garments factories show up to some 3000 in 2000

and by 2008 it reached 4500.

According to the BGMEA there were 4300 member firms in 2004-

2005 of which 2275 were woven garments units 700 were knitting

factories and 525 were producing sweaters ; however 1300 of these

units were closed.

In addition there were 560 units which were exclusive member of

the Bangladesh knitwear exporters and manufacturers association

(BKMEA) the total number of active firms producing garments in

15

3560

Late 70s

Emergence

1980 1990 2000 2005

47

804

3000

2008

4500

Bangladesh in 2005 was 3560 of which 47 percent was woven 42

percent knit units and percent producing sweated.

The distribution of employment among different size class of firms

is important from the perspective of the present study. EPB data as

cited in World bank (2005) show a relatively high degree of export

concentration at the firm level of 2387 exporting RMG units in 2004

the top 500 firms exported 74 percent of total garments export while

81 percent of total RMG exports was made by the top 650 firms.

These firms belong in the large category (Production) capacity of

5,000 to 10,000 dozens pegmatite.

The remaining 19 percent of garment export was made by 1737 firm

which can be considered as small (production capacity of less than

5,000 dozens per month). The large firms source their own fabric

and sell directly to foreign buyers while the medium sized forms

work on a cut and make (CM) basis for importers or buying agents.

The small firms either sell to buying agents or work as subcontractor

for the larger firms. This means that out of he total number of 3560

firms in the RMG industry6 about 1200 firms were wither not

exporting at all or were working as subcontractors.

The same EPB firm level data show that 1.2 million workers were

employed in the 2387 firms that were exporting garments. This

means that about 0.8 million workers are employers in the 1200

firms that are engaged in subcontracting activity (ie they are not

16

direct exporters) and hence are not required to fulfill the social

compliance conditions for foreign buyers.

2.4 Favorable Trade Environment and low labor cost in

Two factor which played important roles in the growth of the RMG

industry in Bangladesh were (i) a favorable exporting environment

created by the MFA Quota system and (ii) low wages of Bangladesh.

How these two factors have contributed to the rise of the garment

industry in Bangladesh will be analyzed in this section.

As an LDC Bangladesh enjoyed quota free state in the 1970 and

wages were also low. There are two features attracted quota hopping

foreign producers to Bangladesh who collaborated with Bangladesh

entrepreneurs to export garment to North America the EU and

Elsmere. Daewoo a major south Korea appears exporter

collaborative with Dash. Garment of Bangladesh in 1980 and this

resulted in the first major consignment of RMG export from

Bangladesh. The simple technology of working garments basically

involving cutting and making (CM) together with relatively low

investment cost made it easier for the Bangladeshi entrepreneur to

move into this industry and rapid growth took place as mentions

earlier.

Even though Bangladesh enjoyed quota free status in the North

American market its sports were subject to payment of import duties.

17

However in the EU Market Bangladesh was not only example form

MFA (Multi Fiber Arrangement) quotas but it also enjoyed

preferential market access under the EUS Generalized System of

Preference(GSP) which allowed duty free access to Bangladesh’s

garment exports. Thus Bangladesh’s exports of garments enjoyed

quota free and duty free access to the EU market. This was another

important factor which contributed to the emergence of RMG

industry in Bangladesh.

These favorable external market conditions, together with low labor

cost were two important factors which favored the rise of the RMG

industry in Bangladesh. As noted above both the number of firm in

he industry and the value of export grew rapidly.

To get some idea of the impact of quota rents we use the data on

quota process of different categories of garments exported by

Bangladesh in 2003 which is cited in Table of World Bank (2005).

The major garment items exported by Bangladesh are shirts and

trousers.

18

2.5 Quota Prices of Selected Garments

Table 3 : Average quota price of selected garment items

exported by Bangladesh 2002-

Category Unit Decryption Average Quota

Price

237 Dozen Play suits sin suits 1.06

334/634 “ Other Coat MB 13.77

335/635 “ Coat W & G 11.61

336/636 “ Dresses 3.76

338 “ Knitted shirts M

& B

11.56

347/48 “ Trousers slacks &

shorts M & B

21.65

351/651 SMG Night wears &

pajamas

5.08

352/652 Dozen Under wears .40

Source :World Bank (2005)

Table 3 shows that the quota price of these items are quite high. The

RMG industry is a low technology and labor intensive industry.

Hence global relocation of this industry has been party directed by

the availability of cheap labor in a potential supplying country.

Being a labor strophes economy Bangladesh has always enjoyed low

ways.

19

2.6 Wages in the apparel industry:

Table 4 : Wages in the apparel industry in selected courtiers

Country Annual wage in 1981

US$

Hourly Wage in 1984

US$

Bangladesh 305.7 0.24

S. Korea 2096.9 5.00

Hong Kong 4121.5 3.90

Indonesia 664.9 0.40

Malaysia 1363.4 1.20

Thailand 1708.3 1.00

India 626.00 0.60

Pakistan 1228.4 0.40

There is another dimension of the wage structure in the RMG

industry in Bangladesh which deserves attention. Wage in

Bangladesh’s apparel industry have been lower not only in

comparison to other competitor countries but also in comparison to

most other domestic industries.

This for example a comparison on the basis for wage data provided

in the statistical year book of Bangladesh, 1998 shows that the

overage monthly wage f skilled RMG factory workers was 1.4 to 2

times lower than that of similar factory workers in the textile and

other sectors. Real wage indices also show the comparatively low

wages in this sector as seen from table 2.6. Furthermore, UNID data

show a very modest increase of 11.5 percent in annual wages in the

20

apparel industry of Bangladesh over the period 1981-1992 from US

$ 305.7 to US $ 340.9 is an average annual increase of about one

percentage point.

Recently the minimum wages is fixed up for RMG workers which is

1662.50 per month.

21

Table-5 Average Minimum wages of RMG industry as percent

of average minimum waged of 11 selected industries.

Industry Minimum wage of RMG Industry as %

Minimum wage of this industry

Jute 83

Match 83

Re-Rolling 70

Printing 92

Cold storage 82

Pharmaceutical 79

Petrol Pump 77

Shoe 83

Fishing Trawler 57

Road Transport 72

In reality the condition of garments workers in Bangladesh is very

bad. There are some changes due to the labor unrest, trade union

movement social pressure and for the pressure of developed

countries. But till now living standard of workers is unacceptable.

There is no law for the national minimum wage. There are scopes to

fix the minimum wage in sector based. In every 3 years the

minimum wage is supposed to be revised but it is but followed in the

all sector. In 1994 the minimum wage for the garment worker was

fixed at Tk. 930/per month (i) for the unskilled workers and Tk.

22

2300 for skill worker. After the movement of worker, BGMEA

authority has fixed minimums wages 1662.50.

Labor law requires that all workers receive an appointment letter

since this protects labor rights; Studies however show that only 5

percent of garment worker most of then men receive this document.

Violation of this law has not only resulted in widespread job

disparity in the garment industry it has also enabled garment factory

owners to pay lower wages to workers since a worker without as a

casual worker and hence paid lower wages it has also made it

possible for employer to dismiss seekers without prior notices which

is alleges.

By depriving the workers of the minimum wage and severance pay

garment employers have been able to reduce labor cost and increases

their profits. This has been a major source of conflict between

employers and employs in the garment industry.

23

Chapter-Three

3.1 SUPPORTIVE GOVERNMENT POLICIES

In contrast to the public sector-led import-substituting

industrialization strategy pursued during the first few years after

independence, the industrialization philosophy of the government

changed rather dramatically from the late 1970s when the emphasis

was on export-oriented growth to be spearheaded by the private

sector. Towards this end, various policy reforms were implemented

in the 1980s and 1990s. Some of these reformed policies contributed

considerably to the growth of the RMG industry in Bangladesh.

The most significant policy reforms in the industry sector were

introduced through the New Industrial Policy (NIP) announced by

the government in June 1982. The aim of the NIP was to stimulate

industrial development through the private sector' and to that end it

made fundamental changes in the industrial policy environment and

promotional instruments. The highly regulated policy environment

of the previous period began to give way to a process of policy

decontrol and the dominance of market forces in the allocation of

resources. The NIP was revised in 1986, and the Revised Industrial

Policy (RIP) further strengthened the process of liberalization set in

motion by the NIP. The Industrial Policy 1991 reiterated the

objectives of the NIP and the RIP of achieving a rapid expansion of

the private sector and transforming the economy into a competitive

market economy.

24

The investment sanctioning procedure was gradually simplified and

liberalized. The sanctioning authority delegated to government

departments and financial institutions was increased substantially,

while controls exercised by the Department of Industries and the

Chief Controller of Imports and Exports (CCIE) were streamlined.

Automatic registration was provided to projects financed from non-

government sources, and from 1991 no government sanction was

required for private investment in 'free' sectors, provided the industry

was set up with the entrepreneur's own fund. These reforms made it

much easier for new investors to enter the RMG industry. Import

licensing procedures were liberalized in the 1980s. In 1983-84,

imports financed with cash license at official exchange rate were

gradually reduced and industries were required to import the rest of

their requirements from the secondary exchange market. (SEM)

where the exchange rate better reflected the opportunity cost of

foreign exchange. Even though this increased import cost, garment

manufactures (and other entrepreneurs) benefited because of the

hassle-free availability of foreign exchange which did not require the

payment of speed money. Import licensing was shortly abolished

and imports were permitted against letter-of-credit (L/C)

authorization forms to be accepted by banks designated by the

industrialists. A very important change in import regulations was the

shift in 1986 from a "positive list" to a "negative list" supplemented

by a "restricted list". This greatly benefited industries dependent on

imported inputs, like the RMG industry.

25

During the 1980s, a number of incentives were introduced to

encourage export activities. Some of them were new like the Bonded

Warehouse Facility (BWF), while others like the Export

Performance License (XPL) Scheme 37 were already in operation and

were improved upon. Also, rebates were given on import duties and

indirect taxes, there were tax reductions on export income, and

export financing was arranged.

Some other government policies, of more recent vintage, have also

provided assistance to garment export from Bangladesh from 1999-

2000 cash assistance was provided to garment exporters to the extent

of 25 percent of f.o.b. value of export; it was reduced to 15 percent

in 2002-03, and 5 percent subsequently. From 2004 garment.

Manufacturers have been exempted from the payment of VAT on

import of inputs and export of garments. These policies were

however introduced when the garment industry was already well

established and therefore had little or no role to play in the rise of the

industry.

Leakage of fabrics imported on a duty-free basis by some garment

manufacturers into the domestic market during the 1980s had a

significant effect on raising profitability of the industry since at that

time the import duty on fabric was as high as 150 percent. This was

possible since the garment manufacturers ordered excess fabric by

using false estimates of fabric requirements. Import of 15 percent

excess fabric was legally allowed to cover damage, wastage, etc.

during the manufacturing process. However, garment manufacturers

26

imported additional fabric more than this 15 percent legal limit by

bribing concerned customs officials. Consequently, much more

fabric than necessary was imported duty-free, and the excess cloth

was than sold in the open market (such as Islampur in old Dhaka).

This practice was however largely discontinued by the 1990s when

the customs duty rate on imported fabric was substantially reduced,

thereby reducing the premiums on selling cloth imported on a duty-

free basis. This is a classic example of how poor implementation of

policy, caused by corruption on the part of both the businessman and

the bureaucrat, can help an industry's cause even through it hurts the

national cause (lower sale of locally produced fabric in this case).

The discussion in this section clearly points to the positive

contribution made by policy reforms to the growth of the RMG

industry in Bangladesh. In particular, two policies- the SBW facility

and the back-to-back L/C system- led to significant reduction in cost

of reducing garments and enhanced competitiveness of Bangladesh's

garments exports. It also allowed garment manufacturers to earn

more profit which, when necessary, could be sed to overcome

difficulties arising from weak governance. Furthermore, poor

governance, reflected in the leakage of duty-free imported fabrics in

the domestic market, paradoxically enough also helped the garment

manufacturers to earn extra 'profit' and thereby enabled them to

absorb the 'high cost of doing business' - a fall-out of bad

governance.

3.2 THE ROLE OF THE GARMENT ENTREPRENEUR

27

In the literature on the garment industry of Bangladesh there

seems to be a general indifference on the part of scholars regarding

the role of the entrepreneurs in the rise of this industry in this

country. Such apathy is perhaps attributable to a belief that the

country was suffering from an acute shortage of entrepreneurs in the

post-independence period due to the outflow of West Pakistani

entrepreneurs who had dominated the East Pakistan (now

Bangladesh) economy before independence. In the view of these

scholars, the garments industry emerged in Bangladesh because of

favorable world market conditions and the support provided by

government policy. While these factors were undoubtedly very

important for the rise of the garment industry in Bangladesh, a

deeper analysis reveals that the Bangladeshi garment entrepreneurs

also had a role to play in this process.

The literature tells us that a successful entrepreneur is one who, by

using his skills and by taking risks, takes advantage of economic

opportunities which are thrown up by prevailing economic

conditions. In the case of the Bangladeshi garments manufacturer,

the MFA quota system created the opportunity for his economic

advancement. But this was a time during the country's history, only a

few years after its independence, when the physical and social

infrastructure was highly inadequate and weak, where the economic

policy regime was highly regulated and public sector oriented, and

where the bureaucracy was inexperienced and far from honest. Thus,

the RMG entrepreneur was taking a big risk in investing in this new,

little-known, export-oriented manufacturing activity. And, he had to

28

display various types of entrepreneurial skills like getting hold of

foreign collaborators, id-ranging finance, managing labour, getting

around bureaucratic obstacles, etc. Thus, we may justifiably consider

the garments manufacturer in Bangladesh as a successful

entrepreneur who made at least some contribution to the rise and

growth of this industry.

3.3 SUSTAINABILITY OF THE RMG INDUSTRY

From 1st January 2005 the global apparel market has become fiercely

competitive after the complete phase-out of the MFA Quota system.

The implication is that Bangladesh would have to enhance its

competitiveness in garment manufacture to retain its share in the

world market. It is important to note here that competitiveness in the

global apparel market no longer depends only on technical and

economic standards (like cost competitiveness, product quality,, on-

time delivery, etc.) but also on social standards, especially labour

standards. The labor standards which are accepted internationally are

those that are included in the concept of 'decent work' introduced by

the ILO in 1999, and it focuses on four objectives: the promotion of

rights at work, employment, social protection, and social dialogue.

The emphasis is ensuring decent and productive work, in conditions

of freedom, equity security and human dignity. The implication is

that employers would have to ensure, inter alia, payment of fair

wages and acceptable working conditions.

In recent times, foreign buyers and retailers have been insisting on

the fulfillment of these labour standards as a pre-condition for

29

importing garments from Bangladesh and other countries. Whatever

the motive behind this move, if Bangladesh's garment exporters fail

to meet these labor standards, exports are likely to suffer. At the

same time, workers of Bangladesh's garment factories have been

demanding for quite some time the payment of fair wages and other

non-wage benefits permissible under national labour laws, together

with improvement in general working conditions. Several violent

strikes by these workers, including setting fire to several garment

factories, have been taking placing in the country since May 2006.

Thus, it is clear that unless the issue of compliance with acceptable

level of labour standards is properly, addressed by garment

enterprises, the long-run sustainability of this industry may be

jeopardized. It has been noted above that the wage rate in the

garments industry in Bangladesh is not only lower compared to

wages in competing countries even in South Asia, it is even lower

than wages paid in most other industries in Bangladesh. Not only

that, the government's minimum wage for the garment industry has

remained unchanged at Taka 930 for grade seven employees and

Taka 4,500 for grade one employees over the last 10 years. Evidence

from many studies show that the garment industry is characterized

by a wide variety of deprivation of workers, particularly women

workers. These include, inter alia, lack of proper infrastructure

facilities and safety at workplace, non-compliance with legal

minimum wages, wage discrimination against women workers, lack

of provision of essential service benefits to workers, lack of housing

facilities, irregularities with granting maternity leave and benefits,

insufficient number of toilets, congested workplace in unsafe

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buildings, non-issuance of any formal contract of employment, non-

compliance with overtime work rules and allowances, etc. It is

important to note that very little improvement has taken place in

wage and non-wage benefits paid to workers and working conditions

in the garment factories since the industry started in the late 1970s,

despite many attempts made by researchers . and civil society to

convince garment factory owners to bring about improvements in

these conditions.

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3.4 Problems of RMG:

There are some problems in the RMG sector. These are given below:

Internal problem;

Absence of good relations between workers and owners

Misbehavior of mid-level officials to workers.

Delay payment.

Lack of local raw material

Lack of skilled worker

Unstable political situation.

Shadows of violence / labor unrest

Hartal

Natural calamity

Unfavorable working environment

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External problems:

Recent world recession in the international economy.

Quota system.

Import raw materials

USA, EU and Canada oriented export

Low labor cost is the only strength

Lack of image and weak forecast.

No diversification of market

Price hiking of fuel and production materials.

High interest from bank.

Decreasing unit price in International market.

Following Figure shows the Decreasing price of Bangladeshi Cotton

Polo Shirts in the EU Market and US market. :

Figure-3

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Chapter-Four

4.1 Findings :

Strength of RMG sector:

Support of low wage

Quota Advantage

The Govt. initiatives

Export to the US market.

Weakness of this sector:

Under complete control of the buyers greatly depends on

the imported raw materials.

Limited number of product categories.

Lack of forward linkage.

Longest lead time

Inefficient port management limit.

Absence of good governance.

Opportunity

Less competitive pressure grant Bangladesh duty free

status in the EU markets.

Free or less restricted access to the US market

High potential for trade creation offered by Japan

Possibility of high labour intensive in China giver the

opportunity to enter in the China market.

Treats

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Removal of quota system

Increase foreign competitors in the global market.

The TDA legislation provides opportunities for CBI

and Sub-Saharan African countries to take market away

from Bangladesh.

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Recommendations & Conclusion

4.2 Recommendations:

1. Cost minimization efforts at each stage of production must be

implemented.

2. Improving labor productivity is must needed. For this training

is necessary.

3. Infrastructural development is necessary.

4. Sufficient Gas and Power supply is mostly needed.

5. The government should play a key role for the expansion of

the garments market by diversification of items for

manufacturing and export.

6. The Government should offer more logistic support to

exporters and do all means to divine strategic solutions to the

problems that plague the exporters.

7. The Government should set up garment village, factories,

which comply with labor and environment standards in all

factors.

8. Bangladesh has to face serious problem of duty and quota free

access. In this case, the govt. & business community should

work together and give aggressive efforts for duty-free and

quota free or preferential access to RMG products to the USA

and relaxation of rules of origin in the European market.

9. Identify the items that are demonstrating competitive strength.

10. Create a textile RMG technology up gradation fund inline with

India.

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11. Invest in skill Development: Public-private partnership; link

vocational training institutes with the needs of the RMG

sector.

12. Academy of labour relations should be setup for improvisation

of labour owner relationship. Srilanka Govt. has set up such

kind of Academy in 2006-07 FY.

4.3 Conclusion :

The RMG industry is the most global sized industry. Both rich and

poor countries participate in the production and distribution of

Garments. As a resource poor country, Bangladesh has faced to

serious problem in the matter of duty and quota free access. But the

chairman of BGMEA recently says that without quota system

Bangladesh RMG sector will develop for few years such as 2005-

2010, but passing those year RMG sector will face a high

competition in global market. Proper strategies should be taken for

this.

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Reference

Hafiz G. A. Siddiqi-The Readymade Garments industry of

Bangladesh.

Sadequl Islam-The textile and clothing industry of Bangladesh in

changing world economy.

Garment Industry in Bangladesh", in M. Muqtada, A.M. Singh and

M.A. Rashid (ed.),

Bangladesh : Economic and Social Challenges of Globalisation.

Dhaka : The University Press Limited.

Rahman, Mashiur and Zaid Bakht (1997), "Constraints to Industrial

Development : Recent

The End

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