Significance of Readymade Garments Sector in Bangladesh
Significance of Readymade Garments Sector in Bangladesh
Significance of Readymade Garments Sector in Bangladesh
in Bangladesh
1
Abstract
Readymade Garments (RMG) industry is the most significant industry of Bangladesh as more
than 80% export revenue of the country is generated through this sector. The significance of this
industry on the total export revenue and GDP are undeniable. Also, the industry is arranging
employment opportunities for over 4 million people over the country and it is also helping to
ensure woman empowerment as well. Since the birth of the nation, the industry has been
flourishing. A rapid growth over last couple of decades has been seen in RMG industry.
However, the country has different drawbacks for which it has been lagging behind than other
countries. It is important to understand the issues concerning export revenue of RMG sector.
Thus, in future the importance of this sector can be understood. Also, the report will put major
focus on analyzing the impact of revenue earned in this sector on total export revenue as well as
GDP of the country.
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Chapter 1: Introduction
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poverty line. Also, a significant amount of people of the country is illiterate. Nonetheless, RMG
sector is helping the poor illiterate community to live a better life by giving them opportunity to
survive through employment in the given RMG sector.
One of the many significant reasons why the products of Bangladesh’s RMG sector is so much
accepted all over the world is it’s price. The price of the products produced in Bangladesh and
the labor is astonishingly low. On the other hand, the quality of the product is world standard.
Thus, the demand of the products produced through the RMG industry of Bangladesh is so very
much. However, sadly, the technical skills of the employees and R&D related aspects haven’t
been given proper importance. Thus, it is becoming a barrier. Also, frequent instability in the
political sector as well as existence of different types of natural disasters is creating drawback for
the sector. There are safety concerns which are also concerning the foreign countries to put
shades on Bangladesh. Some of the events in recent years like the destruction of Rana Plaza or
blaze of Tazin Garments have been a major talk in foreign community. However, different steps
have been taken by the Government to make betterment of the sector.
It is found that, the demand of the products of Bangladesh is most in USA and European
countries and also in different major sporting or other related events, the products of Bangladesh
is getting more acceptance than ever before.
As the country is majorly dependent on the export-oriented arena, the economy of the country
depends on how the sectors are managed and through proper implementation of RMG sector, the
country is developing. The policies those have been taken, has been taken for creating more
demand in the domestic as well as international arena. As a developing country, Bangladesh is
trying to focus on the global market in relation to the current local market. A dynamic approach
is necessary to attain expected results. The growth in RGM industry in Bangladesh is great
compared to other countries. However, in order to reach to reach at the pinnacle proper
measurements are needed to be taken. Robustness in performance is seen for producing the
readymade garment products although there have been a series of unfortunate events those took
place over the recent years.
It has been seen that the Government is supporting the industry a lot by giving different rebate
and other supports. For developing more, the Government is trying to make arrangements as well
as for ensuring woman empowerment.
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As the flagship industry of the country, RMG sector is attracting a lot of attention in recent years
as a possible area to invest from both local and foreign sectors. Thus, the improvement and
demand of the sector can be realized. The metamorphosis in social context has been seen to be a
significant one that has been seen in a bigger context through RMG sector. Throughout this
paper, different related factors will be discussed.
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- What is the impact of the revenue earned from the RMG sector on the overall revenue
and GDP of Bangladesh?
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Chapter 2: Literature Review
RMG sector is a significant sector of Bangladesh. There has been a number of papers regarding
the significance of RMG sector. However, from the perspective of Bangladesh, the significance
of RMG sector is a lot but, first I’m going to analyze the studies made before regarding the
relationship of economic growth and export revenue. Muhammad A. Quddus and Ikram Saeed
(2005) found that there is a positive relationship between economic growth of a country and
export revenue. The study basically suggests economic factors like increase in total export
revenue, GDP etc as significant factors of economic growth. Majeed A. Hussain (2014) made a
study on the export aspect of Pakistan regarding the causative relationship between export
revenue and economic growth and he found a Granger relationship as well. Mushfica Akter
(2015) also made a research study regarding the relationship between export revenue and
economic growth and there was a positive relationship in that study. The relationship between
import and export has been tasted by T and Achchuthan.S (2013) and they showed a positive
result as well. Thus, initially, these reports show that there is a positive relationship between
economic growth and export revenue and this factor is a significant factor that is to be concerned
while understanding the following aspects.
As generally, the positive relationship between economic growth and export revenue has been
seen, it can be understood that the significance of RMG sector is beyond words. As the RMG
sector is the main sector and almost 75% of export revenue is generated from the RMG sector,
the importance is easily understandable. Robbani (2000) made a study regarding the contribution
in foreign export revenue and he showed that the dominant part of the export revenue comes
from this sector. Rehman and Hundker (2001) discussed regarding the amount of export revenue
earned and they showed even though the sector started with an export revenue of sixty nine
thousand in the 70’s, the number climbed up to four and a half billion by the start of 2002 and
that shows how far the industry has come in terms of Bangladesh. Rock (2001) explored the
inception of garments industries in Bangladesh and found out that, Desh Garment started
exploring first in 1976. Also, a study conducted by Rahman (2002) showed that a positive effect
is found on the macroeconomic factor from the perspective of RMG sector.
However, there have been some drawbacks in case of growth in RMG sector. A study conducted
by Chowdhury et al. (2005) showed that the there is inefficiency caused by lack of training and
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thus the lack of skilled labor is causing increase in cost of production. Also, another study
conducted by Rahman and Anwar (2007) showed the weakness of infrastructures in Bangladesh
that is pushing the RMG sector behind. The recent events of Rana Plaza and Tazin Garments
show the poorness of the situation. However, it is ironical that the garments owner are also not
interested in training the employees thinking of cost but, there production cost is getting
increased anyway Berik and Rodgers (2008). The level of efficiency in RMG sector was checked
by Clark & Kanter (2011) and it was found out that the level is not satisfactory. However, the
problems were understood by Berg et al., (2011) and the significant challenges refer to –
- The infrastructures being weak
- Issues regarding compliance
- Low supplier
- Efficiency in labor
- Political stability.
The biggest challenge identified by Hasan (2013) is sustainability in the competition in
international market as the quota system has been withdrawn by MFA accord. Klaus Schwab
(2014) also marked some of the major issues regarding the infrastructure in the RMG Sector of
Bangladesh. However, there are different problems like disagreement between the owner party
and worker party as well as the infrastructure, the gas and electricity problem, inefficient labor,
political instability, quota problem etc have been identified by Islam et al. (2014).
However, the significant development in socio economic development has been seen by Md.
Salim Uddin and Mohammed Abu lahed (2007). Also, they said it has been a boom in the
economy of Bangladesh as a result of RMG sector and the major sector of revenue has been
RMG sector as well. They have complemented the RMG sector as the symbol of dynamism in
terms of economy of the world is concerned. However, the Multi Fiber Agreement has
intensified the competition in global market.
Ayesha Jamal(2013) has discussed regarding the RMG sector and the performance of the RMG
sectors and especially, the clothing have been given major focus on her study. The proper
administration in RMG sector to make further improvement has been suggested by Irshad
Rahman (2007). Md. Mustafizur Rahman(2012) revealed in his report that the transaction of
deals done through RMG sector is a win-win situation for both the client and the company.
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However, proper administration and promotion of the related industry is very important from the
perspective of Bangladesh.
Islam (2015) expressed in his report that, initially the RMG sector is was dependent on the
import. However, with the passage of time the situation has changed and more demand has been
seen in manufacturing of clothing from Bangladesh as a result of low labor cost and high quality
of product. Rakib Ibne Habib (2009) examined that a serious issue regarding the RMG sector of
Bangladesh belongs to the backward linkage and after the success of RMG sector in Bangladesh
depends on this. However, to develop more after the MFA agreement, proper policies are needed
to be implemented. In a criticism made by Khandoker Abdul Mottaleb (2011) showed even the
RMG industry has been booming for last three decades and leading the sector in the world, the
lack of proper knowledge may lead to doomsday of the sector in the long run. Thus, proper steps
are necessary to take. In the report of Sayed Sarwer Hussain (2014), it was expressed that
Bangladesh is highly dependent on the RMG sector.
Thus, throughout this literature review, it has been seen that importance of RMG sector is
beyond words for Bangladesh. The country has been leading in the relevant sector and due to
high quality of product in a low price, the attraction in the related arena has been found.
However, different drawbacks are lagging the sector behind and proper knowledge is necessary
to spread and Government needs to take different steps to continue the boom in RMG sector of
Bangladesh.
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Chapter 3: Research Methodology
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from the source and also, in primary data, data is collected from the place in which any work is
operated or the data is kept. Secondary data on the other hand is different as it is collected from a
source in where the data has already been collected. In secondary source, the data is not collected
directly rather than indirectly from the source that has collected directly. In here, secondary data
source will be used as data will be collected from sources like papers, newspapers, internet,
journals etc. After collecting the secondary sources, the research will be made and the final
results and findings will be presented.
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Chapter 4: Contributions of RMG sector
These are main RMG products exported abroad. However, a variety of other products are
exported and especially, the jerseys are world famous which are worn both by players and fans
all over the world in big events like Olympics, Fifa world cup, ICC cricket world cup and other
great tournament as well as throughout the years.
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4.2 Prime Export Market
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4.3 Potential Future Market of Bangladesh
Although European and American markets are the major markets for Bangladesh, there are
potentialities in other arena as well. More European countries can be focused where the products
can be exported as they can import from Bangladesh a lot. More and significant garments are set
up which are attracting interest from Bangladesh. There are green industries setting up beside
other significant industries which are attracting the customers. The green factory focuses on
sustainability of environment and employees. Thus, the customers are becoming more interested
in Bangladesh. The garments industry is improving several factors for getting customer attraction
and thus, they are becoming more interested. The Scandinavian countries can be the next big
target market as countries like Sweden, Norway etc are very lucrative place to export. Beside
them, China can be an attractive destination to export. They are a huge country with most of the
people living in it. Thus, China can be a preferred destination with multi-billion dollar
investment. Also, in recent years China has been looking towards Bangladesh as a preferred
destination in this arena as well. Thus, other continents like Africa, Latin America or Australia
can be focused more to generate revenue. So, there are a lot of areas where Bangladesh focus to
shift and generate more revenue in the long run.
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4.4 Social Benefits of RMG Sector
As it has already been discussed, the significance of RMG sector in economy of Bangladesh has
been significantly influential. However, for different important factors, social significance
influential of RMG sector is undeniable. Beginning from the empowerment to several significant
reasons, the importance of RMG sector is very much. The significant social benefits for RMG
sector is given below-
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environment has been more than ever before. The Government has been strict and imposed new
laws and regulations. As a result of this, the garments are becoming more eco-friendly and they
are imposing major focus on environment. Thus, the idea of green industry has discovered. Here,
the companies try to earn profit with having environment sustainability. Thus, green factory is
built. There are touch of environment and trees and natural elements all around the factory as
well as the energy, light and power consumption is reduced to sustain the environment. Also,
different safe rules and regulations have been imposed. Also, the foreign countries also prefer the
safe and green industries as those are safe investment for them. The emission of different type of
polluted air has been restricted inside the garments and the garments are now working not to
pollute the environment. Thus, the Bangladesh Government as well as BGMEA is working hard
to make a better situation.
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Chapter 5: Government Assistance to RMG sector of Bangladesh
Export sector is the most significant sector in case of earning revenue for a country like
Bangladesh. When it comes down to understanding the significance of export revenue, the first
name that pops up is certainly the RMG sector. The RMG sector of Bangladesh has been a
backbone of it’s export sector since the amount of revenue earned in this sector is the most. For
last three decades, the industry has been developing for MFA accord. From the RMG point of
view, Bangladesh exports 7th highest amount of export. Since the MFA accord made in 2005, the
competition in RMG sector has been very tough. The production cost has been increasing
continuously. As a result of this, the industry is getting less profit. Also, the price of the clothing
has decreased in recent years as well. However, the demand from the customers has been
increasing. They want quality product within a limited amount of time. Thus, the garments are
pressurized as well. As a result of these factors, the survival of the factories is threatened.
On the other hand, RMG sector is the most important sector of Bangladesh and it generates the
most amount of revenue. As a result of this, the Government is coming forward. They are
helping the garment factories. Also, they are assisting the garment industries by helping them
financially. The Government is providing financial support as well as different rebate including
tax to encourage the people come forward to be a part of this industry. Whenever needed,
depending on the situation the Government is offering the garments financial support. Also,
when a new industry is established, they are given tax rebate like other industries to foster the
growth and contribute in the economy of the country. The Government understands that this is
the precursor industry of the nation and if the nation has to generate more export revenue, they
need to encourage the sector and provide them with different facilities.
For further assistance and betterment in garments sector, the Government has launched training
program. This has been done with cooperation of Germany. By this, the woman empowerment
and efficiency of women in the garment sector will increase as a result of this. Both DWA and
MoWCA are working together to improve the condition. The newly established training facility
that is free of barrier in Gazipur is actually helping enlarging the image of women in such
industry. For growing and diversifying the industry, PSES is working with GIZ to make social
and environmental improvement. In Bangladesh, two of the main obstacles to further
development are inefficient workers and disable workers or mid level employees. Thus, these
became major drawbacks for Bangladesh. Thus, the development projects have been taken to
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make the situation better. The training facilities and classrooms are working to make the workers
efficient and helping the disable workers to work efficiently as well. The trainers are very good
and they are helping to make more efficient employees.
Thus, it can be said that there are different steps taken by the Bangladesh Government including
financial support to the industries to encourage entrepreneurship in this industry and make more
investment from different people so that the country can generate more export revenue in the
long run.
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Chapter 6: Quantitative Analysis of RMG Sector
4600
4500
4400
2013-14
2014-15
4300
2015-16
2016-17
4200
2017-18
4100
4000
Number of Garment Factories
Interpretation: It shows that, in last five years the number of garment factories in Bangladesh has
been increasing continuously. In 2013-14, the number of garments was 4222 and it increased
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continuously and in 2017-18, it became 4560. Thus, it shows that continuous increase in number
of garment factories.
4.5
3.5
3
2013-14
2.5 2014-15
2015-16
2
2016-17
1.5
2017-18
1
0.5
0
Number of People Employed
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Interpretation: Here, it can be seen that the industry has ensured employment opportunity for
4.00 million of people for last five years continuously. However, the number has obviously
increased over the course of five years but, as the number has been shown in millions, it showed
same numbers over the years. This is a significant number as a lot of people have been employed
through this and unemployment rate of the country has decreased because of this.
6.3 Export in RMG Sector and it’s Impact on Total Number of Export of
Bangladesh
The significance of export revenue earned from the RMG sector is undeniable as more than 80%
of export revenue is earned from this sector. Thus, it is crucial to understand the impact of the
export revenue on the overall revenue of the country. Total number of export in RMG sector and
it’s impact on Total number of export of the country are given below both in table and chart-
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40000
35000
30000
25000
Number of Exports in RMG
20000 Sector
Total Number of Exports
15000
10000
5000
0
2013-14 2014-15 2015-16 2016-17 2017-18
Interpretation: Here, the results show that the dominant part of total export comes from the
export revenue earned from the garments sector. Over 81% of total revenue is generated from the
RMG sector every year and the number is increasing. Even though in 2016-17 the number
decreased, it increased significantly in the latest year. Thus, it shows the significance of RMG
sector in the total export revenue earned by the country.
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18000
16000
14000
12000
10000
Woven
8000 Knit
6000
4000
2000
0
2013-14 2014-15 2015-16 2016-17 2017-18
Interpretation: Here, it can be seen that woven products contribute more to the Bangladesh
export and economy than knit products. In every year, the excess of woven than knit can be seen.
However, in recent years, knit products have been more important.
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Percentage of Export in RMG Sector in GDP
16.00%
14.00%
12.00%
10.00%
4.00%
2.00%
0.00%
2013-14 2014-15 2015-16 2016-17 2017-18
Interpretation: Here, the impact of percentage of Export in RMG sector earned on GDP of
Bangladesh shows that over the years, the percentage is decreasing. This is a good sign for the
country as the country is getting diversified and focusing on other areas. However, the total
revenue shows that the export revenue is still dominant by RMG sector and thus, it can be
understood that other factors are involved in here for which the percentage is decreasing over the
years.
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Chapter 7: Comparison of Export of RMG Sector of Bangladesh with Indian
RMG Sector
Currently Bangladesh is considered as earning second highest number of export revenue after
China. However, the economy of India is highly dependent on RMG sector as well. They are not
much behind in earning export revenue and their growth in the related sector is exemplary. A
comparison between Bangladesh and India on the export revenue is given below in billions-
35
30
25
20
Bangladesh
15 India
10
0
2013-14 2014-15 2015-16 2016-17 2017-18
Interpretation: Here, it can be seen that the number of export revenue that is earned by
Bangladesh is almost one and a half time higher than India. It has been seen that India is also
increasing in the export in RMG sector in Global market. However, so it Bangladesh, Thus,
Bangladesh’s RMG sector is much enriched and better than India. Even if India is a bigger
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country than Bangladesh miles away, Bangladesh has edged the country in this sector. Indian
textile and apparel products are very great. However, the products those are supplied by
Bangladesh are just too good and thus, the acceptance in the countries can be understandable.
Also, the emphasis of Bangladesh in related sector is very much and thus, the country is
improving each day. India has also been focusing on improving in the related industry and the
result can be seen as their increase in export revenue. Recently, the biggest RMG market known
as Chinese market is fallen down and the likes of Bangladesh or India in such industry can be
understandable. They are trying to capitalize this opportunity and increase more revenue. Thus,
here it can be seen that Bangladesh is doing better than India in the related sector and both
countries are continuously improving.
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Chapter 8: Limitations of Garment Sector
While operating inside Bangladesh, a garment industry has to face different problems. Some of
the limitations are described below-
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8.5 Education and Knowledge
All the people in Bangladesh don’t have proper education and thus, they do not have proper
knowledge. Lack of sufficient manpower and other problems are created for lack of education.
They do not have proper knowledge and did not learn about the factors regarding success in the
industry properly. It is important to make betterment in education system regarding RMG sector
to get even better result.
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Chapter 9: Conclusion
Finally it can be said that, RMG sector is the most significant sector of Bangladesh. The
economy of the country depends on the sector. In last couple of decades, the country has seen
major growth in this industry. Thus, the country has achieved second position in generating
export revenue over the world through RMG sector. Even though there are some major
drawbacks regarding the RMG sector which is actually lagging the industry behind, it is
important to understand that the industry is actually responsible for major foreign investment as
well as export. Thus, it is also crucial to understand that the industry is helping to eradicate the
unemployment rate in a big margin. The Government thus needs to take proper steps to solve the
problems. Also, the woman empowerment through this industry and the social benefits those
have been mentioned are undeniable. When the revenue of the country is compared with India, it
was seen that Bangladesh is also above them and the growth exists for both countries. Since the
independence of the country, the RMG industry is actually helping to alleviate the poverty rate.
The country has come a long way till it’s primary period of independence and now dominating
the RMG world. However, the Government and the role of law makers and people concerning
this sector is very important as they decide the way the industry will head at. For further success
in global market, the Government and the people concerning the sectors need to come forward
and take serious steps so that significant result can be found. So, finally it can be said that the
significance of RMG sector from the perspective of Bangladesh is very important.
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