Free Essay

Rmg in Bangladesh

In: Business and Management

Submitted By arkfarid
Words 8599
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History of Ready-made Garment (RMG) Sector in Bangladesh
Now a days textile sector of Bangladesh retains it's top position in global market. This can't be gained overnights. Bangladesh can get it's present position by dint of merit and industry of people of Bangladesh. The base of textile sector was first established in 60th decade of the last century."mercury shirts"which is originated from Karachi started the rmg business first.the industry exported shirts to the European market in 1965-66 first. | |
In 1977-78 only 9 exporting industries were available in this country which deal with 10 million used every year.there were 3 big industries available in that time.they were: 1. Riaz garments 2. Jewel garments 3. Paris garments.
Of them, Riaz garments was the most well known and oldest industry in that time.In urdu road of Dhaka it started it's business with some tailoring shop first.In that time it was known as Riaz store.In 1973,it was named Riaz garments.In 1978,it started exporting products exported 1 million pieces of shirts to the Olanda,a South Korean company.
Another garments known as Desh Garments ,also treated as the pathfinder of textile sector in Bangladesh.
In 1979 Desh Garments opened a joint venture project with south korean company "Daiyuu".
At present RMG sector of Bangladesh deals with 22 billion USD every year.4 million people directly depend on the ups and downs of the sector.the 81% of the total export earnings are come from this textile sector.
The textile sector passes it's golden time now.with the help of the government and different organizations we may hope for the betterment of this sector.
The economy of Bangladesh is largely dependent on agriculture. However the Ready–Made Garments (RMG) sector has emerged as the biggest earner of foreign currency. The RMG sector has experienced an exponential growth since the 1980s.[1] The sector contributes significantly to the GDP. It also provides employment to around 4.2 million Bangladeshis, mainly women from low income families.
History: 1950 was the beginning of RMG in the Western world. In order to control the level of imported RMG products from developing countries into developed countries, the Multi Fibre Agreement (MFA) was made in 1974. The MFA agreement imposed an export rate 6 percent increase every year from a developing country to a developed country. In the early 1980s Bangladesh started receiving investment in the RMG sector. Some Bangladeshis received free training from the Korean Company Daewoo. After these workers came back to Bangladesh, many of them broke ties with the factory they were working for and started their own factories.
Facts: In the 1980s, there were only 50 factories employing only a few thousand people. Currently, there are 4490 manufacturing units. The RMG sector contributes around 76 percent to the total export earnings. In 2007 it earned $9.35 billion. This sector also contributes around 13 percent to the GDP, which was only around 3 percent in 1991. Of the estimated 4.2 million people employed in this sector, about 50 percent of them are women from rural areas. In 2000, the industry consisting of some 3000 factories employed directly more than 1.5 million workers of whom almost 80% were female. USA is the largest importer of Bangladeshi RMG products, followed by Germany, UK, France and other E.U countries.[2]
Women in the garment industry: The garment sector is the largest employer of women in Bangladesh.[3] The garment sector has provided employment opportunities to women from the rural areas that previously did not have any opportunity to be part of the formal workforce. This has given women the chance to be financially independent and have a voice in the family because now they contribute financially.[4]
However, women workers face problems. Most women come from low income families. Low wage of women workers and their compliance have enabled the industry to compete with the world market. Women are paid far less than men mainly due to their lack education.[5] Women are reluctant to unionize because factory owners threaten to fire them.[3] Even though trade unionization is banned inside the Export processing Zones (EPZ), the working environment is better than that of the majority of garment factories that operate outside the EPZs. But, pressure from buyers to abide by labor codes has enabled factories to maintain satisfactory working conditions.[4]
Garment workers have protested against their low wages. The firsts protests broke out in 2006, and since then, there have been periodic protests by the workers.[6] This has forced the government to increase minimum wages of workers.[7]
Wages & efficiency in the garment industry: In 2013 Doug Miller, discussed wages, labour costing, efficiency, and standard minute values in "Towards Sustainable Labour Costing in UK Fashion Retail."
The future: The RMG sector is expected to grow despite the global financial crisis of 2009.[9] As China is finding it challenging to make textile and foot wear items at cheap price, due to rising labor costs, many foreign investors, are coming to Bangladesh to take advantage of the low labor cost. Local accessories are being made including zippers, buttons, labels, hooks, hangers, elastic bands, thread, backboards, butterfly pins, clips, collar stays, collarbones and cartons.
The accessory market is dominated by multinational companies operating in Bangladesh, because in the majority of cases, garment buyers prefer accessories from them over the locally available items.
Compliance: Five deadly incidents from November 2012 through May 2013 brought worker safety and labor violations in Bangladesh to world attention putting pressure on big global clothing brands such as Primark, Loblaw, Joe Fresh, Gap, Walmart, Nike, Tchibo, Calvin Klein and Tommy Hilfiger, and retailers to respond by using their economic weight to create change.[8] No factory owner has ever been prosecuted over the deaths of workers.[9] Other major fires 1990 and 2012, resulted in hundreds of accidental deaths, include those at That's It Sportswear Limited and the fire at Tazreen Fashions Ltd. Spectrum Sweater Industries, Phoenix Garments, Smart Export Garments, Garib and Garib, Matrix Sweater, KTS Composite Textile Mills and Sun Knitting. Foreign buyers looking for outsourcing demanded compliance-related norms and standards regarding a safe and healthy work environment which includes fire-fighting equipment and evacuation protocols. RMG insiders in Bangladesh complain about the pressure to comply and argue that RMG factory owners are hampered by a shortage of space in their rental units. In spite of this the industry exports totaled $19 billion in 2011-2012. They expected export earnings to increase to $23 billion in 2012-2013.[10]
Two dozen factory owners are Members of Parliament in Bangladesh.[8]
Scott Nova of the Worker Rights Consortium, a rights advocacy group, claimed that auditors, some of whom were paid by the factories they inspect, sometimes investigated workers right issues such as hours or child labour but did not properly inspect factories’ structural soundness or fire safety violations. Nova argued that the cost of compliance to safety standards in all 5,000 clothing factories in Bangladesh is about $3 billion (2013).[8]
In year 2000 a boook said that garment entrepreneurs had a reputation for shirking custom duties, evading corporate taxes, remaining absent in capital markets, avoiding social projects such as education, healthcare, and disaster relief but, argued authors Quddus and Salim, these entrepreneurs took the risks needed to build the industry.[11] Bangladesh successfully competes in the manufacturing industry by maintaining "lowest labor costs in the world." Garment workers' minimum wage was set at roughly $37 a month in 2012 but since 2010 Bangladesh's double-digit inflation with no corresponding rise in minimum wage and labor rights, has led to protests.[12]
A fire broke out on 24 November 2012, in the Tazreen Fashion factory in Dhaka[13] killing 117 people and injuring 200.[14] It was the deadliest factory fire in the history of Bangladesh.[15] According to the New York Times, Walmart played a significant role in blocking reforms to have retailers pay more for apparel in order to help Bangladesh factories improve safety standards. Walmart director of ethical sourcing, Sridevi Kalavakolanu, asserted that the company would not agree to pay the higher cost, as such improvements in electrical and fire safety in the 4,500 factories would be a "very extensive and costly modification" and that "it is not financially feasible for the brands to make such investments."[16]
On April 24 1137 textile workers factories making clothes for Western brands, were killed when a garment factory collapsed. The Savar building collapse was in the Rana Plaza complex, in Savar, an industrial corner 20 miles northwest of Dhaka, the capital of Bangladesh. It was the "world's deadliest industrial accident since the Bhopal disaster in India in 1984.[17] While some 2,500 were rescued from the rubble including many who were injured, the total number of those missing remained unknown weeks later.[17] The eight-story building, owned by Sohel Rana, associated with the ruling Awami League, was constructed on a "pond filled with sand". It only had planning approval for five floors.[18] Owners used "shoddy building materials, including substandard rods, bricks and cement, and did not obtaining the necessary clearances."[17] An engineer raised safety concerns after noticing cracks in the Rana Plaza complex the day before its collapse. In spite of this factories stayed open to fill overdue orders. When generators were restarted after a power blackout the building caved in.[9][19] Six garment factories also in Rana Plaze were cleared to re-open on May 9, 2013 after inspectors allegedly issued safety certificates. Nine people were arrested including four factory owners, the owner of the complex and the engineer who warned of the crack in the building.[9]
Immediately following the April 24 deadly industrial accident, Mahbub Ahmed, the top civil servant in Bangladesh's Commerce Ministry, fearing the loss of contracts that represent 60 per cent of their textile industry exports, pleaded with the EU to not take tough, punitive measures or "impose any harsh trade conditions" on Bangladesh to "improve worker safety standards" that would hurt the "economically crucial textile industry" and lead to the loss of millions of jobs.[9]
On May 9, 2013 eight people were killed when a fire broke out at a textile factory in an eleven-story building in the Mirpur industrial district owned by Tung Hai Group, a large garment exporter. Mohammad Atiqul Islam, president of the politically powerful textile industry lobby group, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Reuters that "the Bangladeshi managing director of the company and a senior police officer were among the dead."
Solutions: One of the solutions central to the safety issue may be worker empowerment; at Rana Plaza where the biggest disaster took place, the workers were forced to work, despite imminent collapse reported on TV news the previous day. One of the ways to empower workers may be by following Toyota Production System in manufacturing.
Chronology of recent events in the Bangladesh Ready Made Garment (RMG) sector : 24 November 2012: A fire at Tazreen Fashions leads to the deaths of 112 workers.

15 January 2013: A tripartite statement of commitment on fire safety in the work place in Bangladesh was adopted and signed after a tripartite meeting. The meeting was organized jointly by the Ministry of Labour and Employment and the ILO. In the statement the tripartite partners commit to the development of national plan of action on fire safety.

26 January 2013: A fire at Smart Exports Garments leads to the deaths of 7 workers.

24 March 2013: National Tripartite Plan of Action on Fire Safety (NTPA) in the RMG Sector of Bangladesh is developed in response to the Tazreen fire. The NTPA outlines initiatives covering three areas: 1) Policy and legislation, 2) Administration, 3) Practical activities. It foresees the establishment of a National Tripartite Committee (NTC) to ensure and monitor implementation of the NTPA. The ILO accepts a formal request to assist in the implementation and coordination of the NTPA.

24 April 2013: The Rana Plaza building collapse leads to the loss of 1,132 lives. Most of the victims were workers from the ready-made garment factories housed in the building.

1–4 May 2013: A high-Level ILO mission headed by Deputy Director General Gilbert Houngbo visited Bangladesh to identify key areas for action. It results in the signing of a Joint Statement of the tripartite partners (government, workers, employers), which builds upon the NTPA. The Joint Statement identifies key areas for action, such as the assessment of the structural integrity of RMG factory buildings; strengthening labour inspection; worker and management training and awareness of occupational safety and health and workers’ rights; rehabilitation and skills training of disabled workers; and the possible establishment of a Better Work programme.

13 May 2013: Two global unions (IndustriALL, UNI Global) and international brands and retailers (currently over 100) sign the Accord on Fire and Building Safety in Bangladesh. This is a five-year programme under which companies commit to ensure the implementation of health and safety measures. The ILO acts as neutral chair of the Accord, which is estimated to currently cover approximately 1,700 factories.

8 July 2013: The EU, Bangladesh Government and ILO issue the Global Sustainability Compact to promote improved labour standards, the structural integrity of buildings and occupational safety and health, and responsible business conduct in the RMG and knitwear industry in Bangladesh. The Compact builds upon the NTPA and assigns an important coordination and monitoring role to the ILO.

10 July 2013: The Alliance for Bangladesh Worker Safety is launched by a number of North-American retailers and brands (currently 26), including Walmart, Gap, Target and JC Penney. It is a five-year programme under which the companies commit to ensuring the implementation of health and safety measures. The Alliance recognizes the importance of the NTAP and states it will support its implementation. The Alliance has reported to currently cover 686 factories.

15 July 2013: The Government of Bangladesh adopts amendments to the Bangladesh Labour Act, the first step towards fulfilling the Government’s obligation to respect fully the fundamental rights to freedom of association and collective bargaining and to address the critical need to bolster occupational safety and health.

25 July 2013: The NTPA merges with the Joint Statement to form the National Tripartite Plan of Action on Fire Safety and Structural Integrity in the RMG Sector of Bangladesh, without altering the content of either.

7 September 2013: ILO brings together stakeholders in the readymade garments industry, including Accord and Alliance representatives , to begin work on the development of a coordinated approach to undertaking assessments between the three initiatives, including harmonisation of standards.

8 October 2013: A fire at Aswad Composite Mills leads to the deaths of 7 workers.

22 October 2013: The ILO launches a US$24 million, three-and-a-half year programme on improving working conditions in the RMG sector. The programme is designed to support the National Tripartite Plan of Action on Fire Safety and Structural Integrity.

22 October 2013: Better Work (a joint initiative between the ILO and International Finance Corporation) announces the launch of a new programme in Bangladesh, which will be part of the overall ILO RMG programme.

24 October 2013: Six-month anniversary of the Rana Plaza building collapse.

7 November 2013: The ILO brings together technical experts (structural engineers, fire safety experts, etc.) from the Bangladesh University of Engineering and Technology (BUET - on behalf of the NTC), the Accord, and the Alliance. The experts agree on harmonized standards for undertaking structural integrity and fire safety assessments, which were subsequently submitted to the decision-making bodies of the respective organizations for review and formal endorsement.

21 November 2013: The NTC endorsed Guidelines for Assessment of Structural Integrity and Fire and Safety, which include the harmonized standards developed by technical experts from the BUET, Accord and Alliance. The NTC also establishes a review mechanism to handle urgent safety issues in garment factories.

22 November 2013: Led by the engineers from the BUET, assessments of the structural integrity and fire safety of RMG factory buildings not within the supply chains of the Accord and the Alliance officially commences.

24 November 2013: One-year anniversary of the fire at Tazreen Fashions.
There is that old adage, don’t kill the golden goose. Why I compare Bangladesh garments sector with the golden goose? The reason is the garment sector in Bangladesh has been giving for many years.
Bangladesh is the second largest exporter of readymade garment products trailing China according to the McKinsey report (2011). Bangladesh’s garment exports during July-June 2012-13 period climbed by about 12.7 percent to US$ 21.515 billion over exports of US$ 19.089 billion made during the corresponding period of 2011-12. In 2012-13, the top three export destinations for Bangladesh garments were Europe, which accounted for US$ 12.56 billion, followed by the US and Canada, which accounted for US$ 4.99 billion and US$ 980 million, respectively. But now it has received bad news.
Recent incidents like fire in the Tazreen Fashions factory in November last year that killed more than 110 and the collapse of the Rana Plaza garment factory building in April that killed over 1,100 people and more than 2,500 were injured in the disaster. It may be the second biggest industrial accident in recent history.
As a result, The President Barack Obama-led US government in June suspended Bangladesh from the Generalised System of Preferences (GSP), which allows duty-free entry of over 5000 goods to the US market from least developed countries.
Now, RMG products (which make up most of the US import from Bangladesh) are not included in the list of duty-free products in GSP, there will an export fall of about $40 million .At present, Bangladesh exports about $5 billion worth of goods (mostly RMG products) to the USA every year and hence, the suspension from US GSP will account for a fall in export of about 0.8 %.
Losing the GSP facility will cost Bangladesh millions of dollars in taxes. It is also influence the European Union to take similar action, which would have a much bigger impact on Bangladesh and its garment sector.
In August, Garment factory workers clashed demanding a Tk 8,000 minimum monthly wage. Many factories closed for clashing. The owners finally agreed to pay Tk 5,300 as prescribed by a government-endorsed wage board on Nov 4.
In November, 18,800 people lost their work for fire in Standard Group. The factory was among the ten biggest in the country and it was the biggest supplier of Gap in Bangladesh. The loss to the firm could run into more than US$100-million.
In December, The European Parliament has threatened to withdraw GSP, the duty and quota-free access to EU market that Bangladesh enjoys. The European Union buys more than $12 billion in Bangladeshi garments each year, or roughly three-fifths of the country’s production. If the EU were to withdraw or suspend the facility, the price per unit of garment will rise and this may lead to many European buyers turning their backs on our products. So, Bangladesh would suffer a huge setback.
Due to the recent political unrest, Bangladesh RMG sector losses in billions of taka every day. The blockades have put the garment sector in a tight corner as exporters are counting losses from order cancellation and rising transport costs.
Buyers are cancelling orders as exporters fail to meet the lead time due to transport crisis. Some buyers are also imposing penalties in case of delayed shipment, cutting prices of garment products and transport costs have surged by around 30 percent due to expensive air shipment. Many factories have halted production as they can’t bring imported raw materials from ports.
The BGMEA’s research and development team has collected three-day data (December 1-3) from 10 exporters to assess the overall losses caused by the blockade.
Orders worth $3.96 lakh were cancelled during the period, while the exporters spent $3.08 lakh on air shipment. Many small factory owners may go bankrupt due to failing shipment on time. So that’s the trap: the golden goose is caught between a rock and a hard…………
Minimum Wage in the RMG Sector of Bangladesh: Rules,Regulations and Practices: Rules and Regulations regarding the Minimum Wage.
The term minimum wage is not defined in the Bangladesh Labour Act 2006, nor in the Amended Labour Act 2013.
“In making its recommendation the Wage Board shall take into consideration cost of living, standard of living, cost of production, productivity, price of products, business capability, economic and social conditions of the country and of the locality concerned and other relevant factors”
Definition of wage in the act is rather more specified It indicates a set of benefits which are not to be considered as wage including the value of any house accommodation, supply of light, water medical attendance or other amenity or of any service; It excluded by general or special order of the government, (a) any contribution paid by the employer to any pension fund provident fund, (b) any traveling allowance on the value of any traveling concession, and (c) any sum paid to the worker to defray special expenses entitled on him by the nature of his employment.
RMG sector: navigating the challenging times ahead…….Mustafizur Rahman

In matters concerning safety of workers in the garment sector, zero-tolerance should be the overriding motivation. Photo: Star
Bangladesh’s export performance in the first quarter of fiscal 2014 has been quite robust — export earnings were 21.2 percent higher than the corresponding period of fiscal 2013. Excepting the negative growth in the Canadian market (-1.4 percent), export was high in all major markets (EU 27 percent, USA 15.7 percent).
Exports record in quarter 1 would imply that a growth of 10.3 percent will be required over the next nine months to reach the target of 12.9 percent planned for the whole of fiscal 2014.
In regards to RMG exports, performance in Q1 of fiscal 2014 was equally impressive. Growth of RMG was 24.2 percent, with knitwear recording a rise of 24.4 percent and woven wear 23.9 percent over the corresponding period of fiscal 2013.
RMG exports will need to register a growth of 8.6 percent over the next three quarters from the same time last year if the overall RMG growth target of 12.2 percent for fiscal 2014 is to be achieved. This appears to be an attainable target in view of current trends and emerging market signals.
However, a number of factors will make the journey over the upcoming months a particularly challenging one to navigate.
Firstly, the high RMG growth in the first quarter was based on a relatively low growth of 3.8 percent posted in the first quarter of fiscal 2013. There was, thus, a favourable base-line effect. In October-June of fiscal 2013, RMG growth was 15.7 percent. This would imply that growth over the next three quarters will have to be attained on the relatively more robust performance record and higher base line of the preceding year.
Secondly, over the next few months, the orders placed in the post-Rana Plaza tragedy period will start to be reflected in the export figures. As of now, market intelligence is not transmitting any disquieting signals.
However, much will depend on Bangladesh’s ability to undertake the needed homework and implement the various action plans that have been put in place in view of the Rana Plaza incident.
These include various activities envisaged as part of tripartite agreement, ILO Work Plan and measures to be taken under the purview of ‘Accord’ and the ‘Alliance’.
In matters concerning work place safety of workers and employees in the RMG sector, zero-tolerance should be the overriding motivation. Any failure in this regard will also put the RMG sector at a disadvantage in addressing the generalised system of preferences (US-GSP review in December 2013, EU-GSP review in January, 2014), assuaging the concerns of consumer groups in developed country markets and, most importantly, in dealing with the major buying houses. There should be full commitment in this regard on the part of all involved stakeholders. This is critical to safeguarding the medium to long term interests of the sector.
Thirdly, in spite of Bangladesh’s good performance in both the EU and the US markets, Vietnam has been outperforming Bangladesh in the US market and Cambodia in the EU market.
In recent years, market share of all these three countries have gone up at the cost of China whose exports and market share have continued to decline, particularly in the US market.
In the foreseeable future, the advantage and attention that Bangladesh has enjoyed thanks to the China plus one policy pursued by major buyers is likely to face increasing competitive pressure from Vietnam, Cambodia and also India, among others. Bangladesh will need to keep competitors on the radar screen and calibrate policies and initiatives accordingly.
Fourthly, Bangladesh’s RMG export performance received a positive jolt in the EU market in recent times, thanks to changes in the rules of origin for woven-RMG products under the EU-GSP scheme. The initial advantages resulting in higher exports, which arose from Bangladesh’s capacity to access the preferences, is likely to taper off over the medium term. Bangladesh will need to be cautious about this prospect.
Fifth, a sharp depreciation of the currencies of some of Bangladesh’s competitors, particularly India, has put Bangladesh to some disadvantage. A market analysis at disaggregated level shows that, for example, in the EU market, out of Bangladesh’s ten topmost (six digit-level) knitwear items eight items figure among India’s top ten items (for wovenwear the number is six).
Although no adverse impact of the relative appreciation of the taka has been visible in major export markets till now, it will be prudent to keep a sharp eye on the dynamics of the relative market shares over the coming months and take corrective measures if needed.
Sixth, enterprise-level production costs in the RMG sector will go up in view of the investment needed to address compliance-related concerns and also consequent to the expected rise in the minimum wage for the apparels workers.
Bangladesh’s continued competitiveness will depend on the ability of the entrepreneurs to remain competitive, go for higher productivity and more value addition, move upmarket and the ability to pass on a part of the higher cost on to the buyers. On all these counts, there will be formidable challenges, which will need to be addressed.
Seventh, in view of recent market dynamics and the likely changes in the strategy pursued by major buyers, the prevailing sub-contracting system is likely to be eased out.
The RMG sector will undergo important structural changes. This may not necessarily have a negative impact on overall export performance, but from the medium term perspective, the longstanding production practices based on sub-contracting model will no longer remain the predominant mode. Careful planning will be required so that the RMG sector is able to adjust to the changes that will occur both in production and marketing of apparels. This will call for concerted efforts both at the enterprise and policy level.
Eighth, the Rana Plaza incident has exposed serious contradictions that are emerging between the productive forces and the production relations in the sector.
Ensuring workers’ welfare by giving living wages, providing better work place safety, allowing workers to pursue collective bargaining ought to receive priority and urgent attention on the part of entrepreneurs, government institutions and other stakeholders.
Entrepreneurs will need to look at the issues from the perspective of enlightened self-interest. The government must be mindful of its responsibility as regards implementation and enforcement of provisions stipulated its own laws and regulations, and the ILO conventions to which Bangladesh is a signatory.
A coalition of the willing must recognise these as key components of a winning strategy for the future of Bangladesh’s apparels sector.
Bangladesh at present is delicately poised in view of the anticipated challenges and the emerging possibilities in a fast changing global apparels market. Let us seize the opportunities by doing the needed homework and by being adequately equipped and ready.
Abstract :
Bangladesh in one of the 48 least developed countries measured in terms of per capita income, literacy rate and contribution of manufacturing to GDP. The countries 48 percent population lives below the poverty line and the government has planned to reduce the poverty level to 30% by next five years3. Agriculture is still the major employment provider of the country (64%) To alleviate poverty unemployment rate has to be reduced and employment opportunity in the non-agricultural sector has to be promoted. As women constitute almost 50% of total population, consideration of women's integration into the economic activities has already been recognized 4. Foreign trade policy in this regard can contribute in alleviating poverty by encouraging investment in those industries that are based on labor intensive technologies and allow women to be included in labor force. According to comparative advantage theory of classical economists Bangladesh has a great cost advantage due to abundant and cheaper laborers of which 90% are women and it is already evident since late 1970s in export performance of Ready-made Garments (RMG). So far entrepreneurs of RMG are not directly involved in international marketing. But after the year 2005 the market will be open for all the producers and they will have to take the responsibility to market their products directly.

The Ready Made Garments (RMG) sector of Bangladesh has emerged as the biggest earner of foreign currency. The RMG sector has experienced an exponential growth since the 1980s. The sector contributes significantly to the GDP. It also provides employment to around 4.5 million Bangladeshis. An overwhelming number of workers in this sector are women. This has affected the social status of many women coming from low income families. Bangladesh-origin products met quality standards of customers in North America and Western Europe, and prices were satisfactory. Business flourished right from the start; many owners made back their entire capital investment within a year or two and thereafter continued to realize great profits. Some 85 percent of Bangladeshi production was sold to North American customers, and virtually overnight Bangladesh became the sixth largest supplier to the North American market. After foreign businesses began building a ready-made garment industry, Bangladeshi capitalists appeared, and a veritable rush of them began to organize companies in Dhaka, Chittagong, and smaller towns, where basic garments--men's and boys' cotton shirts, women's and girls' blouses, shorts, and baby clothes--were cut and assembled, packed, and shipped to customers overseas (mostly in the United States). With virtually no government regulation, the number of firms proliferated; no definitive count was available, but there were probably more than 400 firms by 1985, when the boom was peaking .After just a few years, the ready-made garment industry employed more than 200,000 people. According to some estimates, about 80 percent were women, which was never noticed previously in the industrial work force. Many of them were woefully under paid and worked under harsh conditions. The net benefit to the Bangladeshi economy was only a fraction of export receipts, since virtually all materials used in garment manufacture were imported; practically all the value added in Bangladesh was from labor.

2. Present Situation:
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. 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. Economies of scale for large-scale production and export-quota holdings in the corresponding categories are the principal reasons for such a narrow product concentration. With about $15 billion in exports in 2010, ready-made garments are the country's most important industrial sector; they represent 13% of GDP and more than 75% of total exports. Recent surveys carried out by the consulting firm McKinsey and the accounting firm KPMG identified attractive prices as the most important reason for purchasing in Bangladesh. Price levels will remain highly competitive in the future, since significant efficiency increases will offset rising wage costs. Besides labour cost and duty advantage, raw materials and real estate costs are also cheaper in Bangladesh. There is also no doubt that Bangladesh is benefitting from various preferential trade agreements providing tax free entry into several dozen countries. But Bangladesh has its own challenges to overcome. Impediments to investment include unreliable power supply, high real interest rates, corruption, and weaknesses in law and order.

3. History of Apparel Industry in Bangladesh:
There were only 9 export oriented garment manufacturing industry in 1978, earned only 1 million dollar. Some of them were very small, produced RMG for local market as well. Four such small and pioneer garments were Reaz garments, Paris garments, Jewel garments and Boishakhi garments. Reaz garments established in 1960, as a small tailoring outfit, named Reaz store in Dhaka. Served only domestic market of its initial 15 years. In 1973, it changed its name to Reaz Garments Ltd and started to export by selling 10 000 pieces of shirt to France, valued 13 million franc in 1978.That was the first direct export of apparel.Desh Garments Ltd., first joint venture in Bangladesh, Technical and marketing collaboration with S. korean Daewoo Corporation, established in 1979. First 100% export oriented company.In 1980, Youngone (49%) and Trexim (51% equity) formed a company named younone Bangladesh exported first consignment of padded and non padded jackets to sweden in dec 1980.It had trained 120 operators including 3 women in S. korea Went to the production in 1980.

4. Facts and Figures:
In the 1980s, there were only 50 factories employing only a few thousand people. Currently, there are 4490 manufacturing units. The RMG sector contributes around 76 percent to the total export earnings. In 2007 it earned $9.35 billion. This sector also contributes around 13 percent to the GDP, which was only around 3 percent in 1991. Of the estimated 4.2 million people employed in this sector, about 50 percent of them are women from rural areas. In 2000, the industry consisting of some 3000 factories employed directly more than 1.5 million workers of whom almost 80% were female. USA is the largest importer of Bangladeshi RMG products, followed by Germany, UK, France and other E.U countries.

The RMG sector is expected to grow despite the global financial crisis of 2009.[9] As China is finding it challenging to make textile and foot wear items at cheap price, due to rising labor costs, many foreign investors, are coming to Bangladesh to take advantage of the low labor cost. Even now for the readymade garments most of the manufacture need to bring all the accessories from abroad, which is very costly. Now they are start using locally accessories minting the required quality. Zippers, buttons, labels, hooks, hangers, elastic bands, thread, backboards, butterfly pins, clips, collar stays, collarbones and cartons are the major garment accessories produced in Bangladesh. Many small and medium accessory industries have grown here over the years, particularly to meet high demand from low-end garment makers The accessory market is dominated by multinational companies operating in Bangladesh, because in majority cases, garment buyers prefer accessories from them over the locally available items, Now it is time for the Bangladeshi Merchandiser to introduce more local trims and trims manufacturer to buyer to show their expertise.
6. The challenges of International Marketers in the 21st Century: The Case of Ready-made Garment (RMG) Industry of Bangladesh:
By the year 2005 according to the policy of WTO (World Trade Organization) - the facilities like GSP and Quota in Readymade Garment sector will be phased out. The restrictions under the Multi-Fiber Agreement (MFA) will be phased out in four stages. As an impact of the withdrawal of these facilities, Less Developed Countries, which are enjoying the benefits, have to face fair competition. Bangladesh will not be an exception in this regard as RMG export is the highest foreign currency-earning source of Bangladesh. To abate poverty in Bangladesh, unemployment rate has to be reduced by creating more employment opportunities in the non agricultural sector. For economic development integration of women into formal economic activities must not be overlooked, as they constitute almost 50% of total population. So, foreign trade by labor intensive industries that allow women to participate in formal economic activity can have a significant role in poverty alleviation process. RMG industry has been keeping a momentous part in this context. So far RMG entrepreneurs are recognized as only producers to foreign market. But with immediate effect of withdrawal of preferential treatments they will have to accept the challenges of international marketing/global marketing in a free-market competitive situation as international marketers. They will have to face two levels of uncertainty arising from domestic uncontrollable and international uncontrollable variables. The challenges for future marketers will be to accommodate those uncertainties to controllable variables in order to create market opportunities. This paper attempts to assess the challenges and weaknesses to be faced by international marketers of RMG industry after 2005 in WTO governed free trade economy within the framework of some possibilities and strengths in consideration to significant contribution of RMG industry to domestic economy.

Both primary and secondary information have been utilized in designing and preparing this paper. For collecting primary data two open-ended structured questionnaires were developed to interview persons directly involved with Ready-made Garments and Buying Houses. Nonprobability- sampling procedure of convenience sampling has been followed to determine the sample size. From the sample size of 65 RMG concerns and Buying Houses, interviews were conducted among 55 RMG concerns and 10 Buying Houses. Views of other concerned persons like policymakers and buyers have been included in this paper through surveying secondary sources such as books, newspapers, annual reports, different publications of BGMEA and other bodies. The survey covered garments factories of Dhaka City only. The paper is organized as follows: Section-II describes the significance of this sector, which justifies the concern of the authors. Section-III investigates some specific challenges and possibilities for Bangladeshi entrepreneurs, which are based on literature survey. The section- IV describes data collected from primary survey conducted by the authors and examines major areas of strengths and weaknesses through analyzing information available on domestic controllable factors, domestic uncontrollable factors and international uncontrollable factors. Section-V makes some recommendations derived from section IV. The section VI concludes with overall recommendation.

8. Export Products of Bangladesh | List of Export Products of Bangladesh |
Comparative advantage of existing cheap labor will help to continue RMG industry in Bangladesh if the future trade in textile and clothing depends on low cost and high quality products. At present over 60% of world clothing exports are manufactured in developing countries with Asia alone contributing about one third of it. Asia's emergence as the major world supplier has occurred in three successive waves. During the first wave, newly industrialized countries, such as South Korea, Hong Kong, Taiwan and Singapore achieved excellent results in clothing sector. Due to raising labor costs, between 1985 and 1990, the production of clothing increased significantly in the Philippines, Indonesia, Thailand and Malaysia and together they led the world exports during this period. But with the increase of labor costs in these countries they in turn, begun to invest or redistribute part of their production units to third world countries, such as Bangladesh, Pakistan and Sri Lanka, and more recently Laos, Nepal and Vietnam. In these countries labor is more abundant and labor cost is relatively cheaper. The average hourly wage in Bangladesh is less than $0.25, while it is $0.56 in India, $0.49 in Pakistan, and $0.39 in Sri Lanka.7 However, the cost data does not tell anything. Cost needs to be adjusted by productivity. Entrepreneurs were not actively concerned with marketing of their products since the inception (1960s) of RMG export and they don't have to maintain direct relation with foreign market. But the textile sector including RMG will be gradually deregulated and integrated into the GATT (now the World Trade Organization) on the basis of strengthened GATT rules and disciplines over a transitional period of 10 years, four-stage transition period from January 1995 to January 2005. The bilateral textile agreement negotiated under the MFA (Multi Fiber Agreement) will cease to exist following the schedule of integration of which two steps have already been completed, 16% by January 1, 1995 and another 17% by January 1, 1998; step 3 involves further integration of 18% by January 2002, and the step 4 will integrate the remaining 40% of the trade by January 1, 2005. The integration will be carried out on the basis of HS codes or categories. 8 Under the agreement of WTO, GSP and Quota facilities will be withdrawn in the year of 2005. During the transitional period the quota for the items which remain outside the integration process will be enhanced. The significant changes to be noted here is that Bangladeshi entrepreneurs will be recognized as international marketer who will have to compete with local marketers as well as international marketers in free trade world.
10. Domestic controllable factors of the RMG sector of Bangladesh: Factors | Percentages of Diff. Type | Strengths | Low cost of production | 81.54% | Strength | Good quality | 60% | Strength | High turnover ratio | 44.62% | Strength | Simple technology (labor) | 43.08% | Strength | Short pay back period | 23.08% | Strength | About 96% of total readymade garments have been exported to the US markets and to the markets of the European Union. So, it is very likely that entire RMG export business will be at stake with the elimination of the MFA and GSP trade regimes under the Uruguay Round by the year 2005. As international marketer, they will have to make in depth analysis of all problems and potentialities of international market to maintain its current position and to make growth in domestic economy.

11.Possible challenges or threats:
At the first stage of MFA the US, Canada, Norway, and the EU have applied restrictions. Exports of garments and knitwear from Bangladesh face MFA restrictions in US and Canada only; The EU countries and Norway have not applied MFA quota restrictions on Bangladesh's export. Consequently, garments export from Bangladesh increased rapidly in the EU market to reach a value of US$510 million (or a market share of 1.8 percent) in 1994. At third stage of liberalization USA is expected to remove restrictions on gloves and mittens and silk trousers in Bangladesh which might have substantial effect on Bangladesh's access to the US market.

12. International price comparisons in terms of productivity:
One of the most important aspects of competing in this intensely competitive world is to minimize production costs and maximize quality. Bangladesh textile industry lacks the both. But Bangladesh Textile Mills Association (BTMA) claims that manufacturing cost of spinning mills in Bangladesh is cheaper than many of the Asian countries, including India, Pakistan, Japan, Korea, Thailand and Indonesia. As the Table-4 indicates, per unit manufacturing cost of yarn in private sector mills in Bangladesh is US$1.48 compared with US$1.78 in India, US$1.60 in Pakistan, US$2.38 in Japan, US$1.73 in Korea and US$2.74 in Thailand 11.
13. International comparison of manufacturing cost of yarn 1995 (US$): | Bangladesh | | India | Pakistan | Japan | Korea | Thailand | | Public sector | Privet Sector | | | | | | Total cost for per kg yam | 2.56 | 1.48 | 1.78 | 1.60 | 2.38 | 1.73 | 2.74 | Index | 173 | 100 | 120 | 108 | 161 | 171 | 118 | 14. Backward Linkage: * Supporting Industry * Spinning, weaving/knitting, dyeing, finishing Industries. * In addition to these, Interlining, labels, buttons, sewing threads, packing and packaging materials, zippers, draw strings all are backward linked industries. * 70% of accessories collected locally. * Share of BB L/C in total export dropped from 68.33% in FY 1995 to 45.1% in the first eight months of FY 2001. * Total investment in backward linkage is € 4 B.

It is only about 8 years from now to phase out the MFA in the year of 2005. It is difficult to predict what will be happened with high time margin especially during an era of rapid technological growth. During the last 8 years of the last decade of 20th century the technological knowledge has increased by 6 times. Along with technological life cycle, product life cycle is also changing very fast.l9 So, it is very obvious that with the withdrawal of the MFA consumer taste and preferences will be a major concern for every marketer. The question of sustainability and growth depends on how far and to what extent marketers of RMG industry can cope up with the uncertainties arising from domestic uncontrollable and international uncontrollable factors. For Bangladesh it will be a great challenge as major domestic uncertainties are related to govt. rules and regulations and political factors. In addition to that unknown foreign markets deserve thoughtful attention and an intensive preparation which has not yet been observed in that way. As an outcome of necessary preparation the types of textile and garment products have to be identified which will be comparatively advantageous for Bangladesh. The RMG sector is the most important sector in Bangladesh in context of its contribution to the national economy not only in foreign earning but also to poverty alleviation through employment generation especially for the women workers directly and indirectly through creating different linkages industry. Starting from 1981 export of the RMG has increased to US$4b at a growth rate of 24% per annum. In order to reach competitive strength Bangladesh has a three- way plan. At first to improve the overall operational efficiency and technological up gradation. Secondly, exploring newer export markets and finally, diversifying the product range. The success depends on appropriate strategy formulation and policy implementation. Considering its current performance and its contribution in the process of economic development future expectation from this industry should not be pessimistic. Rather, all out efforts must be taken from industry as well as govt. to enable international marketers to be successful by adjusting all uncertainties and exploiting all opportunities.

Reference: 1. Fatema Begum, Muhammad Salahuddin Ahamed, Journal of Business Research, vol. 2, 1999 2. Journal of International Affairs (Volume 4, Number 2, July-December 1998) 3. The Independent Bangladesh Yearbook (1999), Garment Industry, p.166 4. Dowlah CAF (1998), "The Consequences of the GATT Uruguay Round for the Textile and Garments Sector in Bangladesh", Journal of Internal Affairs, Vol. 4, No. 2, Bangladesh Institute of Law and International, Affairs, P. 20 5. Abrar Ahmed Apu , Impact of RMG sector in Bangladesh economy : Industry

The industry of RMG is one of the most potential and revenue earning sector of Bangladesh. The standing of the RMG market is known worldwide. It was started in the late 1970s. Soon it became one of the major economical strength for Bangladesh. The RMG sector has added very much in earning foreign exchange, balancing export and import, huge unemployment problem for the country and empowerment of women along with giving them financial support.
The main markets of the Bangladeshi RMG products are North America and countries of Western Europe. The prices of the products are reasonable. Some 85 percent of Bangladeshi production was sold to North American customers, and virtually overnight Bangladesh became the sixth largest supplier to the North American market. Business prospered right from the start; many owners made back their entire capital investment within a year or two and after that continued to realize great profits.

The Primary stage of RMG sector in Bangladesh:The early stage was not so good for this industry. Pre independence and for a while after independence, the backbone of this country was totally depended on agriculture and a very little industry which is also related to agriculture. As the policymakers of that time were trying hard to progress the agriculture sector to make it a source of revenue, Industrialization was coming up rapidly. In the year of 1970, the East-Pakistan government saw the opportunity that they can have a future in the textile and garment industry and that was the start of it. On that particular year, a new law came has been announced so that the new opportunity can be grabbed and the process can be governed. Entrepreneurs of this country took the opportunity and made the best out of it.
After that the growth continued with new industries, investments, exports and revenue earnings. After the liberation war, the progress started in a new level.
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.

Table: 1
|Major Products Export From Bangladesh And Contribution|
|to GDP
|RMG |75.65%
|Frozen Food |4.22%
|Jute Goods |2.60%
|Leather |2.19%
|Chemical Products |1.77%
|Raw Jute |1.21%
|Agri Products |0.72%
|Tea |0.06%
|Others |11.56%

The Future:
GARMENTECH Bangladesh has been the most preferred technology & machinery sourcing forum in the country since the past 11 years. 13th edition of GARMENTECH Bangladesh 2014 concurrent with the 5th edition of International Yarns & Fabrics Sourcing Fair and 3rd edition of PAC Expo - The Garment Accessories, Packaging and related Machinery Tradeshow is tailor-made to attract the Decision makers, Sourcing Managers and Technical Managers from the RMG Industry in the country.

If you are in the Business of TECHNOLOGY, MACHINERY, SPARES, SERVICES to the RMG Industry BANGLADESH is a market you cannot ignore ! Consider the following facts :

Bangladesh's Apparel & Garment Exports will double by 2015 and nearly triple by 2022 as European and US buyers plan to strengthen their presence in the country and new players enter the market seen as 'next China', according to a study by McKinsey & Company.
This will create employment opportunities for an additional 3.5 million workers.
Bangladesh fetched $12.59 billion from garment exports in 2010- 2011, accounting for around 80% of national exports and 13% of gross national product.
Major Garment makers expect a boost in exports as the US economy is rebounding and orders are shifting from China to Bangladesh.
The country will maintain good export growth for the export of Apparel to new destinations like Japan, India, Turkey, South Africa, Australia, Brazil, Mexico, Russia, China and Korea.

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