Introduction:

The economy of Bangladesh is largely dependent on agriculture. However, in recent years, the
ReadyMade Garments (RMG) sector has emerged as the biggest earner of foreign currency. The readymade garment (RMG) sector has experienced an exponential growth since the 1980s. The sector
contributes significantly to the GDP. It also provides employment to around 4.2 million Bangladeshis,
mainly women from low income families which affects their social status.The hundred percent exportoriented RMG industries have experienced phenomenal growth during the last 15 years. Within a very
short period of time, it has attained great importance in terms of its contribution to GDP, foreign exchange
earnings and employment and also as a vehicle of social changes. The export earnings data of Bangladesh
shows that in 19884-85, ready-made garment sector earned 12.39 %( $116 million) of the total export.
This was raised to 36.46 %( $471 million) in 1989-90. This share rapidly went up to 53.36 %( $1064
million) in 1991-92. Surprisingly, the share showed no increase for the last three years. Bangladesh
garments products are facing various barriers and difficulties in the international market. Garments
contribution to the total export earning remained constant at around 52% for the years (52.84%) in 199495 and 52.63% in 1995-96. The total amount of RMG export in 2004-05, 2005-06 and 2006-07 was
$5689.09 million, 7900.80 million and 4730.36 million. This is the current situation of RMG export from
Bangladesh.
History:
The first ready-made garment factories in Bangladesh aimed at the export market were opened in the late
1970s by investors from other Asian countries whose exports had been restrained by quotas imposed by
importing nations. By the mid-1980s, the ready-made garment industry had become a strong export
earner. Garment exports brought receipts of only US$3 million in FY 1981, but by 1984 exports had risen
to US$32 million, and the following year revenue soared to US$116 million. For FY 1985 and FY 1986,
ready-made garments were the second biggest foreign exchange earner for Bangladesh after jute.
The surge in Bangladeshi exports eventually caused a reaction among some industrial nations. Canada,
the European Economic Community, and the United States expressed concern that inexpensive
Bangladeshi garments were flooding their markets. In 1985, after a series of notices as called for by
multilateral agreements, the United Stateswhich was the destination of about 25 percent of Bangladeshs
garment exportsbegan imposing quotas on Bangladeshi garments, one category at a time.
Bangladeshi manufacturers, working with the government, organized with remarkable speed and
efficiency to adapt to changing conditions. They policed themselves to stay within quotas, allocating
production quotas according to equitable criteria, and began diversifying their production into categories
where there were not yet quotas: for example, cotton trousers, knitwear, dresses, and gloves. After a
period of adjustment, during which some of the least well-established firms closed and workers were laid
off, the industry began stabilizing, and growth continued at a more moderate pace. Exports in FY 1986
rose another 14 percent, to US$131 million, and prospects were good for continued growth at about that
rate.
The ready-made garment industry in Bangladesh is not the outgrowth of traditional economic activities
but emerged from economic opportunities perceived by the private sector in the late 1970s. Frustrated by
quotas imposed by importing nations, such as the United States, entrepreneurs and managers from other
Asian countries set up factories in Bangladesh, benefiting from even lower labor costs than in their home
countries, which offset the additional costs of importing all materials to Bangladesh. 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

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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 become the sixth largest supplier to the North American market.
Countrys RMG producers have been steadily moving towards high value sophisticated items like high
quality suits, jackets, branded jeans items, embroidered ladies wear etc. Increasing at the rate of 27% per
year over the last several years,. major share of the countrys RMG export market from the very
beginning was led by US followed by EU. But during 1995, EU overtook the US. Among countries in
EU, Germany has been topping the list over last several years followed by UK, France, Italy and The
Netherlands. In 1995, Germany imported apparels worth US$ 317.86 million against US$ 245.39 million
in 1994. Only Shirts and T-shirts that Germany imported in 1995 were worth US$ 202.36 million. As
single country, however, US have been the highest apparel importing country for Bangladesh. (GOB
1996) Bangladesh Statistical Yearbook, 1995, Dhaka: BBS, BGMEA: 1996.

Objectives of the Study:

1.
2.
3.
4.
5.
6.

To know the existing position of Bangladesh garments in international market;

To identify the difficulties and barriers faced in the international market;
To identify possible threats to the Bangladesh garments in the international market in near future;
To identify the opportunities of the Bangladeshi garments that may be realized in the international market.
To recommend the measurers needed to be taken for increasing the export volume.
To full fill the course requirements.

Methodology:
Since this study is clinical in nature, a number of techniques were used to collect the required
information. Both primary and secondary information were collected. Primary technique involved
Questioning BGMEA officials, in addition in depth interview of prospective exporters and experts were
also undertaken. Secondary study involved the study of existing literature and available documents of the
exporters were also used.
Information has been collected from both the primary and secondary sources. Potential sources were
BGMEA, export directory, BBS reports, International Trade Bodies of UN; various journals, magazines
and publications of BEPZs.

Limitations of the study:

Information related to RMG export was not available

Recent information are hard to collect

Experts are not willing to give interview

Last but not the least time was very short to do such a study.

The survey was conducted in a very short time so we were not able to collect more information.
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Another limitation of this study is the persons private information were not disclosing some, data
and information for obvious reasons, which could be very much useful.

Lack of experience in this field.

Lack of proper authority to conduct the interview program

Sources of data
Primary source:
From different employees in garments I get information. To collect this information I communicate with
this companys different department employees such as Md. Azizur Rahman and Md. Ashraful Alam.
Secondary source:
To prepare this report I user different news papers, books which are secondary information. Especially I
use various websites as well as bangladesh garments industry.

THREATS OF READY-MADE GARMENTS INDUSTRY:

Bangladesh has successfully established a remarkable presence in the world markets, particularly in the
US and EU markets. If one analyses its external threats and opportunity profile, one finds that its
powerful competitors will try to influence the trading environment in such a way as will create hurdles for
Bangladesh to retain or improve its competitive edge. This hurdle can take numerous forms. Broadly,
these are discussed in two categories: (1) Phasing out of MFA and (2) Other non-tariff barriers.

1. Phasing Out of MFA:

It seems that the phenomenal growth of RMG exports from Bangladesh has become a threat to its
powerful competitors. Naturally, they (the competitors) are preparing to snatch away the markets from
Bangladesh with aggressive and innovative business strategies. They will certainly take advantages of
the new provisions included in the final Acts of Uruguay Round. One such provision is the phasing out of
the MFA.
Before we can answer the question whether the phasing out of MFA will be a threat to Bangladesh, we
need to understand the origin and meaning of MFA (Multifibre Agreement). The GATT did not originally
include textile and apparel industries in its principles of MFN (Most Favored Nation). The Uruguay
Round (UR) decided to integrate textile and RMG industries into GATT system. As is well known,
GATT/WTO prohibits not only unjustified tariff barriers but all forms of non-tariff barriers including
imposition of quota. In sixties, while GATT principles prohibited discrimination between the trading
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partners, it allowed certain exceptions to GATT principles on the ground of fairness. Such an exception
is MFA. The United States and several other developed countries argued that if the developing countries
which enjoy comparative advantages in terms of labor costs are allowed to export RMG without any
restrictions to the cost-disadvantaged developed countries, the textile and apparel industries in the latter
countries will be injured. They strongly felt that the interest of the domestic textile and apparel industries
of the USA and other developed countries where labor cost is very high must be protected in way, which
is recognized by the GATT. To achieve this goal, a special provision known as After the year 2005, if
MFA is really phased out, these countries, to be more specific, companies from these countries that have
collaboration with our entrepreneurs, may not be our partners in progress due to the changed
circumstances. Under the changed circumstances, all countries including those, which are now under
quota restrictions, will be on quota-free status. In fact they will probably emerge as our stronger
competitors. This means that Bangladesh will have to compete with a larger number of established and
powerful suppliers of ready-made garments, namely, China, Hong Kong, Singapore, Indonesia, Malaysia,
India, Pakistan, Sri Lanka, Egypt, etc. in the world markets on the equal terms and of its own. In addition,
Vietnam, Poland, Brazil, and small countries of Caribbean region are likely to emerge as new competitors
(Quddus: 1996).
Some people fear that the RMG exports of Bangladesh may be driven out from the world market. But we
believe that if Bangladesh can take certain measures, it should continue to do as well as it is now doing.
To retain its competitive edge, it needs to:
i) Make substantial development to labor productivity and managerial efficiency through the effective
training efforts.
ii) Look for new product development and diversification along with new venues of markets.
iii) Make structural development to textile and RMG industries with appropriate backward and forward
linkage.

2.

Other Non-Tariff Barriers:

The final Acts of the Uruguay round (UR) negotiations expanded, integrated and strengthened the GATT
principles of reducing / eliminating all forms of trade barriers with a view to increase world trade. It is
easier to identify and remove trade restrictive tariff barriers because they take so many and such subtle
forms that multilateral negotiators face more disagreement than agreement on their definitions. For
example, customs evaluation procedures suitable in a particular country may be interpreted as deliberately
created non-tariff barriers by its trading partners. Similarly, there is a scope for misinterpretations of
subsidies given to exporters by the respective government. The child labor, environmental and human
right issues are also susceptible to similar misinterpretations(Jonokontho : 1995).

3. Quota System:
For decades the worlds garment trade has been governed by a system of quotas. It limited the amount
efficient countries like China could export to the big markets of the United States and Europe. The
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original intention was to protect the garment industries in the West. But the effect was to guarantee less
developed countries like Bangladesh a slice of the trade. Quotas were abolished from 1 January 2005.
Retailers are now free to buy from whatever country can make garments for the lowest price. It could
mean cheaper clothes for consumers but the pain will be felt in slums in the developing world.
4. Competitor:
Competition has become intense in the garment industry at present. Garment industry is emerging rapidly
in Taiwan, Hong Kong, Singapore and Korea in Asia. Thailand, Malaysia, Indonesia, Philippines and Sri
Lanka have found the garment industry more attractive to develop their economy from 70s decade.
Vietnam has become a potential entrant in garment industry throughout the world.
5. Threat from Various Regional Organizations (Such as NAFTA, EEC, EFTA, etc.):
The trend of the modern world is regionalism to strengthen the economy of the member countries through
co-operation. North American Free Trade Association has been signed recently and the main initiator of
NAFTA is the USA, who is the main buyer of garment from Bangladesh. According to the treaty of
NAFTA, USA will invest its domestic resources to develop their economy by using 60% of their own raw
materials through utilizing the low cost labor of Mexico. So, it is a potential threat to the garment industry
of Bangladesh. On the other hand, EC countries have already declared a single currency for European
Common Market called ECU (European Currency Unit) to protect the interest of the member countries
through co-operation. This sort of protectionism is great threat to the garment industry of Bangladesh,
because Germany, Britain, Denmark, Norway, Belgium, Italy, etc. are buyers of the garment of
Bangladesh.
6. Scarcity of Raw Materials:
There is no alternative of ample supply of raw materials in order to become self-sufficient in any industry.
The raw materials of the garment industry of Bangladesh are foreign dependent. Bangladesh has to import
raw materials of garments from abroad in order to process it in Bangladesh. About 70% of garment export
income has to be spent for the raw materials. Moreover, the export and import policy of Bangladesh is
very weak. So, the scarcity of raw materials for the garment industry in Bangladesh is a great threat.
7. Political Instability:
Bangladesh is not a stable country politically. Political instability is a great threat for any industry of our
country. Frequent strikes and hartals are great obstacles for the growth of any industry. The production
cost increases and productivity decreases because of frequent hartals and strikes. Garment producers
cannot keep their contract with buyers because of hartals and strikes. Hartals and strikes have become a
common phenomenon of Bangladesh. There is a positive relationship between law and order situation of
any country and export. If the law and order situation improves, the volume of exports increases.
Unfortunately, the political stability and law and order situation is not in favors of the export of our
country and becoming a threat to our export trade day by day.
8. The Child Labor Issue:
It is quite likely that by restructuring the industry and improving the productivity and managerial
efficiency, Bangladesh will be able to compete in the international markets. But problem will arise if the
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importers apply subtle non-tariff barriers under the disguise of humanitarian and environmental
arguments. For Bangladesh, the problem is not how to cope with the technical and cost reduction
problems; the real problem is how to tackle the problem of such non-tariff barriers. As an example, one
can cite the child labor issue. The much-talk about the Child Labor issue can be an effective non-tariff
barrier. The Harkins Bill designed to prevent the abuse of child labor is a prima-facie based on
humanitarian ground. But many people will contest the basic logic.

9. Business Consideration:

Replacement of some 12000-child labor now working in Bangladesh RMG factories by older and more
experienced workers will increase the production cost. But given the wage structures in Bangladesh, it
will not be an amount to be concerned about. Another cost is to be added. The stipend-support and
schooling of the terminated children will cost the industry some money. If the total cost is shared by the
industry, it is not likely to increase FOB price to a level, which will make RMG less competitive in the
world market.

10. Political crisis:

Garments industries often pay dearly for political unrest, hartal and terrorism etc. The international
market has withdrawn quota advantage over garments export form Bangladesh since December 2005.
Bangladesh has to advance cautiously for getting better position of her garments in the world market.
Finally destruction of twin tower in 11 September 2001. invasion on Afghanistan and Iraq and depression
in world Economy have seriously affected the export trade of Bangladesh.

11. Price competitiveness:

China and some other competitors of Bangladesh have implemented sharp price-cutting policies in
exporting garment products over the last few years, but Bangladesh has failed to respond effectively to
such policies. China was able to drop the export price of 29 garment categories by 46 per cent on average
in the United States within a year, from $6.23 per sq metre in December 2001 to $3.37 per sq metre in
December 2002. Bangladesh needs to respond to such price-cutting policies of its rivals in order to remain
competitive in the quota-free global market.

12. A small number of manufacturing methods

13. Low acquiescence: there is an international pressure group to compel the local producers and the
government to implement social acquiescence. The US GSP may be cancelled and purchasing from
US & EU may decrease significantly

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14. M/c advancement is necessary. The machinery required to assess add on a garment or increase
competence are missing in most industries.
15. Lack of training organizations for industrial workers, supervisors and managers.
16. Autocratic approach of nearly all the investors
17. Fewer process units for textiles and garments
18. Sluggish backward or forward blending procedure
19. Incompetent ports, entry/exit complicated and loading/unloading takes much time
20. Speed money culture
21. Time-consuming custom clearance
22. Unreliable dependability regarding Delivery/QA/Product knowledge
23. Communication gap created by incomplete knowledge of English
24. Subject to natural calamities
25. Recent activities: US may relate increase in garments export quota to labor standard, BGMEA hopeful of
success in negotiations on US market access: As the negotiations for the Bangladesh governments
request for a 30 per cent rise in the export quota of ready-made garments to the US market are likely to
begin early next month, the leaders of the countrys apparel industry are pinning great hopes on its
success. We are surely going to get a rise in the export quota as a reward for the elimination of child
labor. There is no doubt about it, President of the Bangladesh Garments Manufacturers and Exporters
Association (BGMEA). This will be in addition to a 10 per cent annual graduation of export quota in the
US market, he said. But another source close to the industry, however, apprehended that the US
administration may relate a rise in the special quota allocation to compliance with core labor standard and
some other conditions. I

OPPORTUNITIES OF READY-MADE GARMENTS INDUSTRY:

Bangladesh has opportunities of expanding the market through the following strategies.
1.

Cost Effective Strategy

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2.

New Product Development and Diversification Strategy

3.

Market Diversification Strategy

4.

EU is willing to establish industry in a big way as an option to china particularly for knits,
including sweaters

5.

Bangladesh is included in the Least Developed Countries with which US is committed to enhance
export trade

6.

Sweaters are very economical even with china and is the prospect for Bangladesh

7.

If skilled technicians are available to instruct, prearranged garment is an option because labor and
energy cost are inexpensive.

8.

Foundation garments for Ladies for the FDI promise is significant because both, the technicians
and highly developed machinery are essential for better competence and output

9.

Japan to be observed, as conventionally they purchase handloom textiles, home furniture and
garments. This section can be encouraged and expanded with continued progress in quality.

10.

Considerable Qualified/keen to learn workforce available at low labor charges.

11.

Energy at low price

12.

Easily accessible infrastructure like sea road, railroad, river and air communication.

13.

Accessibility of fundamental infrastructure, which is about 3 decade old, mainly established by the
Korean, Taiwanese and Hong Kong Chinese industrialists.

14.

FDI is legally permitted.

15.

Moderately open Economy, particularly in the Export Promotion Zones.

16.

GSP under EBA (Everything But Arms) for Least Developed Country applicable (Duty free to
EU).

17.

Improved GSP advantages under Regional Cumulative.

18.

Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful track.

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19.

Investment assured under Foreign Private Investment (Promotion and Protection) Act, 1980 which
secures all foreign investments in Bangladesh.

20.

Overseas Private Investment Corporation, USA insurance and finance agendas operable

21.

Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under which

protection and safety measures are available.

22.

Adjudication service of the International Centre for the Settlement of Investment Dispute (ICSID)
offered.

23.

Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD & Cellular services.
Finally it can be said that Bangladesh has a very bright future in exporting Ready Made Garments.
Findings

After explaining different aspect of Bangladesh RMG sector different issue is pointed out. The major
issue related to this industry is present here.

The garment industry is by far the countrys most important manufacturer, earning
around $5 billion annually and accounting for about two thirds of all exports.
Bangladesh has about 4,000 garment factories with up to 10 million livelihoods
dependent on it directly or indirectly. In 2006 it provided jobs for 2.2 million people,
accounted for 10.5% of the countrys GDP, and contributed 40% of its manufacturing
output. Exports have been growing at an impressive rate in recent years. In 2006/07
alone, they increased by 18.2% to reach US$9.6 billion, a record level for the fifth
consecutive year. The contribution to GDP increases at 13.25% in 2007. About 80 per
cent of garment workers are women and the current minimum wage is Tk.1650.

The major strength for the garments sector of Bangladesh is the low labor charge,
free economy, infrastructural support, improved GSP, low energy price and so on.
Major weakness of this sector is lack of marketing tactics, small number of
manufacturing method, low acquiescence, fewer process units for textile and
garments, risky working environment etc. There are also some opportunities
associated with threat that can be captured by the sector to acquire more profit.

The major importer of RMG products are USA and Europe. But there is other country
that has a contribution to the total RMG export. The other countries are Belgium,
Canada, France, Germany, Netherlands and more.

The RMG industry not only propelled the growth of spinning, weaving, dyeing and
finishing industries, production of accessories and spare parts, but also rendered
large externalities by contributing to other economic activities in such areas as
banking, insurance, real estate, packaging, hotels and tourism, recycling, consumer
goods utility services and transportation. RMG sector has overwhelmingly high
backward linkage with textile sector providing fabrics, yarn and other ancillaries. It
has important backward linkage with utilities such as electricity, gas, and machinery
and spare parts supplying.

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The basic problem of the ordinary workers and labor movement in garments sector
are low scope of operation, non-recognition of legally registered unions at the factory
level, long working hours and practically no weekly holiday that left hardly anytime
for workers to participate union activities, non-compliance of existing labor laws, high
occupational accidents etc. On the other hand, creation of yellow trade unions by the
garments owners, imposition of self-made code of conduct, apathy to active social
dialogue made ordinary workers and trade unions more vulnerable.

80% of garments workers are women. In the early stage they could be paid much
less than men with equivalent skills and be treated as a largely informal workforce to
whom employers had no obligation aside from paying their wages. Today, things are
beginning to change. Female education has gone up steadily; there has been
widespread dissemination of ideas about womens rights through non-governmental
organizations (NGOs), state pronouncements and the media, while microfinance has
increased and diversified employment opportunities in the countryside. Women enter
the industry not just because of poverty, but also for the prospect of improving their
familys standard of living, sending their children to school, saving for their dowries
or supporting ageing parents. They have been able to leverage their earnings into
increased decision-making power within their families and independent purchasing
power in the market place. They have also become increasingly visible in collective
actions in support of their rights, which have linked local and global movements.

The working environment of garments factory is really risky. Year after year women
and men are killed while making clothes for stores in our communities. There is a
clear need for a long-term wide scale program to address health and safety in the
garment/textile sectors. The failure to implement safety measures in these sectors in
Bangladesh has resulted in a conditions where the death and injury of workers has
become alarmingly routine: in 2000 53 workers died at Choudury Knitwear, 24 died in
2001 at Maico Sweater, nine died in 2004 at the Misco Supermarket building, and 23
died at Shan Knitting and 64 died at the Spectrum-Shahriyar factory in 2005.

From the time series analysis it is found that RMG export will be increased by US$
519.15 million per year. The regression analysis reveals that there is a significant
relationship between the RMG export and Total export. The GDP growth and RMG
export growth is also significant at 5% significant level.

The quota end at 2004 but it continued to show robust performance, competitive
strength and, of no less importance, social commitment. RMGs contribution to
Bangladesh economy is well-known, well-appreciated and well-respected. In 2005-06
the industry faced a great instability due to the protest of the worker. After that
under the state of emergency the sector enjoyed a stable growth and finally reaches
at the matured stage. The ongoing financial crisis has not affect the Bangladesh
Garments Industry at a large extent till now but it can be. So, Bangladeshi exporters
have to be careful. If they can make shipment timely and keep the quality intact,
global financial crisis will not affect the RMG sector of Bangladesh.

RECOMMENDATION:
Special attention needs to be given to Agreements on Subsidies and Countervailing Measures, on
Safeguards, and on Anti-Dumping.

The industry will need to be careful about observing the WTO rules and regulations
P a g e | 10

Governmental support is to be considered to ensure that it is consistent with the provisions of the
WTO.

Bangladesh must put its house in order in the spirit of public private partnership

The backward linkage industries need to be developed

LDCs like Bangladesh should be given duty-free and quota-free access for all products, at a time,
in fulfillment of the commitments
Extension of duty free & quota free market access by all newly industrialized countries.
Stringent and binding WTO disciplines should be introduced to facilitate the removal of existing
barriers to market access that adversely affect LDCs export interest.

Relaxation of Rules of Origin under the GSP.

Inclusion of S & D status for LDCs in the ATC by suitably amending the Agreement.

To face the upcoming challenges in RMG sector, the country should take the following measures:

Formulation of a national policy on RMB industry and workers for post MFA period.

Unconditional and quick implementation of core labor standards and labor laws at workplace of all RMGs.

Establishing a compulsory social safety net package for RMG workers.

Exploration of new market for RMG to protect the industry and the workers and take maximum advantage
of free excess to Canadian, Australian and other markers.

Capacity building training and re-training activity for employers and workers in RMG sector to develop
productivity and efficiency level.

Develop backward linkage industries for RMG.

Export and product diversification.

Building alliances with likeminded neighbors and competitors within the LDCs.

Continuous training program to sensitize the workers about their rights and interest should be undertaken in
cooperation with and financial assistance from the fraternal organizational abroad.

CONCLUSION:
In order to sustain the smooth growth and development of the garment industry of Bangladesh,
Government should play a key role to offer a good export policy. Otherwise the production, employment,
earning of foreign currency and economic development of the country will be affected seriously.

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