RMG sector In Bangladesh

The inception of ready-made garment (ARM) industry in Bangladesh goes back to the ate sass and soon became a key player in the economy of Bangladesh. Ever since its rise, the industry has contributed to export earnings, foreign exchange earnings, employment creation, poverty alleviation and the empowerment of women in Bangladesh. The two main reasons behind the success of the industry can be attributed to the export-quota system and the availability of cheap labor in the country.

Although the growth of the ARM sector has remained steady over the years, it is not without any challenges. In our paper we delve into the factors that have made ARM such a powerful economic sector in our country and the challenges faced y the industry and try to provide recommendations to overcome those hurdles from an economic perspective. Introduction The ARM industry of Bangladesh has seen fast growth over the past three decades. Until the sass the Jute industry reined the industrial sector of Bangladesh but the ARM industry progressively replaced the Jute industry since the early sass.

In the decade of the sass, Bangladesh exports doubled from IIS$O. 9 billion to US$I . 8 billion, which in the next decade increased to Just over IIS$ 5 billion on its way to reach IIS$II billion by the end of the fiscal year 2005-06 an went to increasing up till 012 establishing the ARM sector as a huge economic developed segment of not only Bangladesh but worldwide. This study focuses on the contributing factors that have lead to the development of this sector, and the problems faced by the sector.

The paper is structured as follows; the first section consists of introduction, history and an overview of the Bangladesh Ready Made Garments Industry. The second section consists of the growth of ARM sector in Bangladesh, the reasons behind its growth and the problems faced by it followed by conclusion and recommendation. History Muslin and Jamaican cloth of our country were used as the luxurious garments of the royal figures in Europe and other countries. In ancient Bengali had a great deal of expertise with regards to weaving of textile products.

In rural communities both men and women were apprenticed in weaving. These skills in sewing and weaving were passed down through generations and are now transferred in today’s modern knitwear factories. In the early sass, there were small-scale independent industry in Bangladesh had flourished and by the early sass it had surfaced as a key employer. Under the vibrant leadership of the private sector together with policy purport from the government, the export oriented ARM industry has shown a magnificent expansion during the last two and a half decades.

The textile sector initially could not keep pace with the requirement of yarn and fabrics particularly by the woven ARM sector as the textile and clothing industry was controlled by a fairly small community of local entrepreneurs. However, the sector expanded and the country currently exports over IIS$II billion in textiles and garments, with a projected target of IIS$24 billion dollars by 2020. Three independent associations are responsible for the textile sector: the

Bangladesh Textile Manufacturers Association (BATMAN), which represents spinners, woven fabric manufacturers and dyeing units; the Bangladesh Garment Manufacturers and Exporters Association (BAGMEN), which represents the ARM sector, primarily the cutting and sewing units; and the Bangladesh Knitwear Manufacturers and Exporters Association (BEAK), which represents the knitwear fabric manufacturers, the fabric dyeing units and the knit garment cutting and sewing units.

An Overview of the Bangladesh Ready-Made Garment Industry: The ARM industry is the sole multi-billion-dollar manufacturing and export industry n Bangladesh. In 1976 the ARM industry contributed only 0. 001 per cent to the country’s total export earnings which drastically increased to about approximate 80 percent of those earnings in 2010. At the end of fiscal year 2011, total export of Bangladesh export was IIS$22. 92 billion which is a 43%increase over the previous year. In the following table, we present some important issues related to the ARM industry of Bangladesh.

Table 1 : Important issues related to the Bangladesh ready-made garment industry The ARM sector is Bangladesh currently has more than 4,000 firms out of which more Han 95 percent are locally owned with the exception of a few foreign firms located in three main cities: the capital city, Dacha, the port city, Chitchatting and the industrial city, Narrations. 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 rule the garment export earnings of the country. The share of nit garment products has been growing for more than 40 percent since the early sass; such products currently account of the country’s total ARM export earnings (BAGMEN website). Growth of ARM Industry in Bangladesh Usually an industry originally develops in response to domestic demand, and then Subsequently turns to export once it becomes mature.

However, the development of the garment industry in Bangladesh has not treaded that pattern; instead the rise of the ARM industry in Bangladesh can be ascribed to the growing demand in developed countries for cheap apparel. It was the global trend of sourcing of reduction of garments from high-wage to low-wage countries, together with the bilateral MFC Quota system prior to 2005 acted as the main driving force for the emergence and subsequent growth of the ARM industry in Bangladesh.

Along with these two factors, supportive government policies also played an important contributory role in this regard. The first consignment of private sector export of garments from Bangladesh took place in 1977-78. At that time, there were only 9 export-oriented ARM units in Bangladesh. By 1980, the number of firms in the industry increased to 47, but total ARM export from Bangladesh was less than US $ 1 lion (Table 2).

Despite the small export volume in the initial years, by the early eighties, the export-oriented ARM industry was well on its way to a historic place in the annals of industrial development in Bangladesh. During the early eighties, the government granted licenses to many entrepreneurs for the duty-free importation of machinery to produce garments for export purposes. As a result the number of firms in the garments industry increased rapidly and reached 632 in 1984-85. Export also increased profusely from US $ 1. 3 million in 1980-81 to US $ 116. Million in 1984-85, as shown in the Table 2. Bangladesh exported its garments to the North American and European markets in the early eighties; at that time, its exports were not subject to MFC Quotas in these markets being a developing country but this regimen ended in 2005 and the ARM sector of Bangladesh was feared to experience a setback but on the contrary the ARM sector continued to grow and exports increased to almost million as shown in the Table. Growth in the Garment Industry of Bangladesh Year Year Export Percentage change 1978-79 0. 04 1979-80 0. 25 84. 0 1980-81 1. 32 430. 00 1981 -82 3. 50 62. 14 1982- 83 6. 37 82. 14 1983-84 31 . 57 95. 60 1984-85 116. 20 268. 07 1985-86 131. 48 13. 15 1986-87 298. 67 127. 16 1987-88 433. 92 45. 28 1988-89 471 . 09 8. 57 1989-90 624. 16 32. 49 1990-91 866. 82 38. 88 1991 -92 1182. 57 36. 43 1445. 02 22. 19 1993- 94 1 555. 79 7. 67 1994 ? 95 2228. 35 43. 47 1995 – 96 2547. 13 14. 11 1996-97 3001 . 25 17. 83 1997 – 98 3781 . 94 26. 01 1998-99 4019. 98 6. 29 1999 – 2000 4349. 41 8. 19 2000 – 01 4859. 83 11. 74 2001 – 02 4583. 75 -5. 68 2002 -03 4912. 12 7. 21 2003 -04 5686. 09 15. 3 2004-05 6417. 67 12. 87 2005-06 7900. 8 23. 11 2006-07 921 1 . 23 16. 59 10699. 8 16. 16 2008-09 12347. 77 15. 40 2009-10 2496. 72 1 . 21 2010-11 17914. 46 43. 35 2011-12 19089. 73 6. 56 Source: Export Promotion Bureau At this moment around 5500 units are working units are performing in this industrial sector at year 2012. Out of the total textile export ARM (knit & oven apparel) export was equivalent to USED 19. 09 billion which is equivalent to 89. 60% of total textiles export. In relation to the total export from Bangladesh, the contribution of RUG export is equivalent to 78. 8%. Reasons behind the Growth of ARM in Bangladesh: Low labor cost Since Bangladesh is a developing country it is very easy for the garment industries to ire labors at a lower rate. At present the government of our country has announced minimum wage to the garment workers but the industries can still earn a handsome amount of profit by exporting their product. Export-quota system & Favorable exporting environment The “export-quota system” in trading garment products played a significant role in the success of the ARM industry in Bangladesh.

Although that quota system came to an end in 2005, it provided a strong initial foothold for the industry to build upon. Many international business firms, in particular those from the Asian facing binding auto restrictions in their own countries, relocated part of their production and trade to other relatively developing countries including Bangladesh. Government Support Apart from the international trade environment, the growth of the ARM sector in the much needed policy support to the export sector.

Up till the early sass Bangladesh followed a very rigid import-substituting trade regime which was later changed to more favorable export opportunities that enabled the ARM sector to grow. Challenges faced by the ARM sector of Bangladesh Raw materials Bangladesh imports raw materials for garments like cotton, thread color etc. This dependence on raw materials hampers the development of garments industry. Moreover, foreign suppliers often supply low quality materials, which result in low quality products.

Lack of managerial knowledge The garment industries often are lacking of marketing tactics, absence of easily on- hand middle management, lack in training organizations for industrial workers, supervisors and managers, autocratic approach of nearly all the investors, fewer process units for textiles and garments, incompetent ports, entry/exit complicated and loading/unloading takes much time, time-consuming custom clearance etc. Wages & labor unrest Although one of the lucrative of ARM sector in Bangladesh is the cheap labor cost, there has been labor unrest increasingly witnessed in ARM industries due to lower labor costs.

With inflation high in the country workers demand higher pay and impose strikes which disrupt the functioning of the industries. Lack of safety of workers Recently the fire outbreaks in several ARM industries have drawn untoward attention towards the poor safety of workers and several international buyers have voiced their concern upon labor rights in Bangladesh. This is very likely to have a negative impact n the image of ARM sector in Bangladesh and may drive away buyers in the future. Poor infrastructure Lack of transport and utilities supply is a huge reason hampering the ARM sector in Bangladesh.

At the moment, buyers have to be careful in the products they choose to source from Bangladesh, since congested roads, limited inland transport, and a lack of deep-sea harbor add to garment lead times. As volumes continue to grow, these issues will need to be resolved in order to avoid a collapse in the transport network. Likewise, power supply issues have led to delays in manufacturers’ expansion plans. Garments industries often pay dearly for political unrest, strike 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 garments in the world market. Lead time Lead time refers to the time required for supplying the ordered garment products after the export order has been received. In the sass, the usual lead time in the garment industry was 120-150 days for the main garment supplier countries of the world; it has been reduced to 30-40 days in the current decade. However, in this regard the Bangladesh ARM industry has improved little; for example, the average lead time is 90-120 days for woven garment firms and 60-80 days for knit garment firms.

In China, the average lead time is 40-60 days and 50-60 days for woven and knit products respectively; in India, it is 50-70 days and 60-70 days for the same products respectively. Bangladesh should improve its average lead time to compete in the international market. Market Overview The ARM market is huge both globally as well as locally. The demands of ARM product spread from local buyers from poor and middle class to globally in the US ND European Union countries. Among the competitors of Bangladesh ARM sector are China and India which has also increased ARM exports to USA over the years.

Bangladesh is less competitive compared with China or India in the United States and it is somewhat competitive in the European Union. With increasing labor unrest in the country, many industrialists and economists fear that investors and buyers are likely to pull out of their orders from Bangladesh ARM and go to China which would be detrimental for the ARM sector in Bangladesh unless steps are taken. Conclusion Redeemed Garments is the rising sector in our country. We have manpower, which is an important factor for garments industry.

We should use the manpower effectively in this field to face challenges in the global market. This paper describes the key departments of redeemed garments industry and also identifies the major compete with the global market and provide contributions to the national economy. Recommendations 1 . The foremost important task for ARM is to reduce the lead time so that international buyers do not turn to other countries for import and lose market share. 2. Secondly, Bangladesh needs to concentrate on improving the working environment n factories and address other social issues related to the garment industry.

The ARM firms in Bangladesh have been facing immense pressures from international buyers for compliance with their codes of conduct. 3. Lastly the Government of Bangladesh needs to strengthen its support for the development of port and other physical infrastructure, for smooth utility supply, the attainment of a corruption-free business environment and political stability. Such steps will contribute to reducing the lead time while building the confidence of international buyers which will boost the ARM sector of the country.

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