Bangladesh is a southern Asian third world and developing country with over 164 million people. Readymade Garments Industry of Bangladesh creates over 4.2 million employment opportunities for young, urbanizing workers, contributing significantly to the GDP and raising as the biggest earner of foreign currency.
History of Readymade Garment Industry (RMG) Sector in Bangladesh:
The readymade garments industry acts as a catalyst for the development of Bangladesh. The “Made in Bangladesh” tag has also brought glory to our country and makes it a prestigious brand worldwide.
We have already got a clear conception about RMG in the history of textile in Bangladesh. Now, let’s know it more elaborately.
During the 60th decade of the 19th century, the textile sector was first found. In 1965-66, the Bangladesh textile industry exported the Mercury shirts to the European market for the first time. The three most prominent industries in 1977-78 were Reaz Garments, Jewel Garments, and Paris Garments.
When developing the garments industry, several garments businesses started: Stylecraft Limited, Aristocraft, Azim Group, and Sunman Group.
These are some essential phases of Bangladesh RMG:
- 1977-1980: Early period of growth
- 1982-1985: Boom days
- 1985: Imposition of quota restrictions
- 1990: The knitwear sector developed significantly
- 1995-95: Child labor issue and its solution
- 2003: Withdrawal of Canadian quota restriction
- 2005: Phase-out of export-quota system
- 2013: Uncertainty about the US GSP and different internal problems, including political unrest and poor working environment
Present Situation of RMG Sector in Bangladesh:
At present, there are more than 5000 garment factories in the RMG sector in Bangladesh. More than 12 lack workers are working in this field, and 85% are women. Currently, the RMG industry is the largest export earner in Bangladesh, with a value of over $24.49 billion of exports in the last financial year.
It’s great news for us that Bangladesh is ahead of other South Asian countries in supplying the readymade garments industry. As a third-world developing country, it’s a massive achievement for us.
There are several types of garments manufactured in Bangladesh. The readymade clothes are classified into two broad categories. One is woven products, and the other is knitted products.
Woven products are Shirts, Pants, and Trousers. On the other hand, the knitted products are T-Shirts, Polo Shirts, Undergarments, Socks, Stockings, Sweaters, etc.
From the starting, Woven garments earnings are dominating the export business in Bangladesh.
According to BGMEA, there are 4000 garment factories in Bangladesh. Their website says that the production of the knitted item is increasing rapidly at a considerable rate, and now it is achieving about 40% export earnings in Bangladeshi economics.
Contribution of RMG Sector to Bangladesh Economy:
RMG sector has significant contribution in the field of Bangladesh economy. From the last decade, the RMG sector has considerable rate. About 76% of the total export earnings of Bangladesh come from the RMG sector.
Statistically, in FY 2003-04 RMG sector of Bangladesh earned US$ 5,686.06 million; in FY 2004-05, the value was US$ 6,417.67.67 million, in FY 2005-06, the value was US$ 7900.80 million, in FY 2006-07, the value was US$ 9,211.23 million, in FY 2007-08 the value was US$ 10,699.80 million, in FY 2008-09 the value was US$ 12.35 billion and finally in FY 2013-14 the value stands at $24.49billion.
These are the critical factors of success in the RMG sector of Bangladesh:
- Vast labor force,
- Skilled and eligible human resources,
- Technological upgrades,
- Government supports for textile and clothing,
- Special economic and export processing zones,
- Creation of textile and clothing villages,
- The incentive for the use of local inputs,
- Duty reduction for the import of inputs/machines,
- Income tax reduction,
- And international supports like GSP, GSP+, duty-free access, etc.
Business is all about Strategy. If we think about the key factors strategically, these are the point that comes fast:
- Cost-Effective Strategy,
- New Product Development strategy,
- Product Diversification Strategy and
- Market Diversification Strategy.
Readymade Garment Industry (RMG) of Bangladesh in World Markets:
A recent publication in Dhaka Tribune said that Vietnam overtook Bangladesh in the global apparel market and took the second-largest international readymade garment (RMG) exporter position in the world. First is China.
Bangladesh RMG is holding the third position in the world market.
According to the World Trade Statistical Review 2020, Bangladesh’s global market share in apparel exports stood at 6.8% in 2019, 6.4% in 2018.
In 2020, Bangladesh exported $28 billion worth of clothing, accounting for a 6.3% share in the world market, while Vietnam exported nearly $29 billion.
Both Bangladesh and Vietnam earned less from clothing exports in 2020 than the previous year due to the Covid-19 pandemic, but the level of decrease was different. According to the World Trade Organization (WTO), Bangladesh’s earnings declined by 15% in 2020, whereas Vietnam’s was 7%.
The experts from BGMEA think that the growth rate decreased due to shut down of Bangladesh last year, whereas the factories of Vietnam did not suspend their production and export for a single day.
Everything You Should Know About RMG:
In this topic, we’ll discuss why you should invest in the Bangladesh apparel industry and the pros and cons of it.
First, let’s look up why you should start a garments business.
- Quick Return, Protection: Bangladesh offers up to 100% foreign equity, especially in the Economic Zones (EZs). Additionally, as per the Government policy, investors have the right to pull out the entire investment, which is further transferrable with the total profit sum.
Bangladesh Economic Zone Authority (BEZA) assures full repatriation of capital and dividend and imposes no ceiling on Foreign Direct Investment (FDI). The country will be offering a resident visa for investors who invest the US $ 75,000 or above.
For those investing the US $ 500,000 or more, ‘citizenship’ will be offered.
Development of Industrial Zones bring in Ample Opportunities, Incentives:
Bangladesh is willing to open up to foreign investment, and by 2030 BEZA is working to establish 100 Economic Zones (EZs), including a majority of garment manufacturing factories, across the country.
- Big Internal, External Markets: The global apparel market will have the US $ 650 billion by 2020.
BGMEA report says that every year, Bangladesh’s RMG export is increasing rapidly, and the market share rose by 5.1%, 5.9%, and 6.3% through the last three consecutive years, which gives a hope for bright future for Bangladesh that is currently exporting to 130 countries all over the globe.
Cheap and Abundant Labor: Bangladesh is one of the most inferior labor forces globally, with 3.6 million laborers currently working at BDT 5,300 (around the US $ 65), making it the most lucrative destination compared to other hubs.
- The GREENEST Manufacturing Hub: Bangladesh has 67 LEED (Leadership in Energy and Environmental Design) certified factories which is the highest globally.
The BGMEA has even said that over 220 more garment manufacturers have applied for LEED.
Strong Backward, Building Forward Linkage: In Bangladesh, Around 1,430 textile mills are currently operating with the capacity of yarn production at 2,100 million kg per year and fabric production capacity at 2,800 million meters.
Now, let’s talk about some problems and challenges you may have to face in the textile industry:
- Lack of Modernize Machinery and Equipment;
- Lack of Research and Development;
- Finance Bill to Burden Industry Further;
- Increasing Cost of Production;
- Energy Crisis;
- Tight Monetary Policy and Removal of subsidy on the Textile sector;
- Industrial Safety and Security.
If you face such issues, here are some recommendations to solve or get easier:
- Zero ratings on import of all textile machinery
- Zero-rating exports
- Tariff reduction
- Incessant energy supply to textile units
- Issues relating to the market access
- Duty-free market access to European Union and the United States,
- The remedy through Foreign Direct Investment (FDI)
- Image building of Bangladesh to Attract Foreign Direct Investment (FDI)
- Focus on Value Addition, Technology Up-gradation, and Capacity Building
- Human Resources Development, Reducing the cost of doing business in Bangladesh.
- Need for Improving Textile Production, Awareness of International Quality
- Subsidy removal should be taken back.
- The interest rate should be low down to survive this industry.
- Electricity and gas tariff, Removal of Energy Crisis
- Exploration of new Export Markets, Bonded warehouse facilities, Duty-free importation of raw materials of export in the RMG
- Avoidance of double taxation for joint venture projects, Income tax exemption for up to three years for foreign technicians
- Duty on dyes and chemicals should be withdrawn.
- Duty-free import of capital machinery,
- Appoint an advisory committee to represent the industry to the government
It was encouraging to see the prosperous Textile Industry of Bangladesh.