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THE GARMENT INDUSTRY OF BANGLADESH
Introduction:
The garment industry has played a pioneering role in the development of industrial sector
of Bangladesh. Though it took a rather late start i.e., in 1976 but it soon established its
reputation in the world market within a short span of time. Resultantly garment is now one
of the main export items of the country. Besides, enriching the countrys economy it has
played a very important role in alleviating unemployment. At present there are more than
two thousand one hundred garment factories in the country employing more than 12 lack
labors. 85 percent of the labor force is women.
Once Sri-Lanka was leader in this field in South Asia and India was its competitor. After a
bloody civil war resulting in the quick demise of the garments industry of Sri-Lanka and
India, the international buyers and investors diverted their attention towards Bangladesh.
As a result the garments industry of Bangladesh expanded with unprecedented success.
During the financial year 1993-94 Bangladesh earned 6199.8 cores Taka.
Contribution in the national economy
The role of the RMG sector in our national economy can hardly be over-emphasized.
There has been a steady development in our RMG export field during at least the last
decade and a half but in the last few years it has been unique. The export of RMG recorded
an average growth of 21.53% since 1994-95, which grew to 76.05% by the year 1999.The
table, is given bellow elaborates the growth.
Development of the Export of RMG Sector
YEAR Export of RMG (in Mln. US$) Total Export (in Mln. US$) Share of RMGs to Total
Export
1993-94 1555.79 2533.90 61.40
1994-95 2228.35 3472.56 64.17
1995-96 2547.13 3882.42 65.61
1996-97 3001.25 4418.28 67.93
1997-98 3781.94 5161.20 73.28
1998-99 4019.98 5312.86 75.67
1999 2810.38 3695.46 76.05
Source: Bangladesh Export Statistics, Export Promotion Bureau (EPB) (Compiled).
The table below helps to understand the situation more clearly.
Development of the Export (in Million Taka) of different Sectors from 1993 to 1999
Commodities 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Amount % Amount % Amount % Amount % Amount % Amount %
Woven 51 47.21 50.97 7360.53 52.85 7970.65 50.20 9529.18 50.65 12900.18 55.09
14320.80 56.18
Knit 1052.58 10.42 1577.37 11.32 2447.12 15.41 3250.11 17.28 4266.17 18.22 4967.67
19.49
Total RMG 6199.79 61.40 8937.9 64.17 10417.77 65.61 12779.29 67.93 17166.35 73.31
19288.47 75.67
Frozen Food 638.91 8.31 1225.93 8.80 1283.01 8.08 365.65 7.26 1333.13 5.69 1316.17
5.16
Tea 152.14 1.51 131.54 0.94 135.51 0.85 162.39 0.86 21 5.36 0.92 184.99 0.73
Raw Jute 227.23 2.25 318.74 2.29 371.12 2.34 495.29 2.63 488.94 2.09 344.14 1.35
Chemical Product 21 6.73 2.15 431.65 3.10 402.68 2.54 461.89 2.46 363.21 1.44 380.19
1.49
Leather 670.16 6.64 810.52 5.82 865.86 5.45 832.35 4.42 863.21 3.69 807.20 3.17
Jute 1130.89 11.20 1278.62 9.18 1345.29 8.47 1353.45 7.19 1276.82 5.45 1457.78 5.72
Grand Total 10097.59 100.00 13928.46 100.00 15879.09 100.00 18813.04 100.00
23416.37 100.00 25491.10 100.00
Source: Bangladesh Export Statistics, Export Promotion Bureau (EPB) (Compiled).
Back in the 80s, a large number of private sector initiatives were taken in manufacturing
sectors like the RMG industry. The RMG industry has enjoyed a meteoric rise from less
than 50 factories in 1983 to over 3000 in 1999. In between this period, the level of
employment has increased from some 10,000 to approximately 1.5 million today (see
Table: 3); with its share of employment in the manufacturing industry increasing from a
mere 2% to over 15%.A table is given bellow,
The number of the factories
Year 1983 1987 1991 1995 1999
No. of Factories 50 629 934 2268 3000
Source: Bangladesh Statistics, EPB
The reasons behind the huge success
The success story of the Readymade Garments sector of Bangladesh is based on
employment generation and increasingly high value addition, thus smoothening the path
for growth and development of the country. The apparel and garment industry propels
sectors such as banking, finance and insurance, cargo, shipping and transport,
entertainment and hospitality, research and education and a lot more. The mentioned
performance of the industry has been possible due to:
The Government of Bangladesh has always been concerned about the sectors growth and
has played an active role as a catalyst to solve various complexities, whenever intervention
was necessary.
The cheap but disciplined and regimented workforce has been key for the success of this
industry.
The entrepreneur class has been dedicated and motivated to the countrys economic
prosperity.
The quality of the manufactured apparel, which has been increasingly recognized by our
international buyers and end users all over the world.
Buyers response has been encouraging through repeat orders. The industry has been
producing all sort of apparels for all seasons and has managed to get repeat orders for
every season.
The import policy of Bangladesh has been flexible and friendly for import of accessories.
Although there are accountable anomalies, the financial institutions, both nationalized and
private, have been serving to assist this sector.
Readymade garment industries have managed to maintain the confidence of the buying
class and others in the business.
Although the backward linkage textile industry is not adequate for the needs of the RMG
industry, it has been supporting regular manufacturing and supply systems to some extent.
Bottlenecks Retarding the Growth of the Readymade Garment Sector
This vital and vibrant export oriented industry has been facing some problems from local
forces, which may be termed weaknesses (or the Nations weakness), and some problems
caused by forces beyond our geographical/political boundary, which may be termed as
threats to our industry. The Readymade Garment Industry is already 20 years old but
during the last two decades no planned, fruitful policy to build up a backward linkage
textile industry to feed the RMG industry has been taken by the authorities. Even the
existing textile industries are not capable of producing high standard fabrics to offset the
foreign ones from the market. Shortage of capital necessary to develop local sources for
quality fabrics/yam is a major weakness. The weaknesses could be classified in following
categories:
Unstable political environment and unfavorable law and order
Insufficient development of political measures for the RMG sector
Inadequate financial measures
Infrastructural bottlenecks
Inefficient service support
Inappropriate development management and institutional initiatives.
Unstable Political Environment and Law and Order
Political Instability
Due to the last non-cooperation movement in 1995-96 the industry suffered a loss of about
Tk. 4,500 crore (Tk. 45 billion) and about 300 factories were forced to take loans of over
Tk. 200 crore (Tk. 2 billion). Due to hartal (general strike) and other such political
programs, problems such as order cancellations and stock-lot gluts arose in the ready-made
garment industry. Banks started showing its reluctance to open L/Cs. Ultimately many
affected factories were on the verge of winding-up and declaring bankruptcy. The export
oriented garment industry bore production losses equivalent to Tk 6-9 crore (Tk. 60-90
million) per hour.
Unfavorable Law and Order Situation
The disrupting law and order situation is another heavy constraint which hinders not only
the development of the national economy but also the development of the export- oriented
RMG sector. Due to the depreciating law and order situation, the interest of both the
employers and the employees are being affected.
Inefficient Development of Political Measures for RMG
Unsuccessful Initiatives for Foreign Direct Investment in the Export Oriented RMG Sector
The proper authorities have duly resolved that the Board of Investment (BOI) would not
approve any Foreign Direct Investment (FDI) proposal in the RMG sector without seeking
recommendation from the BGMEA. Any further foreign investment in the garments
industry must be considered in light of the technological modernization in this sector, i.e.
whether the foreign investment is promoting technology transfer.
Inefficient Efforts to Increase Quota in USA and Other Important Countries
BGMEA has been pursuing for a 30% quota increase for the US market. It will provide the
garments industry in Bangladesh with an opportunity to export apparel worth about US$
400 million and to employ another one million workers. Although BGMEA representatives
have initiated a strong drive towards achieving this target, visited the USA and met key
Congressmen, Senators and other government representatives, it is still not considered
sufficient effort to achieve such a large national interest issue; concerted efforts from the
proper levels of Government are needed.
Insufficient International Marketing Support
In order to expand the market share and survive in the up coming free global competition
in the international market, product diversification appears to be an indispensable strategy.
The more varied the product line and range, the better the competitive strength. As for our
access to other markets, efforts are being made to enter Japan and other Far East markets;
however, presently we are mainly dependent on EU markets and the U.S. By considering
only these markets we are literally putting all of our eggs in he same basket, which is more
risky. So the government should ensure assistance from international organizations like
WB, IMF, UNDP, WTO and international Chambers to support the export-oriented RMG
sector.
Inefficient Financial Measures
Inefficient Financial Support for Backward Linkage Industries
The arrangement of bilateral quotas and restrictions on import under MFA has begun
phasing out from January 1995 and the process will be complete by 2005. Therefore there
will be no more quotas and the only barrier to import penetration will be the normal rules
of competitiveness such as price, quality, service, fashion and tariff.
Investment in a textile industry will not be viable unless the government reforms its
policies for financial support. The cost of financing the linkage projects must be brought
