Readymade garment (RMG) industry Textile industry in Bangladesh

1 readymade garment (rmg) industry

1.1 world markets

1.1.1 mckinsey report (2011): bangladesh next hot spot, next china


1.2 trade agreements

1.2.1 1974 multi fibre arrangement (mfa) , daewoo of south korea
1.2.2 tariff relief assistance developing economies act
1.2.3 effects on exports

readymade garment (rmg) industry

garment products made in bangladesh

rmgs finished textile product clothing factories , bangladeshi rmg sector 1 of fastest growing sectors in bangladeshi economy, growth rate of 55% 2002 2012. exports of textiles, clothing, , ready-made garments (rmg) accounted 77% of bangladesh’s total merchandise exports in 2002. 2005 (rmg) industry multibillion-dollar manufacturing , export industry in bangladesh, accounting 75 per cent of country s earnings in year. bangladesh s export trade dominated ready-made garments (rmg) industry. in 2012 bangladesh’s garment exports – , europe – made 80% of country’s export income. 2014 rmg industry represented 81.13 percent of bangladesh s total export. of tremendous growth of sector , role economic powerhouse country attributed availability of cheap labor. of 4 million workers employed rmg industry, 85% illiterate women rural villages. working environments , conditions of factories produce ready-made garments has undergone criticism in recent years concerning worker safety , fair wages.

subcontracting major component of rmg industry in bangladesh. many western companies contract different factories, requesting quotas met @ times. companies prefer subcontracting because degree of separation presumably removes them of liability of wage , labor violations. makes easier distribute production across variety of sources.

world markets
mckinsey report (2011): bangladesh next hot spot, next china

as of 2011 bangladesh second largest ready-made garments (rmg) manufacturer after china, next 5 years bangladesh become largest ready-made garments manufacturer. bangladesh sixth largest exporter of apparel in world after china, eu, hong kong, turkey , india in 2006. in 2006 bangladesh s share in world apparel exports 2.8%. largest single market us$3.23 billion in exports, 30% share in 2007. today, remains largest market bangladesh s woven garments taking us$2.42 billion, 47% share of bangladesh s total woven exports. european union remains largest regional destination - bangladesh exported us$5.36 billion in apparel; 50% of total apparel exports. eu took 61% share of bangladeshi knitwear us$3.36 billion exports.

according 2011 report international consulting firm mckinsey & company, 80 percent of american , european clothing companies planned move outsourcing china, wages had risen, , considering bangladesh next hot spot making next china offering lowest price possible known china price, hallmark of china’s incredibly cheap, ubiquitous manufacturers, dreaded competitors.

trade agreements
1974 multi fibre arrangement (mfa) , daewoo of south korea

t-shirt quality checking in ready made garment factory of bangladesh

starting in 1974 multi fibre arrangement (mfa) in north american market ensured trade in textiles , garments remained regulated in world. among other things mfa set quotas on garments exports newly industrialising countries of asia, had exceptions, notably state of bangladesh. entrepreneurs quota-restricted countries south korea began quota hopping seeking quota-free countries become quota-free manufacturing sites. export-oriented readymade garment industry emerged @ time. daewoo of south korea entrant in bangladesh, when established joint venture on 27 december 1977 desh garments ltd. making first export oriented ready-made garment industry in bangladesh. after 1 year in 130 desh supervisors , managers received free training daewoo in production , marketing @ daewoo s state-of-the-art ready-made garment plant in korea, 115 of 130 left desh garments ltd. , set separate private garment export firms or began working other newly formed export-oriented rmg companies new garment factories in bangladesh higher salaries desh garments ltd offered.

global restructuring processes, including 2 non-market factors, such quotas under multi fibre arrangement (mfa) (1974–2005) in north american market , preferential market access european markets, led emergence of export-oriented garment industry in bangladesh in late 1970s. uncertain phase out of mfa meant bangladeshi rmg industry. however, surpassing doubts, industry continued succeed , dominate on global level.

the garment industry in bangladesh became main export sector , major source of foreign exchange starting in 1980, , exported $5 billion usd in 2002. in 1980 export processing zone officially established in @ port of chittagong.

by 1981, 300 textile companies, many small ones had been denationalized returned original owners. in 1982, shortly after coming power following bloodless coup, president hussain muhammad ershad introduced new industrial policy (npi), significant move in privatization process, denationalized of textile industry, created export processing zones (epzs) , encouraged direct foreign investment. under new industrial policy (npi) 33 jute mills , 27 textile mills returned original owners.

in 1985 , canada imposed import quotas of own, no international agreement, on bangladeshi textiles. however, bangladesh able meet demand every quota each year , able negotiate higher quotas subsequent years.

the export of ready-made garments (rmg) increased $usd 3.5 million in 1981 $usd 10.7 billion in 2007. apparel exports grew, initially, ready-made garments rmg industry not adequately supported growth , down domestic supply chain (e.g., spinning, weaving, knitting, fabric processing, , accessories industries).

from 1995 2005 wto agreement on textiles , clothing (atc) in effect, wherein more industrialized countries consented export fewer textiles while less industrialized countries enjoyed increased quotas exporting textiles. throughout 10-year agreement, bangladesh’s economy benefited quota-free access european markets , desirable quotas american , canadian markets.

as above table shows, market shares bangladeshi textiles in usa , both textiles , clothing in european union have changed during time period of atc.

until fy 1994, bangladesh s ready-made garments (rmg) industry dependent on imported fabrics - primary textile sector (pts) not producing necessary fabrics , yarn.

since 1990s, knit section expanded producing , exporting shirts, t-shirts, trousers, sweaters , jackets. in 2006, 90 percent of bangladesh s total earnings garment exports came exports united states , europe.

although there concern, noted in imf report, wto s multi fibre arrangement, agreement on textiles , clothing (atc), phase-out shut down textile , clothing (t&c) industry, bangladesh textile sector grew tremendously after 2004 , reached export turnover of us$10.7 billion in fy 2007. bangladesh expected suffer ending of mfa, expected face more competition, particularly china. however, not case. turns out in face of other economic giants, bangladesh’s labor cheaper anywhere else in world. while smaller factories documented making pay cuts , layoffs, downsizing speculative – orders goods kept coming after mfa expired. in fact, bangladesh s exports increased in value $500 million in 2006.

textile exports bangladesh united states did increase 10% in 2009.

us tariff relief assistance developing economies act

the united states introduced tariff relief assistance developing economies act of 2009 designated bangladesh 1 of 14 least developed countries (ldc), defined united nations , state department, eligible duty-free access apparel assembled in countries , exported u.s. 2009 through 2019. bangladesh garment manufacturers , exporters association (bgmea), industry lobby group, claimed in 2008 alone bangladesh paid $usd 576 million duty against export of $3 billion consisting of woven , knitwear. however, act temporarily suspended bangladesh president obama after rana plaza collapse in 2013.

effects on exports

bangladesh ranked second leading exporter in world after china in 2015 according estimate khurram shahzad applied data derived world trade organization balassa s rca index. shazad found bangladesh fell between pakistan , india in regards comparative advantages in textiles, held highest rca clothing private actors maintain positive outlook on industry, clothing sector has seen positive growth in terms of rca. despite rating highly, bangladesh s textile and clothing industries face several challenges make access textile , clothing products unstable, such weak government , political turmoil. private actors have speculated bangladesh 1 of top sourcing spots next 5 years, clothing sector has seen positive growth in terms of rca , country has low cost of labor. some bangladeshi companies have purchased machinery , technology increase efficiency, such computerized cutting , spread machinery, sewing machines, , barcode-enable inventory management systems. market access and trade policy have played role in growth of bangladeshi garment industry, country s garment exports concentrated in united states , european union. however, the multi-fibre arrangement (mfa) period showed 21 out of 52 firms export third market, while 66 out of 69 have exported @ least third market, indicates diversification in bangladeshi garment industry.