Term Paper on Export of Ready Made Garments of Bangladesh

Bangladesh economy at present is more globally integrated than at any time in the past. The RMG industry of Bangladesh is facing new and unique challenges. The report attempts to identify the prospects of RMG industry by analyzing the current scenario along with different policy measures and the available options in order to be more competitive in the new regime. The phase out was expected to have a negative impact on the economy of Bangladesh. But recent data reveals that Bangladesh absorbed the shock successfully and indeed RMG exports grew significantly. Due to a number of steps taken by the industry Bangladesh still remains competitive in RMG exports even in this post phase-out period. But much more needs to be done (for example, removal of structural impediments, establishment of training and research institute, sharing of knowledge and technology) in order to maintain the competitiveness in the global RMG market.
The tremendous success of readymade garment exports from Bangladesh over the last two decades has surpassed the most optimistic expectations. Today the apparel export sector is a multi-billion-dollar manufacturing and export industry in the country. The overall impact of the readymade garment exports is certainly one of the most significant social and economic developments in contemporary Bangladesh. With over one and a half million women workers employed in semi-skilled and skilled jobs producing clothing for exports, the development of the apparel export industry has had far-reaching implications for the society and economy of Bangladesh.
Large-scale production of readymade garments (RMG) in organized factories is a relatively new phenomenon in Bangladesh. Until early sixties, individual tailors made garments as per specifications provided by individual customers who supplied the fabrics. The domestic market for readymade garment, excepting children wears and men's knit underwear (genji) was virtually non-existent in Bangladesh until the sixties.
Since the late 1970s, the RMG industry started developing in Bangladesh primarily as an export-oriented industry although, the domestic market for RMG has been increasing fast due to increase in personal disposable income and change in life style. The sector rapidly
attained high importance in terms of employment, foreign exchange earnings and its contribution to GDP. In 1999, the industry employed directly more than 1.4 million workers, about 80% of whom were female. With the growth of RMG industry, linkage industries supplying fabrics, yarns, accessories, packaging materials, etc. have also expanded. In addition, demand for services like transportation, banking, shipping and insurance has increased. All these have created additional employment. The total indirect employment created by the RMG industry in Bangladesh is estimated to be some 200,000 workers.
In addition to its economic contribution, the expansion of the RMG industry has caused noticeable social changes by bringing more than 1.12 million women into labour force. The economic empowerment of these working girls/women has changed their status in the family. Most importantly, the growth of RMG sector produced a group of entrepreneurs who have created a strong private sector. Of these entrepreneurs, a sizeable number is female. A woman entrepreneur established one of the oldest export-oriented garment factories, the Baishakhi Garment in 1977. Many women hold top executive positions in RMG industry.
The RMG industry is highly dependent on imported raw materials and accessories because Bangladesh does not have enough capacity to produce export quality fabrics and accessories. About 90% of woven fabrics and 60% of knit fabrics are imported to make garments for export. The industry is based primarily on sub-contracting, under which Bangladeshi entrepreneurs work as sub-contractors of foreign buyers. It has grown by responding to orders placed by foreign buyers on C-M (Cut and Make) basis. During its early years, the buyers supplied all the fabrics and accessories or recommended the sources of supply from which Bangladeshi sub-contractors were required to import the fabrics. However, situation has improved. At present, there are many large firms, which do their own sourcing. Within a short period, Bangladeshi entrepreneurs got familiar with the world apparel markets and marketing. They acquired the expertise of mobilising resources to export-oriented RMG industries.

Till the end of 1982, there were only 47 garment manufacturing units. The breakthrough occurred in 1984-85, when the number of garment factories increased to 587. The number of RMG factories shot up to around 2,900 in 1999.

In 1983-84, RMG exports earned only $0.9 billion, which was 3.89% of the total export earnings of Bangladesh. In 1998-99, the export earnings of the RMG sector were $5.51 billion, which was 75.67% of the total export earnings of the country. As per July2003-Jan2004 the export earnings are 74%. The net foreign exchange earnings were, however, only about 30% of the figures quoted above because approximately 70% of foreign exchanges earned were spent in importing the raw materials and accessories to produce the garments exported.