The Ready-Made Garments

Industry in
Bangladesh
 Submitted To:
Lec.
Sabak
un
Nahar
Shetu
Busine
ss
Comm
unicati
on
ALD
1204

Department of Business
Administration in Marketing
Faculty of Business Studies
(FBS)
Bangladesh
University of
Professionals
Mirpur
 Cantonment,
Dhaka-1216

Date of Submission:
November 21, 2020

LETTER OF TRANSMITTAL

Date:
November21,
2020
The Couse Instructor
Faculty of
Business
Studies (FBS)
Bangladesh
University of
Professionals
Mirpur
Cantonment,
Dhaka-1216

Subject: Term Paper on The Ready-Made Garments Industry of Bangladesh.

Dear Ma’am,
We, the students of the Faculty of Business Studies, Department of
Marketing, are pleased to conclude this report on ‘The Ready-Made
Garments Industry of Bangladesh’. This letter marks the submission of
our term paper.

We ensure you that we have put all of our collective efforts to ensure our
work is of a superior quality. We hope you acknowledge the dedication
and the devotion we have shown towards this paper. However, we
understand that our work is not perfect, and thus we welcome any and all
the criticism you have of our work.

Sincerely,
Md Tanjil Islam
On behalf of all the members
of the team Department of
Business Administration in
Marketing Faculty of Business
Studies (FBS)
Bangladesh
University of
Professionals
Mirpur
Cantonment,
Dhaka-1216

ACKNOWLEDGEMENT

Firstly, we would like to thank the Almighty Allah for blessing us with
the ability to successfully complete the dedicated task.

Our heartfelt gratitude goes to our Course Instructor, Sabakun Nahar

Shetu, who has invested her full effort in guiding the team in achieving
the goal. We would also like to thank our Course Instructor for helping us
with all the problems we have faced to complete this term paper.

We are grateful to our family members, especially to our respected

parents for their continuous support.

And last, but not the least, we want to profess our gratitude to the Internet
which has been the main source of all the information we have compiled
in this term paper. With the success of this paper, we shall share the credit
where it is due and accept the errors as our own responsibility.
 DECLARATION

We hereby declare that the report titled “The Ready-Made Garments

Industry of Bangladesh” is a product of our collective efforts under the

guidance of the Course Teacher, Sabakun Nahar Shetu. The report has
been submitted to the Faculty of Business Studies, Department of
Marketing, at Bangladesh University of Professionals. This report is a

partial fulfillment of the 2nd Semester Final Examination, 2020 for the
course Business Communication (Course code: ALD 1204).

We further declare that the work projected in this report has not been
previously submitted in this or any other institute.

Md Tanjil Islam
On behalf of all
the members of
the team Place:
Mirpur
Cantonment,
Dhaka.

List of Abbreviations
RMG Ready-Made Garments
BGMEA Bangladesh Garment Manufacturers and Exporters
Association
COVID Corona Virus Disease
Ltd. Limited
Approx. Approximately
e.g. Example
 ABSTRACT
This paper was prepared in order to portray the various aspects of the
Readymade Garments Industry of Bangladesh. The information in this
paper was based on different surveys and resources. The paper also
delineates the industry’s inception and culmination by becoming one of
the most pivotal industries in Bangladesh. The analysis of the Readymade
Garments industry was done meticulously. This paper comprises of the
History, Export Status and Destinations, Buyers, Contributors, Supply and
Demand ratio, the impact of COVID-19 on the industry and lastly, some
Recommendations on how can we work on the fallouts of this Industry.
The paper also aims to show how the textile and clothing Industries
provide the single source of growth in Bangladesh's rapidly developing
economy along with how Exports of textiles and garments are the
principal source of foreign exchange earnings.

Table of Contents

Section 1: Introduction
The ready-made garments (RMG) industry contributes to the Bangladesh
economy in a distinctive manner. The industry plays a significant role in
terms of employment and income generation of millions of people,
especially the poor. The sector contributes significantly to the GDP. It
also provides employment to around 4.5 million Bangladeshis. An
overwhelming number of workers in this sector are women. This has
affected the social status of many women coming from low-income
families. Bangladesh-origin products met quality standards of customers
in North America and Western Europe, and prices were satisfactory.
Business flourished right from the start; many owners made back their
entire capital investment within a year or two and thereafter continued to
realize great profits. Some 85 percent of Bangladeshi production was sold
to North American customers, and virtually overnight Bangladesh became
the sixth largest supplier to the North American market.

After foreign businesses began building a ready-made garment industry,

Bangladeshi capitalists appeared, and a veritable rush of them began to
organize companies in Dhaka, Chittagong, and smaller towns, where basic
garments--men's and boys' cotton shirts, women's and girls' blouses,
shorts, and baby clothes--were cut and assembled, packed and shipped to
customers overseas (mostly in the United States). With virtually no
government regulation, the number of firms proliferated; no definitive
count was available, but there were probably more than 400 firms by
1985, when the boom peaked after just a few years, the ready-made
garment industry employed more than 200,000 people. According to some
estimates, about 80 percent were women, which was never noticed
previously in the industrial workforce. Many of them were woefully
underpaid and worked under harsh conditions. The net benefit to the
Bangladeshi economy was only a fraction of export receipts, since
virtually all materials used in garment manufacture were imported;
practically all the value-added in Bangladesh was from labor. There were
only 9 export-oriented garment manufacturing industry in 1978, and they
earned only 1 million dollars. Some of them were very small, produced
RMG for the local market as well. Four such small and pioneer garments
were Reaz garments, Paris garments, Jewel garments, and Boishakhi
garments. Reaz garments established in 1960, as a small tailoring outfit,
named Reaz store in Dhaka. Served only the domestic market of its initial
15 years. In 1973, it changed its name to Reaz Garments Ltd and started to
export by selling 10 000 pieces of shirts to France, valued 13 million

francs in 1978. That was the first direct export of apparel. Desh Garments
Ltd., first joint venture in Bangladesh, Technical and marketing
collaboration with South Korean Daewoo Corporation, established in
1979. The first 100% export-oriented company. In 1980, Youngone (49%)
and Trexim (51% equity) formed a company named Youngone
Bangladesh, exported the first consignment of padded and non-padded
jackets to Sweden in December 1980. It had trained 120 operators
including 3 women in South Korea and went into production in 1980.

Section 2: Background
Nowadays textile sector of Bangladesh retains its top position in global
market. This cannot be gained overnights. Bangladesh can get its present
position by dint of merit and industry of people of Bangladesh. The base
of textile sector was first established in 60th decade of the last century.
"Mercury shirts" which is originated from Karachi started the RMG
business first. The industry exported shirts to the European market in
1965-66 first. Like other 3rd world countries Bangladesh is a developing
country. Her economic development depends firstly on agriculture and
secondly on industry. Although Bangladesh is not developed in industry,
it has been enriched in Garment industries in the recent past years. In the
field of Industrialization garment industry is a promising step. It has given
the opportunity of employment to millions of unemployed, especially
innumerable uneducated women of the country. It is making significant
contribution in the field of our export income.

In 1977-78 only 9 exporting industries were available in this country

which deal with 10 million used every year. There were 3 big industries
available in that time. They were:

Riaz garments, Jewel garments and Paris garments.

Of them, Riaz garments was the most well-known and oldest industry in
that time. In Urdu road of Dhaka, it started its business with some
tailoring shop first. In that time, it was known as Riaz store. In 1973, it
was named Riaz garments. In 1978, it started exporting products abroad.it
exported 1 million pieces of shirts to the Olanda, a South Korean
company.

Other garments known as Desh Garments, also treated as the pathfinder of

textile sector in Bangladesh.

In 1979 Desh Garments opened a joint venture project with south Korean company
"Daiyuu".

Once the cloth of Bangladesh achieved worldwide fame especially

Muslim and jamdani cloth or our country was used as the luxurious
garments of the royal figures in Europe and other countries. The British
rulers in India did not develop our cloth industries at all. Rather they
destroyed them and imported cloths from England. Garment Industry
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 lifestyle. The sector rapidly attained high
importance in terms of employment, foreign exchange earnings and its
contribution to GDP.

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
Boishakhi Garment in 1977. Many women hold top executive positions in
RMG industry. The hundred percent export oriented RMG industry
experienced phenomenal growth during the last 15 or so years. In 1978,
there were only 9 export-oriented garment manufacturing units, which
generated export earnings of hardly one million dollars. Some of these
units were very small and produced garments for both domestic and
export markets. Four such small and old units were Reaz Garments, Paris
Garments, Jewel Garments and Baisakhi Garments.

Reaz Garments, the pioneer, was established in 1960 as a small tailoring

outfit, named Reaz Store in DHAKA. It served only domestic markets for
about 15 years. In 1973 it changed its name to M/s Reaz Garments Ltd.
and expanded its operations into export market by selling 10,000 pieces of
men's shirts worth French Franc 13 million to a Paris-based firm in 1978.
It was the first direct exporter of garments from Bangladesh. Desh
Garments Ltd, the first non-equity joint-venture in the garment industry
was established in 1979. Desh had technical and marketing
collaboration with Daewoo Corporation of South Korea. It was also the
first hundred percent export-oriented company. It had about 120 operators
including 3 women trained in South Korea, and with these trained workers
it started its production in early 1980. Another South Korean Firm,
Youngones Corporation formed the first equity joint-venture garment
factory with a Bangladeshi firm, Trexim Ltd. in 1980. Bangladeshi
partners contributed 51% of the equity of the new firm, named Youngones
Bangladesh. It exported its first consignment of padded and non-padded
jackets to Sweden in December 1980.

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. Bangladesh is now one of the 12 largest apparel exporters of the
world, the sixth largest supplier in the US market and the fifth largest
supplier of T-shirts in the EU market. The industry has grown during the
1990s roughly at the rate of 22%.

The country's RMG sector, to a creditable level has relieved Bangladesh

from over populous unemployment burden through providing the largest
employment next to agriculture, transport, and trade and industry sector.
This sector has uplifted the neglected section of the population, thus
radically transforming the socio-economic condition of the country. Such
empowerment and employment raised awareness regarding children
education, health safety, population control disaster management only so
for. It is an epoch-making event in the history of Bangladesh.

At present RMG sector of Bangladesh deals with 22 billion USD every

year. 4 million people directly depend on the ups and downs of the sector
the 81% of the total export earnings are come from this textile sector.

The textile sector passes its golden time now with the help of the
government and different organizations we may hope for the betterment
of this sector.
 Section 3: Literature Review
Literature review exhibits the overall scenario of the RMG sector in
Bangladesh and its contribution to the Bangladesh economy. Berg et al.,
(2011) stated five major challenges for Bangladesh RMG sector such as
weak infrastructures, compliance issues, low supplier and labor efficiency,
insufficient backward linkage, and political & economic volatility.
Chowdhury et al. (2014) pointed major challenges as utility crisis such as
oil and gas shortage, too much dependency on imported raw material,
suppliers’ inefficiency and low labor productivity, high interest rate
and insufficient bank finance and political unrest within the country.
Hasan (2013) addressed that the single most challenge of Bangladesh
RMG sector as the open competition emerged from the withdrawal of
quota system under MFA agreement and the sustainability of the RMG
sector under global market competition. Klaus Schwab (2014) addressed
that the infrastructure facilities such as road network, sea and land port
facilities, and utility such as electricity and gas supply are the topmost
challenges for Bangladesh RMG Sector. Construction of new and up-
gradation of existing Road-Rail-Port facilities are now become major
requirements for RMG growth and sustainability. Narrow and busy
highways such as Dhaka- Chittagong will take almost take 20 hours of
transport time, lack of alternative transportation mode e.g., rail also offers
very limited capacity. Unavailability of deep-sea harbor and inefficient
management of Chittagong port and limited crane capacity and employee
strike have increased the lead time by almost 10 days. Islam et al. (2014)
identified a number of problems such as conflict between owners and
workers, labor unrest, shortage of gas and electricity, poor infrastructure,
poor port facility, lead time complexities, conspiracy of home and abroad,
advancing competitors in the quota free international market. From the
above literature different researchers have examined the RMG sector in
different viewpoints. The present study will be general in nature that it
will analyze and consider both contribution and challenges of RMG sector
in Bangladesh economy.
 Section 4: Methodology
Research Design: The report is mainly a descriptive research. The main
focus of this paper is The Ready-Made Garments Industry of Bangladesh.

Sources & Collection of Data: In this paper the main source of data is
secondary data. All data are collected through online research, from
articles of renowned authors, books and from various recognized
websites.

Section 5: History of Garments Industry in

Bangladesh
NUMBER OF FACTORIES
The export-oriented readymade garments (RMG) sector in Bangladesh
started its journey in late 1970s as a small non-traditional sector of export.
At that time there were only nine exporting garments industries in the
country. The three largest industries in that time were Riaz Garments,
Jewel Garments, and Paris Garments. Among those, Riaz Garments was
the most famous and oldest industry in that time. In the earlier stage, Riaz
Garments of Mohammad Reaz Uddin started its business with some
tailoring shop in the name of Riaz store. Later on, the name turned into
Riaz Garments in 1973, and from 1978 the company started exporting
with one million pieces of shirts in the South Korean Company named
„Olanda‟. Desh Garments is another pioneer of Bangladesh RMG sector.
In 1979, Desh Garments started a joint project with South Korean
company “Daiyuu”. At the same time, several garments factories were
established such as Stylecraft Limited, Aristocraft Limited, Azim Group,
and Sunman Group. Following the beginners of RMG sector, some others
discreet and hard-working entrepreneurs started their RMG business in the
country. Since then, RMG sector of Bangladesh has been developing day
by day through various critical stages. Bangladesh exported RMG worth
only US$ 69 thousand when Reaz Garments exported its first
consignment in 1978. By FY2002, within a span of about two decades,
exports increased to US$4.5 billion and in next 12 years it became
US$24.49 billion in the year 2013-14. Over the past decade alone, the
sector registered a phenomenal

growth rate of 15 percent per annum, which is impressive by any

standard. All the readymade garments of Bangladesh are classified into
two broad categories namely woven products and knitted products.
Woven products include shirts, pants, and trousers. On the other hand,
knitted product includes T-Shirts, polo shirts, undergarments, socks,
stockings, and sweaters. Woven garments still dominate the export
earnings of the country. It is evident from BGMEA report that knitted
items production is increasing in considerable rate day by day and at
present about 40% of the export earnings of Bangladesh has been
generating from knitted products.

Quota system that gave enormous benefit was a great blessing for
establishing the garments industry in Bangladesh. Thanks to the system,
RMG sector of the country has become a matured industry today. The
system was governed through the Multi-Fiber Arrangement (MFA) of
world trade in textiles and garments from 1974 to 2004 that imposed
quotas on the amount developing countries could export to developed
countries. Between 1990 and 2004, Bangladesh witnessed about eightfold
increase of its exports of garments from US$620 million to US$5.7
billion. While quota system was approaching to an end in 2004, many
people who were directly or indirectly related to the industry got upset
about the future of RMG sector of Bangladesh. But the sector was not
affected so heavily as the experts concerned. The industry conquered the
post quota challenges and made that a successful story. In fact,
Bangladesh's exports increased in value by about US$500 million in 2006.
Critics say that the garment industry grew sharply in Bangladesh after the
end of the MFA and exhibited social benefits such as empowering
women, their mobility, and their individual choice but that increased
opportunities for women have been made at the cost of their health and
increased risk of harassment.

Section 6: Current Export Status

RMG exports has contributed $34.13 billion to Bangladesh’s total export
earnings this year, growing by 11.49% compared to last fiscal year.
According to Export Promotion Bureau (EPB) data, the RMG sector has
contributed 84.21% to Bangladesh’s total exports of $40.53 billion,
growing by 10.55% in FY19. The figure-1 depicts that in last 5 years the
RMG exports added additional 10 billion dollars in the export basket that
means growing at a rate on average 2 billion each year. Though the
growth rate is impressive it is too optimistic to reach 50 billion mark by
2021 which is the target set by the government.

The export growth rate is 11.49% which was only 8.76% in 2017-18
indicates the upward trend of RMG export after the disastrous year in
2016-17 when the RMG export growth was the slowest in the history at
0.2%. (Figure-2) The export of knit and woven products seems evens to
even growing at a similar rate, however, woven export has surpassed knit
export in terms of value in the past 5-6 years. This year also the woven
exports stood at 17.24 billion USD whereas knit exports stood at 16.88
billion USD.

According to Research Director of CPD, In the beginning of the year, the

government projected single digit growth but there is a double-digit
growth which is a positive sign for the RMG sector. However, if on
average 10% growth is predicted in the upcoming two fiscal years, the
total RMG exports will stand at 37.54 billion in 2019-20 and 41.29 billion
in 2020-21 which is shy by 8.71 billion USD compare to the ambitious
target of 50 billion set by the government of

Bangladesh.

In terms of textiles export however, the scenario is not pleasant. In FY19,

the specialized textile sector has had a positive growth of 28.51% to $144
million from 112.15 million while the home textile sector saw a negative
growth of 3.07% to $851.72 million, down from $878.68 million in the
last FY.

Among other major sectors, Jute and jute goods have contributed 21.83% negative
growth to
$695.52 million which was $889.74 million during the same period in the
previous fiscal year of FY19 Negative growth in home textiles and jute
goods is an alarming issue for the country as these industries are more
value adding industries when compared to RMG. Agricultural products
exports meanwhile stood at $722.73 million by 53.05% growth from
$472.23 million in the last year.
 Section 7: Bangladesh Garments
Industry’s
Export
Destinations
The Garments Industry of Bangladesh exported a total of 34133.27
million USD textile in 2019. The major export destinations of
Bangladesh’s Garments Industry are the European Union countries, The
United States of America, and Canada. In 2019, Bangladesh exported
21133.08 million USD to the EU alone, which was an increase of 7.66%
from the previous year. Exports to Germany, the United Kingdom, and
France summed up to 13.57% of the total EU export.

However, in 2019, the United States of America imported 6133.72 million

USD and Canada imported 1179.30 million USD from the Garments
Industry of Bangladesh. Both the markets had substantial growth. The
United States clocked in a growth of 14.60% and Canada reported a
growth of 22.44% from 2018.

On the other hand, the non-traditional markets of Bangladesh are

Australia, Brazil, Chile, China, India, Japan, Korea, Mexico, Russia,
South Africa, and Turkey. The non-traditional markets accounted for
$5.68 billion of the country's total garment export volume. Korea, India,
and China markets reported significant growth from the previous year.

Pag

From the above graph, we can see that on the Fiscal Year 2019,
Bangladesh Garments Industry exported 61.91% (21.13 Billion USD) of
the total (34.13 Billion USD) export volume to European Union
Countries, 17.97% (6.13 Billion USD) to the United States of America,
3.45% (1.17 Billion USD) to Canada and the rest 16.66% (5.68 Billion
USD) were exported to the Non- traditional markets and other countries.

Section 8: The International Garment Buyers

and Importers of Bangladesh
Garments Industry
The Bangladesh textile and apparel industry earns a lot of appreciation
from International Garment Buyers & Importers. The new generation of
garment manufacturers in Bangladesh are providing high-end fashion
clothing with supreme quality. With the latest technology and machinery,
the Garment industry of
Bangladesh is
providing products
at a very
competitive price
than any other
country.

As a result,
Bangladesh is
attracting a greater
number of
international buyers
from around the
world, who are
seeking
manufacturers that
can fulfill their
manufacturing
requirements and
on-time delivery of
the goods. Below is
a list of the
top 20 Buyers of the Bangladeshi Garment Industry, who alone accounted
for the 7.13% of the total 34133.27 million USD Garments export of
Bangladesh in 2019.

• Adidas • Academy
• H&M • US Polo
• Wal-Mart • American Eagle
• GAP • Banana
• Levi’s • Perry Ellis
• Nike • Zara
• VF Asia • Sainsbury’s
• Phillips-Van Heusen • C&A
• Li & Fung • Hugo Boss
• Old Navy • Puma

Section 9: The Major Contributors of

the Bangladesh
Garments Industry
The Textile Industry of Bangladesh was at its peak during the years 2012-
2013 with 5876 Garments factories. At present, in 2019 there are 4621
Garments factories operating in Bangladesh. From the years 2015 to 2019
we can see that the number of garments factories have been fluctuating
around 4500 from the below graph.

There are both Government owned and Privately owned Textile factories
in Bangladesh. And in reality, 98.14% of factories are actually privately
owned, with only 86 Government-owned factories. The most notable
government-owned textile factories are:
 • Bengal Textile Mills in Jashore
• Sundarban Textile Mills in Sathkhira
• Rajshahi Textile Mills in Rajshahi
• Amin Textile Mills in Chattogram
• And Rangamati Textile Mills in Rangamati

All the government-owned textile mills are under the jurisdiction of

Bangladesh Textile Mills Corporation (BTMC). Bangladesh Bank has
reported that BTMC has the largest liability of any government-owned
enterprise with BDT 76.54 Billion in outstanding loans. And
unfortunately, BTMC’s 99% of the outstanding loans are default loans.
BTMC also has 636.38 acres of unused lands.

On the other hand, the major privately owned textile factories are operated by:

• DBL Group
• Ha-Meem Group
• Square Fashions Ltd.
• BEXIMCO Fashions Ltd.
• Opex Sinha Group
• Fakir Group
• Epyllion Group
• Standard Group
• Asian Apparels Ltd.
• Givensee Group of Industries Ltd.
In 2019, the Total RMG export of Bangladesh was 34133.27 million
USD. The privately-owned factories were the major contributors with
DBL group’s 600 Million USD, Ha-Meem group’s 550 Million USD, and
Square Fashions 104.63 Million USD contribution.

Picture: Knitting Machineries inside the Textile Factory of DBL Group.

PERCENTAGE
 Section 10: The Supply and Demand Ratio
of Bangladesh
Garments Industry
The Global Market of Exported Garments was valued at USD 421 Billion
in 2019 by the World Trade Organization. And the Garments Export
Industry of Bangladesh successfully managed to capture USD 34.13
Billion out of the total global market in 2019. Therefore, the Supply and
Demand ratio of Bangladesh’s exported garment industry was 0.08 in
2019, indicating a seller’s market. But in actual reality, Bangladesh
struggled to gain global market share.

Even though from 2018 to 2019 the garment export industry of

Bangladesh grew 11.49%, Bangladesh still lost 0.1% of the global market
share, from 6.5% in 2017 to 6.4% in 2018. While the closest competing
nation Vietnam gained 0.3% of the global market share, from 5.9% in
2017 to 6.2% in 2018. China still maintains the top position of Global
exporter of Textile products with USD 158 Billion and a market share of
31.3% in 2018, which was down from 34.9% in 2017. The global garment
export market share of the top five countries in 2018 is given below.

An Economist from World Bank Bangladesh has blamed the inadequate

delivery capacity of the Bangladesh Garment industry, an increase in
production costs, and a higher appreciation of BDT against the USD for
losing the competitive edge, resulting in a decline in the global market
share. On the other hand, he suggested, Vietnam has gained market share
because of better logistics support, shorter lead time, and bigger port
capacity.

Economists have suggested that the Bangladesh Government should take

on policies to promote diversification of products that are in high demand,
focus on non-traditional markets, and attract direct foreign investment to
start gaining Global
 Section 11: Impact of COVID-19 on the
Garments Industry of
Bangladesh
At the end of April 2020, orders for more than 3.17 billion USD had been
canceled, reported by 1,149 factories in Bangladesh. More than half of the
suppliers have had their in-process, or already completed, production
canceled. Cancellation of these current orders means a loss of resources
with an imminent threat to
the RMG
backward
linkage
industries, as
72.1% of buyers
refused to pay
for the raw
materials
already
purchased by
the suppliers.

However, 14
brands,
including H&M
and C&A have
agreed that they
will take their
export orders, in
contrast to the
long list of
brands refusing
to pay
for goods workers have already made for them.

The cancellation of orders has directly affected the lives of 2.27 million
workers. 47% of the garment workers reportedly stated that they had no
income currently.

The COVID-19 has pushed BGMEA into a difficult position to decide

whether or not to close the factories. On one hand, there has been pressure
from the suppliers to keep the factories open for the sake of survival of the
business. On the other hand, trade unions and activists from around the
world are worried about the lives of the garment workers and expect to
close down the factories.

Although, the BGMEA initially has urged the owners to close their
factories, it later allowed production in the factories which have export
orders and who are producing products such as, Personal Protective
Equipment and Face Masks to protect from coronavirus.

P a g e | 29

A Garments Factory in Bangladesh producing Personal Protective

Equipment.

• : Massive Job Loss

Any disruption in the RMG sector therefore will upset the economic
growth of the nation and hamper the socio-economic gains attained in
all these years. The fall in demand has already resulted in massive job
losses. It is feared that it may increase poverty in the country.

In March, the government had announced a $500 million bailout

package exclusively for the garment industry. Later, the government
announced another $8 billion stimulus package for all industries, a large
portion of it being earmarked for the garment and related industries.
Also, the Bangladesh Bank, the country’s central bank, has adopted an
industry-friendly policy and declared that none of the factories will be
considered defaulter until June.
These steps by the government are encouraging as it provides cushioning
time to the industry to absorb the initial shocks. However, these
measures are for the short-term and do not provide permanent
alternatives. Sustenance of the sector requires long-term measures, and
the stimulus cannot provide the solution.

Of the 47,000 manufacturing units in the country, a significant number of

them are involved with the garment industry. According to the BGMEA,
the industry needs Taka 4,000 crore monthly for salaries and wages alone.
So, the stimulus package could keep the factories floating around for a
few months only.

• : The Trade Unions’ Perspective

Since the outbreak of Covid-19, data from Bangladesh Garments
Manufacturers and Exporters Association (BGMEA) shows that $3.18
billion worth of orders were canceled from 1150 factories from mid-
March till April 16, affecting approximately 2.28 million workers,
leading to many workers being sent home without pay.

In the midst of this crisis, trade unions in the RMG industry have stepped
up to the front lines of the pandemic to negotiate the rights of the 4.1
million workers employed in this industry, demanding factory owners to
comply with government-mandated lockdowns by keeping factories shut
and to protect the jobs and wages of the workers.

Sadly, the reality of the RMG sector and all of its workers is that
there is no one-size-fits-all solution in this unprecedented crisis.

• : The Government Stimulus Package

On March 25, the prime minister announced a fiscal stimulus of
Tk50 billion for export- orientated industries, which includes the
RMG sector.

The stimulus package has been introduced with the objective of

protecting workers by ensuring job security and regular wage payments,
as well as protecting the industry through the retention of qualified
workers and a smoother transition into a post-COVID-19 economy.

The conditions set forth by the stimulus package stipulate that an

interest-free loan will be given to employers for the sole purpose of
payment of wages and benefits to workers for up to three months. Upon
successful applications to scheduled banks, the wages will be disbursed
 by the bank directly to the workers through their Mobile Financial
Services (MFS) or bank accounts.

The declaration of this package at the onset of the lockdown in

Bangladesh shows the government’s priority and commitment to
protecting the RMG sector and its employees.

Section 12: Data Analysis and Findings

Table-1: Sector Profile, Garments and Textiles, Bangladesh, 2018-19 FY

No. of export-oriented 4621

garments industries

Total garments export 34.13 billion $

% of total exports 84.21%

Labor force 4 million

% contribution to GDP 11.17%

The last FY can be characterized by negative to sluggish growth of
exports. In fact, first time in the history export growth registered negative
growth for four consecutive months on the trot. In December 19, the
growth raised its nose up but very slightly unlike the previous years.
However, according to World Bank and other economic models
Bangladesh is forecasted to sustain in 2020 and the garments exports are
also forecasted to grow positively.
% of value 63.23%
addition

Major products T-shirts, polo shirts, jerseys, pull

overs, trousers

Major markets EU, USA, Canada

Yarn Manufacturing
– 425 Fabric
Manufacturing – 796
No of textile units Dyeing-printing-
finishing – 240

Investment in Over 6 billion $

primary textile
sector
Exports of textiles 229 million $ (April-Sept 2019)

Exports of jute 333 million $ (April-Sept 2019)

goods

The sector profile shows that the total no. of garments factories registered
under BGMEA is 4621 now. If we analyze the trend of change in the no
of factories from chart 1, the number of new factories being added every
year is decreasing. There was a big drop in the number of industries in
2013-14 when accord and alliance came into action. After that, every year
the on

average around 75 new industries being added in total. Furthermore, we have seen that
around
200 industries have been shut down in the recent times which indicated
the newly added industries fully compliance and they are here to stay. So,
though the number of new industries every year is decreasing but the
quality of the newly launched industries is far better taking Bangladesh in
the next level as a role model of green industries and sustainable practices.
Overall, the total number of LEED-certified garment factories in
Bangladesh is 90 now, including the 24 platinum rated buildings,
according to the USGBC. Although the buyers are not paying any extra
money for green buildings, such initiative still helps a lot in branding, and
it is necessary for our own survival.
Another important thing to notice is the number of workers being stagnant
at 4 million for a few years now working directly in garments industries
according to BGMEA. It indicates that the total number of workers per
production unit is not increasing rather may be in the decreasing side. One
explanation can be adoption of some semi-automatic processes in the
production line resulting in less manpower requirement. Overall, this is
not a bad thing for the industry and the workers as they are being paid six
times more than a decade before.

Another major thing to look for is the value addition. Value addition is
increasing day by day as industries are becoming more self-sufficient in
backward linkage industries specially in knit sector. in woven sector the
industry is still dependent on foreign sources for fabrics which reduces the
value addition scopes. Matter of hope is that the denim sector is rising
heavily of late. According to major denim manufacturers of the country,
they used to produce denim trousers for $5.50 and $7.0 a piece earlier, but
now the price range has gone up to $10 to $11. Bangladesh exports denim
goods worth more than $3 billion a year and has already overtaken China
to become the top denim supplier to the EU. The production capacity of
the 31 denim mills in Bangladesh is more than 40 million yards a month
against a demand for nearly 70 million yards. The rest of the demand is
met through imports from countries like China, India, Pakistan, and
Turkey. According to manufacturers, new technologies used in washing
and polishing as well as the increasing use of finer fabrics and design are
allowing Bangladesh to add more value to denim items.

Analysis of the table-2 depicts cluster-based product’s export growth this

year. Both in knit and woven segment articles made from made-made and
synthetic fiber have registered huge growth. Woman’s or girls’ anoraks,
windcheaters, etc. of man-made fibers recorded the highest growth of
44%. Even in the knit segment products like jerseys and pullovers made
of man-made fibers are the top with 29.25% growth. In contrast, some
cotton-based articles registered very low growth. Specially men’s and
women’s trousers, blouses and pullovers made from cotton and other
materials (than man-made and synthetic) has recorded negative growth.
This analysis clearly indicates buyers’ transformation from cotton based
to non-cotton-based products in the recent past. And it can be surely
forecasted that the trend will be the same in the upcoming years. One big
reason may be the innovations in man-made and synthetic fibers and
products; today non- cotton products are as much (or in some cases more)
comfortable as cotton-based products. Also, today consumers are more
aware about the hazardous environmental impacts of cotton cultivation.
Another negative point about the synthetic products was concerned with
its non- biodegradability. This is a crucial point in the future business
decisions for the entrepreneurs as most of the back-ward linkage
industries are cotton based. So, if the trend continuous we will be

again dependent on foreign products and lose huge scope of value

addition.
Analyzing furthermore from table 3, exports to the traditional market has
been stable in the FY 2018-19 but in the last 6 months there is a negative
growth. Canada and the non-traditional markets registered highest growth
at 22.44% and 21.77% respectively in the last FY 2018-19. But even these
markets recorded a negative growth in the last six months at -12.18% and
-5.13% respectively. It will be very difficult to off-set this negative row
may be due to the corona virus epidemic in China. Many export orders
will be halted or delayed due to a seize in imports from China.

In the EU market Hungary, Cyprus, Portugal, Malta, and Sweden

registered highest growth, whereas the bigger markets like Germany,
UKI, Spain, France and Italy registered very low growth. In the non-
traditional market India, China, Japan, South Korea, and South Africa
recorded the highest growths. In this market segment only, Turkey
registered negative growth at
-27.02% and another potential market for Bangladeshi apparel Russia
registered 14.17% growth. so, overall indication from this analysis is that,
more market innovation is required to sustain the export market as the
regular markets like EU and USA are shrinking day by day mostly due to
their near shoring and even on shoring business strategies taken off late.

Section 13: Recommendations

 • : Development of Social Capital:
The concept of social capital in the industrial context can be defined as the
networks of relationships among people and enterprises who live and
work in the same industrial value chain, enabling those industries to
function effectively.

The social capital in the form of mutual trust between Bangladeshi

suppliers and a large number of the Western buyers is depleted by the
latter's cancellation of orders and refusal to pay the agreed price for the
finished goods. According to the BGMEA, orders worth 3 billion US
dollars were canceled as of early April 2020. In the home front, due to
canceled orders and unfair prices offered, the payment of wages to the
RMG workers suffered heavily. The trust between the workers and
employers of the RMG industry in Bangladesh got eroded too due to
delay and irregularity in paying the wages.

This calls for renegotiating the norms of future contracts between the
buyers and manufacturers, and bring necessary reforms in the current
standards of the 'Incoterms' - the universally accepted standards defining
the responsibilities and obligations of the buyers and sellers in
international trade.

• : Securing the Payment:

Strengthening the contact and securing the payment with the buyers and
retailers has to be ensured. The payment method in the garments industry
has been through open accounts, but the contracts are not specialized
enough to allow the buyers to compensate for any collateral damage
caused by any circumstance. The companies do not have to deal with
much damage due to the cancellations of orders if there are terms and
conditions in specialized contracts with the buyers. Big market players in
the global arena are facing losses but in a bearable scale. This is because
of the strong contracting they implement when dealing with the buyers.

• : Reduce Unnecessary Costs and Working Capital:

Reduction of the cost in the companies can not only be by the means of
laying off people in mass numbers. Without reducing people, there are
smarter ways to reduce costs. Many global companies are canceling the
bonus schemes and increments of the Chief Executives or the higher
officials. It is not only about affecting the individuals at the bottom of the
pyramid, but also trying to balance out by contributing from everyone a
little bit. Renegotiating with the vendors can also reduce costs, such as,
renegotiating with the owners of the factory space to reduce the rents and
charges. Renegotiating with the suppliers to reduce the costs of raw
materials if they are not much affected. As the demands are reduced due
to desperate circumstances, the supply can also be reduced which can
result in the reduction of working capital.

• : Tripartite Monitoring Taskforce:

A tripartite (government, BGMEA employers’ group, and IndustriALL
Bangladesh Council) monitoring task force has to be established under
the leadership of the Labor Ministry. The structure of the task force has to
be a tripartite one to ensure collaboration and coordination among all the
related governing bodies. This structure can foresee the interest of all the
parties involved in the sector. BGMEA can ensure the interests of the
Exporters and Manufacturers. The Labor Ministry would be responsible
for securing the interests of the workers and the government can provide
support in the conduct of the monitoring without any hindrance. The
taskforce would mainly function to monitor the recovery process and
secure the interests of all the parties involved in the sector and ensure the
health safety measures of those.

• : Manufacturing Masks and Personal Protective Equipment

(PPE):
Apparel exporters have started producing personal protective equipment
(PPE), following the standard set by the government, to boost the safety
and morale of health professionals in the fight against Covid-19. Apparel
makers said they received the approval of the Directorate General of
Health Services to produce five lakh pieces of PPE under a joint initiative
of the Bangladesh Garment Manufacturers and Exporters Association
(BGMEA). Twelve textile companies have already started production to
supply PPE to the local market, and they have also been requested to
export it to four countries

Section 14: Conclusion

The Garments Industry of Bangladesh occupies a unique place in the
economy of Bangladesh and has experienced substantial growth year
after year during the past 25 years. The Garments Industry is also the
largest exporting Industry in Bangladesh.

It is not any wonder that Bangladesh is taking advantage of various trade

agreements from international organizations, such as the Multi-Fiber
Agreement of World Trade Organization and is also taking advantage of
Duty and Quota Free garments exports to China, India and South Korea,
to have an impact in generating jobs, especially for the poor population of
Bangladesh and assisting the growth of the economy of Bangladesh.

To remain successful and thrive in the global market, the Bangladesh

Garments Industry must remove all the obstacles from the process of
shipping the garments abroad, the law and order of the country and also
strengthen the communication network between Bangladesh and
importing countries. The Garments industry must also ensure proper
power supply to its factories, and proper management of the seaport and
other utility services to help the Garments industry overcome its
weaknesses. Not only they needs to be unite rather they also needs to be
passionate about what they are doing. There must not be any sorts of
collision between the owners & employees.

After the Rana Plaza tragedy, we all know there was a huge problem in our
very own garments industry but we overcome that thing. Though it is still a
little bit shaky but we worked together & made a lot of changes. We have
already ensured a safe & secured work place for the workers, we have
ensured that they get their minimum possible wages at least, even we have
worked with the international dealers or consumers to make sure that we are
providing everything perfectly as the world wanted us to be. So, there is no
doubt that our garments industry has grown a lot & this process is going to be
the best possible outcome for our better future.

Bangladesh Garments industry is not only a name now. It’s something the
world market relies on, it’s something that shows how capable we are & it
is something that is making a lots of job sectors for our countryman &
ensuring that we get a perfect developing world what will turn into a
digital country over time. And as we call ourselves ‘Digital Bangladesh’
it is not so far when we can claim ourselves a Developed digital
Bangladesh & for that period of time it is the ultimate time to enhance &
focus on how to develop the most promising & advanced industry of
Bangladesh which is the Garments industry of Bangladesh.

Section 15: References

WORLD TRADE ORGANIZATION. (n.d.). Retrieved
October 23, 2020, from
https://www.wto.org/english/tratop_e/texti_e/texti_e.ht
m

RMG global market share: Bangladesh loses as Vietnam gains.

(2019, August 04). Retrieved October 23, 2020, from
https://www.dhakatribune.com/business/economy/2019/08/04/rmg-
global-market-share-bangladesh-loses-as-vietnam-gains

Bangladesh Textiles and Clothing Exports by country. (n.d.). Retrieved

October 23, 2020, from
https://wits.worldbank.org/CountryProfile/en/Country/BGD/Year/LTST/T
radeFlow/Export/Partn er/by-country/Product/50-63_TextCloth

TradeInformation. (n.d.). Retrieved October 23, 2020, from

https://www.bgmea.com.bd/home/pages/TradeInformation

Students, S., & Founder and Editor:Mazharul Islam Kiron is a textile

consultant. (n.d.). History of Ready-made Garment (RMG) Sector in
Bangladesh. Retrieved October 23, 2020, from
https://textilelearner.blogspot.com/2013/10/history-of-ready-made-
garment-rmg.html

|, M. (n.d.). RMG exports drop 19pc in FY'20. Retrieved October

23, 2020, from
https://thefinancialexpress.com.bd/economy/bangladesh/rmg-
exports-drop-19pc-in-fy20- 1593660880

|, M. (n.d.). RMG exports to major markets plunge in H1. Retrieved

October 23, 2020, from
https://thefinancialexpress.com.bd/economy/bangladesh/rmg-exports-to-
major-markets-plunge- in-h1-1596771440

Admin. (n.d.). Top 10 Leading Garment Factories in Bangladesh.

Retrieved October 23, 2020, from https://texgarmentzone.biz/top-10-
leading-garment-factories-in-bangladesh/

Fashionpress24. (2019, October 30). The Bangladesh Textile-

Garments Industry: Demand V Supply Chain Flow : A Review.
Retrieved October 23, 2020, from
https://www.fashionpress24.com/the-bangladesh-textile-garments-
industry-demand-v-supply- chain-flow-a-review/

Kabir, H., Maple, M., & Usher, K. (2020, July 31). Impact of
COVID-19 on Bangladeshi readymade garment (RMG) workers.
Retrieved October 23, 2020, from
https://academic.oup.com/jpubhealth/advance-
article/doi/10.1093/pubmed/fdaa126/5879065

Abdulla, H. (2020, July 08). Bangladesh highlights Covid's "devastating"

impact on RMG sector. Retrieved October 23, 2020, from
https://www.just-style.com/news/bangladesh-highlights- covids-
devastating-impact-on-rmg-sector_id139132.aspx
Sa, Piash, Washim, Siddik, Masud, Augustyn, K., & Wolf, A. (2020, July
19). Top Garment Buyers of Bangladesh. Retrieved October 23, 2020,
from https://ordnur.com/textile/top-garment- buyers-of-bangladesh/

Bhattacharjee, J. (2020, May 16). Bangladesh: COVID-19 badly impacts garment

industry.
Retrieved October 23, 2020, from
https://www.orfonline.org/research/bangladesh-covid19- badly-
impacts-garments-industry-65275/

Section 16: Appendix

APPENDIX TABLE 1: GROWING SHARE OF APPAREL
IN BANGLADESH'S EXPORTS

Total Export

Export of RMG of % of RMG

Year
(In Million Bangladesh export To Total
Export
US$) (In Million US$)
1976-77 0.012 417.00 0.02
1977-78 0.069 493.74 0.01
1978-79 0.104 618.81 0.02
1979-80 0.672 749.44 0.09
1980-81 3.36 709.85 0.47
1981-82 6.99 625.90 1.12
1982-83 10.84 686.60 1.58
1983-84 31.57 811.00 3.89
1984-85 116.20 934.43 12.44
1985-86 131.48 819.21 16.05
1986-87 298.67 1076.61 27.74
1987-88 433.92 1231.20 35.24
1988-89 471.09 1291.56 36.47
1989-90 624.16 1923.70 32.45
1990-91 866.82 1717.55 50.47
1991-92 1182.57 1993.90 59.31

1992-93 1445.02 2382.89 60.64

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- 4349.41 5752.20 75.61
2000
2000- 4859.83 6467.30 75.14
2001
2001- 4583.8 5986.09 76.57
2002
Total 36551.03 61470.20 --
Source: BGMEA.

APPENDIX TABLE 2: SHARE OF RMG EXPORT IN THE COUNTRY’S GDP

Values in Million US $

GDP at RMG export

GDP RMG
Year RMG as percentage
current Export Export ratio
of GDP
price
FY84 19636 31.57 0.00 0.16
FY85 21644 116.20 0.01 0.54
FY86 21170 131.48 0.01 0.62
FY87 23759 298.67 0.01 1.26
FY88 25604 433.92 0.02 1.69
FY89 27710 471.09 0.02 1.70
FY90 30477 624.16 0.02 2.05
FY91 30975 866.82 0.03 2.80
FY92 31335 1182.57 0.04 3.77
FY93 32031 1445.02 0.05 4.51
FY94 33853 1555.79 0.05 4.60
FY95 37940 2228.35 0.06 5.87
FY96 40726 2547.13 0.06 6.25
FY97 42319 3001.25 0.07 7.09
FY98 44034 3781.94 0.09 8.59
FY99 45713 4019.98 0.09 8.79
FY00 47125 4349.41 0.09 9.23
FY01 46934 4859.83 0.10 10.35

FY02 (p) 47374 4583.80 0.10 9.68

Source: CPD IRBD Database.

APPENDIX TABLE 3: CHARGES PROVIDED TO EPB BY THE

RMG UNITS (YEAR 2001)

Existing Rate/ Total Unit Total

Fee per Visa or
Components Unit (in million
Taka)
1. Visa Fee (For 24 hours delivery) 500 61061 30.53
2. Visa Fee (For 72 hours delivery) 150 -- --
3. Visa cancellation Fee 100 882 0.09
4. License Fee (Canada) Nil -- --
5. License cancellation Fee (Canada) Nil -- --
6. New Registration Fee 2000 150 0.30
7. Registration renewal Fee 1000 2929 2.92
8. Duplicate/Replacement issue 1000 100 0.10
of GSP
9. Duplicate/Replacement issue of CO 1000 100 0.10
10. CO issue Fee 100 60000 6.00
11. GSP issue Fee 200 53913 10.80
12. Export License issue Fee nil
Second Total 50.83
Grand Total (First total + 58.85
Second total)
Source: EPB, BGMEA.