The history of readymade garments industry in Bangladesh

The RMG sectors is the largest export earning sector of Bangladesh.This industry
is a major source of foreign exchange starting in 1980,This industry had exported
USD$5 billion in 2002.In 2016 ,Bangladesh was the country to hold 2 nd place to
produce garments after China.Bangladesh is the world’s second-largest apparel
exporter of western fast fashion brands.Europeans are 60% buyers and Americans
are 30% buyers and 10% are other buyers of exported western brands
apparels.95% of the RMG factories are owned by the local investors,other 5% are
foreign investors. Bangladesh's garments industry has been part of the trade versus
aid debate. MFA-quota had benefited entreprenuers in Bangladesh’s ready-made
garments industry .The MFA-quota was a blessing for Bangladesh’s RMG industry
because it had helped Bangladesh take a root,gradually develop and become
mature. At the end of 2004, the MFA-quota had come to end, many anticipated that
the phase-out would arise an enormous upset in Bangladesh’s export.Nonetheless,
the post-MFA era is another story of success of Bangladesh.Bangladesh proved al
anticipation wrong and defeated the post-MFA challenges. The apparel industry
was Bangladesh's biggest export earner with value of over $27.9 billion of exports
in 2019-20 financial year.

The garments industry of Bangladesh started its journey in the 1980s.The person
who established 100% export-oriented RMG industry in Bangladesh was Late M.
Nurool Quader Khan,with a vision to transform the country.He sent 130 trainees to
South Korea so that they could be given both technical and marketing training.He
opened up the first garments factory in Bangladesh in 1977 named ’’Desh
Garments’’ in order to fulfill his objective of establishing a garments factory ,Desh
Garments was established as a joint venture with Daewoo of South Korea.Mr.
Quader launched both the bonded warehouse and back-to-back letter of credit
systems,which are considered as the standard protocols of Bangladesh’s garments
making trade.Many considered him the father of Bangladesh’s 100% export
oriented ready-made garments industry

In 1977,many others also stepped forward and set up some of the first garment
factories in Bangladesh.They were late Akhter Mohammad Musa of Bond
Garments,the late Mohammad Reazuddin of Reaz Garments, Md Humayun of
Paris Garments,Engineer Mohammad Fazlul Azim of Azim Group, Major (Retd)
Abdul Mannan of Sunman Group,M Shamsur Rahman of Stylecraft Limited,who
is the first President of BGMEA, AM Subid Ali of Aristocrat Limited also stepped
forward and set up some of the first garment factories in Bangladesh . Many other
prudent and industrious entrepreneurs followed theirs footsteps and formed RMG
factories in Bangladesh.After that Bangladesh garments industry did not need to
look behind.Now there are now more than 4.62 thousand garments factories in
Bangladesh.They are fulfilling both the demands of country people and other
worldwide people.All major global fashion brands are being served by Bangladeshi
RMG factories.

Impact of macroeconomic variables on RMG sector in Bangladesh

The real GDP growth rate of Bangladesh in FY 21 was 5.6%.The real GDP growth
rate in FY22 is projected to be 7.2%.In FY 2016-2017 the RMG sector had
generated US$28.14 billion and this was 80.7%of the total export earnings in
exports and also 12.36%of the GDP. Bangladesh had exported worth USD 3.8
billion in December 2021 which had made the annual export figure to USD 35.57
billion. This amount was USD 2.5billion higher than the previous record of
USD 33.07billion which was determined in 2019.
In 2022,with regards to overall GDP,the RMG sector’s contribution to overall GDP
is around 12 percent.,The RMG sector contributes around 83 percent of all export
earnings for Bangladesh.Instead of being a vital source of exports and job creation
and helping Bangladesh in taking a place on the global economic map,the RMG
sector has made a very small contribution to GDP.

Unemployment rate of Bangladesh in previous 5

years(2016-2020)
6.00%

5.00%

4.00%

3.00%
5.30%
4.35% 4.37% 4.29% 4.22%
2.00%

1.00%

0.00%
2016 2017 2018 2019 2020

Unemployment Rate

Figure:Unemployment rate of Bangladesh in previous 5 years(2016-2020)

In this graph we can see an increasing trend of unemployment rate.Though
Bangladesh is facing a high unemployment rate in recent years in Bangladesh,it
has a less impact on RMG sector.RMG sector created employment for millions of
people in the country .In 2015,there were more than 4 million workers in RMG
sector.After 6 years,on 2020 ,the estimated number of workers in RMG sector was
4.22 million.80%of garments workers are women.This industry has employed 2.8
million women.
But in 2020,COVID-19 had changed the export situation In terms of capital
investment,COVID -19 caused some factories to delay or to decrease planned
investment,including investments in increasing automation.RMG factories total
employment fell in the of 2020.RMG manufacturers faced loss in demand due to
COVID -19.RMG factories faced a shortage of raw materials because of
cancellation and delay of import shipments.Many buyers cancelled or renegotiated
confirmed procurement orders.In 2020,the RMG sector had experienced
cancellation of orders worth US$3 billion until April 3.Many workers got infected
with COVID-19.
The rate of interst in Bangladesh in 2022 is 4.75%.Special repo rate in Bangladesh
Bank is 7.75%.Reverse repo rate of Bangladesh Bank is 4.00% .Bank rate is 4.00%
set by the Bangladesh Bank.The real interest rate in 2019 was 4.88%.The real rate
of interest in 2020 was 2.64%.The real interest rate in Bangladesh is decreasing
year by year.The Govt. of Bangladesh is trying to maintain a moderate interest rate
so that economic activity in Bangladesh increases.High interest rate is a problem
for this sector ,then RMG manufacturers will not be able to take loans easily.

Bangladesh's Inflation rate of previous

five years(2016-2020)
6.00%
5.92%
5.90%
5.80% 5.78%

5.70% 5.65%
5.60%
5.50% 5.48%
5.44%
5.40%
5.30%
5.20%
5.10%
2016 2017 2018 2019 2020

Inflation rate

Figure:Bangladesh’s inflation rate for previous five years(2016-2020)

In FY 2019 the inflation rate was 5.48%In FY2020 ,the inflation rate of
Bangladesh was 5.65% .The inflation rate decreased to 5.56% in 2021.The
government has set the target of average inflation rate for FY22 at 5.3%This graph
indicates that the inflation rate of Bangladesh is fluctuating.Bangladesh Govt. is
trying to maintain a moderate inflation rate because if inflation rate
increases,Bangladesh garments manufacturers will face huge cost increases.The
cost of raw materials,gas,electricity and water supply,minimum wages for the
labors and also the costs associated with upgrading facories to make them safer
will increase.But it is a matter of fact that,as the interest rate increases ,the
exchange rates also increases which promotes the garments exports of Bangladesh.
The amount of domestic credit in FY 21 was 10.1%.In FY22 the amount of
projected domestic credit is 16.00%.On FY21 the amount of credit to the private
sector was 8.3%.The amount of credit to the private sector is projected to be
increased to 15.0%.Private sector credit grew by 8.37% in 8.37% in FY21.But this
growth is much lower than the targeted growth of 14.80% for this year and also
much lower than the actual growth of 8.61% in FY20.Nonetheless,this lower
growth might be associated with the uncertainties created by COVID-19 in
addition to banks’ conformity towards quality credit.In FY21 domestic credit grew
by 10.31 percent ,but the growth is lower than the targeted growth of 17.38% for
FY21 and it is also lower than the actual growth which was 13.66% in FY20.The
reason for this fall was large decrease of credit flow to both the public and private
sectors from the banking system because of the pandemic situation of COVID-19.
Bangladesh Govt. had created a BDT 5000 crore fund (approximately US$589
million) for lending to all export-based industries and RMG owners so that they
can pay salaries to workers for three months.
Inspite of slowdown of growth because of substantial impact of COVID-29 ,the
economy of Bangladesh had steadily recovered over FY21. From January
2021,Bangladesh started to administer COVID-19 vaccination,with the objective to
reduce the impact of COVID-19 and to ensure safety of the mass people.The
future looks bright for Bangladesh's RMG sector after a period of extreme
uncertainty because of the global pandemic.The latest apparel export figures
indicate that, inspite of the coronavirus pandemic and global lockdowns in
key markets, Bangladesh has set a new record for apparel exports in the 2021
calendar year.