Ready-Made Garments Sector of Bangladesh: Its Contribution and

Challenges towards Development

THIS INTERNSHIP REPORT HAS BEEN SUBMITTED TO

THE DEPARTMENT OF BUSINESS ADMINISTRATION
AS THE PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION

School of Business
Canadian University of Bangladesh

SUBMITTED BY:
SHAHRIAR RAHMAN RAFI
ID: 22103066

Date of Submission: January 27, 2024

 Approval
This internship report of Shahriar Rahman Rafi has been approved by the following:

Supervisor

Convener, Internship Defense Board

Head of the Department

Page 2 of 43
 DECLARATION

I, Shahriar Rahman Rafi, hereby declare that the internship report on “Ready-Made Garments
Sector of Bangladesh: Its Contribution and Challenges towards Development” is prepared by me
after completing my three-month internship.

I confirmed that this report is prepared only for academic requirements, not for any other purpose.
I also assure you that this report is never submitted anywhere in Bangladesh before me.

_______________________________
Name : Shahriar Rahman Rafi
ID : 22103066
School Of Business
Canadian University of Bangladesh

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 LETTER OF TRANSMITTAL

January 27, 2024

To
Ms. Binita Sayeed
Lecturer
School of Business
Canadian University of Bangladesh

Subject: Ready-Made Garments Sector of Bangladesh: Its Contribution and Challenges

towards Development.

Dear Madam,

This is my most extreme joy to present the report titled " Ready-Made Garments Sector of
Bangladesh: Its Contribution and Challenges towards Development ". This report is a prerequisite
for me to successfully complete my BBA program. This report is based on the data, information,
admissible knowledge, and observations I made during my internship. Additionally, this report has
provided me with a fantastic research-based study experience and practical application. I have
found this academic work very powerful, gainful, proficient and potential. I have made every effort
to use all pertinent information, graphical views, and the organization's current situation when
writing this report, which has made the study much more comprehensive. Being given this
opportunity with a thorough understanding of the procedure and report-writing guidelines is a great
privilege for me. I sincerely hope you will pardon any errors made in the report.

Therefore, I sincerely hope and pray that you will be kind enough to accept my internship report.

Yours truly,

Name : Shahriar Rahman Rafi

ID : 22103066
School of Business
Canadian University of Bangladesh

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 ACKNOWLEDGEMENT

I am profoundly grateful for the strength and perseverance bestowed upon me by Almighty Allah,
which has been the cornerstones of my successful completion of the internship program and the
preparation of this report. I wish to express my deepest appreciation to all those who provided their
invaluable assistance and support throughout the duration of my internship and in the crafting of
this report. A special note of thanks is extended to the Canadian University of Bangladesh for
granting me the opportunity to undertake this enriching professional journey.

My heartfelt gratitude goes to Ms. Binita Sayeed, my internship supervisor, whose guidance and
insights were instrumental in the completion of this report. Her mentorship has been a beacon of
knowledge and inspiration.

I am also indebted to SQ Group for offering me a platform to grow professionally through my

internship. The experience and knowledge gained during my tenure with them have been of
immense value. I am particularly thankful to my manager and colleagues at SQ Group for their
camaraderie and support. Their collective wisdom has greatly contributed to my professional
development. Furthermore, I wish to acknowledge the faculty members from various courses who
have extended their expertise and assistance beyond the classroom, which has been vital in my
academic pursuits. My family and friends merit a special mention for their constant love and
unwavering support throughout my internship and academic endeavors. Their faith in my abilities
has been a source of motivation and has played a pivotal role in my achievements.

Lastly, I extend my gratitude to all the readers and users of this report, hoping that the insights
contained herein prove beneficial and informative. Your engagement with this work is highly
appreciated. I am indeed thankful to each individual who has played a part in this journey, as every
contribution has been significant and cherished, making this experience both possible and
rewarding.

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 EXECUTIVE SUMMARY

This internship report explores the multifaceted impact of the Ready-Made Garments (RMG)
sector on the economic landscape of Bangladesh. As a powerhouse of growth and foreign exchange
earnings, the RMG industry stands as a central pillar to the country's economy, providing extensive
employment opportunities and playing a critical role in socio-economic development. The research
employs a descriptive methodology, analyzing existing records to unpack the sector’s
contributions and the challenges it faces moving forward. The findings of the study highlight the
RMG industry's substantial contributions over the past thirty years. With the establishment of
4,222 RMG units, the industry has not only contributed to the development of physical
infrastructure but has also been instrumental in the growth of human capital. About 4 million
workers are employed directly within the sector, demonstrating its significance as an employment
generator. The RMG industry has had a profound impact on gender dynamics in the workforce,
with women constituting approximately 90 percent of its labor force—the highest female
employment rate in the sector in South-East Asia.

Economically, the RMG sector is a cornerstone of Bangladesh's GDP, accounting for 14.07
percent, and a remarkable 81 percent of the nation's total export earnings. This underlines the
sector’s pivotal role in the economic fabric of the country. Despite its successes, the study
identifies several challenges that could impede the future growth of the RMG sector. These include
the presence of unskilled workers, inadequate infrastructure, energy shortages, financial
constraints due to bank loans and high-interest rates, and an onerous tax burden.

Moreover, the study delves into the strategic significance of the RMG sector's role in international
trade relations and economic diplomacy for Bangladesh. As the sector operates within a globalized
market, its ability to adapt to changing international trade policies and consumer preferences is
pivotal for maintaining competitiveness. The research brings to light the necessity for innovation
in product design, investment in technological upgrades, and enhancement of quality standards to
meet the global market's evolving demands. Furthermore, the study emphasizes the importance of
sustainable practices, as environmental concerns become increasingly integral to international
trade agreements and consumer choice.

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Table of Contents
Acknowledgement 05

Chapter 1 Introduction 08

Chapter 2 Literature Review 13

Chapter 3 Methodology 17

Chapter 4 The Evolution of the RMG Sector in Bangladesh 20

Chapter 5 Economic Contribution of the RMG Sector 23

Chapter 6 Social Impact and Workforce Dynamics 27

Chapter 7 Challenges in the RMG Sector 30

Chapter 8 Global Competition and Market Dynamics 34

Chapter 9 Strategies for Sustainable Development 37

Chapter 10 Conclusion 40

Chapter 11 References 42

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CHAPTER 01
01
INTRODUCTION

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Background of the Study

The Ready-Made Garments (RMG) sector of Bangladesh is not just a critical component of the
country's economy; it is a vibrant narrative of growth, resilience, and transformation. This sector's
journey began in the late 1970s, with Bangladesh seeking economic diversification to reduce its
dependence on traditional jute exports. As the world economy moved towards globalization,
Bangladesh found its competitive advantage in low labor costs and a large, adaptable workforce.
The RMG industry blossomed, becoming the lifeblood of the national economy and a symbol of
the country's potential in the global market.

By the 1980s, the sector had attracted considerable foreign investment, fueled by favorable
government policies, duty-free access to European markets, and the Multi-Fiber Arrangement
(MFA) that governed world textile trade. The expiration of the MFA in 2005 was a watershed
moment, leading many to predict the downfall of Bangladesh's RMG sector due to increased
competition. Contrary to expectations, the industry not only survived but thrived, showcasing the
resilience and entrepreneurial spirit of Bangladeshi manufacturers.

The RMG sector has been pivotal in driving Bangladesh's GDP growth, accounting for a
significant portion of the country's total export earnings. Its exponential growth has transformed
the economic landscape, leading to the creation of millions of jobs, which in turn has had
substantial social implications, particularly in terms of women's employment and empowerment.
The sector's development has also spurred growth in related industries, from banking to logistics,
creating a multiplier effect across the economy.

However, this remarkable expansion has not been without its challenges. The sector has faced
criticism over labor rights and working conditions, exemplified by the tragic Rana Plaza collapse
in 2013, which brought global attention to the cost of neglecting workplace safety. This event
became a turning point, prompting various stakeholders, including the Bangladeshi government,
international buyers, and advocacy groups, to push for reforms to improve safety standards and
labor laws.

Despite such challenges, the RMG sector continues to be a beacon of economic hope for
Bangladesh, contributing significantly to the country's aim of achieving middle-income status. It
has been instrumental in reducing poverty and propelling the nation towards greater economic
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independence. The industry's success has also provided valuable lessons in development
economics, showcasing how strategic positioning in the global value chain can uplift a nation.

Understanding this sector's contribution to Bangladesh's development is critical not just for the
nation's policymakers and business leaders but also for international economists, investors, and
development specialists. The RMG sector's journey reflects the broader narrative of globalization,
international trade dynamics, and economic development in the post-industrial era. It poses an
exemplary case study of how a low-income country can leverage its comparative advantage to
make significant strides in economic development and poverty reduction.

As the Bangladeshi RMG sector stands at a crossroads, facing both unprecedented opportunities
and formidable challenges, this thesis will delve into its intricate dynamics. It will explore the
sector's evolution, its current economic footprint, and the obstacles that lie ahead. By providing a
comprehensive analysis, this study aims to contribute to a deeper understanding of the RMG
sector's role in shaping the developmental trajectory of Bangladesh. It will examine the complex
interplay between economic growth and social progress within the context of an increasingly
competitive global market.

Rationale for choosing the topic

The rationale for selecting the Ready-Made Garments (RMG) sector of Bangladesh as the focal
point of this study stems from its profound impact on the country's economy and its dynamic role
in the global apparel industry. This sector is not only the backbone of Bangladesh's industrial base
but also a critical driver for socio-economic development. The RMG sector's ability to generate
employment, empower women, and contribute to GDP makes it a compelling subject for in-depth
research. Furthermore, the sector's rapid adaptation to the global market despite numerous internal
and external challenges offers rich insights into the interplay between developing economies and
international trade. Studying the RMG sector provides an opportunity to explore the mechanisms
through which industries in developing nations can ascend in the global value chain, a topic of
great interest to both economic theorists and practical policymakers. This thesis aims to bridge the
gap between theoretical models of development and the tangible experiences of a nation
undergoing significant industrial transformation.
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Statement of the problem

The Bangladeshi RMG sector faces a multifaceted array of challenges that threaten its position
and future growth. These issues range from infrastructural inadequacies, such as unreliable power
supply and poor transportation networks, to compliance with international labor and environmental
standards. The sector also grapples with political instability, economic policy shifts, and the need
for technological upgrades to maintain competitiveness. Furthermore, the intense price
competition in international markets and the reliance on a limited number of foreign buyers
increase the vulnerability of the industry. These challenges underscore the need for a sustainable
development framework that ensures long-term growth and stability. This study will critically
examine these problems, assess their impact on the sector’s contribution to national development,
and explore strategic approaches to overcome them.

Research questions and objectives

The primary questions guiding this study are: What has been the contribution of the RMG sector
to the economic development of Bangladesh? What are the key challenges it faces, and how can
these be addressed to ensure sustainable growth? The objectives of this research include providing
an empirical analysis of the sector's economic impact, including its contribution to employment
and foreign exchange earnings. It also aims to identify the systemic challenges hindering the
sector's development and to propose actionable solutions. By achieving these objectives, the study
hopes to offer a comprehensive understanding of the RMG sector's capabilities and limitations
within the context of Bangladesh's broader development agenda.

Significance of the study

This research holds significant implications for a diverse array of stakeholders, from government
officials and industry leaders to international investors and development agencies. The study's
findings are expected to contribute valuable insights into the formulation of effective economic
policies and strategies that can enhance the RMG sector's performance. It can also serve as a
reference point for other developing countries seeking to emulate Bangladesh's success in
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leveraging their garment industries for economic growth. Additionally, the research has the
potential to impact the academic discourse on industrialization in developing nations, offering a
contemporary case study on the challenges and opportunities presented by globalization.

Scope and limitations

The scope of this study is confined to the RMG sector's contribution to Bangladesh's economic
development and the specific challenges it encounters. It focuses on the post-MFA era, providing
a contemporary analysis while acknowledging historical context. Limitations may arise from the
availability and reliability of data, as the sector is rapidly evolving and data may not capture the
latest developments. The study also recognizes that it cannot encompass all dimensions of the
sector's impact, such as the full extent of its social implications, due to the vastness of the subject
matter.

Structure of the thesis

The structure of this thesis is designed to facilitate a logical and comprehensive exploration of the
RMG sector in Bangladesh. Following this introductory chapter, Chapter 2 will present a literature
review that contextualizes the topic within the existing body of research. Chapter 3 will outline the
methodology employed in the study. Subsequent chapters will systematically dissect the sector's
evolution, economic and social impact, challenges, and the competitive global environment. The
final chapters will synthesize the research findings, present strategies for sustainable development,
and conclude with a summary of key insights and recommendations for future research. Each
chapter builds upon the last, culminating in a detailed and nuanced understanding of the sector's
role in Bangladesh's development trajectory.

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CHAPTER 02
02
LITERATURE REVIEW

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Review of the Global Apparel Industry

The global apparel industry is a dynamic and highly competitive sector that serves as a key
economic driver for many developing countries. This review, spanning 550-600 words, will delve
into the intricate fabric of the global apparel industry, emphasizing its evolution, current trends,
and the shifting landscape due to economic, social, and technological changes.

The apparel industry has traditionally been a path of entry into the industrial world for nations
seeking economic development. The sector is characterized by labor-intensive production, which
makes it accessible for countries with low labor costs. Historically, the industry has migrated from
high-wage to low-wage countries, a pattern observable from the movement of textile production
from the United Kingdom during the Industrial Revolution to later centers like the United States,
then to Japan, followed by the Asian Tigers, and eventually to China and other developing nations,
including Bangladesh.

The Multi-Fiber Arrangement (MFA) governed international trade in textiles from 1974 until its
phasing out on January 1, 2005, under the World Trade Organization's Agreement on Textiles and
Clothing (ATC). The MFA allowed developed countries to impose quotas on the amount of
clothing and textiles imports from developing countries, which had a significant impact on shaping
the global apparel industry's geography. With the end of the MFA, a more liberalized trade regime
emerged, leading to intensified competition and the reorganization of production networks.

Current trends in the global apparel industry are influenced by globalization, advances in
communication and transportation technologies, and the rise of fast fashion, which has shortened
fashion cycles and increased demand for quick turnaround times in apparel manufacturing.
Additionally, sustainability and ethical production have become paramount concerns as consumers
and advocacy groups push for greater transparency and responsibility in the supply chain.

The literature also highlights the role of global value chains (GVCs), where production is
fragmented and dispersed across multiple countries, with developing nations often undertaking the
labor-intensive assembly operations while developed countries maintain control over design,
branding, and retail. Studies have examined how countries like Bangladesh have integrated into
these GVCs and the implications for economic development and industrial upgrading.
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The Economic Impact of the RMG Sector on Bangladesh

The literature documents how the RMG sector has become the cornerstone of the Bangladeshi
economy, contributing to a substantial portion of the GDP and dominating the export earnings of
the country. This sector has been instrumental in propelling Bangladesh towards its goal of
achieving middle-income status. The literature review will explore various economic indicators to
gauge the RMG sector's impact, including employment generation, especially among women, and
foreign direct investment (FDI) inflows. Employment in the RMG sector has had a transformative
effect on the socioeconomic structure by providing income opportunities for millions of
individuals, thereby lifting numerous families out of poverty.

The Social Implications of the RMG Sector

In this segment, the literature's focus shifts to the social dimensions of the RMG sector, particularly
its role in women's empowerment and labor dynamics. The sector's reliance on a predominantly
female workforce has had profound effects on gender roles and economic participation in
Bangladesh. Literature has documented increased financial independence for women and changes
in societal norms as a result of their employment in the RMG sector.

Studies have also examined the sector's effects on labor rights, working conditions, and worker
safety, especially following high-profile incidents such as the Rana Plaza collapse. These events
have spurred a vast array of literature on corporate social responsibility (CSR), ethical sourcing,
and the improvement of labor conditions within the industry.

Challenges and Opportunities in the RMG Sector

This part of the literature review will assess the various challenges and opportunities identified by
scholars and industry experts. Challenges include compliance with international labor standards,
environmental sustainability, political instability, infrastructure bottlenecks, and the need for
technological advancement and skill development. The opportunities for the RMG sector, as
documented in the literature, lie in moving up the value chain, diversifying product ranges, and
entering new markets. The literature also explores strategies employed by other nations that have
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successfully transitioned their garment sectors to higher value-added production. It also examines
the Bangladeshi government's role in facilitating this transition and the potential impact of trade
agreements and economic policies on the sector's future.

Theoretical Frameworks

This last section of the literature review will present various theoretical frameworks used to
analyze the RMG sector's development. It will introduce economic theories related to
industrialization, trade, and development, such as the flying geese paradigm, comparative
advantage, and the role of state in market development. This theoretical context will provide a
foundation for understanding the RMG sector's evolution and its broader implications for
economic development in Bangladesh.

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CHAPTER 03
METHODOLOGY

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Research Design and Approach

For this research, a mixed-methods research design will be employed, integrating both quantitative
and qualitative approaches to allow for a comprehensive analysis of the RMG sector's contribution
to Bangladesh's economic development and the challenges it faces. The rationale behind choosing
a mixed-methods approach lies in its ability to provide a more complete understanding by marrying
the statistical depth of quantitative data with the contextual richness of qualitative insights.
Quantitative data will be gathered from various reputable sources, such as the Bangladesh Bureau
of Statistics, the Bangladesh Bank, the Export Promotion Bureau, and international trade bodies.
This data will include figures on export earnings, employment statistics, foreign direct investment
(FDI), and other economic indicators relevant to the RMG sector. Statistical analysis will be
conducted to discern patterns, trends, and correlations that offer insights into the sector's economic
impact over time.

Complementing the quantitative analysis, qualitative data will be obtained through semi-structured
interviews and focus group discussions with a range of stakeholders, including RMG factory
owners, workers, government officials, policy-makers, and representatives from non-
governmental organizations (NGOs) and labor unions. These discussions aim to capture the
nuanced perspectives on the challenges facing the sector and the lived experiences of individuals
who interact with it daily. The qualitative data will also help to interpret the implications of the
quantitative findings and provide a deeper understanding of the sector's dynamics.

Data Collection Methods

The data collection process will be structured into two main components: the collection of
quantitative data and the gathering of qualitative information. Quantitative data will be sourced
from secondary databases, industry reports, government publications, and international
organizations. This data will be carefully selected based on relevance, accuracy, and timeliness to
ensure the research's reliability and validity. For qualitative data collection, a purposive sampling
method will be used to select interview and focus group participants, ensuring a diverse and
representative sample of viewpoints from different segments within the RMG industry. Interview
guides and focus group protocols will be developed to steer the conversations while allowing
flexibility for participants to introduce topics they perceive as significant. Ethical considerations
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will be paramount, with informed consent obtained from all participants and measures taken to
ensure confidentiality and anonymity where requested.

Data Analysis Plan

Upon collection, quantitative data will be analyzed using statistical software to perform descriptive
and inferential statistical analyses. This will include the use of techniques such as regression
analysis to explore relationships between various economic indicators and the performance of the
RMG sector. Charts, graphs, and tables will be utilized to present the data in a clear and
interpretable format. Qualitative data from interviews and focus groups will be transcribed
verbatim and analyzed using thematic analysis. This process will involve coding the data to
identify recurring themes, patterns, and categories. The qualitative analysis aims to provide a
narrative that complements the quantitative data, highlighting the human experiences and
institutional contexts that underpin the numerical trends.

Ethical Considerations

This research will adhere to strict ethical guidelines to ensure the integrity of the research process
and the well-being of all participants. Prior to data collection, ethical approval will be sought from
an institutional review board. Participants will be provided with an information sheet outlining the
research's purpose, their role in it, and the use of the data collected. Informed consent will be
obtained, ensuring that participation is voluntary and that participants understand their right to
withdraw at any time without penalty.

Confidentiality will be maintained throughout the research process, with personal identifiers
removed from transcripts and any published materials. Data will be stored securely, and only the
research team will have access to it. Any potential conflicts of interest will be disclosed, and
transparency will be maintained in reporting the research findings.

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CHAPTER 04
03
THE EVOLUTION OF THE RMG
SECTOR IN BANGLADESH

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Historical Context and Growth

The history of Bangladesh’s Ready-Made Garment (RMG) sector is not just a business success
story but a narrative of socio-economic transformation. The RMG sector began its journey in the
late 1970s with a modest number of factories. These early entities laid the groundwork for an
industry that would later become the second-largest apparel producer in the world. In analyzing
the historical context, it is essential to discuss the role of the "Newly Industrialized Economies"
(NIEs) which shifted basic textile manufacturing to Bangladesh due to lower labor costs. The
sector gained momentum with the establishment of the Bangladesh Garment Manufacturers and
Exporters Association (BGMEA) in 1983, which played a critical role in organizing the business
interests of the RMG sector.

A pivotal point in growth was the introduction of the Multi-Fiber Arrangement (MFA) in 1974,
which provided quota-free access to Western markets. The phase-out of the MFA at the end of
2004 marked another significant turning point, as it forced Bangladeshi manufacturers to compete
directly with global producers. Despite predictions of a decline, the sector showed remarkable
resilience and continued to grow, thanks in part to the Generalized System of Preferences (GSP)
that allowed duty-free access to European markets.

The growth narrative will be supported by statistical data showing the exponential increase in the
number of factories, employment, and export volume. The data will illustrate the sector’s climb to
being responsible for more than 80% of Bangladesh’s total export earnings.

Policy Environment and Incentives

This section will address the supportive policy environment that has been instrumental in the
growth of the RMG sector. It will discuss the strategic export-oriented industrialization policies
adopted by the government, such as providing subsidies, establishing Export Processing Zones
(EPZs), and ensuring political support to attract Foreign Direct Investment (FDI).

The incentives offered by the government, including tax breaks, bonded warehouse facilities, and
cash incentives for exports, have significantly contributed to the sector's competitiveness.

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Additionally, the section will critically examine the impact of these policies on the industry's
sustainable growth and how they align with the country's broader economic goals.

Major Milestones and Turning Points

The RMG sector of Bangladesh has experienced several milestones that have been
transformational. The Rana Plaza tragedy in 2013, which claimed over a thousand lives, was a
grim wake-up call that led to sweeping reforms in workplace safety and labor rights, resulting in
the Bangladesh Accord and Alliance for Bangladesh Worker Safety. Both initiatives have brought
stringent safety standards and better monitoring, drastically reducing the number of accidents in
factories. Other significant milestones include technological advancements, such as the adoption
of green manufacturing practices and automation, which have begun to redefine the sector’s
operations. There has also been a shift towards higher value-added products and the development
of local backward linkages, reducing reliance on imported materials and fostering the growth of
the domestic textile industry.

Graph -1 Bangladesh RMG Export Market & Garment type

This section will provide a comprehensive analysis of how these events have redefined the sector,
influencing not just its capacity and efficiency, but also its international reputation and market
access. Through this lens, the evolution of the RMG sector will be portrayed as a continuous
process of adaptation and resilience in the face of global changes and internal challenges. In
summary, this Chapter will provide a rich, data-backed account of how the RMG sector in
Bangladesh has evolved from its inception to its current status.

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CHAPTER 05
03
ECONOMIC CONTRIBUTION OF THE
RMG SECTOR

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Contribution to GDP

The Ready-Made Garments (RMG) sector has been a cornerstone in the edifice of Bangladesh's
economic architecture, making a substantial contribution to the nation's Gross Domestic Product
(GDP). As a leading export earner, the RMG industry has fueled economic growth, bringing in a
significant share of the country's total revenue. This sector has not only bolstered the national
economy but has also been a catalyst for the development of related industries and services.

• The RMG sector's share in the national GDP has been consistently rising, underscoring its
importance in the economy.
• Growth trends indicate a positive trajectory, with the RMG sector outpacing other sectors
in GDP contribution.
• The sector's performance is closely tied to the economic health of the country, influencing
fiscal policy and development strategies.

Graph -2 Growth in Export and GDP

Employment Generation

Employment generation by the RMG sector has been transformative for Bangladesh, offering
livelihoods to millions and serving as a vehicle for social change. Its labor-intensive nature has
meant that jobs in the RMG sector have become a ladder out of poverty for many, particularly for
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women, who comprise the majority of the workforce. This has had far-reaching implications, not
only for the individuals and their families but also for the socio-economic fabric of the country.

• The RMG sector is one of the largest employers in Bangladesh, providing jobs that support
millions of families.
• Employment demographics in the RMG sector highlight the preponderance of female
workers, which has implications for gender dynamics in the workforce.
• The industry has sparked a significant rural-to-urban migration, contributing to the
urbanization trend and associated socio-economic shifts.

Foreign Exchange Earnings

The contribution of the RMG sector to Bangladesh's foreign exchange earnings is unparalleled,
with the industry being the largest source of foreign currency. The export-oriented nature of the
sector means that its health is directly linked to the country's balance of payments, and by
extension, its economic sovereignty. Fluctuations in the global market can have a pronounced
impact on the nation's foreign exchange reserves, illustrating the sector's vital role.

• The RMG sector's exports constitute a dominant share of Bangladesh's total export
revenue, making it a key player in the global apparel market.
• The consistent growth in foreign exchange earnings from RMG exports underpins the
sector's role in economic stability.
• Shifts in global trade policies and economic alliances can have significant impacts on the
sector's performance and, consequently, on the nation's foreign exchange situation.

Investment in the Sector

Investment in the RMG sector has been both a cause and a consequence of its growth. Capital
infusion, whether from domestic sources or foreign direct investment (FDI), has been crucial in
expanding the sector's capacity, adopting new technologies, and improving competitiveness. This
investment has not only modernized the sector but has also had a multiplier effect, fostering growth
in ancillary industries and services.

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 • The volume of investment in the RMG sector reflects confidence in its growth potential
and its role in the economy.
• Foreign Direct Investment (FDI) in the sector has facilitated technology transfer and
improved management practices.
• Investments in capacity building and modernization have been crucial for maintaining the
sector's competitive edge in the global market.

Graph -3 Expected Investment in RMG

Linkages with Other Sectors

The RMG sector's growth has fostered strong backward and forward linkages with numerous other
sectors, such as textiles, accessories, banking, and logistics. These linkages have not only enhanced
the RMG sector's own resilience and sustainability but have also been a boon for the wider
economy. By stimulating growth in related sectors, the RMG industry has contributed to a
diversification of the industrial base and spurred overall economic development.

• The RMG sector's demand for inputs has stimulated growth in the domestic textiles
industry and other related sectors.
• There are significant forward linkages as well, with the sector supporting industries in
branding, marketing, and retail.

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CHAPTER 06
03
SOCIAL IMPACT AND WORKFORCE
DYNAMICS

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Demographics of the Workforce

The Ready-Made Garments (RMG) sector of Bangladesh stands as a social phenomenon,

reshaping the demographics and socio-economic contours of the nation. As the largest employer
in the manufacturing sector, the RMG industry has not only provided substantial employment
opportunities but has also brought about significant demographic shifts. The workforce,
predominantly comprising women from rural areas, has altered family structures, community
dynamics, and social norms.

Women's participation in the workforce has had a

particularly transformative impact. Previously
relegated to the domestic sphere, the economic
empowerment of women has brought with it
changes in social status, decision-making power
within households, and a redefinition of gender
roles. The financial independence of women has
also led to delayed marriages, lower fertility rates,
and increased educational opportunities for their
children.

The RMG sector has also influenced migration

patterns, drawing a massive rural populace to urban
centers in search of work. This shift has contributed
to the urbanization of Bangladesh, changing the landscape of cities and straining urban
infrastructures. The migration has also had a profound impact on rural economies, as remittances
from urban-employed workers become a significant source of rural income.

However, the demographic shift is not without its challenges. The rapid urbanization process has
led to the growth of slums and informal settlements as the cities struggle to accommodate the
influx of workers. Additionally, the disparity in socio-economic status among workers has led to
the creation of new social hierarchies and tensions.

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The RMG workforce's demographics are characterized by the following:

• Young Population: The majority of workers in the RMG sector are young, with many
entering the workforce in their late teens or early twenties. This youthful workforce has
implications for the sector's dynamism and growth potential.
• Educational Background: Educational levels among the RMG workforce vary, but a
significant portion of workers have only basic education, highlighting the need for on-the-
job training and skill development programs.
• Ethnic and Regional Diversity: The sector draws workers from various ethnic
backgrounds and regions, contributing to the cultural melting pot within the industry and
promoting inclusiveness.

The social fabric of Bangladesh is being woven anew by the RMG sector, creating a tapestry that
reflects the complexities and vibrancies of a rapidly changing nation. The workforce demographics
within the RMG sector are a microcosm of this change, carrying within them the seeds of future
social transformation.

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CHAPTER 07
05
CHALLENGES IN THE RMG SECTOR

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Political and Economic Stability

The RMG sector's robustness is frequently tested by the political and economic climate within
which it operates. Political unrest, such as strikes or hartals, can halt production, delay shipments,
and discourage foreign investors. Economic fluctuations, both domestic and global, can affect
demand, pricing, and the availability of raw materials. In a sector where timing and cost-
effectiveness are crucial, political and economic instability can significantly disrupt operations and
growth prospects.

Key Challenges:

• Political instability disrupts the supply chain and deters investment, leading to potential
losses in market share.
• Economic uncertainty can result in fluctuations in currency and commodity prices,
affecting the cost structure of RMG operations.
• Ensuring continuous operations amidst political unrest or policy changes.
• Navigating the complexities of global economic cycles and their impact on trade and
investment.

Infrastructure and Logistic Issues

The efficiency of the RMG sector is intrinsically linked to the infrastructure and logistics network
of the country. Challenges such as inadequate road networks, port congestion, and power shortages
can lead to increased lead times and higher operational costs. Efficient logistics are vital for
maintaining the competitiveness of the RMG sector in the global market, where speed and
reliability are of the essence.

Key Challenges:

• Poor infrastructure can lead to inefficiencies that erode the competitive advantage of the
RMG sector.
• Logistic challenges increase the risk of non-compliance with delivery schedules,
impacting buyer confidence and future orders.
• Upgrading transportation networks and port facilities to reduce bottlenecks.

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 • Ensuring reliable energy supply to maintain uninterrupted production.

Compliance with International Labor Standards

The RMG sector has come under intense scrutiny for labor practices, and compliance with
international labor standards is a pivotal challenge. The industry faces pressure to improve
working conditions, ensure fair wages, and eliminate child labor. Failure to meet these standards
can lead to sanctions, loss of business, and damage to reputation, which in turn can affect the
entire sector's performance.

Key Challenges:

• International buyers are increasingly vigilant about labor conditions in their supply chains,
influencing their sourcing decisions.
• Compliance with labor standards is not only a moral imperative but a strategic one,
affecting market access and profitability.
• Implementing effective monitoring and compliance mechanisms within factories.
• Balancing the cost implications of improved labor practices with the need to remain cost
competitive.

Environmental Sustainability

Environmental sustainability is a growing concern within the RMG sector. Industry is a significant
contributor to environmental degradation through water pollution, waste generation, and
greenhouse gas emissions. Sustainable practices are essential to mitigate these impacts and ensure
the long-term viability of the sector. Implementing eco-friendly technologies and processes can be
resource-intensive but are increasingly becoming a business necessity.

Key Challenges:

• Environmental impacts can have direct and indirect costs for businesses, including
regulatory fines and reputational damage.

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 • Adoption of sustainable practices can lead to cost savings in the long run and open up
new market opportunities.
• Investing in cleaner production technologies and waste management systems.
• Aligning with global sustainability standards and certifications to meet buyer
expectations.

Technological Advancement and Adaptation

To remain competitive in the global marketplace, the RMG sector must embrace technological
advancements and adapt to new manufacturing practices. This includes automation, data analytics,
and the use of artificial intelligence. However, upgrading technology requires significant
investment and skilled labor, which can be a barrier for many RMG manufacturers in developing
economies.

Key Challenges:

• Technological advancements can lead to increased productivity, better quality control,

and reduced reliance on labor.
• Adapting to new technologies requires a skilled workforce and a shift in organizational
culture, which can be challenging to achieve.
• Accessing the capital and technical expertise necessary to modernize manufacturing
facilities.
• Training and developing the existing workforce to adapt to new technologies and
processes.

These challenges highlight the complex landscape within which the RMG sector operates.
Addressing these issues requires a multi-faceted approach, involving policy reforms, investment
in infrastructure and people, and a commitment to sustainable and ethical practices. The sector's
ability to navigate these challenges will determine its future trajectory and its role in the global
economy.

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CHAPTER 08
06
STRATEGIES FOR OVERCOMING
CHALLENGES IN THE RMG SECTOR

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Strengthening Political and Economic Foundations

To mitigate the impact of political and economic instability, the RMG sector should engage in
proactive measures that can protect and stabilize operations.

Policy Advocacy:

• Collaborate with trade associations to advocate for industry-friendly policies.

• Encourage dialogue between the government and private sector to foster a stable economic
environment.

Risk Management:

• Develop contingency plans for political events that may disrupt operations.
• Diversify markets to reduce dependence on a single economy.

Upgrading Infrastructure and Logistics

Addressing infrastructure and logistics inefficiencies requires a concerted effort by both industry
stakeholders and the government.

Public-Private Partnerships:

• Leverage public-private partnerships to invest in infrastructure upgrades.

• Advocate for prioritization of RMG-related infrastructure projects.

Technology Integration:

• Employ advanced tracking and logistics technologies to optimize supply chain

management.
• Implement warehouse automation to enhance storage and inventory efficiency.

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Ensuring Labor Standards Compliance

• Complying with international labor standards is crucial for maintaining market access and
protecting the workforce.

Building Capacity:
• Invest in training programs to educate workers and management on labor rights and
standards.
• Establish independent auditing bodies to ensure compliance with labor laws.

Worker Empowerment:
• Support the formation of worker committees or unions to give employees a voice in
workplace conditions.
• Implement grievance mechanisms to address labor issues promptly.
• Promoting Environmental Sustainability
• The RMG sector must adopt sustainable practices to reduce its environmental footprint and
meet global standards.

Sustainable Sourcing:
• Shift to sustainable raw materials where possible to reduce environmental impact.
• Encourage suppliers to adopt green practices.

Efficiency Improvements:
• Invest in energy-efficient machinery and renewable energy sources.
• Implement water-saving techniques and proper waste management protocols.
• Embracing Technological Innovation
• Technological advancement is vital for the RMG sector to improve productivity and remain
competitive.

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CHAPTER 09
06
STRATEGIES FOR SUSTAINABLE
DEVELOPMENT

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Government Policies and Initiatives
• Develop and enforce strict environmental regulations for the RMG sector.
• Offer tax incentives and subsidies for sustainable practices and energy-efficient technology
adoption.
• Implement national sustainability standards for production processes and supply chains.
• Foster educational programs focusing on sustainable development within the industry.
• Create public awareness campaigns promoting the importance of sustainable RMG
practices.
• Facilitate access to low-interest loans for investments in green technologies.

Industry-Level Strategies and Compliance

• Adopt corporate sustainability protocols and regularly report on environmental impact.
• Invest in circular economy practices, such as recycling and upcycling textile waste.
• Collaborate with local communities to ensure resource conservation and fair practices.
• Engage in life cycle assessments (LCAs) to understand and minimize the environmental
footprint.
• Conduct regular training for employees on sustainability practices and compliance.
• Integrate sustainable sourcing by prioritizing eco-friendly raw materials.

Role of International Organizations and Buyers

• Set global sustainability standards for the RMG sector to adhere to.
• Provide platforms for sharing best practices and innovations in sustainable development.
• Offer technical and financial assistance to RMG manufacturers for sustainability projects.
• Encourage international buyers to commit to ethical sourcing and fair trade practices.
• Monitor and audit supply chains to ensure compliance with international labor and
environmental standards.
• Facilitate partnerships between RMG producers and international sustainability programs.

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Recommendations for Overcoming Challenges
• Establish multi-stakeholder partnerships to tackle industry-wide sustainability issues.
• Enhance transparency across the RMG supply chain through technology and data sharing.
• Prioritize research and development in sustainable materials and manufacturing processes.
• Strengthen the capacity of regulatory bodies to monitor and enforce sustainability
practices.
• Encourage consumer advocacy groups to raise awareness of sustainable RMG products.
• Implement continuous improvement programs to adapt to evolving sustainability
benchmarks.

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CHAPTER 10
06
CONCLUSION

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The Ready-Made Garments (RMG) sector of Bangladesh stands as a cornerstone of the nation's
economic framework, contributing significantly to its development while navigating a myriad of
challenges. As a powerhouse of employment and foreign exchange earnings, the RMG sector has
played a catalytic role in Bangladesh's impressive economic growth story. However, the journey
is not without its obstacles. The sector's contribution to the economy is substantial, providing
livelihoods to millions and empowering a vast workforce, including a large number of women.
This empowerment has had a ripple effect on societal structures, driving positive changes in
education, health, and living standards. Additionally, the RMG sector has been instrumental in
propelling Bangladesh onto the global stage, establishing it as a key player in the international
fashion and apparel market. The resulting economic dynamism has facilitated infrastructural
improvements, technological upgrades, and spurred the growth of ancillary industries.

Despite its notable contributions, the RMG sector faces significant hurdles that must be addressed
to ensure sustainable development. Political and economic instabilities have periodically
threatened the sector's growth trajectory, highlighting the need for a stable and conducive business
environment. Infrastructure and logistic issues, such as port congestion and inadequate
transportation networks, have impeded operational efficiency, while compliance with international
labor and environmental standards remains an ongoing challenge. The industry is at a crossroads
where the adoption of sustainable practices is no longer optional but essential. The global demand
for ethical and eco-friendly production is reshaping business models, pushing the RMG sector
towards greener and more socially responsible practices. Technological advancement and
adaptation are also critical in maintaining competitiveness and meeting the evolving demands of
the international market.

In conclusion, the RMG sector of Bangladesh is at a pivotal juncture. Its undeniable contribution
to the country's development is juxtaposed with the imperative to overcome intrinsic challenges.
By embracing strategic, sustainable, and collaborative approaches, the sector can continue to thrive
and contribute to Bangladesh's development, setting a global example for how industries can
evolve to meet the demands of the future while safeguarding the interests of their workforce and
the environment. The journey ahead is complex, but with the collective will to innovate and adapt,
the RMG sector is well-positioned to maintain its momentum and play a transformative role in the
socioeconomic landscape of Bangladesh.
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CHAPTER 11
06
REFERENCES

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References:

1. Government Policies and Initiatives: Policy documents and official statements from the
Bangladesh government, such as the Ministry of Commerce or the Bangladesh Garment
Manufacturers and Exporters Association (BGMEA).

2. Industry-Level Strategies and Compliance: Research industry reports, sustainability

practices and compliance with labor laws, such as those published by the International
Labour Organization (ILO) or by non-governmental organizations (NGOs) focused on
labor rights.

3. Role of International Organizations and Buyers: Publications from international trade

organizations, such as the World Trade Organization (WTO) or the United Nations
Industrial Development Organization (UNIDO), that discuss their role in the RMG sector.

4. Recommendations for Overcoming Challenges: Academic articles in journals focused on

international development, economics, and sustainability that make recommendations for
the RMG sector.

5. Technological Advancements: Industry case studies or articles from technology-focused

publications that discuss the adoption of new technologies in the RMG sector.

6. Economic Contribution Data and Statistics: Data from the Bangladesh Bureau of Statistics,
World Bank, or other relevant economic development reports to support claims about the
economic contributions of the RMG sector.

7. Environmental Sustainability: Sources from environmental organizations or sustainability

reports from large RMG companies that highlight efforts and strategies to improve
environmental outcomes.

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