Major Country Wise RMG Export

Introduction:

The garment industry has played a pioneering role in the development of industrial sector of
Bangladesh. The textile and clothing sector now stands at a crossroads. Trade in RMG &
Textile sector has undergone a fundamental change as MFA quota system has been out on
December 31, 2004. Though it took a rather late start i.e., in 1976 but it soon established its
reputation in the world market within a short span of time. Resultantly garment is now one of
the main export items of the country. Besides, enriching the country's economy it has played a
very important role in alleviating unemployment. At present there are more than two thousand
one hundred garment factories in the country employing more than 10 million labors.
Once Sri-Lanka was leader in this field in South Asia and India was its competitor. After a
bloody civil war resulting in the quick demise of the garments industry of Sri-Lanka and India,
the international buyers and investors diverted their attention towards Bangladesh. As a result
the garments industry of Bangladesh expanded with unprecedented success.

History

In the 1950s, labors in the Western World became highly organized; forming trade unions. This
and other changes provided workers greater rights including higher pay; which resulted in higher
cost of production. Retailers started searching for places where the cost of production was
cheaper. Developing economies like Hong Kong, Taiwan and South Korea presented themselves
as good destinations for relocations because they had open economic policies and had non-
unionized and highly disciplined labor force that could produce high quality products at much
cheaper costs.

In order to control the level of imported RMG products from developing countries into
developed countries, Multi Fibre Agreement (MFA) was made in 1974. The MFA agreement
imposed an export rate 6 percent increase every year from a developing country to a developed
country. It also allowed developed countries to impose quotas on countries that exported at a
higher rate than the bilateral agreements. In the face of such restrictions, producers started
searching for countries that were outside the umbrella of quotas and had cheap labor. This is
when Bangladesh started receiving investment in the RMG sector. In the early 1980s, some
Bangladeshis received free training from Korean Daewoo Company. After these workers came
back to Bangladesh, many of them broke ties with the factory they were working for and started
their own factories.

Facts and Figures

In the 1980s, there were only 50 factories employing only a few thousand people. Currently,
there are 4490 manufacturing units. The RMG sector contributes around 75 percent to the total
export earnings. In 2007 it earned $9.35 billion. This sector also contributes around 13 percent to
the GDP, which was only around 3 percent in 1991. Of the estimated 10 million people
employed in this sector, about 50 percent of them are women from rural areas. USA is the largest
importer of Bangladeshi RMG products, followed by Germany, UK, France and other E.U
countries. In fact, Bangladesh is the 6th largest supplier of apparels in the US market.

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 Major Country Wise RMG Export

Contribution to the National Economy:

The role of the RMG sector in our national economy can hardly be over-emphasized. There has
been a steady development in our RMG export field during at least the last decade and a half but
in the last few years it has been unique. Readymade Garment (RMG) industry still remains the
mainstay of export earnings for Bangladesh. About 76 percent of total export earnings of
Bangladesh come from this sector. Export statistics from RMG sector in the last five years were
US$ 5,686.06 million in FY 2003-04, US$ 6,417.67.67 million in FY 2004-05, US$ 7900.80
million in FY 2005-06, US$ 9,211.23 million in FY 2006-07, US$ 10,699.80 million in FY
2007-08 and US$ 12.35 billion in FY 2008-09.

Development of the Export of RMG Sector:

In terms of GDP, RMG’s contribution is highly remarkable; it reaches 13 percent of GDP which
was only about 3 percent in FY91. This is a clear indication of the industry’s contribution to the
overall economy. It also plays a pivotal role to promote the development of other key sectors of
the economy like banking, insurance, shipping, hotel, tourism, road transportation, railway
container services, etc.

One of the key advantages of the RMG industry is its cheap labor force, which provides a
competitive edge over its competitors. The garment industry is by far the country’s most
important manufacturer, earning around $5 billion annually and accounting for about two thirds
of all exports. Bangladesh has about 2,500 garment factories with up to 10 million livelihoods
dependent on it directly or indirectly. About 80 per cent of garment workers are women.. The
sector opened up employment opportunities for many more individuals through direct and
indirect economic activities, which eventually helps the country’s social development, woman
empowerment and poverty alleviation.

Table: Comparative Statement on Export of RMG & Total Export of Bangladesh

Year Export of RMG (M Total Export of % of RMG to Total

US$) Bangladesh (M US$) Export
2003-04 5686.09 7602.99 74.79
2004-05 6417.67 8654.52 74.15
2005-06 7900.80 10526.16 75.06
2006-07 9211.23 12177.86 75.64
2007-08 10669.80 14110.80 75.83
2008-09 12347.77 15565.19 79.33

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 Major Country Wise RMG Export

Chemical
Tea
Agri. Product products Leather
1%
1% 1% Raw jute 4%
Others Jute goods
7% 2%
5%

Frozen food
6%

Knit wear
woven garments 18%
55%

Figure: Present export chart of Bangladesh

Fig: Export product of Bangladesh

Exporting Condition of Garments Industry:

RMG is the largest exporting industry in Bangladesh, which experienced phenomenal growth
during the last 20 years. By taking advantage of an insulated market under the provision of Multi
Fibre Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange
earnings, exports, industrialization and contribution to GDP within a short span of time. Over the
past twenty years, the number of manufacturing units has grown from 180 to over 3600. The
sector has also played a significant role in the socio- economic development of the country.

Table: Growth rate of garments in Bangladesh:

Year No of Factory Compound Growth rate in %

1999-00 3200 7.96
2004-05 4107 5.12
2005-06 4250 3.48
2006-07 4370 2.75
2007-08 4465 2.80
2008-09 4500 approx. 1.6

The export made by Garments Industries of Bangladesh is improving year after year except some
of the year. Strike, layout, shutdown of company, political problem, economic problem, inflation
etc. are the prime cause of decreasing export in this important sector. But above it, Readymade
Garments Industries is the leading sector in export sector.

Over the last thirty years, international trade and investment in the global textile and garment
(T&G) sectors has been influenced by Multi-Fiber Agreement (MFA) quantitative restrictions
(quotas) applied by the major developed country importers (the United States, the European
Union, Canada and Norway) on T&G exports from (predominantly) developing countries. MFA

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 Major Country Wise RMG Export

quotas were negotiated bilaterally and applied on a discriminatory basis to some exporting
countries but not to others, thus differing from country to country in both product coverage and
the degree of restrictiveness. From 1 January 2005 all such quantitative restrictions on the trade
in textiles and clothing were phased out, and finally abolished. Historically speaking that as per
requirement of The ATC, all MFA quotas on T&G products be removed over a ten-year
transition period split into three phases and ending on 1 January 2005, thus finally incorporating
international T&G trade into general GATT rules that prohibit discriminatory measures and call
for the reduction and elimination of quantitative restrictions. The quota system under the MFA
has distorted international T&G trade and has resulted in global welfare losses since quota limits
on the exports of selective producers have prevented an allocation of resources to the most
efficient T & G producers and prevented prices in quota protected developed country markets
from falling.

Table-1: Exports of Knit and Woven Garments to the United States

Rank Origin Amount (Million US$) Rate of Change (%)

2003 2004 2005 2003-04 2004-05
1 China 8690 10723 16808 23.39 56.75
2 Mexico 7098 6845 6230 -3.56 -8.98
3 Hong Kong 3732 3878 3523 3.93 -9.16
4 India 2056 2277 3058 10.74 34.29
5 Indonesia 2155 2402 2882 11.47 19.99
6 Bangladesh 1759 1872 2268 6.45 21.15
13 Combodia 1229 1418 1702 15.42 20.06
Source; Export Promotion Bureau

Table- 2: Exports of Knit and Woven Garments to EU

Rank Origin Amount (Million US$) Rate of Change (%)

2003 2004 2005 2003-04 2004-05
1 China 10913 13714 20334 25.66 48.27
2 Turkey 8112 9348 9790 15.24 4.72
3 Bangladesh 3471 4578 4346 31.90 -5.08
4 Romania 4124 4572 4285 10.87 -6.28
5 India 2599 3020 3988 16.23 32.02
19 Combodia 475 643 587 35.27 -8.77
Source; Export Promotion Bureau

Tables 1 and 2 show the trends in garment exports to the United States and EU from the five
largest garment exporters and the two leading exporters among the LDCs, Bangladesh and
Cambodia. It was revealed that China and India expanded garment exports to the US and EU, the
world’s two largest markets. Along with China and India, Bangladesh and Cambodia have also

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 Major Country Wise RMG Export

increased their exports to the United States during 2005 by more than 20 percent. Though their
garment exports to the EU declined between 2004 and 2005, the drops were not significant

B
C
20000 D

17500

15000

12500
Million US $

10000

7500

5000

2500

0
China India Bangladesh Srilanka Pakistan

Country
Export of knit and woven garments in USA(2006)

Table: Fiscal Year Basis

(Value In MN. US$ Quantity in MN Dozen)
TOTAL APPAREL EXPORT IN MN.US$
YEAR
WOVEN KNIT SWEATER TOTAL

2000-2001 3364.32 1018.64 476.87 4859.83

2001-2002 3124.82 941.1 517.83 4583.75
2002-2003 3258.27 1075.45 578.37 4912.09
2003-2004 3538.07 1531.71 616.31 5686.09
2004-2005 3598.20 1926.35 893.12 6417.67
2005-2006 4083.82 2772.97 1044.01 7900.8
2006-2007 4657.63 3305.51 1248.09 9211.23
2007-2008 5167.28 4058.43 1474.09 10699.8
2008-2009 5918.51 4570.64 1858.62 12347.77

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 Major Country Wise RMG Export

Major country wise export scenario of garments product from Bangladesh:

The major destination of our RMG products is EU, USA, Canada, Japan, and Australia.

Bangladesh is currently the 4th largest apparel exporting country to the US market, trailing
behind only China, Vietnam and Indonesia. Not long ago, Mexico’s apparel exports were
significantly higher than of Bangladesh which is reversed in the recent months.

Bangladesh was the top export performer in the European Union market in 2009 with 6 percent
growth, when all other countries, except for Qatar, suffered an export fall in the common market
due to a global financial contraction.

Bangladesh shipped products worth 5.8 billion euro’s to the EU in 2009, increasing from 5.7
billion euro’s in 2008, witnessing a 6.3 percent rise. During the time, Bangladesh outperformed
its global competitors: China, India and Vietnam.

Table: Major Country wise export documents

Source; Export Promotion Bureau

Analysis of country wise export shows that the USA is the main destination of our export. It
appears from Table that in FY 2008-09, the USA secured the top position in respect of importing
commodities from Bangladesh followed by UK (14.58%), Germany (9.64%) and France
(6.62%). During the period under report, goods worth US$4,052.00 million were exported to the
USA, which was 26.03 percent of the total export of the country. The principal commodities
exported to USA are woven garments, knitwear.

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 Major Country Wise RMG Export

Table: Export target and performance during FY 2002-03 to 2008-09.

Source; Export Promotion Bureau

Table: Export from Bangladesh to SAARC member countries.

Source; Export Promotion Bureau

Problem:

The garment industry of Bangladesh has been the key export division and a main source of
foreign exchange for the last 25 years. National labor laws do not apply in the epzs, leaving
BEPZA in full control over work conditions, wages and benefits. Garment factories in
Bangladesh provide employment to 40 percent of industrial workers. But without the proper laws
the worker are demanding their various wants and as a result conflict is began with the industry.
Low working salary is another vital fact which makes the labor conflict. Worker made strike,
layout to capture their demand. Some time bonus and the overtime salary are the important cause
of crisis. As a result the production is hampered. Insufficient government policy about this sector
is a great problem in Garments Company.

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 Major Country Wise RMG Export

There are some other problems which are associated with this sector. Those are- lack of
marketing tactics, absence of easily on-hand middle management, a small number of
manufacturing methods, lack of training organizations for industrial workers, supervisors and
managers, autocratic approach of nearly all the investors, fewer process units for textiles and
garments, sluggish backward or forward blending procedure, incompetent ports, entry/exit
complicated and loading/unloading takes much time, time-consuming custom clearance etc.

Prospectus of the RMG industries:

Despite many difficulties faced by the RMG industry over the past years, it continued to show its
robust performance and competitive strength. The resilience and bold trend in this MFA phase-
out period partly reflects the imposition of ‘safeguard quotas’ by US and similar restrictions by
EU administration on China up to 2008, which has been the largest supplier of textiles and
apparel to USA. Other factors like price competitiveness, enhanced GSP facility, market and
product diversification, cheap labor, increased backward integration, high level of investment,
and government support are among the key factors that helped the country to continue the
momentum in export earnings in the apparel sector. Some of these elements are reviewed below.

Conclusion:

The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh
economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal
growth during the last 25 years. By taking advantage of an insulated market under the provision
of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign
exchange earnings, exports, industrialization and contribution to GDP within a short span of
time. The industry plays a key role in employment generation and in the provision of income to
the poor. To remain competitive in the post-MFA phase, Bangladesh needs to remove all the
structural impediments in the transportation facilities, telecommunication network, and power
supply, management of seaport, utility services and in the law and order situation. The
government and the RMG sector would have to jointly work together to maintain
competitiveness in the global RMG market. Given the remarkable entrepreneurial initiatives and
the dedication of its workforce, Bangladesh can look forward to advancing its share of the global
RMG market.