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0 Introduction
1.1 Definition
Readymade garments industries mainly are the makers and sellers of fashionable clothing,
apparel industry, fashion business, fashion industry.
3.0 History
The readymade garments industry acts as the backbone of our economy and as a catalyst for
the development of our country. We take pride in the sector that has been fetching billions of
dollars as export earnings and creating jobs for millions of people in the country.
The Made in Bangladesh tag has also brought glory for Bangladesh, making it a prestigious
brand across the globe. Bangladesh, which was once termed by cynics a bottomless basket
has now become a basket full of wonders. The country with its limited resources has been
maintaining 6% annual average GDP growth rate and has brought about remarkable social
and human development.
It is really a matter of great interest to many how the economy of Bangladesh continues to
grow at a steady pace, sometimes even when rowing against the tide. Now we envision
Bangladesh achieving the middle-income country status by 2021. We firmly believe that our
dream will come true within the stipulated time and the RMG industry will certainly play a
crucial role in materializing the dream.
After the independence in 1971, Bangladesh was one of poorest countries in the world. No
major industries were developed in Bangladesh, when it was known as East Pakistan, due to
discriminatory attitude and policies of the government of the then West Pakistan. So,
rebuilding the war-ravaged country with limited resources appeared to be the biggest
challenge for us.
The industry that has been making crucial contribution to rebuilding the country and its
economy is none other than the readymade garment (RMG) industry which is now the single
biggest export earner for Bangladesh. The sector accounts for 81% of total export earnings of
the country.
When our lone export earner the jute industry started losing its golden days, it is the RMG
sector that replaced it, and then, to overtake it.
The apparel industry of Bangladesh started its journey in the 1980s and has come to the
position it is in today. The late Nurool Quader Khan was the pioneer of the readymade
garment industry in Bangladesh. He had a vision of how to transform the country. In 1978, he
sent 130 trainees to South Korea where they learned how to produce readymade garments.
With those trainees, he set up the first factory Desh Garments to produce garments for
export. At the same time, the 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, the first President of BGMEA, AM Subid Ali of
Aristocrat Limited also came forward and established some of the first garment factories in
Bangladesh.
Following their footsteps, other prudent and hard-working entrepreneurs started RMG
factories in the country. Since then, Bangladeshi garment industry did not need to look
behind. Despite many difficulties faced by the sector over the past few years, it has carved a
niche in world market and kept continuing to show robust performance.
Since the early days, different sources of impetus have contributed to the development and
maturity of the industry at various stages. We learned about child-labor in 1994, and
successfully made the industry free from child labor in 1995.
The MFA-quota was a blessing to our industry to take root, gradually develop and mature.
While the quota was approaching to an end in 2004, it was predicted by many that the phaseout would incur a massive upset in our export.
However, the post-MFA era is another story of success. Proving all the predictions wrong, we
conquered the post-MFA challenges. Now the apparel industry is Bangladeshs biggest
export earner with value of over $24.49bn of exports in the last financial year (from July
2013 to June 2014
sector. Meanwhile, India is been in the process of capturing the market. China and
Bangladesh is the biggest competitor in the clothing business for India. Regarding to
overcome this challenge India is taking initiatives and long term planning. For example:
According to Indias apparel export promotion council 12 apparel parks are planned to
establish by the Government of India. 4 of them are almost completed. They are planning to
earn over 6 billion USD within the year 2017.
Bangladesh Corporate Tax Rates:
The standard rate of corporate tax in Bangladesh is 27.5% in 2008 - 2009 tax years. This is
the standard corporate tax rate applicable to publicly traded companies in Bangladesh, a list
including tax rates for other corporations are as follows:
Publicly Traded Company 27.5%
Non-publicly Traded Company 37.5%
Bank, Insurance & Financial Company 45%
Mobile Phone Operator Company 45%
If any publicly traded company declares more than 20% dividend, 10% rebate on total tax is
allowed.
Political/ Legal Forces
In spite of having favorable business environment for RMG sector with having low labor cost
,duty-free export facilities to 27 European Union countries and 10 developed countries, this
sector is facing negative impact in business operations due to unstable political state .Among
various features of our political situation, most noticeable and important conditions may be
identified as follows:
Moreover, owing to some industrial accidents and deserters in recent years like April 2005 64 garment workers killed in building collapse in Savar ,more than 400 garment workers
killed in at least 213 factory fires between 2006 and 2009, according to Bangladesh fire
department November 2012 - at least 117 workers killed in fire at Tazreen Fashions in
Ashulia, and the most recent ,the eight-storey Rana Plaza building came crashing down on 24
April demonstrating the ugly politics of Bangladesh, The US duty-free trade privileges order
suspends Bangladesh's under the terms of a trade program called the Generalized System of
Preferences (GSP), designed to promote economic growth in developing countries suspecting
Bangladesh was not taking steps to afford internationally recognized rights to its workers.
While the foreign ministry in Dhaka described the move as harsh, saying the government had
taken clear measures to improve safety at clothing factories.
Socio-cultural
Society and culture is an important factor that must be given emphasis by any business,
specifically those who are operating in the global arena. It is important that any industry must
operate in compliance with the social systems in order to gain good reputation and effective
public image. On the other hand, cultural aspects is equally essential, in order to understand
the various needs of different individuals that belongs to different cultures. - Population
growth rate - Age distribution - Career attitudes - Consumer behavior - Religion and culture
itself. Although Consumer Rights Movement, enforcement of government regulations and a
structured view regarding the economic importance of Social responsibility are not yet so
widespread in the corporate world in Bangladesh. , business organizations can thereby have
an inclusive financial, commercial and social approach, leading to a long term strategy
minimizing risks linked to uncertainty. This is an investment, not a cost, much like quality
management.
Technological Segment
The manufacturing technology of garment production has been changing from labor-intensive
to more sophisticated and capital-intensive production. This change creates dissatisfaction for
the lower skilled workers because of their inability to adapt to the new manufacturing
process. Work dissatisfaction reduces the performance of workers and, in turn, company
performance is negatively affected. On the other hand, the positive relationships to
technological change include improvement of task significance, salary increase, improvement
of the quality of supervision, improved co-workers relations and increase benefits, in
addition, if skilled technicians are available to instruct, prearranged garment is an
option because labor and energy cost are inexpensive here.
After the Macro environment analysis of the Readymade Garments industry of Bangladesh,
we must confess that the Competitive strategic factor for Bangladesh, the human capital or
cheap labor, is itself the competitive advantage of the RMG industry. So, the labor cost and
human resource is the main part of formulating the business and competitive analysis RMG
industry of Bangladesh. In recommendation, we must say that some effective initiative should
be implemented as follows:
fair pay
rewards for work
attention to the subordinates' feelings
work redesign
communicating company goals to workers
sharing information, increasing benefits
increasing promotions
providing more skill training to women garment workers
Bank Interest Rates should be lower.
The success of the export-oriented clothing industry can be attributed to four key factors:
(a) Quality
(b) Price
(c) Lead-time and
(d) Reliability
Threat of Substitutes
Bangladesh, in terms of substitutes, plays both the roles of an affected and an opportunist.
China and India are growing their customer base at a higher pace than Bangladesh. This is
due to poor country branding, and less power to influence customers. Due to these reasons,
customers sometimes prefer China or India to Bangladesh. More to add, Bangladeshi
products are being substituted due to lack of supplier power and governments reputation.
Many firms, buyers, investors are now hesitating to invest in Bangladesh due to unstable
political scenario. Thus the opportunity for Bangladesh is being substituted to either China or
India. Also, the substitute cost is not that high for buyers to switch to a Chinese producer or
even to a Sri Lankan producer. On the other hand, due to the lower production cost,
Bangladesh plays a major role in substituting the Chinese and Indian manufacturers. This
opportunity has to be nurtured by the Bangladeshi industry to ensure its growth and
profitability. Bangladesh posses the ultimate weapon of cheap labor and thus at times, it has
to use it to substitute opportunities from its competitors.
Demand
for Opportunity
work contract
seeking
Risk taking
.893
0.675
Information seeking
.888
0.789
Persistence
.887
0.657
Systematic planning
.858
0.758
.811
0.654
.786
0.748
Self confidence
.757
0.642
Goal setting
.674
0.853
.956
0.945
.936
Opportunity seeking
Eigen Value
6.843
1.489
1.201
Proportion of Variance
48.881
10.638
9.577
48.881
59.519
69.096
10
0.745
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6.1 Strengths
One of the strengths behind the success of RMG of Bangladesh is the availability of low cost
labor compared to other countries in the region. The labor rates in textile industry (compiled
by Warner International) show that the average hourly wage rates for Bangladesh, India,
Pakistan and Sri Lanka were respectively US$ 0.23, $0.56, $0.49 and $0.39 (Bhattacharya
1999a). Being in the manufacturing of RMG for two decades, Bangladesh now possesses a
large pool of skilled & semiskilled manpower. Moreover, there are many unemployed young
men and women who can easily be converted into a skilled workforce if needed.
Given the fairly long learning curve in this industry, extensive experience in dealing with
foreign buyers, offshore bankers, shippers, and Clearing and Forwarding (C&F) agents is a
valuable asset for the exporters of Bangladesh.
6.2 Weaknesses
Dependence on others for raw materials, low productivity, limited knowledge in international
marketing information, poor infrastructure, political instability, disruptive trade unionism,
inefficiency in port management, and excessive dependence on RMG sub-sector are the
major weaknesses of the industry.
The industry is heavily dependent on others for outsourcing of raw materials such as clothing
and accessories. Bangladesh is currently importing raw materials (gray fabrics) for its RMG
factories from countries like India, China and Thailand under back-to-back L/Cs. In a quota
free environment, these countries will obviously try to export finished apparels to North
American markets rather than sell fabrics to countries like Bangladesh .With equal access to
the world market, these direct competitors will either stop selling materials to their
competitors like Bangladesh (a strategic move) or charge higher prices for their materials
(because of increased internal demand). In either case, Bangladesh will face difficulty in
procuring the required raw materials at reasonable prices.
Another major shortcoming of the apparel sector is the low productivity of its workers. The
laborer productivity of Bangladesh is much lower than that of Sri Lanka, South Korea and
Hong Kong. Low productivity might erode the advantage of low cost of labor of Bangladesh.
Exporters of Bangladesh also have limited access to current market intelligence and
international trade information because, so far, foreign buying houses have been dominating
the marketing part of the business. In a post MFA era, if these buying houses shift their bases
to other countries, Bangladeshi exporters may face serious problems in finding their ultimate
buyers.
Besides numerous procedural, physical and/or infrastructure related bottlenecks; some
sociopolitical consequences have added fuel to the chronic go-slow and congestion problem
at the port. Some of these problems are:
Frequent work stoppage by different service providers, dock laborers, transport
workers etc.
Excessive dock labor unionism (there are about 30 different agencies/groups
including 22 workers unions).
Politicization of Collective Bargaining Agents (CBA).
Direct involvement of powerful local politicians, elite and musclemen
Illegal gratification practices (it has been a common phenomenon since long).
6.3 Opportunities
The greatest opportunities lie on the unlimited market outside Bangladesh. In a quota free
world, the United Nations Commission for Trade and Development estimated that removal of
the MFA and tariffs by developed countries will expand exports of clothing by 135 percent
and textile by 78 percent. Trela and Whalley using a global general equilibrium model,
estimated that the change will be much larger: the value of imports of textiles and clothing
will rise by 305 percent in the US, 200 percent in Canada, and 190 percent in EU. This
indicates that phasing out of quota will expand the market tremendously. Asia by far is the
largest player in the world textile and clothing market and, industry experts are confident that,
overall, Asia still will dominate.
Although Bangladesh lags behind in the textile sub-sector, it is very likely that the sector will
get a boost through forward integration with RMG.
In the knitting sector, Bangladesh gained substantial competitive advantage over her
competitors. According to the Bangladesh Knitwear Management and Exporters Association
(BKMEA) the cost of yarn production per kg. In the private sector of Bangladesh is only
US$1.48, whereas in India it is $1.78, in Pakistan $1.60, in Japan $2.38, in Korea $1.73 and
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in Thailand $2.78 (IFC 1998 cited in Bhattacharya 1999). Therefore, knit-RMG has a good
prospect for Bangladesh in post MFA period.
The apparel sector of Bangladesh mainly exports low-cost products to the international
market. But she can move into high value added products through diversification. This is not
impossible given her two decades of experience, good relationship with buyers, worldwide
reputation, and presence in quality-conscious United States and EU markets. Recently it has
already penetrated the difficult but lucrative quality-conscious Japanese market.
6.4 Threats
India & Pakistan biggest threat for Bangladeshi RMG & textile export. The threat also will be
the fierce competition from efficient producers like Hong Kong, China, Thailand, and Sri
Lanka, Vietnam and many SSA and Caribbean countries. Threats might come not only from
marketing but also from outsourcing. As mentioned earlier, more than 95 percent fabrics are
imported from direct competitors. The potential danger after 2005 is that these countries
might either stop selling their raw materials to Bangladesh or increase the price of their
materials tremendously. Whatever may be the case, Bangladesh will lose some competitive
edge in the world market.
Environmental issues, labor standard, Trade Related Aspects of Intellectual Property Rights
(TRIPs) etc. might also appear as a deadly threat to developing countries like Bangladesh. In
the words of Reza.
Although developing countries are not being singled out for environmental issues, being
poorer, they cannot obviously maintain rigorous environmental standards. Moreover, the fact
that their competitive advantage often lies in natural resources and pollution-intensive
industries implies that they are vulnerable to being pressured to enforce stricter standards or
face less market access for their exports to developed countries.
Other issues like child labor have already proved as a sensitive issue in the western market.
Compliance to the Rules of Origin4 (ROO) may threaten the future market access and
performance of RMG sector of Bangladesh. In the case of woven-RMG, a two-stage, and in
the case of knit-RMG, a three-stage transformation (cotton to yarn, yarn to fabrics, and
fabrics to RMG) process is required for imported yarn from India. Bangladesh exporters also
had to pay back exempted duties amounting to about US$60 million (as per an agreement in
October 1997) to EU on the grounds of ROO violation and circumvention (Bhattacharya
1999).
Regionalism is another threat to the industry. The World Bank country study (1995)
expresses its concerns that Over the medium term it is also possible that NAFTA may lead
to a displacement of East Asian RMG imports into the U.S. and Canada. To the extent these
exports by the more efficient East Asian producers are then diverted to the European
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Community, they may tend to displace Bangladeshs RMG exports into Europe. In the US
market another challenge will come from Mexican apparel industry where it has zero tariff
access because of NAFTA. Mexicos share in US clothing imports increased by over 200% in
the period 1993-98. Extension of NAFTA membership to the other Latin American and
Caribbean countries may aggravate the situation further.
following: The clothing industry is highly dependent on export and is concentrated in a few
countries. Moreover, balance of trade of Bangladesh is highly sensitive to this export. So, the
government is providing all kinds of support to this sector regardless of comparative
importance.
A dormitory for 3000 workers in Chittagong is being set up jointly by the Chittagong
Development Authority (CDA) and BGMEA. One more dormitory is going to be set
up in Ashulia.
BGMEA ensures mandatory group insurance scheme for the garment workers and
staff.
BGMEA runs skill development programs for garment workers through several
training centers spread around the country.
BGMEA organizes Workers Fair annually. It also organized a voice talent hunt
program for garment workers titled Gorbo (pride).
10.0 Recommendation
Here are some recommendations which readymade garments factory must follow to have a
successful future worldwide.
10.1 Environment
Suggested Initiatives for Companies Operating in the RMG Sector.
Publicly report environmental impacts in line with GRI standards.
Join the Bangladesh UN Global Compact and produce a Communication on Progress.
Commit to zero discharge of hazardous chemicals. Every six months, check and
report waste emissions and have these reports externally verified
Investigate secondary uses for solid waste. Consider recycling solid waste as concrete
or converting it to fuel.
Develop and report processes to manage sludge emissions.
Send sludge and other emissions to internationally accredited labs for testing.
Work with other companies to disseminate best practices.
Follow all environmental laws, even those in draft form.
Include noise assessments in environmental assessment procedures.
Develop workplace recycling programs.
Build awareness of company environmental impacts within the company, and
commission suggestions from employees and managers on improving environmental
impacts.
Set specific environmental benchmarks for suppliers, and assist in building capacity to
reach them.
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Suggested Initiatives for the Government to Improve the Human Rights Practices of
Companies Operating in the RMG Sector.
Monitor all initiatives taken by companies to improve working conditions..
Provide incentives to workers and identify improvement of working conditions as a
policy priority.
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References
1. http://www.thefinancialexpress-bd.com/2008/04/16/30828.html
2. http://en.wikipedia.org/wiki/Bangladesh_textile_industry
3. http://www.mightystudents.com/search?q=A+SWOT+Analysis+on+Readymade+Gar
ment+Industry+in+Bangladesh
4. http://www.businesswire.com/news/home/20110511006349/en/Research-MarketsBangladesh-Apparel-Industry-Analysis
5. http://www.just-style.com/analysis/bangladesh-garment-industry-aims-for-fastgrowth_id109958.aspx
6. http://moshiur008.blogspot.com/2011/08/swot-analysiss-of-bangladesh-economy.html
7. http://e.unescap.org/tid/publication/aptir2456_haider.pdf