a research on garments industry

A Survey on Garments Industry of Bangladesh 2014

1 A Survey on Garments Industry of Bangladesh

EXECUTIVE SUMMARY

Bangladesh had a historical reputation in production of textile products in addition to famous

Dhaka muslin. Fabrics from Bengal were found in ancient Egyptian tombs, and were traded

with the Roman and Chinese empires in the medieval age. In ancient Bengal a great deal of

expertise existed with regards to weaving of textile products as well as great reverence

towards its trade. In rural communities both men and women were apprenticed in weaving.

These skills and disciplines in sewing and weaving are passed down through generations and

are quickly transferred to production lines in modern knitwear factories.

In the early 1980s, there were small-scale independent investments in the readymade

garments (RMG) sector. At that time, it was not considered viable and received very little

government attention. Within a decade, the RMG industry in Bangladesh had flourished and

by the early 1990s it had emerged as a major employer. Under the dynamic leadership of the

private sector together with policy support from the government, the export oriented RMG

industry has shown a spectacular growth during the last two and a half decades.

The textile sector initially could not keep pace with the requirement of yarn and fabrics

particularly by the woven RMG sector as the textile and clothing industry was controlled by a

fairly small community of local entrepreneurs. However, the sector grew with vengeance and

the country currently exports over US$11 billion in textiles and garments, with a projected

target of US$24 billion dollars by 2020.

Three independent associations are responsible for the textile sector: the Bangladesh Textile

Manufacturers Association (BTMA), which represents spinners, woven fabric manufacturers

and dyeing units; the Bangladesh Garment Manufacturers and Exporters Association

(BGMEA), which represents the RMG sector, primarily the cutting and sewing units; and the

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), which represents

the knitwear fabric manufacturers, the fabric dyeing units and the knit garment cutting and

sewing units.

These three associations work either in collaboration, or independently from each other,

subject to the agenda they may be forwarding. However, it should be borne in mind that the

bulk of yarn manufactured by BTMA members is consumed by members of the BKMEA,

which at times leave the two associations at loggerhead opposing sides of an industry issue.



The three main government departments that work for apparel sector are the Ministry of

Textile and Jute, the Ministry of Finance and the Ministry of Commerce.

ECONOMY OF BANGLADESH

The economy of Bangladesh is a rapidly developing market-based economy. According to

the International Monetary Fund, Bangladesh ranked as the 44th largest economy in the

world in 2011 in PPP terms and 57th largest in nominal terms, gross domestic product of

US$269.3 billion in PPP terms and US$104.9 billion in nominal terms. More than half of the

GDP is generated by the service sector; while nearly half of Bangladeshis are employed in

the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather

and leather goods, ceramics, ready-made goods.

Exports of textiles and garments are the principal source of foreign exchange earnings.

Shipbuilding and pharmaceuticals have become a major force of growth, while the jute sector

is re-emerging with increasing global demand for green fibers. Remittances from

Bangladeshis working overseas, mainly in the Middle East, are another major source of

foreign exchange earnings.

After its independence from Pakistan, Bangladesh followed a socialist economy by

nationalizing all industries, proving to be a critical blunder undertaken. As life expectancy

increased, the limitations of land and the annual floods increasingly became constraints on

economic growth. Traditional agricultural methods became obstacles to the modernization of

agriculture. Geography severely limited the development and maintenance of a modern

transportation and communications system.

The partition of South Asia and the emergence of India and Pakistan in 1947 severely

disrupted the economic system. The united government of Pakistan expanded the cultivated

area and some irrigation facilities, but the rural population generally became poorer between

1947 and 1971 because improvements did not keep pace with rural population increase. The

lack of natural resources meant that East Pakistan was heavily dependent on imports, creating

a balance of payments problem.

Since Bangladesh followed a socialist economy by nationalizing all industries after its

independence, it underwent a slow growth of producing experienced entrepreneurs,

managers, administrators, engineers, and technicians. There were critical shortages of



essential food grains and other staples because of wartime disruptions. The war of

independence had crippled the transportation system. Hundreds of road and railroad bridges

had been destroyed or damaged, and rolling stock was inadequate and in poor repair.

Between December 1971 and January 1972, India committed US$232 million in aid to

Bangladesh from the politico-economic aid India received from the USA and USSR.

After 1975, Bangladeshi leaders began to turn their attention to developing new industrial

capacity and rehabilitating its economy. The government gradually gave greater scope to

private sector participation in the economy, a pattern that has continued. Many state-owned

enterprises have been privatized, like banking, telecommunication, aviation, media, and jute.

In the mid-1980s, there were encouraging signs of progress. Economic policies aimed at

encouraging private enterprise and investment, privatizing public industries, reinstating

budgetary discipline, and liberalizing the import regime were accelerated. The World Bank

approved $536 million in interest-free loans.

In January 2007, reserves stood at $3.74 billion, and then increased to $5.8 billion by January

2008, in November 2009 it surpassed $10.0 billion, and as of April 2011 it surpassed the US

$12 billion according to the Bank of Bangladesh, the central bank. In addition imports and

aid-dependence of the country has systematically been reduced since the beginning of 1990s.

This is a chart of trend of gross domestic product of Bangladesh at market prices estimated by

the International Monetary Fund with figures in millions of Bangladeshi Taka. However, this

reflects only the formal sector of the economy.

Year Gross Domestic Product

US Dollar Exchange

Inflation Index (2000=100)

Per Capita Income

(as % of USA)

1980 250,300 16.10 Taka 20 1.79 1985 597,318 31.00 Taka 36 1.19 1990 1,054,234 35.79 Taka 58 1.16 1995 1,594,210 40.27 Taka 78 1.12 2000 2,453,160 52.14 Taka 100 0.97 2005 3,913,334 63.92 Taka 126 0.95 2008 5,003,438 68.65 Taka 147

Table No 1: Gross Domestic Product 1980 – 2008 (Source: Bangladesh Economic Forum)



Fiscal Year Total Export Total Import Foreign Remittance Earnings

2007–2008 $14.11 Billion $25.205 Billion $8.9 Billion

2008–2009 $15.56 Billion $22.00 Billion $9.68 Billion 2009–2010 $16.7 Billion ~$24 Billion $10.87 Billion 2010–2011 $22.93 Billion $32 Billion $11.65 Billion

2011–2012 $24.30 Billion $35.92 Billion $12.85 Billion Table 2: Total Trade 2007 – 2012 (Source: Export Promotion Bureau)

OVERVIEW OF BANGLADESH GARMENTS INDUSTRY

The textile and clothing industries provide the single source of economic growth in

Bangladesh rapidly developing economy, exports of textiles and garments are the principal

source of foreign exchange earnings. Agriculture for domestic for domestic consumption is

Bangladesh largest employment sector. By 2002 exports of textiles, clothing and readymade

garments accounted for 77% of Bangladesh total merchandise exports.

By 2013 about 4 million people, mostly women worked in Bangladesh $ 19 billion industry

exported oriented readymade garment industry. Bangladesh is second only to china, the

second largest apparel exporter of western brand. In Bangladesh total garments factory are

about 5,600. Garments industry mainly based in Dhaka (Mirpur, Savar, Ashulia,

Hemayetpur), Gazipur, Narayangonj, Chittagong. In garments industry value chain mark

increases every year. Directly and indirectly more than 9 million dependent on garments

industry for their livelihood.

From 1947 to 1971 the textile industry like most industries in East Pakistan, were largely

owned by west Pakistanis. During that in the 1960s local Bengali entrepreneurs had set up

their own textiles and jute factories. Following its separation from East Pakistan the newly

1formed Bangladesh lost access to both capital and technical expertise. Until the liberation of

Bangladesh in 1971, the textile sector was primarily part process of import substitutions

industrialization to replace imports.

After the liberation, Bangladesh adopted export oriented industrialization by focusing on the

textile and clothing industry, particularly the readymade garments sector. Immediately after

the founding tea and jute were the most export oriented sectors. But due to constant flooding

declining jute fiber prices and significant decrease in world market, contribution of the jute

sector to the country’s economy deterioted.



In 1972 Government under Sheikh Mujibur Rahman founded Bangladesh Textile Mills

Corporation under this policy every textile miles were nationalized. BTMC never managed to

match the pre 1971 output and every year after 1975 - 1976 lost money heavily. In 1980s the

state owned all spinning mills in Bangladesh and 85% of the textile assets. Under the 1982

new industrial policy a large number of these assets including jute mills and textiles mills

were privatized and returned to their original owners.

In 1974 the multi fiber arrangement in the (MFA) in the North American market ensured that

trade in textiles and garments remained the most regulated in the world. Among other things

the MFA set quotas on garments exported from newly industrializing countries.

Entrepreneurs from quote free restricted countries like South Korea began quota hopping

seeking quota free countries that could become quote free manufacturing sites. The exported

oriented readymade garments emerged at this time.

Daewoo was an early entrant in Bangladesh when established a joint venture in December 27,

1977 with Desh Garments limited making it country’s first export oriented readymade

garments industry. In 1978 130 Desh supervisors and managers received free training from

Daewoo in production and marketing at Daewoo’s state of the art readymade garments plant

in Korea, 115 of 130 left Desh Garments limited and set up generate private exports firms or

began working for other newly formed export oriented RMG companies in Bangladesh for

much higher salaries than Desh Garments limited offered.

Global restricting processes including two non market factors such as quotas such as under

Multi Fibre Arrangement (MFA) (1974 - 2005) in the North American market and

preferential market access to European markets led an emergence of an export oriented

garments industry in Bangladesh in the late 1970s and ensured the garments sectors continual

success.

In early 1980s India and Sri Lanka were the major South Asian suppliers of RMG to USA

and Western Europe. After the onset of political problems in Sri Lanka and a consistent anti

export environment in India, western buyers and Eastern producers become interested in

trying their luck in Bangladesh, which was able respond quickly. 1980s was an era that set up

garments industry in Bangladesh.

In 1983 21 units were registered with the Bangladesh Garments Manufacturing and Exporters

Association which generated around $10 million. Apparel export grew but initially



readymade garments industry was not adequate supported by growth up and down the

domestic supply chain (spinning, weaving, knitting, fabric processing and accessories

industries.

In the end of 80s and start of 90s Bangladesh becomes one of the main hubs of world

garments industry. In 90s the knit section expanded mainly producing and exporting shirts, T

- shirts, trousers, and Jackets. In 1994 Bangladesh readymade garments industry was mostly

dependent on imported fabrics - the primary textile sector was not producing enough fabrics

and yarn.

From 1995 - 2005 the WTO agreement on textiles and clothing was in effect, wherein more

industrialized countries consented to export fewer textiles while less industrialized countries

enjoyed increased quotas for exporting their textiles, throughout the 10 years agreement

Bangladesh economy benefited from quota free access to European markets and desirable

quotas for USA and Canada market.

2

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1 Knitwear Industry in Bangladesh: A Case Study of Firms in Narayanganj - Mohammad Yunus.

2. Competitiveness of the Bangladesh Ready-made Garment Industry in Major International Markets - Mohammed Ziaul Haider

3. http://en.wikipedia.org/wiki/Bangladeshi_RMG_Sector

4 Trade, Development and Poverty Linkage: A Case Study of Ready Made Garment Industry in Bangladesh - Abdur Razzaue, Abu Eusuf



Table No 3: Annual Export of Bangladesh Apparel 1994 - 2011

Table No 4: Monthly Apparel Export Statistics of Fiscal Year 2010-2011 & 2011-2012 (3

months)

Table No 5: Comparison of Monthly Knitwear Export, Source (Export Promotion Bureau)



Table No 6: Annual Export of Bangladesh Apparel (destination wise), Source (Export

Promotion Bureau)

Table No 7: Major Export Destinations of Bangladesh Apparel.

Table No 8: Destination wise Export Performance of Bangladesh Apparel in FY 2010-11.



Table No 9: Export Scenario of Major Knitwear Exporters in the EU 27 & USA.

Table No 10: Country Wise Knitwear Import, EU 27.

Table No 11: Country Wise Knitwear Import, USA



Table No 12: Export Scenario of Major Woven Exporters in the EU 27 & USA.

Table No 13: Country Wise Woven Import, EU27.

Table No 14: Country Wise Woven Import, USA.

A Survey on Garments Industry of Bangladesh


Table No 15: Top 8 Bangladesh Apparel Items Exported to the

Table No 17: Major Apparel Export Items of Bangladesh to the EU and the USA

Table No 16: Top 8 Bangladesh Apparel Items Exported to the World in FY 2010



Top 8 Bangladesh Apparel Items Exported to the World in FY 2010

Major Apparel Export Items of Bangladesh to the EU and the USA

Top 8 Bangladesh Apparel Items Exported to the World in FY 2010

EU



World in FY 2010-11.

Major Apparel Export Items of Bangladesh to the EU and the USA.

Top 8 Bangladesh Apparel Items Exported to the World in FY 2010-11 US &



Table No 17: Top 10 (HS 6) Knitwear & Woven Items

Table No 18: Price (i.e. Value/ Quantity) Scenario of Top 8 Knitwear Items (HS 6) in EU 27

Table No 19: Price (i.e. Value/ Quantity) Scenario of Top 8 Woven Items (HS 6) in EU 27 Market



Top 10 (HS 6) Knitwear & Woven Items Exported in the Japan Market

Price (i.e. Value/ Quantity) Scenario of Top 8 Knitwear Items (HS 6) in EU 27

Market

: Price (i.e. Value/ Quantity) Scenario of Top 8 Woven Items (HS 6) in EU 27 Market



Exported in the Japan Market.

Price (i.e. Value/ Quantity) Scenario of Top 8 Knitwear Items (HS 6) in EU 27

: Price (i.e. Value/ Quantity) Scenario of Top 8 Woven Items (HS 6) in EU 27 Market.



Table No 20: Price (i.e. Value/ Quantity) Scenario of Top 8 Knitwear Items (HS 6) in US

Market.

Table No 21: Price (i.e. Value/ Quantity) Scenario of Top 8 Woven Items (HS 6) in US

Market.

CONCLUSION

Notwithstanding the debate about whether international trade can act as an engine of growth,

the role of Bangladesh’s export-oriented RMG sector in establishing a link between trade and

poverty alleviation cannot be overemphasized. The highly labor intensive nature of the

Production process has meant jobs for a large number of unskilled workers, particularly those

of the women, thereby having a direct impact on poverty. Restricted global textiles and

clothing trade regime along with EU trade preferences were most important factors for the

country to achieve a rapid growth in the sector, which had been effectively aided by generous

export incentives provided by the government.

Supply side problems have always characterized the production and exporting of RMG

from Bangladesh, nevertheless, the country has so far been able to maintain a robust growth

of the sector. With the abolition of MFA quotas while RMG exporters are now exposed

to a more difficult and competitive global business environment, labor unrest has also

added a new challenge to the industry that is currently at crossroads from the pressures for



improvement in competitiveness on the one hand and for providing higher pays and ensuring

better working conditions on the other. Given these, the trade-poverty nexus through the

RMG industry is currently under intense focus.

For Bangladesh, therefore, it is imperative to exploit every possible means to promote

Competitiveness of the sector. Reducing the costs of doing business is the one principal route

through which some immediate gains can be materialized.

With regard to setting up labor standards and their implementation, the Bangladesh case

illustrates the important role that the government can play in promoting trade-poverty

linkages. Certainly, addressing the issues related to working conditions will greatly open up

the possibilities for further improvement in workers’ welfare and human development.

However, the growth and expansion of the industry further by creating more employment

opportunities is the likely key to achieve faster poverty reduction through trade. How much

of the scopes can be exploited in the future, to some extent will be dependent on the country’s

export prospect in the post-MFA period.

APPENDIX

Product Wise knitwear Export of Bangladesh to EU 27

Product Wise Woven Export of Bangladesh to EU 27



Product Wise knitwear Export of Bangladesh

Product Wise



Product Wise knitwear Export of Bangladesh to USA

Product Wise Woven Export of Bangladesh to USA





BIBLIOGRAPHY

http://en.wikipedia.org/wiki/Bangladesh

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http://en.wikipedia.org/wiki/Bangladeshi_RMG_Sector

Global Shift Bangladesh Garment Industry in Perspective - Shahidur Rahman

Analysis Strategies of External Environment Influence - Camelia Teodorescu,

Silviu Costachie

Competitiveness of the Bangladesh Ready-made Garment Industry in Major

International Markets - Mohammed Ziaul Haider

Knitwear Industry in Bangladesh: A Case Study of Firms in Narayanganj -

Mohammad Yunus.

Rahman, S.H. “Trade and Industrialization in Bangladesh”. Chapter 8 in G.K.

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Trade, Development and Poverty Linkage: A Case Study of Ready Made

Garment Industry in Bangladesh - Abdur Razzaue, Abu Eusuf

http://en.wikipedia.org/wiki/Bangladesh

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a research on garments industry

Business

economy of bangladesh

textile sector

ministry of textile

woven rmg sector

readymade garments rmg

apparel sector

private sector

clothing industry