Contents

Part-A Global Industry Analysis

Overview of the Global RMG Industry ........................................................................................................ 2
Overview of the RMG Industry in Bangladesh............................................................................................. 6
Industry trends, ratios and statistics .............................................................................................................. 7
Overview of the Supply Chain of an RMG Firm ........................................................................................ 13
PEST Analysis for RMG Industry in Bangladesh ...................................................................................... 16
Key Success Factor and Constrain Analysis ............................................................................................... 18
Future prospects of Ready Made Garments Industry in Bangladesh .......................................................... 19
References ................................................................................................................................................... 21

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Overview of the Global RMG Industry

Looking at the global scenario of the RMG sector, the majority of the end consumers reside in
US, Canada and Europe. These countries usually do not produce the RMGs and outsources it to
different Asian and less developed countries where labor is cheap. Complicated designed are
outsourced from Southeastern Asia and simpler cloths from less developed countries usually.
Some of the underlying features of the RMG sector in the global context are outlined below
(cited Akter 2012):

China, Bangladesh, India, Vietnam, and Cambodia (Pakistan and Egypt can also be
included on this list, but with smaller market shares) are experiencing steady growth in
RMG.

Indonesia is increasing its market share in the US and Japan, and decreasing its share in
the EU.

Sri Lanka is increasing its market share in the EU and decreasing in the US.

Hong Kong, South Korea, Malaysia and other countries have decreasing market
shares since the 1990s besides the Philippines and Singapore.

China, Bangladesh and India is considered as the most steady supplier that means
China is no longer the only option for textile and apparel sourcing, and it certainly is no
longer the cheapest option.

Pakistan with low cost domestic supply of cotton and low labor costs, has a good track
record for pure cotton apparel production for items such as male T-shirts and cotton
jerseys. Good infrastructure and inland cotton is the strength for Pakistan but their
vulnerable image as a nation in the world is a drawback for their industry. Textile export
recorded $12.356 billion in 2011-12 which is around a billion dollar less than the last
fiscal though. Power energy shortage has emerged as a key problem for the industry
recently. Social compliance would remain an issue for the country while current fire
breaks in readymade garment industry kills around 350 workers recently.

Bangladesh has developed to a great extent with its fabric manufacturing industry,
supporting the rapid growing garments factories with its very low labor costs. Though the
production inputs (cotton & capital machineries) are completely imported, still the
country is the most competitive, thanks to its exceptionally cheap labor cost. Thus
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Bangladesh can be targeted for sourcing of cotton garments of basic design and standard
quality and it is the second best choice at present for the buyers. Bangladesh has exported
textile & apparel products worth $22.23 billion last year. As government still support the
cotton spinning mills with cash incentives, the country can overcome additional shipment
& transportation cost for raw materials. Over the years, industries are adopting skills and
performances to improve their quality and performance. Social compliance scenario is
improving but still possesses some issues to be addressed soon.

Sri Lanka has similar cost advantages as Pakistan and Bangladesh (although the cotton
price and labor costs are slightly higher), but operating and capital costs are higher, and a
lot more machinery needs to be imported. As a result, Sri Lanka could potentially only is
a sourcing target for certain niche products such as women's underwear. They have
established a positive image of practicing greener production. Sri Lanka is also the only
outsourced apparel manufacturing country in South Asia which has ratified all 27
International Labor Organization (ILO) conventions

India has a diverse and integrated fabric and apparel industry, and it now has lower labor
costs and cheaper cotton prices than China. These and other trends mean that India will
likely gain a comprehensive competitive edge over China in the future. India can be
targeted for sourcing fabrics and textiles across virtually all product categories.

Cambodia's textile industry is still highly underdeveloped, but low costs and government
support for the industry makes it attractive likewise for products such as basic design Tshirts.

Indonesia's cotton price is the lowest in the region, but operating costs are higher than
most countries in the region and much of the machinery in the industry is largely
outdated. Indonesia does, however, have substantial installed capacity across a range of
textile segments, and hence can be targeted for a number of products such as synthetic
fabrics, synthetic apparel, and high-end cotton shirts.

Vietnam has a lower cost base than China and India, although higher than Bangladesh
and Pakistan. The textiles and apparel industry is actively supported by the government,
and relatively significant currency depreciation makes the country's exports competitive.
The local workforce is still largely of a low-end skill base, however, meaning that

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Vietnam's best sourcing opportunities are still in basic designs and standard types such as
woven garments and children's products.

Myanmar would be the country to look at as it is going through some political reforms.
Surely the country has advantages of lower labor cost, cheaper power and energy. But the
country is still to build enough infra-structure to get in to the business significantly.
Governance issues and current reports about 'Rohinga' handling does not present them as
nice as Aung San Suu Kyi's parliament presence would show to the world.

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PART- B
Domestic Industry Analysis

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Overview of the RMG Industry in Bangladesh

The country entered in the export export oriented garments industry in 1970 with only 9 units
and earned USD 0.069 million. The leaders of RMG of that era like Singapore, Taiwan,
Indonesia and some developed countries were protected by the quota system in the foremost
ordering countries like USA, European Union. As a result Bangladesh became one of most
promising nation to establish RMG industry and utilize opportunity of restriction free system. As
stated by Zahed, A.M. (2007), at 1977 in the port city of Bangladesh, Chittagong became the
first place to establish countrys first RMG industry with the name of Desh Garments which
was joint venture with Korean Daewoo. A local entrepreneur by the name of Reaz and Jewel
became the first one to export at the middle of the same year (Zahed, A. M, 2007). Rahman
(2004) identified that the joint venture of Desh-Daewoo played a dynamic role in the growth of
the apparel industry in Bangladesh. For technical training, obtaining knowledge of machinery
and fabric and proportion of export earnings to be divided within the company the had joint
venture agreement (Rock, 2001). A potential growth 90% was noted at an early stage when the
operational value surpassed USD 5million and also created professionals who became key
persons to contribute to the Bangladeshi apparel industry (Mahmood, 2002). After the liberation
of 1971 Ready Made Garments industry became the main contributor of foreign earing for
Bangladesh. During the last three decades this sector has achieved a phenomenal growth, due to
policy support from the government and more importantly dynamism of the private sector
entrepreneurs along with extremely hardworking but civic workers. Now the number of RMG
units is more than 5,400 and the export earnings have exceeded USD 24 billion with 145
countries using `Made in Bangladesh' knit garments and 126 countries using Bangladesh woven
products. Analysts are telling-the apparel export numbers can be more than tripled by 2020.
There are 3.6 million workers among them 80% is women.
A latest report published in Wall Street Journal on a Mckensey analysis shows optimistic
figures despite number of negative developments around the sector in Bangladesh. That report
got Bangladesh as a great hotspots, better positioned than Cambodia & Vietnam. But the further
developments including the latest wage hike in Bangladesh gives reasons to reassess the
scenario.

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Industry trends, ratios and statistics

In 2012-13, total export in Bangladesh was 27027.36 (million) US Dollar (including EPZ) and
export of RMG is 21515.73 (million) US dollar. The percent of RMG in total export is 79.61. In
2011-12 and 2011-10 the percentages were 78.4 and 77.1 respectively. Readymade garments or
RMG industry rapidly became important in terms of employment, foreign exchange earnings and
its contribution to GDP.
1. GDP trends:
The Gross Domestic Product (GDP) in Bangladesh expanded 6.01 percent in 2013 from the
previous year. As a major export product RMG acquired 18% of total GDP.
2. Export trends:
Every year value of total RMG export is increasing from Bangladesh. From the figure below, it
shows the increasing trend of value export in RMG sector dividing into main parts Knitwear &
Woven. In 2012-13 total RMG export was 21,515.73 million US dollar including
10.475.88million knitwear and 11, 039.85million woven and growth rate was 10.43%, 14.96%
and 12.71% in knitwear, Woven and total RMG export respectively.

Figure 1: Export trends of RMG.

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In current FY2013-14 up to February the total export value is 16,120.63 million dollar including
7,892.28 million dollar knitwear with growth rate of 17.50%, 15.92%, and 16.67% for Knitwear,
Woven and RMG respectively.
3. Growth trends:
Despite violence in RMG sector the overall growth rate of RMG sector is positive. In the last 20
years, Bangladesh have experienced only 3 times extreme lower growth rate than average growth
rate 20.45% of Knitwear, 10.97% of Woven and 13.79% of RMG in 2001-02, 2009-10, 2011-12
(except woven). In FY2013-14 export target for Knitwear 11,575.85 million dollar and Woven
12,571.46 million dollar. Within February, 2014 real export value goes up to 7,910.28
(Knitwear) and 8,228.35 (Woven) million dollar.

Figure 2: Growth trends of RMG

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4. Percentages in Total BD export:

RMG is contributing highly in the total export of Bangladesh. In current FY2013-14 81.39% of
total export is from RMG sector. In past 15 years 75% of total Bangladesh export came from
RMG sector. The only change is that Woven is contributing more than Knitwear in recent years
like the years in beginning.

Figure 3: Share in total BD export.

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Firms, Employment and Ownership of the Garment industry in Bangladesh:

The industry has been influencing the economy of Bangladesh by creating employment
opportunities, particularly for young, uneducated women, contributing to the reduction of
poverty in the country over the last few decades (Ahmed, 2009). In this context, the garment
industry is considered to be a driving force behind the socio-economic development of
Bangladesh. The number of employees in the sector has also been rising continuously, from 0.04
million in 1984 to 4 million in 2012, or 100 times over during this period.

Figure 4: Employment in the Garment Sector in Bangladesh, 1984-2012

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The number of firms has also increased dramatically along with an increment in garment exports
in Bangladesh. The industry, which consisted of only 30 enterprises in 1980, reached 5,150 firms
in 2010. Indeed, the average of 170 new garment firms was established every year during this
period.

Figure 5: Number of Garments Factories in Bangladesh 1984-2010

Although the Bangladeshi garment industry was initially led by foreign owned firms, the
industry is currently dominated by local entrepreneurs. For instance, in 2006, the number of fully
or partially owned foreign companies was only 83 in comparison over 4000 domestic firms
(Dunn, 2008, p.4). The dominance of domestic firms is partly due to the governments industrial
policy, which limited FDI within the Export Processing Zone (EPZ) until 2006 (ibid.). In other
words, the local entrepreneurs were given opportunities to make investments in the domestic
industry under this regulation. After liberalizing FDI policy in 2006, it was expected that
aggregate FDI in the garment and textile sector would increase considerably. In fact, FDI is still
very low, and there has been no significant increase within the era of liberalization.

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Figure 6: The Trend of Investment in the Bangladeshi Garment Sector, 2006-2010

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Overview of the Supply Chain of an RMG Firm

When the sample of a certain product gets approved by the buyer, the garments manufacturer
estimates the required raw materials and places the order. Mostly, the fabric or yarn is imported
from abroad countries. However, there are now quite a few manufacturers who are doing the
spinning part of value addition themselves. So the spinning phase yields the yarn that are then
passed on to the knitting section to get fabrics. At this stage, the fabric is a basic grey colored
piece of cloth. It is then sent to the dyeing phase followed by the garments phase. In this
garments phase of the supply chain, the fabric is cut into a shape. In accordance to the ordered
design specifications, the stitching and sewing activities are conducted and trimming and
accessories are added too. Finally the finished products are tested for defects, packed and boxed
and loaded into trucks (or similar transport vehicles) to take it to the port for shipment.

Raw materials
Suppliers
In-house production

Spinning

Knitting

Overseas
Buyers

Dying

Garments

Finishing

Stitching or
Swing

Trims & Accessories

Producer (often
buyers designated)

Figure 7: Supply Chain of an RMG firm.

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Raw Material Collection:

Main suppliers for cotton are Pakistan, China, India and Russia. For the sake of cost efficient the
companies mainly prefer the Asian countries as their suppliers but many a times, their buyer has
specifications regarding who the raw materials have to be procured from.

Spinning and knitting:

The cotton imported is made into yarn in the spinning section. It is then sent to the knitting
department for making the fabric. Manufacturing of fabrics require precise technology, special
conditioning and consistently clean machineries and constant maintenance over and above the
standards of the units.

Dyeing:
Dyeing is a very sensitive and sophisticated process on any fabric. Especially the stretch fabrics
require the level of sophistication in the dying process. Using the combination of Tubular and
Open width fabrics processing theses gray fabrics are painted with perfection. Different dying
machineries and advanced technologies from USA, UK and Germany are used by our RMG
producers.

Garments:
Colored fabrics are brought into the garments section to tailor it as per the buyers specifications.
Through a highly sophisticated designing software CAD, they create model blueprints for the
apparels based on which the rest of the tailoring activities are completed in bulk size. Different
parts of apparel is cut here and sent to the sewing department continuously.

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Stitching and Sewing:

Different parts of a garment are stitched together into one piece of clothing. It is then sent to the
embroidery section where further processing is done according to different sorts of customer
requirements including: using a specific type of button or embroidering any tag name or even
using pockets or using any special metal accessory. In that case these trims and accessories are
purchased from some suppliers but sometimes buyers themselves specify those suppliers.

Finishing:
Finally, ironing, folding, using any price tag and then packaging them into cartons are done here.
In this case the entire quality testing is also done by the experts or production manager himself.

Delivering To the buyer:

After completing the production for an order the firm can use its own outbound logistics or
rented transports to send the goods to the port and hand it over to the buyers specified shipping
company.

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PEST Analysis for RMG Industry in Bangladesh

The PEST analysis of RMG industry helps to determine how political, economic, social and
technological factors will affect the performance and activities of RMG industry in long run. A
short PEST analysis for RMG industry of Bangladesh given bellow:

Political Analysis:
Although political unrest is one of the major drawbacks in our RMG sectors, there are several
notice able political factors exit which sometimes bring opportunities and sometimes bring threat
for this sector. These factors are:
Absence of stable political condition
Regulatory inefficiency
Absence of good civil society
Limited workers protection law
Corruption
Governmental bureaucracy

Despite of these drawbacks, our government has taken some positive initiatives in favor of
foreign investors. There are no distinctions between foreign and domestic private investors
regarding investment incentives or export and import policies. Incentives for investors include 100% ownership in most sectors, some tax holidays, reduced import duties on capital machinery
and spares, 100% duty-free imports and tax exemptions.

Economic Analysis:
Although Bangladesh takes advantage of LDC (least develop country) status in world market,
Bangladesh is one of the most developing countries with maintaining 6% annual average GDP
growth rate and has brought about remarkable social and human development. According to
World Economic Freedom index, GDP (PPP) growth in 2014 is 6.1%, $360 billion and
unemployment rate is 5%. It is 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.
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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. This 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.

Social Analysis:
Bangladeshi companies especially RMG companies are facing the challenges of adapting
effectively to the changing environment in the context of globalization and in particular in
the export sector in Bangladesh. 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, companies have
gradually attaching more importance to Social responsibility in the local market as well.
Bangladesh is one of the most populated countries with 150 million populations. Among this
population most of the most of the people are uneducated and limited skills. In Bangladesh, there
is huge local demand of appeal products and also huge low cost labor supply which is very
crucial for RMG sectors.

Technological Analysis:
Although Bangladesh is far behind in technological advancement and innovation, technological
usability and accessibility increased day by day. Today Bangladesh uses world most developed
technology in every spare of life and business. Although most of the technology is imported from
abroad, Bangladeshi companies can use most developed technology in their production. A
National Science and Technology Policy has been formulated and adopted by the Government.

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Key Success Factor and Constrain Analysis

Success Factors in RMG
Bangladesh is experiencing a boom in World RMG market from 1980s. There are various factors
behind the success and expansion story. The major factors are given below:

Strong & Expanding Backward Linkage especially in Cotton items

90% of Domestic Supply Meet Total Fabric Requirement and 75% of the total yarn
requirement

Lower labor and production cost.

Easy and Abundant Access to Skilled Labor Force

Flexible Labor Market Laws and Regulations

Price Competitiveness

Improved Product Diversification and Upgrading

Meeting World Standard on Social Compliance Issues

Pull of Courageous and Intelligent Entrepreneurs

Export Friendly Policy, Govt. Support and Flexible Financial Market

Continuous Effort for Image Building and Market Promotion

Constraints of RMG Industry

The weaknesses, which have been mentioned above, could be classified in following categories:

Unstable political environment and unfavorable law and order

Insufficient development of political measures for the RMG sector

Inadequate financial measures

Infrastructural bottlenecks

Inefficient service support

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Future prospects of Ready Made Garments Industry in Bangladesh

Bangladesh being a second largest market of ready mage garments play major role in global
market. Although, RMG sector in Bangladesh has come a long way in last three years, especially
two decades since 1990. The Entrepreneurs, Laborers, Government, Donors and Agency worked
together to cut so many hurdle, proven many prediction futile and wrong to stay competitive.
Country like Bangladesh, only remains to be competitive through cheap labor unless or until we
will not solve the problem of our infrastructure, technological development, enhancing efficiency
in domestic economy as well as reducing managerial gap in this sector. There is no way to
avoid the grievance of the workers in this industry.
Garments industry in Bangladesh is now producing few categories of products like T-shirt,
Jeans, Trousers, women products, socks sweaters etc. This is the time for moving into a large
scale of more value added production to future growth of this industry.
Some key factors of future prospects in RMG industry

Market Diversification: Bangladesh should move towards others potential markets

rather than US and EU to reduce dependency and enhance the portfolio market share
opportunity.

Product Diversification: Entrepreneurs are now more capable to diversify their product
with proper training of the workers or skilled labors. That will be helpful for them to
continue their export earnings.

Backward Integration: If Bangladesh wants to enjoy increased market access created by

the global open market economy, they should avoid the dependency on imported
materials like fabrics. The trend of back-to-back import has been declining; a wellequipped and modern backward linkage industry may well prove cost effective.

Flow of Investment: In future, it is very important to have significant amount of

investment flow in this industry to modernize or well equipped.

Supportive Policy Regime

Reducing lead time

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Research and Training

BGMEA also has been taking some proactive measures to avoid future uncertainty like starting
work with development partners, most importantly large buyers and sourcing agencies to bring in
new standards including Green production environment to assure commitment to its future
success.

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References
1. Ahamed. F. (2012). Background of History of Bangladesh and Ready-made Garment
Industry: Key challenges in the RMG Industry.
2. Akter. K (2012). Ready made garments sourcing: rise of South Asia. Retrived November
02, 2014 from http://www.textiletoday.com.bd/magazine/493
3. Bhattacharya, D., Rhaman, M. & Raihan, A. (2002). Contribution of the RMG Sector to
the Bangladesh Economy. Retrieved from
http://bdresearch.org.bd/home/attachments/article/110/OP50.pdf

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