INB304

Assignment:
Bangladeshs RMG on
global business.
Submitted by: Md. Nasrath Faisal (1210914)

Introduction:
Bangladeshs ready made garments (RMG) industry has been the key export
industry and a main source of foreign exchange for the last 25 years. The ready made
garments industry acts as the backbone of our economy and is a catalyst for the
development of our country. Due to an insulated market, guranteed by the Multi-Fibre
Agreement of the General Agreement Tariff and Trade, and supportive policies by the
Government of Bangladesh; the industry attained a high profile in terms of foreign
exchange earnings, exports, industrialization and contribution to the GDP within a
very short period of time.

Progress & prospects of the RMG sector:

After the independance war in 1971, Bangladesh was left being one of the
poorest countries in the world. Due to the discriminatory attitude of the government of
then West Pakistan, no major industries ever developed in Bangladesh.
The industry that has been making crucial contribution to rebuilding the
country is the RMG sector. It is the single biggest export earner of Bangladesh,
earning 81% of the total export earnings of the country. The apparel industry is
Bangladeshs biggest export earner with a value of over $24.49 billion of exports in
the last fiscal year of July 2013-June 2014.
Albeit there has been exponential growth in our RMG industry, and its bright
prospects, challenges still exist. The biggest challenge currently faced by our RMG
industry is ensuring workplace safety and better working conditions for the garments
workers. The Bangladesh Garment Manufacturers and Exporters Association
(BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association
(BKMEA) are working their best to carry out corrective actions for this issue.
Ensuring workplace safety at all garment factories is a huge task, and will take
a lot of time to accomplish. With the help of the Bangladeshi government, BGMEA,

BKMEA and of other global brands and international development partners,

Bangladeshs RMG sector will be able to ensure safety and maintain the pace at which
the socio-economic development of the country moves forward.
Facts and figures forecast a very bright future for the RMG industry of
Bangladesh. A study made by the United States Fashion Industry Association (USFIA)
and the University of Rhode Island (URI) has set our RMG sectors optimism at a
peak. According to the study, US-based fashion companies are expected to boost their
orders and sourcing from Bangladesh in the next two years. McKinsey, a global
management firm, forecasts an export-value growth of 9% annually, and Bangladeshs
export will double by the end of 2015, and nearly triple by 2020, provided that the
RMG industry can overcome the aforementioned obstacles and challenges, including
developing infrastructure and a skilled workforce.

Development of the economic infrastructure:

While Bangladesh presents some distinct advantages for sourcing, there are some
challenges for apparel companies seeking to do more business there.
1. Transportation bottlenecks create inefficient lead times for garments and delay
deliveries to customers. This issue will become even more important in the
future, since buyers want to source more fashionable products with shorter lead
times. Therefore the main highways, namely Dhaka-Chittagong, DhakaMymensingh, Dhaka-Tangail routes, through which our apparel products and
the raw materials for apparel textile are transported from factories to the port,
are being widened and drive-worthy for utilizing our export potential.
2. Energy supply is a concern, too. The government has prioritized improvement
in this area and started to upgrade power systems over the last two years. Gas
line connections to the manufacturing plants, and uninterrupted power supply
are required for the stead growth of the industry.
3. Suppliers productivity must improve not only to mitigate the impact of rising
wages but also to close gaps with other sourcing countries and to satisfy new
customer requirements for more sophisticated products. Producing the required

number of skilled workers is another challenge and overcoming it will

determine whether the country will be able to sustain the boom that is waiting
to happen.
4. Bangladesh lacks reliable sources for the supply of raw materials, and its
dependence on imports creates sourcing risks and lengthens lead times.
Compounding the problem is the volatility of raw-material prices over the past
few years. The development of a local sector or local supply chain would
improve lead times and minimize risks.
5. Economic and political stability are a big issue for international business in
Bangladesh. Inadequate infrastructure, bureaucratic inefficiency and corruption
are still the major problematic factors in industrialisation and for growth of this
industry. These are also increasing entrepreneurs cost of doing business.
Political stability of the country is the key to steady growth of the industry.

Negative impacts:
Being one of the top Asian countries to be exporting RMG worldwide, the
industry must keep its cost of production at a minimum to compete in the global
market, thus negatively affecting the income of the workers, as wages are kept
obscurely low. It is especially difficult for the workers as cost of living is so high in
the main cities of Dhaka and Chittagong where a lot of factories are located.
The large scale production of such an industry leaves a significantly negative
footprint on the enviromental wellbeing of the nation. Garments factories produce tons
of toxic water as a result of their dyeing processes daily, which is very harmful for our
enviroment, if not dealt with accordingly.

References:

Achim Berg, Saskia Hedrich, and Thomas Tochtermann (March, 2012). Bangladesh:
The next hot spot in apparel sourcing? Retrieved from:
http://www.mckinsey.com/insights/consumer_and_retail/bangladesh_the_next_hot_sp
ot_in_apparel_sourcing
Faruque Hassan (September, 2014). Dhaka Tribune: RMG industry of Bangladesh:
Past, Present and Future. Retrieved from: http://www.dhakatribune.com/longform/2014/sep/19/rmg-industry-bangladesh-past-present-and-future