Ready-Made Garments in Bangladesh

The journey of the RMG industry started in early 1980s. Unique ideas like the bonded warehouse license and back-to-back letter of credit concepts propelled the industry forward. The hurdles of the Multi Fibre Arrangment (MFA) quotas in 1985 and the Harkin Bill in 1994 were great challenges for the industry, as were the phasing out of MFA quotas in 2004 and the European Union Generalized System of Preferences (GSP) scheme. Although there was concern that the MFA phase-out would shut down the industry, the Bangladesh textile sector actually grew tremendously after 2004 and reached an export turnover of US$10.7 billion in FY 2007.

Bangladesh's export trade is dominated by the RMG industry. The sector currently employs 2.5 million people-about 40% of total manufacturing (85% of these employees are women)-and accounts for 76% of the country's export earnings and 10% of its GDP.

Manufacturers have successfully maintained product quality, commitment to buyers, and social compliance, making Bangladesh a reliable apparel sourcing destination. Bangladesh's RMG industry does business with top buyers around the world including Wal-Mart, Tesco, Hennes & Mauritz, Marks & Spencer, GAP, Nike, JCPenney, Sears, Zara, and Carrefour.

Knitwear: Export Growth Leader in FY 2007

By achieving a 21% growth in exports, Bangladesh's knitwear sector pulled export growth up to 16% in FY 2007. With a value of US$5.5 billion, the knitwear sector emerged as Bangladesh's largest export-earning sector, followed by the woven sector with an export value of US$5.2 billion and an 11% growth rate. Knitwear (39%) and woven (37%) sector contributions jointly composed 76% of Bangladesh's national exports.

Currently, the knitwear sector is recognized as a global industry in Bangladesh with improved social compliance and a growing understanding of environmental safety and hazardous chemicals. In the future, Bangladeshi knitwear production growth should continue to accelerate and is expected to export more than US$10 billion in product annually within the next two to three years.

Decoupled from the Global Recession?

Efficiency and productivity improvements are key for the garment and textile sectors to survive in this time of global financial recession, according to economists and exporters attending a seminar in November 2008 organized by Bangladesh Garments Manufacturers' & Exporters' Association (BGMEA). They said no adverse impact was noticed in the export of Bangladeshi garment items following the global financial meltdown. The downward trend of cotton price is also a plus point for Bangladesh as the country's garment manufacturing is mainly dependent on imported cotton. The price of cotton declined to less than 50 cents per pound from its previous 70 cents per pound. The worldwide price decline of other commodities such as petroleum products will also be beneficial.

There are some factors helping to insulate Bangladesh from the effects of the current recession. These include limited Foreign Direct Investment (FDI) inflow, an insulated capital market, the lack of foreign portfolio investment, a limited exposure to foreign securities markets, and a controlled financial environment. The experts at the November 2008 BGMEA seminar concluded that Bangladesh is more or less decoupled from the rest of the world with regards to the effects of the economic recession.