ACKNOWLEDGEMENTS
Preparing this report was both exciting and hard work at the same time. It is for the first
time that we had a real life experience working on READY MADE GARMENTS. We
would like to give our deep gratitude, compliments and heartfelt thanks to our
respectable course instructor Md Rafayat Alam, Independent University, Bangladesh
for providing me with the proper guidance and support.
INTRODUCTION
The ready-made garment industry in Bangladesh is not the outgrowth of traditional economic activities
but emerged from economic opportunities perceived by the private sector in the late 1970s.Frustrated by
quotas imposed by importing nations, such as the United States, entrepreneurs and managers from other
Asian countries set up factories in Bangladesh, benefiting from even lower labor costs than in their
home countries, which offset the additional costs of importing all materials to Bangladesh. Bangladeshorigin products met quality standards of customers in North America and Western Europe, and prices
were satisfactory. Business flourished right from the start; many owners made back their entire capital
investment within a year or two and thereafter continued to realize great profits. Some 85 percent of
Bangladeshi production was sold to North American customers, and virtually overnight Bangladesh
became become the sixth largest supplier to the North American market.
After foreign businesses began building a ready-made garment industry, Bangladeshi capitalists
appeared, and a veritable rush of them began to organize companies in Dhaka, Chittagong, and smaller
towns, where basic garments--men's and boys' cotton shirts, women's and girls' blouses, shorts, and
baby clothes--were cut and assembled, packed, and shipped to customers overseas (mostly in the United
States). With virtually no government regulation, the number of firms proliferated; no definitive count
was available, but there were probably more than 400 firms by 1985, when the boom was peaking.
After just a few years, the ready-made garment industry employed more than 200,000 people.
According to some estimates, about 80 percent were women, never previously in the industrial work
force. Many of them were woefully underpaid and worked under harsh conditions. The net benefit to
the Bangladeshi economy was only a fraction of export receipts, since virtually all materials used in
garment manufacture were imported; practically all the value added in Bangladesh was from labor.
HISTORY
The history of the Readymade Garments Sector in Bangladesh is a fairly recent one. Nonetheless it is a
rich and varied tale. It is a success story for Bangladesh. The industry started in the late 1970s,
expanded heavily in the 1980s and boomed in the 1990s. The quick expansion of the industry was
possible because of the following unique nature of the industry.
 The technology is less complicated (easy to transfer),
 Machineries are cheap and easy to operate (sewing machines),
 A large female labor force that is easy to train is readily available.
Besides the low cost of labor, one of the major factors behind the success of RMG is the availability of
offshore financing for world-priced inputs through back-to-back letter of credit (L/C) under the special
bonded warehouse scheme. Presence of foreign buyers is also a major factor that introduces the system
of international subcontracting. Foreign buying houses not only bring the international market to the
doorstep of local entrepreneurs, they also ensure the availability of essential inputs such as imported
fabrics and accessories for the industry. They also did the greatest favor for the RMG industry of
Bangladesh by bringing the latest designs and by monitoring output quality. These measures especially
enabled inexperienced garments entrepreneurs to establish a strong foothold during the 1980s.
The garment industry is by far the country’s most important manufacturer, earning around $5 billion
annually and accounting for about two thirds of all exports. Bangladesh has about 2,500 garment
factories with up to 10 million livelihoods dependent on it directly or indirectly. About 80 per cent of
garment workers are women. The Ready Made Garments sector has more potential than any other
sector to contribute to the reduction of poverty. Despite the phenomenal success of the RMG sector the
working conditions and wages of workers in the industry are cause for serious concern. Bangladesh’s
current position as a leading garments exporting nation needs to be consolidated. The economy-wide
reverberations of failure would be disastrous. We believe it is in everybody’s interest to sustain this
industry – an industry which changed the lives of so many people, particularly women, in Bangladesh.
STEPS INVOLVED IN PRODUCTION
There are 4 step is mentioned which is related to production of ready made garments of Bangladesh.




Raw materials selection
Inbound logistics
Processing
Output and finished goods
Raw materials:
In ready made garments selection of raw materials in must be needed. It is the most important part.
Throw the selection of raw materials production take place in ready made garments sector.
Inbound logistics:
Activities used to receive, store, and disseminate inputs includes such as materials handling, ware
housing, inventory control, return of supplier etc of ready made garments.
Processing:
Processing is a part of production in ready made garments. Raw materials are processed to make the
product for production.
Output and finished goods:
After processing the raw materials we get the output. And finally we get the product.
CONTRIBUTION TO OUR ECONOMY
At independence in 1971, most observers of the newly emerged country took a pessimistic view about
the developmental prospect of Bangladesh. Many thought that the country would remain permanently
locked in a ‘below poverty level equilibrium trap’. Although there is little room for complacency
Bangladesh has come a long way from there. About two-fifths of the economy is now connected with
the global economy through exports, imports, factor and commodity markets; the degree of openness of
the economy1 currently stands at 40%. Bangladesh can now rightfully claim that she has graduated
from a predominantly aid receiving nation to a trading nation.
The export-oriented RMG sector has made crucial contribution to this abovementioned transformation
of the Bangladesh economy. The role of our RMG entrepreneurs, domestic fiscal and financial,
institutional policy support and incentives put in place by successive governments, substantial RMGsupportive linkage activities within the domestic economy and global market opportunities combined to
create a story which is, to be honest and true, unparallel in the developing world. When jute and jute
goods were losing their traditional markets, with the prospect of drastic fall for earnings it is the RMG
sector which came in first to replace it, and then to overtake it. While traditional export sector could not
yield expected results, the RMG sector gradually injected dynamism in the export as well as in the
domestic economy though backward and forward linkage economic activities.
The export-oriented readymade garments (RMG) sector in Bangladesh started its journey in late 1970s
as a small non-traditional sector of export. Bangladesh exported RMG worth only US$ 69 thousand
when Reaz Garments exported its first consignment to USA in 1978. By FY2002, within a span of
about two decades exports have gone up to US$4.5 billion. Over the past decade alone, the sector
registered a phenomenal growth rate of 15 percent per annum, which is impressive by any standard2. In
fact, this was an exceptionally high growth rate for an emerging industry anywhere in the world. The
industrial base which sustained such high growths also enjoyed a robust expansion, from less than 50
factories in 1983 to more than 3,400 in 2002, with the number of RMG workers reaching approximately
1.5 million.
Despite many difficulties faced by the sector over the past years, it continued to show robust
performance, competitive strength and, of no less importance, social commitment. RMG’s contribution
to Bangladesh economy is well-known, well-appreciated and well-respected. However, often times the
magnitude of its multiplier impact and implications will justify the support that this sector has been
given over the past years and also the support it is currently seeking from the government.
In FY2002 Bangladesh exported RMG products worth 4.5 billion US dollars. Her share in total US
imports of apparels was 3.2%; in EU it was 3.3% and in Canada it was 3.0%. Bangladesh is known in
these countries as a small country with a strong presence. Everywhere, RMG serves as a flagship
product of our country, inducing people’s interest in Bangladesh both as a tourist and investment
destination. These are the impacts which are difficult to quantify, yet without which the country perhaps
would not have been able to project itself to a trajectory of high growth and higher standards of living.
Thus, RMG’s contribution to Bangladesh, both direct and indirect, needs to be recognized for what it is.
In the following pages, an attempt is made to quantify the key role that RMG has come to play in the
economy of Bangladesh. The RMG sector has also played a significant role in the social metamorphosis
in a broader context. This paper attempts to qualify aspects such as women empowerment, population
control, education, environmental awareness, elimination of child labour which contributed to overall
improvement in the HDI (Human Development Index) Indicators. It should be noted that the study is
not exhaustive, and can be further improved upon.
Contribution in GDP, Export Earnings and Local Currency Retention and Foreign Exchange
Earnings by the Sector
The Bangladesh RMG industry, with its woven and knit sub-components, is a pre-dominantly export
oriented sector, with 95 per cent of the woven and 90 per cent of the knit exports being directed to
foreign markets. The cumulative foreign currency earnings by the sector, since 1978, when first export
was registered, is estimated at 36.6 billion dollars. Bangladesh’s RMG export earning stood at 4.58
billion US dollars in FY2002. In 2002 this sector contributed 76.6% of the total Bangladesh export of
5.9 billion dollars in the same year. RMG export in FY2002 was equivalent to 9.5% of Bangladesh’s
GDP over the corresponding year. At present the local value addition by the RMG sector is estimated to
be 45%. Accordingly, local value addition by the sector in 2002 was about 2.1 billion US dollars which
was equivalent to 4.3% of GDP for the same year. The value addition created by the sector itself is
estimated at 25% of total RMG export earnings which amounted to about 1.2 billion dollars or
equivalent to 2.4% of GDP
RMG Earnings
Total RMG Exports
Local Value Retention
Direct Value-Addition by RMG Sector
Amount
(billion US$)
4.5
2.1
1.2
As Percentage of GDP
9.5
4.4
2.4
VALUE ADDITION
Value addition is one of the best ways to maximize profit. Value addition means increasing sales value.
There are various ways by which value can be added to a product. If we consider two different shirts
both of same size and produced from similar raw materials but may be sold in the markets with
substantial difference in prices. The reason could be one of many e.g. brand, quality control, dyeing or
finishing processes used, special finishes like moth proof or fire proof, attribution of art works like
embroidery and attachments etc. Since we have comparatively cheap labor and electricity available in
Bangladesh we should consider those products which involve more labor and can add more value to a
product.
Different types of apparel products require different types of manufacturing infrastructures. If the
infrastructure for making shirts could be used to produce suits, it would also be a kind of value addition
to the infrastructure. In fact, during production, the higher the processing steps required by the
customers, the higher would be the value addition. Some of the high value added products are costly
products like high quality sports wear, shirts, suits, jackets etc. An organized R & D can precisely help
in attributing value addition as well as finding value added new products and markets. Presently,
Bangladesh is mainly producing cheaper textile and apparel products. By R & D it will be possible to
say which products will maximize profit and accordingly the marketing and merchandising people of
the factories can be guided to target those products.
PROBLEMS IN THIS SECTOR
The problems in the industry pre-date the riots which took place just over a month ago and which were
attended by deaths, injuries and the destruction of property. Over the years, hazardous working
conditions have resulted in the deaths of many workers through factory fires and collapses. The
Spectrum Factory building collapse of April 2005 killed 64 people, injured over 70 and left hundreds
jobless. In February 2006 a fire destroyed the four-story KTS Textile Industries in Bangladesh’s port
city of Chittagong again killing scores of mostly young and female workers. Workers, who are mostly
young women, also face an acutely difficult working environment – wages are low, hours are long,
forced labour is practised, child labour exists, sexual harassment exists, freedom is curtailed, whether it
be locked doors or rights of association, and there are a multititude of other practices which go against
international labour standards and codes of conduct (= non-compliance). At the level of legislation and
business dealings, lack of implementation of laws, restrictive laws and unfair buying practices by
buyers compound the issue of non-compliance.
WHAT IS TO BE DONE?
What has emerged quite emphatically is that for the Bangladesh industry to survive it has to take on
board the issue of “compliance” with internationally recognised social, labour and environmental
standards. There are many initiatives underway – buyers have their corporate social responsibility
initiatives, the government has set up task forces and fora, there are the Memoranda of Understanding
with the trade unions and the manufacturers’ and exporters’ associations. There are many stakeholders,
and dialogue is imperative and all important. There needs to be the capacity and will amongst all the
stakeholders, and particularly the government, to take forward and develop “compliance” and create an
industry with an enhanced global image and global recognition of performance.
OPPORTUNITIES IN THIS SECTOR
The greatest opportunities lie on the unlimited market outside Bangladesh. In a quota free world, the
United Nations Commission for Trade and Development (UNCTAD 1986) 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 (1990), 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 (Arvind et. al. 1996).
SUGGESTION
Bangladesh economy at present is more globally integrated than at any time in the past. The MFA
phase-out will lead to more efficient global realignments of the Garments and Clothing industry. The
phase out was expected to have negative impact on the economy of Bangladesh. Recent data reveals
that Bangladesh absorbed the shock successfully and indeed RMG exports grew significantly both in
FY08 and (especially) in FY09. Due to a number of steps taken by the industry, Bangladesh still
remains competitive in RMG exports even in this post phase-out period. Our Garments Industries can
improve their position in the world map by reducing the overall problems. Such as management labor
conflict, proper management policy, efficiency of the manager, maintainable time schedule for the
product, proper strategic plan etc. Government also have some responsibility to improve the situation by
providing- proper policy to protect the garments industries, solve the license problem, quickly loading
facility in the port, providing proper environment for the work, keep the industry free from all kind of
political problem and the biasness. Credit must be provided when the industry fall in need. To be an
upper position holder in the world Garments Sector.
CONCLUSION
To sum up, the new trading environment is going to pose serious challenges for the RMG industry in
Bangladesh. Time is also of essence (five years have already gone). Unfortunately, Bangladesh has been
slow to respond. Given the strengths, weaknesses, opportunities and threats, establishing backward (e.g.
in textiles) and forward (e.g. in marketing) integration should get first priority. All inefficiencies and
irregularities also have to be removed from production and export processing. Bangladesh should
penetrate into new markets, diversify into new items,