TEXTILE & READYMADE GARMENTS

EXECUTIVE SUMMARY
It would be an unjust to give all the credits to any single part (e.g., global market, Bangladesh business community, or the government policy) for the boom of Bangladesh textile & RMG industry. In fact, a range of internal and global factors & issues combined has caused it to happen. Bengalis have century long history of mechanized tailoring and several thousand years of experience in hand stitching. The aptitude and art of sewing/stitching has genetically transmitted through the females of this land. Even today, one can hardly find a rural female adult who does not know hand stitching or embroidery work. From long since the textile industry and garmenting have been in this very land that has past export experience too. By exploiting the demand of the global apparel market, the local manufacturers/exporters backed by the responsive state polices have successfully utilized the skilled but cheap manpower resource to recover the land's lost pride, once again. Bangladeshs industrial base, which has remained stagnant over the past two decades, was very narrow, contributing to about 11.5 percent of the GDP (BBS, 2001). Within this narrow industrial sector, however, the ready-made garments (RMG) industry has flourished as its most dynamic sector. Since its modest beginning in the early 1980s, the industry has contributed to the economy appreciably in terms of employment, output, and foreign exchange earnings. Moreover, employing as it does more than 3 million young women, the industry has brought about a noticeable change in society as well as in intra-household gender relations. Apparently the most important factors behind the success of the RMG industry in Bangladesh are: the availability of cheap labor. Another factor which is now phased out was the GATT/WTOcontrolled international textile and apparel trading system through the operation of the Multi Fiber Arrangement (MFA). In this connection, there were growing apprehension as to whether the industry, in order to remain competitive, will see both a reduction in the already very low wage levels and a further deterioration of the already very poor working conditions. However, this was not the case. It turns out that even in the face of other economic giants, Bangladeshs labor is cheaper than anywhere else in the world. While some smaller factories were documented making pay cuts and layoffs, most downsizing was essentially speculative the orders for goods kept coming even after the MFA expired. In fact, Bangladesh's exports increased in value by about $500 million in 2006. This portion aims to: 1. Analyze the current status and future prospects of the RMG industry in Bangladesh terms of its growth, employment, and exports 2. Assess the potentiality of investment by banks 3. Assess the likely impact of globalization and liberalization on the RMG industry; and 4. Investigate whether the reduction in wage rates and worsening of working 5. Conditions in the RMG industry figure as strategies to continue to be competitive in the world apparel market. The section examines the static versus the potential dynamic competitive advantages of Bangladeshs RMG sector, and the inter-linkages between job quality, productivity, and competitiveness in this industry.

INTRODUCTION
Bangladesh earns nearly $7 billion a year by exporting textile products, mainly to Europe and the United States. This is about 79 percent of total export earnings of the country. The RMG industry has around 8,500 units across the country. It employs around 4.7 million workers, 70 percent of whom are poor women. Whenever the country is criticized for its high level of corruption and confrontational politics, its garment industry is held up as a success story. Bangladesh has already been grappling with political instability due to the prevailing confrontational politics in the country. The situation was made worse when the countrys major industry and its main foreign exchange earner Ready Made Garments (RMG) industry got embroiled in labor unrest. The industry owners and political leaders initially tried to sweep the grievances of labor under the carpet by floating various conspiracy theories. But the problem has refused to die down as its roots lie within the industry and in the exploitation of labor

BACKGROUND OF RMG
The Ready Made Garment industry in Bangladesh is made up of 3,486 manufacturers and accounts for 76% of total foreign exchange earnings. It employs about 180,000 managers and 4.7 Million workers (Direct & Indirect laborers), of whom almost 3.7 Million are women. In Bangladesh, the RMG industry has emerged as a major economic sector and has had its impact on the financial services sector, communications, transportation, and on other related industries The RMG industry has had a major social impact. It has empowered 3.7 million women with employment and economic independence, which in turn has earned for Bangladesh recognition as a modern and enlightened society. The RMG sector in Bangladesh was not etched out by a competitive and efficient industry. It came about as a result of benevolent accommodations extended to Bangladesh as a developing country. Buyers came to Bangladesh of their own volition and it was at their behest that the industry grew and thrived. Since quality, competitiveness, and efficiency were not required to attract buyers, these aspects have remained largely ignored by the manufacturers of RMG in Bangladesh. The output of the RMG sector in Bangladesh is typified as low cost, low value added and poor quality. The high-end market niches, which demand high value addition and high quality, are well beyond the reach of the RMG manufacturers in their present state. When the preferential accommodations are withdrawn in 2005, other countries with preferred status will take Bangladeshs place as low cost producers. The RMG sector in Bangladesh, with its poor quality and low productivity will be no match for the competitive producers. Sri Lanka has a smaller industry, but the annual turnover in volume and in dollar value is comparatively far superior to that of Bangladesh. The higher volume is explained by productivity. Factories in Sri Lanka operate at 80% 90% of potential capacity. However, in Bangladesh, according to some experts, productivity is between 35% and 55% of potential capacity with very few exceptions. For the RMG sector in Bangladesh, productivity alone can make a difference between life and death. The higher dollar value is explained by the addition of value. The consumer surplus is drastically greater in the market for high end products. Consequently, the profit margin is much higher for high end products. Trained people are at the heart of the successful RMG manufacturer: Trained designers, in tune with designers at the buyers end, adapt the buyers needs into the manufacturing process. And skilled managers organize the production floor for efficiency and quality. Sri Lanka invested in creating the human resource that mans their industry: CITI, Phoenix College, University of Moratuwa, are only some of the academic institutions in Sri Lanka that train people for the RMG sector. In India, the Ministry of Textiles

has set up National Institutes of Fashion Technology in all major cities. In addition there are a large number of elite private institutes. It is in this context that the BGMEA visualized and established the BGMEA Institute of Fashion & Technology in November 1999 and opened its doors to students in April 2000. Presently there are about 550 students enrolled in two Bachelor degree programs under the National University. 675 people employed in the industry have attended certificate courses on various aspects of the manufacturing process. Academic activities at BIFT are stimulated by the apparel manufacturing industry. The degree programs, though distinct, require students to develop some skills that are basic to designing and making apparels. These basic skills are learned through the first two semesters. Thereafter students are able to declare their candidacy for one of the degrees.

ABOUT BANGLADESHI GARMENTS

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. Bangladesh-origin 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 garmentsmens and boys cotton shirts, womens and girls blouses, shorts, and baby clotheswere 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

CONTRIBUTION OF RMG TO THE ECONOMY

Globalization, especially the intensification of trade liberalization in the 1990s, has had a significant impact on the Bangladesh economy, opening up opportunities in the export sector and subjecting the import-competing sectors to greater international competition. Overall, exports in the 1990s have increased by a factor of four, with imports also rising. The ratio of exports to GDP rose from around 5.5 percent in the early 1980s to around 13 percent in 1997. GDP increased to nearly 5 percent on average over this period, leading to a modest rise in per capita income. Unfortunately, the growth in income has also been accompanied by a rise in

income inequalities, the national Gini coefficient rising from around 0.36 in 1983/84 to around 0.43 in 1995/96. Absolute poverty, at around 47.5 percent of the population, has registered hardly any decline from 1988/89 to 1995/96, although the percentage of the hardcore poor (those unable to meet 1,805 k. cal per person per day) has declined a few percentage points, and still accounts for 25 percent of the population. Within the export sector, there has been a shift away from more traditional exports such as tea and jute, to items such as RMG, fish and seafood, and leather. The current manufacturing growth experienced by Bangladesh is thus by and large driven by the growth of the RMG industry. In 1992, knit and woven RMG accounted for 7 percent of units, 11 percent of fixed assets, 21 percent of annual investment, 30 percent of the employment and wage bill, and 23.5 percent of gross value added and returns on capital attributable to Bangladeshs private manufacturing sector. A study of the countrys manufacturing sectors performance in the 1980s found that the top 11 sub-sectors were, in terms of growth in valueadded, RMG, fertilizer, tea processing and blending, compressed liquefied gas, biddies, leather shoes, printing and publishing, bakery, fish and sea food, silk and synthetic textiles, dyeing and bleaching textiles, soft drinks, hand and edge tools, china and ceramic wares, and tanning and finishing. According to a more recent study, RMG and pharmaceuticals are the two sub-sectors which demonstrated the most robust growth in output between 1988/89 and 1995/96, and thus commanded the most significant weight in the manufacturing structure.

GROWTH OF RMG INDUSTRY

Since its beginning more than two decades ago, the RMG industry has shown phenomenal growth, despite Bangladeshs generally sluggish industrial base, turning the country from a traditionally jute-centered export economy to one primarily based on RMG exports. Between 1983 and 1984/85 the number of garment manufacturing units increased from only 47 to 487. In the 1990s, Bangladesh Garments Manufacturers and Exporters Association (BGMEA) membership experienced an annual average growth rate of 18 percentage points.

RMG EXPORTS
The dynamic performance of the RMG industry has transformed Bangladesh from Jute exporting country into what is primarily a garment exporting economy. From about 4 percent of Bangladeshs total export earnings in 1983-84, within a time span of 15 years, the RMG industry currently accounts for about 79 percent of the countrys total export earnings, making Bangladesh one of the 4th largest garments exporters in the world. More than 95 percent of the output of the RMG units and about 90 percent of that of the knitwear units cater to the foreign market. The success of Bangladeshs RMG exports is in part attributable to availability of cheap labor; preferential treatment received from the European Union (EU) under the GSP scheme; and substantial quotas available in the USA (as against quota restrictions imposed on its principal competitors, e.g. China, India, Pakistan, Sri Lanka, and Thailand). In the late 1970s and early 1980s, intermediate buyers began to shift sources of RMG products from neighboring countries, due to the imposition of quotas, to countries like Bangladesh. Abundant cheap labor in Bangladesh ensured competitive prices, and thus acted as a primary incentive, while political turmoil in neighboring countries (e.g. Sri Lanka) further induced this transfer process. By relaxing the need for working capital and allowing duty-free access to inputs for the RMG sector, conducive domestic economic policies such as the granting by the Bangladesh Bank of back-to-back letters of credit (L/C) and bonded warehouse facilities further accelerated the process of establishing new RMG units. Superimposed on this process has been the impact of

the North American quota system and the European Unions preferential treatment under various schemes, e.g. the General System of Preferences (GSP). While in the USA and Canada, quotas imposed on apparel imports mean guaranteed access for developing countries Like Bangladesh, the GSP provided by the EU lends crucial support in maintaining competitive prices, and thus a competitive edge for Bangladeshs RMG exports. Consequently, RMG exports have boomed (See Table 1 below). Over the last decade (1997-2007) the annual compound growth rate of RMG exports was 19.4% percent. Between 2008 and 2013, the annual compound growth rate of RMG exports experienced a robust growth of 12.98% percentage points, almost twice the GDP growth rates registered over the same period.
Table: 1 (*Financial Year: July- June)

Export Performance of RMG of Bangladesh (in Million USD)

2011-12 TOTAL 2012-13 TOTAL Knit Woven 9,486.21 9,603.34 19,089.55 10,475.88 11,039.85 21515.73 EU 2011-12 Total 2012-13 TOTAL *Source: BGMEA 6928.69 6928.69 7306.28 8899.15 Table: 2 1592.87 125.98 216.81 937.81 296.13 Share in National Export Knit Woven 39.06% 39.54% 40.97% 39.75% Knit Growth Rate (%) Growth Rate (%) Woven

+0.05
+20.48

+13.89
+21.00

Region wise Export Performance

USA & Canada 1415.77 EFTA 113.77 LAIA 163.04 Emerging Markets 700.84 Others 164.28

Comparative Export Performance of Bangladeshi Knit Production Major Importing Countries (Figures in Million US $)
Country Germany UK USA France Spain Italy Canada Netherlands Belgium Denmark *Source: BGMEA 2008-09 1334.40 720.58 959.42 705.69 404.23 368.86 292.05 513.98 157.52 131.23 2009-10 1282.77 725.74 891.61 692.00 384.55 379.04 283.86 528.57 155.79 178.24 2010-11 2022.05 990.98 1119.04 999.71 595.92 525.17 432.92 591.07 299.74 256.32 2011-12 2039.97 1103.30 1013.95 855.18 660.73 571.46 401.82 325.28 320.46 318.72 2012-13 2168.13 1259.84 1130.90 892.45 702.90 554.94 461.97 246.77 317.19 375.62

OBJECTIVE OF THE REPORT BROAD OBJECTIVE

To analyze the environmental forces in regard to garment Sector in Bangladesh

SPECIFIC OBJECTIVES
The main objectives of the study are as follows: 1. To analyze the micro & macro environmental forces which are influential in regard to Garments sector in Bangladesh 2. To analyze the environmental factor such as customer, suppliers, and competitors in relation to garments sector in Bangladesh

3. To analyze the environmental factor such as political, economical, Socio-cultural and technological relation to garments sector in Bangladesh 4. To analyze Strength, Weaknesses, opportunity, & Threat of the Garments Industries in Bangladesh 5. To make strategy for the betterment of the sector in the coming years 6. Assess the viability and potentiality of investment by bank in this industry

LITERATURE REVIEW THE MARKETING ENVIRONMENT

The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the macro-environment, the microenvironment and the internal environment.

THE MICRO-ENVIRONMENT
This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.

THE MACRO-ENVIRONMENT
This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.

THE INTERNAL ENVIRONMENT

All factors that are internal to the organization are known as the internal environment. They are generally audited by applying the Five Ms which are Men, Money, Machinery, Materials and Markets. The internal environment is as important for managing change as the external. As marketers we call the process of managing internal change internal marketing.

PEST ANALYSIS
It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organizations marketing environment is made up of: 1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc 2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc

3. The macro-environment e.g. Political (and legal) forces, Economic forces, Socio-cultural forces, and Technological forces. These are known as PEST factors

POLITICAL FACTORS
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as: 1. 2. 3. 4. 5. 6. How stable is the political environment? Will government policy influence laws that regulate or tax your business? What is the governments position on marketing ethics? What is the governments policy on the economy? Does the government have a view on culture and religion? Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

ECONOMIC FACTORS
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. We need to look at: 1. Interest rates 2. The level of inflation Employment level per capita 3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on

SOCIO-CULTURAL FACTORS
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include: What is the dominant religion? What are attitudes to foreign products and services? Does language impact upon the diffusion of products onto markets? How much time do consumers have for leisure? What are the roles of men and women within society? How long are the population living? Are the older generations wealthy? Does the population have a strong/weak opinion on green issues?

TECHNOLOGICAL FACTORS
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points: Does technology allow for products and services to be made more cheaply and to a better standard of quality? Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc? How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc? Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

METHODOLOGY
The theoretical part of the study is based on secondary date collected from different publications on Bangladesh Garments Industries. The information collected has been analyzed along with various numerical observations and graphical representations. The empirical part is mainly based on primary data that is to be collected through questionnaire and personal interview of the owners/managers of the selected sample garments.

FACTORS THAT CONTRIBUTED THE DEVELOPMENT OF RMG

For the development of RMG in this decade, credit should be given to several dynamics that not only sustained the private PT industry and the export oriented RMG industry but also caused real boom of the sector. These are: INTERNATIONAL TRADE TREATY & AGREEMENT 1. Bangladesh RMG export availed the generalized system of privilege (GSP) in the EU countries as a member of least developing country (LDC); this was not given to its nearest core competitors such as India, Pakistan, or Sri lanka 2. Quota facility in USA market was enjoyed, although that was reducing year after year. 3. Rules of origin also favored Bangladesh in developing own backward linkage industry. 4. Bangladesh Government Policy 5. Textile was declared as the thrust sector to extend all out cooperation to the export oriented RMG and the backward linkage industry. 6. Provisions of cash incentives (initially to the extent of 25% of the export value) to the exporters and backward supply chains by the government o f Bangladesh 7. Extended bonded warehouse provisions 8. Rationalized tariff on textile & garments inputs 9. International Supply Chain Hong Kong based dealmakers for their own business interest tried Bangladesh RMG export to expand in the EU, USA, Australia and Canada.

REPORTINGFINDINGS AND ANALYSIS

CONTRIBUTION OF THE RMG INDUSTRY TO THE SOCIO-ECONOMIC DEVELOPMENT OF BANGLADESH The RMG is earning over 75% of the nations total foreign currency. In addition to earning lions share of the countrys total foreign exchange, this sector has brought about a positive transformation in the over allspice economic condition of the clotty. Some of the recent contributions of the industry to the nation are: Bangladesh now shares 80.7% of the total export of Bangladesh and claims 4.8 percent of the global RMG trade of $412 billion The countrys single month export earnings hit a record US$ 3,024.29 million in July, the first month of the financial year 2013-14 The growth is an impressive 24 per cent compared with the export earnings figure of July in financial year 2012-13 which was $2.4 billion The total export earnings from RMG sector in June was over $2.1 billion. T he countrys export in the just concluded FY 2012-2013 was $27.01 billion, growing by 11.18 per cent from the previous FY, whereas the government set the export earnings target for the current FY 2013-14 at $30.50 billion with a CAGR growth of 12.84 per cent.

 The total RMG export in FY 2012-13 grew by 2.73 per cent to $21.51 billion in the FY 13 from $19.08 billion in the FY 12 The sector with a total investment of over 4.5 billion pound is now capable of supplying 90 percent of fabrics for the knitwear sub-sector and 40 percent of fabrics for the woven sub-sector Value addition to the economy is the highest so far with almost 70%
Table: 2

Contribution in National Economy

Share of Knitwear in RMG Export (FY 2012-13) CAGR Growth (FY 2008-09 FY 2012-13) Share of Knit Garments in GDP (FY 2012-13) Net Retention amount (2012-13) Net retention rate Value addition Labour Force Employed Direct Indirect Number of Member Units About 48.69% 12.98% 8.07% US$ 11833.65 million 55% (Highest) 70% (Highest) 4.0 million; about 70% of them are women 0.70 million 1926 (Up to 25 November'2013)

EMPLOYMENT GENERATION The RMG industry of Bangladesh has enjoyed a meteoric rise, from less than 50 factories in 1983 to 8,500 in 2013. In the same period, the level of employment has risen from some 10,000 to approximately 4.7 million (direct and indirect labor) today with about 70% of the workers being women. This industry has created a large-scale employment scope (About 4.7 Crore, each garment factory is providing employment opportunity for about 550 workers. BANKING SECTOR The RMG sector has been playing role as one of the main catalyst contributing to the tremendous development of Banking and Insurance sector in our country. Presently, our commercial banks are earning over Tk. 2,000 Crore per year from this sector. By now, some bank charges have increased to even three times the charges in 1985. INSURANCE SECTOR Insurance companies, even after reducing different rates by about 54%, are presently earning about 12.5% or about Tk. 1800 Crore per year from the RMG industry as various types of premiums for insurance policies. SHIPPING BUSINESS The manifold increase in the shipping business in Bangladesh including setting up of a several container yards (including an Inland Container yard at Dhaka by the Bangladesh Railway), expanding the port facilities to handle large containers, introducing special container caning trains, and the increasing of cargo handling and storage facilities at the Shahjalal International Airport (ZIA) have also been due to the Garment industry. C &. F BUSINESS The unprecedented increase in the C & F Stevedoring is because of the huge import of the RMG raw materials & export of RMG garments. On average, they earn I % on all exports and imports which amounts to nearly TK. 230 Crore. TAX ON EXPORT EARNINGS As source tax only, presently the RMG industry is paying over Tk. 40 Crore.

POPULATION CONTROL With the opportunity of earning more, they now want to enjoy their lives. TIlls need is helping girls avoid early marriage and frequent pregnancy. It is contributing to the birth control program of our country also. From 1985 86 till date, the country has been saved from a burden of at least 4 million new mouths to feed. WOMEN EMANCIPATION AND SOCIAL TRANSFORMATION: The industry is helping women emancipation and employment. The women workers, if enter this sector then continue to stay because of the very working condition congenial for them. They are enjoying recognition and dignity in the society. This sector helps approach social equilibrium between men and women. Having the capability of earning, girls/women are well treated by their families. They are no longer any burden to their families. LINKAGE INDUSTRY Prospect for a huge textile industry capable to supply over 3 billion yards of fabrics a year to the export oriented garment industry has also been developed by the industry. A large number of ancillary have been emerged and growing keeping pace with this industry as well. Estimates shows that about 80% of garment accessories like cartons, threads, buttons, labels, poly bags, shirt boards, neck boards etc. are now being produced our country also. Approximately, this sector is earning about Tk. 2,000 Crore from the RMG industry. WASTE RECYCLING INDUSTRY About 0.2 million people are engaged in (mainly, the waste cut pieces of fabrics) recycling industry. With these wastes, they are stuffing toys, pillows, quilts, cushions etc. and earning about Tk. 1,500 2,000 per month. It means, on an average, at present, they are earning about Tk. 30 40 Crore per year. TRANSPORT The road transport business has been expanded because the lions share of cargo, moving between Dhaka Chittagong and Dhaka Benapole by road, is on account of the garment sector. Those who once started transportation business with rented trucks, many of them by now are the proud owners of even 10/12 trucks. REAL ESTATE Economic demand for real estate development generated by the garment industry to accommodate offices and factories of over 2,600 garment units deserve consideration. About 26,000 mid level manages in the industry have been renting 26,000 posh housing accommodations in Dhaka and Chittagong. Moreover, one study shows that real estate industry could now look forward to launching prospective housing projects feasible and viable in both financial and social tennis for about one million single Women working in garment industry. UTILITY SERVICES Credit of manifold increase in the revenue of utility services also goes to this industry to a great extent. For example, this sector is paying on an average US $ 2.26 million (Tk. 18.08 crore, @Tk. 40,000 per factory) per month. As telephone and fax bill, this industry is paying US $ 0.56 million (Tk. 2.60 crore) per month. EMERGENCY CONSUMERS MARKET

About 4.7 million workers in the industry are appearing in the consumers market with a demand worth of almost US$ 5 million. An increasing demand for moderate cost cosmetics, saree, footwear, fast food and other consumer products is also a direct result of about 1 million new consumers entering into the market with new living standard backed by increasing purchasing power. The industry is helping women emancipation and empowerment. For food (Mainly fast-food items), they are affording about US$ 0.61 million (Tk. 4.8 Crore) per day. FURTHER INDUSTRIALIZATION The industry has proved itself to be the most prospective industry for a country like Bangladesh, which is endowed with the huge cost effective labor force. Moreover, it has further been emerged to the soundest base for the hem industries. As the stock market is slowly standing on its feet, RMG offers itself as to be the only base for further industrialization in the country. 1. 0.4 million workers are spending about US $ 0.30 million (Tk 1.4 crore) as Mess rental per month 2. About 0.7 million workers are spending about US $ 0.02 mil1ion (Tk 7 lakh) for conveyance per day 3. Child labor elimination and education to the reloaded under age worker Today, thanks to the wide media coverage received by the famous Harkins Bill, a General awareness about and appreciation of the noble aim and objective of the Bill has been created among the members of the BGMEA. Each and every Bangladeshi garment exporter is convinced that child labor is indeed Abusive and Exploitative. And as proof of that consciousness we at the BGMEA, with the corporation of the ILO, UNICEF, the Govt. of Bangladesh and active guidance of the US Mission in Dhaka, managed to sign on the 4th of July, 1995 a historic document, known as memorandum of Understanding (MOU) on the elimination of child labor from the gaIll1ent sector of Bangladesh. Following implementation of that MOU, in both letter and spirit, the entire garment sector of Bangladesh has been declared child labor free with effect from October 31, 1996. Although the level of implementation is estimated by lLO at 95%, that should be considered a remarkable doubt free of implementation of the MOD in the socioeconomic realties of the country.

SWOT ANALYSIS OF GARMENTS INDUSTRY

OVERVIEW (SWOT ANALYSIS) S=Strengths, W=Weaknesses, O=Opportunities and T=Threats SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stand for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. A word of caution, SWOT analysis can be very subjective. That is why we are not relying on SWOT too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them

into positive factors. Thus in this section, SWOT is used more as a guideline rather than a definite solution. SWOT ANALYSIS THE STRENGTHS The strength of a firm or country in the Market depends on its specific comparative advantage(s), which its competitor does not have. A particular uniqueness of a supplier shapes up its strategic profile. In case of Bangladesh, this uniqueness is the unlimited availability of unusually cheap labor that stands out as a low technology and labor intensive industry. The workers can be employed at a very low wages, not only in comparison to other competitor countries, but also in comparison to other domestic industries in Bangladesh. In domestic market as well, the wages of the workers of the RMG industry happen to be the lowest. This should be apparent from the figure presented in table below.
TABLE: 1

Average minimum wages of Twelve selected industries Industry PRINTING SHIP BUILDING SOAP & COSMETICS MATCH SHOE JUTE BAILING PHARMACEUTICAL OIL MILLS & VEGETABLE COLD STORAGE ROAD TRANSPORT REROLLING TANNERY Minimum Wage Rate (Gross) 4450 4625 3300 4560 3652.5 3862.5 3625 7420 6050 6300 4600 8750 Percentage 67.42% 64.86% 90.91% 65.79% 82.14% 77.67% 82.76% 40.43% 49.59% 47.62% 65.22% 34.29%

Source: Minimum Wage Board of Bangladesh (FY: 2012-13 April)

The figures in the table indicate, for example, that the average minimum wages of the workers in the RMG industry in 2013 was 77.7% of that in jute bailing industry, 65.2% of that in rerolling industry, and so on. All of the 12 industries included in the table paid average minimum wages, which were higher than that of RMG industry. However, increasing pressure from the workers to increase their minimum wage rates has persuaded the Minimum Wages Board to take the decision of minimum wage of garment workers at Tk. 5,300 unanimously and the final recommendation is sent to the labor ministry for gazette notification which is set to be applicable from December 2013. In high competitive international market, it is the price and quality, which determines the competitive position of a supplier, on the account of price, Bangladesh can beat all its competitors. Price is related to cost of production which in case apparel industry is greatly determined by the labor costs. Wages in Bangladesh is remarkably low. Naturally it will

continue to enjoy competitive advantages in international markets because it has virtually unlimited supply of cheap labor who can learn the low technology operation necessary in producing RMG without much investment in terms of money and time. That Bangladesh has a tremendous labor-cost advantage can be seen by looking at the comparative average hourly wages (including fringe benefits) of some 39 countries, both develop and developing, presented in the table. Werner International data on hourly wage cost in the clothing industry (inclusive of social contributions) is shown in the Table:
TABLE NO. 2

Hourly wages costs in the RMG industry (Selected countries) Country Wages ($) Norway 18.09 Denmark 17.29 Germany 17.22 UK 8.42 USA 8.13 Taiwan 4.61 Hongkong 3.85 Sri Lanka 0.35 China 0.25 Bangladesh 0.16 WEAKNESSES 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 Bangladeshs port city of Chittagong again killing scores of mostly young and female workers. On November 24, 2012, 125 people are recorded to have lost their lives due to a devastating factory fire in Tazreen Fashion of the Tuba Group. Workers, who are mostly young women, also face an acutely difficult working environment wages are low, hours are long, forced labor is practiced, child labor exists, sexual harassment exists, freedom is curtailed, whether it be locked doors or rights of association, and there are a multitude of other practices which go against international labor 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. BANKING SECTOR ANOMALIES Our banking sector, which once played a very positive role behind the development of this sector, based on the bank-client relationship, this relationship has been strained due to the creation of forced loan/demand loans as a result of non-shipment of goods during the period of political impasse in the later parts of 2013. The creation of demand loans/forced loans and their subsequent classification as bad loans resulted in a strained relationship whereby client were refused to open Back-to Back L/C facilities inspire of having the ability to secure export orders and to execute them. ELECTRICITY CRISIS For over the last two years, electricity crisis has been at its peak the last one-decade or more. Presently, on an average, we are losing production worth of about US$1.6 million per day just owing to the electricity crisis.

TAXES ON EXPORT EARNINGS The tax burden on export oriented garments sector is reducing competitiveness of Bangladesh made garments in the international markets against products from competing country. With other incentive for aggressive marketing, several countries including our neighboring ones are totally exempting their export sectors, including RMG, from all export taxes to help supplement their competitiveness and boost up export in the international markets. COMMUNICATION Good communication system is a pre-requisite of economic development. Lack of it creates road congestion, takes longer time in shipping raw materials and finished products to the port from the factory, thus increasing cost. LAW AND ORDER SITUATION Sound law and order situation and congenial political environment are pre-requisites for development. Due to the lack of it, interest of both the employees and the employers are being affected. WAGE PROBLEM The National Wage Board is likely to announce today a minimum wage for the workers in the export-oriented garment sector with a gross salary of around Tk. 5,200 for the entry-level employees. The announcement invited strong protest from both the garment owners and workers, as it is a bit higher than what the factory owners had agreed and much below than the workers demand for Tk. 8,500 as the monthly salary. GENDER DISCREPANCY IN JOB TYPE AND WAGE RATE Within the RMG factories, gender discrepancy in wage levels for comparable jobs is small, especially when accounting for factors such as age, education, and experience. In the production process, however, female workers are mainly concentrated in less skilled operations, and thus are low paid. In the RMG industry, most women work either as operators (where almost all workers are female) or as helpers (40-60 percent of the total work force in this category are females). It is extremely rare to find women working as production managers, supervisors, finishing and machine operators, or as in-charges who draw salaries varying from 2-10 times that of the average operator, depending on the type of operation involved. Elsewhere, the author has thus argued that the female labor market in Bangladesh is largely segmented by jobs (tasks) and by type of industry, as is clear from the discussion in the above section, and factors such as age, education, and marital status account for the low average wages of female workers, since they are prone to crowd in to certain specific jobs and occupations. Thus, discrimination in wage payments between male and female workers may be very limited, but discrimination in terms of education and training and various barriers to entry explain the low wages and low opportunity costs of female labor, a factor which needs to be addressed at the policy level. OPPORTUNITY OF BANGLADESH Buyers like Pelle Karlsson now have the fate of millions in their hands. He works for H&M, a chain that has shops across Europe and the United States. The company is now deciding which countries to keep doing business with. They have their price strategy; quality level and also if the country can work with a good lead time. Based on these three factors H & M will select both the suppliers and the countries that can cope with these things. H&M has moved some of its operations in Asia to Dhaka from Hong Kong in anticipation of buying more of its supplies here

from now on. But what is good news for Bangladesh will be bad news for workers in other developing countries. THREATS NON TARIFF BARRIERS The final acts of Uruguay Rolled negotiations strengthened the GATT principle of reducing all tariff barriers. But it is not in the case of non-tariff barriers; they take so many subtle fonts that they face disagreement. The child labor, environmental and human right issues are such nontariff barriers. It is quite likely that by restructuring, improving managerial efficiency and increasing productivity Bangladesh will be able to compete in the intentional market. But problems will arise if the importers apply subtle non-tariff barriers under the disguise of humanitarian issues like child labor. Here the main challenges for the producers of RMG of Bangladesh lies how to tackle the problems of child labor. The much-talked about Child labor issue can be an effective non-tariff ban-ire. The Harking Bill design to prevent adduce of child labor is based on humanitarian ground. On the other hand, India will withdraw its objection at the World Trade Organization (WTO) against a European Union decision meant for allowing duty-free access to 75 Pakistani products, most of which are garments. Bangladesh will face tough competition mainly for eight garment items if Pakistan is allowed the duty-free facility to the EU. Currently, Bangladesh is the third largest garment supplier to the EU after China and Turkey. Bangladesh may primarily lose $800 million garment market in the EU if Pakistan is granted the duty waiver and the amount will increase gradually. CHILD LABOR ISSUES It should be for both labor welfare and occupational safety. For safety use of aprons, gloves, dust masks, eye masks, ear protectors, gum boots, smoke detector and early rehearsed fire fighting arrangement is very important. Water treatment plant is a must to avoid pollution in the industry. Social environment related to labor rights, product safety and intellectual property rights are considered to be of increasing importance now-a-days. Ensuring social compliance is very important in the industries involved in production of RMG for maintaining quality of products as well as rules for export market. On protection of labor rights and improvement of working conditions, international standards have been developed and adopted by major markets. In contrast with labor rights, product safety issues are mostly mandatory requirements. Compliance issues like working environment, salary, maternal leave for female workers, and safety and health conditions of apparel sector workers have come to the forefront of attention of the international buyers. There is no option other than ensuring social compliance to maintain quality of products. Since labor can never enhance their skill without having a minimum wage for living and favorable environment for work. The compliance issues have become more important after the expiry of the MFA. Though these issues are very fundamental as far as the workers interest is concerned but at the sam e time these are very capital intensive for implementation. MORE NON-TARIFF BARRIER Bangladesh also faces other issues like environmental issues or minimum wage rate issue, apparently on humanitarian ground. But questions arises that are these issues truly on humanitarian grounds or it is a hidden agenda designed by the competitors of Bangladesh

exports to increase the cost of production with the ultimate result of making Bangladesh exports less competitive in the world. DREAMS AND UNCERTAINTY Wages in Bangladesh are low, around half those paid in China, giving the country a competitive edge. A lot of customers are positioning themselves in Bangladesh, like Tesco, like Carrefour, like H&M so all the indications are that this will be the greatest opportunity for Bangladesh. But for garment workers this is a period of uncertainty and it will be some time before it becomes clear whether Bangladesh will be a winner or a loser in the new global free market for garments. Developing countries around the world face upheaval after the quota system governing the garment industry was finally phased out at the end of last year. For Bangladesh the stakes are especially high it relies on garments for more than three-quarters of its exports. About 4.7m people, most of them women, work in garment factories. As many as 15 million more in support industries depend on the trade for their survival. Around the world the big and the efficient see the change as an opportunity. EXPLOITATION OF WORKERS Unions say garment workers are angry over low pay and long hours. Wages in Bangladeshs garment factories can be as little as $66 a month. Thanks to poor working conditions, employerworker clashes have been recurring in the textile industry. Workers often take to the streets with complaints of poor pay and working conditions. IMPACT OF GLOBALIZATION ON RMG SECTOR The possible impact of globalization on employment and quality of jobs in the RMG industry will depend on Bangladeshs ability to withstand a more competitive global environment. It is arguable that this competitiveness on the other hand will depend amongst other things on measures taken to improve productivity and job quality. In the worst scenario, a failure to maintain competitiveness will lead to enterprise closures and increased sub-contracting from larger to smaller units. This will obviously lead to unemployment among mostly women workers, a possible reverse trend of rural-urban migration, and a reduction in the household earnings of workers. A greater degree of subcontracting may also adversely affect job quality, since working conditions and job quality have been found to be inversely related to the size of RMG units. Deterioration in job quality is likely to have serious consequences. Entrepreneurs must recognize that labor is not simply a commodity; and that better working conditions are desirable from the point of view of productivity and efficiency, as well as from that of fairness and justice. Workers rights include freedom of association, which is currently prohibited in the export processing zones, while unionization is actively discouraged in the industry as a whole. Interestingly, the entrepreneurs interviewed as part of this study expressed divergent views regarding job quality. Most were worried about the impact on costs, and some regarded labor retrenchment and subcontracting as a way out. A few more enlightened entrepreneurs believed attitudinal changes were needed, and that wider dissemination of information would help. Others thought that the imposition of a social clause should be delayed, giving entrepreneurs a chance to adjust to the recent devastation in the economic fonts, as well as helping them to relocate factories outside Dhaka, where there could be more available space for canteens and other facilities, and where factories could be functionally designed to meet safety standards.

In any case, measures to increase productivity and competitiveness may involve some rationalization of the workforce and technology upgrading such as the introduction of computer-aided design (CAD). It has been suggested that the latter will lead to a substitution of male for female workers, given the higher educational and skill requirements of the new technologies, and the currently disadvantaged status of women in this respect. Sub-contracting may again be more actively pursued as a cost-cutting strategy by larger and more successful firms. Other measures to improve productivity and competitiveness such as skill upgrading will, on the other hand, improve job quality and earnings for workers.

ACHIEVEMENT OF GARMENTS SECTOR

(1) BGMEA membership starting with only 19 in early 1983 has reached 2923 in 2012-13, increasing at the rate of 20.5% each year. (2) The growth of garment export in terms of dollar is almost proportional to the rate of increases of factories; it depicts a healthy steeper growth of the industry per se. (3)Garment export has been increasing on an average 20% each year. As the rate of increase, not less than 20% per year is expected to continue through the next 15 years, growth prospect of Bangladeshs apparel industry looks very bright. (4) Bangladesh presently currently holds 5th largest apparel exporters sector in USA, 3rd largest in EU and 6th most lucrative place for supply in the world. Countrys RMG products are steadily moving toward high value sophisticated items like high quality suits, jackets, branded jeans items, embroidered ladies wear etc. increasing @ 25% per year, over the last few years, they have utilized quota and diversified their products into non-quota items. (5) Bangladesh has recently entered the extremely quality conscious RMG market of Japan and created a niche for itself. In 1994-95 export of RMG to Japan was US$ 5.72. And in 1996-97 it was US$ 9.35 Million (6) Germany took the 2nd share followed by EU. Germany has led the EU market in the last few years followed by US, France, Italy and the Netherlands. In 2012-13 Germany alone imported apparels worth US$ 39 billion against the purchase of US$ 103 billion in. However, as a single country, US have been the highest apparel importers from Bangladesh.

FACTS & FIGURES

MEMBERSHIP AND EMPLOYMENT YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Source : BGMEA. NUMBER OF GARMENT FACTORIES 4490 4743 4925 5063 5150 5400 5600 DIRECT EMPLOYMENT (MILLION WORKERS) 2.4 2.8 3.5 3.6 3.6 4 4

COMPARATIVE STATEMENT ON EXPORT OF RMG AND TOTAL EXPORT OF BANGLADESH YEAR WOVEN 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 4657.63 5167.28 5918.51 6013.43 8432.4 9603.34 11039.85 EXPORT OF RMG (IN MILLION US$) KNIT 4553.6 5532.52 6429.26 6483.29 9482.06 9486.39 10475.88 TOTAL 9211.23 10699.8 12347.77 12496.72 17914.46 19089.73 21515.73 EXPORT OF RMG (IN MILLION DOZENS) WOVEN 133.08 147.43 169.59 172.8 615.52 599.24 709.89 KNIT 199.54 241.6 290.92 292.7 729.88 677.46 777.22 TOTAL 332.62 389.03 460.51 465.5 1345.4 1276.7 1487.11 12177.86 14110.8 15565.19 16204.65 22924.38 24287.66 27018.26 75.64 75.83 79.33 77.12 78.15 78.6 79.63 TOTAL EXPORT OF BANGLADESH (IN MILLION US$) % OF RMG'S TO TOTAL EXPORT

Bangladesh's RMG Export to World (Jul-December, FY 12-13 & FY 13-14 ) Million US$ Jul-Dec Major EU Countries Austria Belgium Bulgaria Denmark Finland France Germany Greece Italy Ireland Netherlands Portugal Romania Spain Sweden U.K. Cyprus Czech Republic Estonia Hungary Latvia Lithuania 2012-13 9.71 112.15 0.05 60.79 4.02 218 664.09 2.28 158.54 32.68 117.98 2.62 1.57 236.96 52.24 530.31 0.03 17.88 0.36 0.07 0.04 0.21 Woven Jul-Dec 2013-14 11.09 161.36 0.03 57.96 4.88 273.53 853.39 2.83 209.86 31.42 140.49 5.27 1.52 283.9 52.56 565.43 0.07 30.11 0.09 0.24 0.14 0 Growth % 14.23 43.88 -40.14 -4.65 21.4 25.47 28.51 23.91 32.37 -3.86 19.08 101.51 -3 19.81 0.62 6.62 133.33 68.43 75 256.04 243.89 -100 Jul-Dec 2012-13 13.39 148.28 0.62 178.25 10.96 429.41 1,032.81 5.71 247.71 60.07 150.65 9.43 2.85 340.96 98.61 620.15 0.49 17.3 1.25 1.13 0.59 1.07 Knit Jul-Dec 2013-14 16.78 212.95 0.61 219.82 12.63 479.6 1,296.21 5.74 336.7 71.24 185.87 16.73 2.54 417.15 114.8 652.07 1.19 21.76 0.72 3.92 0.73 0.19 Growth % 25.34 43.61 -2.13 23.32 15.29 11.69 25.5 0.61 35.93 18.6 23.38 77.35 -11.02 22.35 16.42 5.15 141.19 25.76 -42.71 245.74 24.39 -81.8 Jul-Dec 2012-13 23.1 260.43 0.67 239.04 14.98 647.41 1696.9 7.99 406.24 92.75 268.63 12.05 4.42 577.92 150.84 1150.46 0.53 35.18 1.61 1.2 0.63 1.28 Total Jul-Dec 2013-14 27.87 374.31 0.64 277.78 17.52 753.13 2149.6 8.57 546.56 102.66 326.36 22 4.06 701.05 167.36 1217.5 1.25 51.87 0.81 4.16 0.87 0.19 Growth % 20.67 43.73 -4.86 16.21 16.93 16.33 26.68 7.26 34.54 10.68 21.49 82.59 -8.17 21.31 10.95 5.83 138.7 47.44 -49.92 246.32 38.4 -84.77

Malta Poland Slovakia Slovenia Sub-Total (EU) EU % of World USA % of USA Canada % of Canada Non-Traditional Markets Australia Brazil Chile China India Japan Korea Rep. Mexico Russia South Africa Turkey Sub-Total % of NonTraditional

0 70.03 14.28 1.22 2308.09 46.43 1,736.97 34.94 247.22 4.97

0.04 92.48 12.71 2.1 2793.5 46.69 1,959.38 32.75 274.61 4.59

0 32.07 -11.02 72.13 21.03

0.35 114.95 20.07 3.85 3510.91 70.56

1.13 149.69 24.06 8.28 4253.11 71.5 616.76 10.37 224.1 3.77

225.11 30.23 19.87 115.06 21.14

0.35 184.97 34.35 5.07 5819 58.5

1.17 242.18 36.77 10.38 7046.61 59.06 2576.14 21.59 498.71 4.18

236.26 30.93 7.03 104.78 21.1

12.8

537.85 10.81

14.67

2274.82 22.87

13.25

11.08

231.7 4.66

-3.28

478.92 4.81

4.13

71.21 28.83 3.51 42.36 27.23 122.12 47.22 23.83 17.45 18.56 94.7 497.04 10

69.99 37.19 4.94 65.95 43.41 161.84 43.07 28.81 33.14 16.9 238.72 743.96 12.43

-1.72 28.99 40.7 55.67 59.42 32.52 -8.8 20.89 89.95 -8.92 152.07 49.68

129.19 64.44 9.72 26.24 7.23 94.74 17.25 34.84 36.89 11.98 67.33 499.86 10.05

138.61 52.23 12.49 44.15 9.45 135.16 26.58 39.73 60.79 9.29 96 624.46 10.5

7.29 -18.95 28.56 68.26 30.69 42.66 54.06 14.02 64.78 -22.52 42.58 24.93

200.4 93.28 13.23 68.6 34.45 216.87 64.47 58.67 54.34 30.54 162.04 996.89 10.02

208.6 89.42 17.43 110.09 52.85 297 69.64 68.53 93.93 26.19 334.72 1368.42 11.47

4.09 -4.13 31.78 60.49 53.39 36.95 8.02 16.81 72.86 -14.26 106.57 37.27

GRAND TOTAL

4971.06

5983.51

20.37

4975.89

5948.69

19.55

9946.95

11932.2

19.96

FUTURE PROSPECTS SHORT-TERM SNAPSHOT

Trade flows are expected to be stable over the next six months with 41.7% of respondents expecting trade volumes to be unchanged. Although respondents have become less pessimistic about the outlook for the global economy, slower growth in Asia in recent months has dimmed their view of growth prospects in these key trading markets.

CURRENT VIEW
Last year, 8% of Bangladeshi exports went to Asia whilst nearly 20% went to North America and more than 40% went to Europe. Wages are lower in Bangladesh than in many Chinese regions and South-East Asian countries, and this competitive advantage has enabled low-cost

manufacturing industries such as textiles to grow rapidly over the past decade. Bangladesh now has a share of more than 10% of the world market for clothing and apparel. Trade within Asia has been boosted by greater regional cooperation with a proliferation of free trade agreements having been signed in recent years. Although emerging market growth has slowed in recent months, it will still support an expansion of trade and by 2020 we expect the share of Bangladeshi exports going to Asia to have more than doubled to 15%.

CORRIDORS OF CHOICE
Clothing and apparel is Bangladeshs largest export sector, helped by wage competitiveness. Although wages will gradually rise, Bangladesh will remain internationally competitive, with the clothing sector contributing almost a quarter of the increase in exports out to 2015. The second largest sector is textiles and wood manufactures and this sector will contribute almost a third of the increase in exports out to 2015. Animal products are Bangladeshs third largest export sector and animal products and animal and plant materials will contribute 15% of the increase in exports from 2013 to 2015. Exports to emerging Asia will grow by more than 15% from 2013 to 2020, particularly in clothing, other manufacturing and animal products to meet the growing demand for these products from the rapidly increasing middle classes in China and the rest of East Asia. Exports to Latin America will also grow strongly with growth averaging more than 10% out to 2020, largely reflecting trade in clothing and textiles.

OPPORTUNITIES FOR BUSINESS

There have been a number of major incidents at clothing factories including a fire in April that killed over 1000 people. Workers safety is an important issue for the multinational clothing buyers and in the near-term, the uncertainty surrounding this might discourage investment (FDI inflows were less than 1% of GDP in 2012). But over the medium to longer-term we expect rising FDI inflows to support investment as foreign companies seek to access Bangladeshs large domestic market and substantial infrastructure development needs.

LONG-TERM OUTLOOK
Bangladesh is located in the worlds most dynamic trading region and has established a strong foothold in clothing and apparel. The demographic trend is very favorable and Bangladesh is seeking to boost its trade prospects further by setting up free trade with many of its neighbors, hoping to broaden its export base and encourage FDI.

CORRIDORS TO WATCH
A rising middle class across Asia will help to drive strong trade flows from Bangladesh to the rest of Emerging Asia and by 2030 India will be Bangladeshs third largest export destinati on. Over the next twenty years China, India, Vietnam and Malaysia will be the fastest growing export destinations. Exports to Turkey, notably of clothing, apparel, textiles and wood manufactures will grow strongly out to 2030 and within twenty years Turkey will be Bangladeshs fourth largest export destination.

India, China, Vietnam and Turkey will be Bangladeshs fastest growing import partners with industrial machinery, textiles and wood manufactures and transport equipment the fastest growing import sectors. By size animal products, cereals, sugars, coffee, tea, spices and beverages will be the largest import sectors, reflecting the basic needs of Bangladeshs large population.

SECTOR CONTRIBUTION TO INCREASE IN MERCHANDISE EXPORTS

FOCUS ON INFRASTRUCTURE Bangladesh is ranked 118th in the world for its infrastructure according to the World Economic Forum. This is the lowest of any country in our sample and its infrastructure rating has actually fallen in recent years. Particular attention needs to be paid to the transportation network and capacity and reliability of power generation. But progress is being made and over the next twenty years the proportion of imports related to infrastructure will rise to more than a third. The governments aim is to more t han double electricity generation within the next few years, at a cost of around USD 15bn. If these developments take place, they will encourage investment in industry and improve growth prospects. But the World Economic Forum has expressed concerns about the honesty and transparency of public funding decisions and financing projects is a major challenge as a high level of bureaucracy deters private funding. The government relies on public-private partnerships in this area and, until tax reforms enable more government-funded projects, progress will be slow.

FINDINGS
The apparel exports to US from Bangladesh has seen a relatively steady increase with the exception being the year 1993-94 because at that time the quota system was introduced.

SOLUTIONS TO THE PROBLEMS

Industrialization is an important part in the economic development of Bangladesh and textile is regarded as the engine in the industrialization of any country. The textile industry in Bangladesh is also the mother industry. But unfortunately the textile industry is facing different kinds of challenges in different times. The textile industry is not free from the burden of loans from banks that was created the BTMC before the denationalization in the 1980s. So cotton factories without modernization cannot be inter linked with the high rate of import tax, vat, advance income tax payment, un-adjustable workers pay with production and high rate of electric charge given to the government, so that they cannot compete with the Indian textile goods., Indian textile goods are smuggled into the country and for lack of administrative control of bonded warehouse and infiltration in the internal market through corruption, so that productive textile goods cannot be marketed in the country. In spite of that creation of enough opportunity acceptability of income tax structure and argument bank rate of interest can boost the export of textile goods. It is often said that the quality of the cloth produced is not at par with foreign cloths and the textile mills in our country are not able to supply cloths according to the demand.

GOVERNMENT SOLUTION
MAJOR ISSUES AND PROSPECTS IN THE GARMENT INDUSTRY Need for market diversification If Bangladesh were to remain competitive in the post MFA era, one inevitable strategy would be to take the necessary steps to increase labor productivity. In order to realize the incremental gains from the expansion of the global apparel market, the country also needs to diversify its market, instead of putting all its eggs in one basket, i.e. continuing to exploit the same niche market. Though Bangladesh now exports garments to about 25 countries around the world, the USA is the single largest importer of its RMG products, amounting to 43 percent of total garment exports. Bangladesh is the sixth-largest supplier of apparel in the US market (Rahman and Rahman, 2001). Considering the European Union as a single market, the USA then becomes the second largest. Over the past few years, Bangladeshs RMG exports to the EU have expanded rapidly, with the EU currently importing about 52 percent of Bangladeshs total garment products. The inter-temporal evidence of the narrow market base of Bangladesh RMG exports in the 1990s is provided by the concentration of exports to the US and EU market (almost 96 percent in 1998-99, see Table A2.8 in Annex). While the export share to the USA has witnessed an annual average rate of decline of 1.5 percentage points, however, the corresponding share to the EU has experienced an annual growth rate of 1.6 percentage points. Thus, the increment in the EU share has simply replaced the declining share in the USA market, which suggests that, instead of diversification, Bangladeshs export market has remained concentrated over the past decade. The combined market share of the USA and the EU has thus increased from 95.5 percent to 95.6 percent between 1991-92 and 1998-99. Bangladesh so far has been unable to gain access to ASEAN or Indian markets, although it imports a huge quantity of fabrics and yarn from these countries. Similarly, although it imports about 95 percent of its total garment machinery from Japan, its market share of apparel export to Japan is a mere 0.1 percent.16 Bangladeshs inability to gain access to these large markets in turn suggests that the country has yet to establish its claims, as advocated by the WTO, to the principles of reciprocity and market access. Establishing backward linkages A fundamental constraint on the potential of the RMG industry is the general absence of backward linkages. In their absence, despite abundant cheap labor, the countrys local value addition has so far been only 25-30 percent of gross exports. The RMG industry is currently heavily dependent on imported raw materials. Roughly 80 percent of the woven fabrics and 50 percent of the knitted fabrics are imported17, despite some improvements in this regard since the mid-1990s, in terms of investments in backward linkage industries, especially with the announcement of the Textile Policy, 1995, and the granting of various incentives by the Government. With the phasing out of the MFA, Bangladesh may face a supply shortage of required fabrics, some stakeholders argue, since the current suppliers will find it more profitable to use their domestically produced fabrics to produce their own RMG products, which they will be able to export competitively in the quota-free world apparel market. Recent trends and relaxation of the GSP to allow for accumulation within the SAARC region, however, suggest that the availability of fabrics may not be such a severe constraint. Nonetheless, Bangladeshs excessive dependence on imported raw materials has adversely affected its competitiveness by increasing the lead time and cost of production. Improvements in productivity It is clear from the discussion so far that one issue facing the RMG industry in Bangladesh is the slow rate of increase in productivity, and the gap that exists between this country and other

competitors in this regard. There is also scope for capacity building in different types of skills and processes. The aim should be to move the industry up to a different regime, wherein competition is based on higher productivity, an improved working environment, and backward and forward linkages to meet the new challenges of the post-MFA era. A more concerted action plan is needed in this regard. Interviews with entrepreneurs, for example, have suggested that Bangladesh is at a disadvantage compared to other countries in South Asia; such as, Sri Lanka, where a more educated labor force, especially at the supervisory and managerial levels, increases labor productivity. Thus, training schemes for managers and supervisors are an important element in increasing productivity, including the introduction of functional English courses for higher-level employees, improving their ability to read operating manuals and so on. To these ends, the Government should also increase its allocations to the education sector. Responsiveness to consumer ethics and standards New challenges facing the RMG industry and the export sector in general include greater consumer awareness of quality, health, and environmental standards. These issues may well act as non-tariff barriers, but entrepreneurs have little option other than to meet these requirements and codes of global transactions. Similarly, working conditionsincluding safety, health, and the earnings of workers, together with issues such as child laborare growing concerns on the part of international consumers. The industry needs to improve its image in this regard, advertising recent achievements such as the abolition of child labor and improvements in occupational safety. Efforts to further improve standards, furthermore, are likely to have longer-term payoffs. Need for a data bank Interviews with entrepreneurs suggested considerable uncertainty regarding the behavior of competitors and their responses to the new global environment. A considerable gap also exists in knowledge about trade and investment flows. This is understandable, given that most entrepreneur interactions are with buyers who merely specify their product needs, provide the designs, etc. The emerging global environment, however, calls for more strategic action with regard to major competitors. In this respect, international organizations such as the ITC, UNIDO, and the ILO can have special roles to play. The relevant ministries can also maintain easily accessible data banks on trade flows by country and region, including information on product line, changes in unit costs, special opportunities, new technologies, cost effectiveness of different technologies, etc., especially in the backward linkage industries. The BGMEA should also try to disseminate such information to all types of entrepreneurs. Dark Side of the Garment Industry This most flourishing industry of Bangladesh has its dark side. A large number of the units are located in dilapidated buildings. In April 2005, an entire building, housing hundreds of mainly female workers in the outskirts of Dhaka, collapsed. Sixty-four laborers, at work on their machines, were crushed to death, and 84 injured. What is worse, most of these buildings do not have adequate fire escapes. On November 24, 2012, 125 people are recorded to have lost their lives due to a devastating factory fire in Tazreen Fashion of the Tuba Group Workers. The industry leaders unite together to get support and benefits from the government, but they are not equally willing to look after the welfare of workers. In the RMG industry in several places in Bangladesh workers are paid their salaries two months late. Overtime is imposed and in some cases not rewarded. The rising inflation has reduced the value of wages. But the industrialists say that its the job of the government to control inflation.

RECOMMENDATION
The main recommendations in this regard are the following: 1. Diversification of markets into ASEAN and other regions outside the European Union and North America 2. Diversification of products, particularly the transition to higher value-added items 3. Building of technological capacity and skills for a range of products 4. Strong support for the establishment of backward linkage industries, but with proper assessment of international competitiveness, with a focus on dyeing and finishing units (which some studies have identified as potentially more competitive) and on smaller units which are less capital intensive and less risky as investments 5. Continued emphasis on primary and secondary education in government education policies, aiming to develop a more skilled and generally higher-quality labor force 6. Continued emphasis on education and skills development for women, specifically, aiming to close the gender gap 7. Introduction of functional English courses for managerial and supervisory staff and greater attention to on-the-job training, with appropriate incentives such as tax rebates 8. Encouragement for relocation of factories outside main urban areas, with serviced plots being made available and adequate supervision to ensure that factories are functionally designed 9. Better regulation and supervision of factories, reinforcing government regulatory capacity in this regard to ensure compliance with the Factory Act 10. Compliance with labor laws with regard to wages, weekly holidays, canteen and crche facilities, occupational safety including attention to fire hazards, etc 11. Setting up a data bank by the relevant ministries in collaboration with such Organizations as the ITC, the ILO, and UNIDO to monitor trade flows by product And region, information on new technologies, etc. 12. Dissemination of information by the ILO regarding linkages between job qualities and productivity and best practices in other countries, aiming to promote attitudinal changes among entrepreneurs