Economics World, Jan.-Feb. 2019, Vol. 7, No.

1, 17-26
doi: 10.17265/2328-7144/2019.01.004 D DAVID PUBLISHING

Ready-Made Garments Sector of Bangladesh: Its Growth,

Contribution and Challenges

Shahajada Mia
Pabna University of Science and Technology, Pabna, Bangladesh
Masrufa Akter
University of Rajshahi, Rajshahi, Bangladesh

The ready-made garments (RMG) sector has a greater potential sector than any other sector in terms of employment
and foreign exchange earnings to reduce poverty and make a contribution to the national economy. Based
on secondary data, the study is intended to draw the scenario of RMG industry in Bangladesh, especially the growth,
contribution, and challenges. It is the largest exporting industry in Bangladesh that has experienced
tremendous growth during the last 25 years. Among the people of Bangladesh, about 4 million workers are directly
employed in RMG sector. Therefore, the contribution of RMG in total export is increasing day by day. At present,
83.9% of national export in Bangladesh is contributed by RMG export although it was 3.89% in 1983-1984. In
fiscal year (FY) 2017-2018, the percentage of ready-made garments (RMG) contribution to gross domestic product
(GDP) is
12.26% but it was only 2.74% in FY 1990-1991. So, it indicates that RMG sector is the main contributor
of Bangladesh’s economy, especially in the export of the country. This sector also faces a lot of
challenges, like unskilled workers, insufficient infrastructure, raw materials, energy crisis, safety issue, political
crisis, and coverage of accord and alliance. To overcome these challenges, we need to take different steps
from owners and major stakeholders.

Keywords: RMG, GDP, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), growth,
contribution and challenges

Introduction


Bangladesh is a developing country. Most of the people are still occupied in agriculture sector. But per
capita land is very scant. Most of our farmers are the marginal farmers. As a result, people move out agriculture
into industry. Therefore, agro-based economy of our country converted to the industrial economy which is the
essential part of the development of a country. The ready-made garments (RMG)industry is played an
important role among these industries. The export-oriented RMG sector in Bangladesh started its journey in late
1970s. At that time, there were only nine exporting garments industries in the country. But nowadays,
the garments industries are grown up. The export-oriented RMG sector has made crucial contribution to
transformation of the Bangladesh economy. The role of our RMG entrepreneurs, domestic fiscal and financial,

Shahajada Mia, Md.,Lecturer,Department of Statistics, Pabna University of Science and Technology, Pabna, Bangladesh.
Masrufa Akter,MSS Student.,Department of Economics, University of Rajshahi, Rajshahi, Bangladesh.
Correspondence concerning this article should be addressed to Md. Shahajada Mia, Department of Statistics, Pabna University
of Science and Technology, Pabna-6600, Bangladesh.
18 READY-MADE GARMENTS SECTOR OF BANGLADESH 18

within the domestic economy, and global market opportunities combined to create a story which is, to be honest
and true, unparalleled in the developing world. When jute and jute goods were losing their traditional markets,
with the prospect of drastic fall in forex 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 RMG sector has emerged as the largest export earning sector of the country. This industry
has contributed in socio-economic prospects, creating a huge number employment opportunities mostly for the
poor illiterate female workforce of the country. The industrial sector can provide high-wage employment for
large numbers of workers and can raise social productivity by producing high value goods on a mass scale.
Besides, poor countries can also earn valuable foreign exchange by exporting manufactural products and the
ensuring foreign exchange can be used to invest in new vintage of machines and technologies that rapid move
up the technology ladder becomes possible. The importance of industrial development as an engine of
Bangladesh’s economic growth is also reinforced by growing realization that the development of agricultural
sector, one of the mainstays of the country’s economy, critically hinges on its backward and forward linkage
with industrial sector.Thus, the RMG sector has played a vital role in empowering women by providing
employment. The RMG sector of Bangladesh as employing the rural poor illiterate female workers is known
for cheap labor and also producing low value garments. So, producing high value products remains a
challenge for it. Besides, there is a high dependency on imported raw materials especially in case of woven
garments that cause high lead time in production.

Literature Review
Literature review exhibits the overall scenario of the RMG sector in Bangladesh and its contribution to the
Bangladesh economy. Hossain and Jagit (1988) said that low-wage labor has made Bangladesh one of
the fastest growing garment exporting countries.Robbani (2000) examined that the major portion of
foreign exchange earnings came from RMG sector, thus it created a giant position in the economy.
Rehman and Khundker (2001) stated that the RMG sector started its journey in late 1970s as a small non-
traditional export, with a small worth of US$69,000, and by FY2002, exports have gone up to US$4.5 billion. In
the following years, the sector develops into an exclusive growth rate of 15 percent per annum. Azad (2001)
said that the tremendous success of ready-made garment (RMG) exports from Bangladesh over the last
two decades has surpassed the optimistic expectation. The impact of garment industry of Bangladesh exceeds
its considerable economic and financial success. The overall impact of the ready-made garment export industry
is certainly one of the most significant social and economic developments in Bangladesh. Chowdhury,
Ahmed, and Yasmin (2014) addressed the challenges of unskilled labor with low productivity which results in
increased per unit cost of production. Rahman and Anwar (2007) highlighted weak and inadequate
infrastructures, e.g., poor energy supply; poor port facilities are the common challenges facing by the RMG
sector in Bangladesh. Haider (2007) said that the garment industry in Bangladesh which accounts for 75%
of the country’s export earnings was created only three decades ago. Berik and Rodgers (2008) addressed
that Bangladesh RMG owners are very reluctant to invest in training and development facilities, although it
revealed that training costs are directly offset by the productivity increase. Mohiuddin (2008) attempted
to identify the prospects of Bangladesh’s RMG industry in the post MFA period by analyzing the
current scenario, strength and weakness of competitiveness in the world market in the coming years.
Nuruzzaman and Haque (2009) said that the recent
years has dramatically changed the landscape of export composition of the country. Clark and Kanter (2011)
found that the efficiency level judged by the productivity of Bangladesh RMG workers is not up to date or
accordance to international level and it is just one-fourth of that of Chinese workers owing to workers’ low
literacy. Berg, Hedrick, Kempf, and Tochtermann (2011) stated five major challenges for Bangladesh
RMG sector, such as weak infrastructures, compliance issues, low supplier and labor efficiency,
insufficient backward linkage, and political & economic volatility. Chowdhury et al. (2014) pointed major
challenges as utility crisis, such as oil and gas shortage, too much dependency on imported raw
material, suppliers’ inefficiency, low labor productivity, high interest rate,insufficient bank finance, and
political unrest within the country. Hasan (2013) addressed that the single most challenge of Bangladesh
RMG sector as the open competition emerged from the withdrawal of quota system under MFA agreement
and the sustainability of the RMG sector under global market competition.Chowdhury et al.(2014)
predicted that Bangladesh will enjoy increasing growth rates as its labor cost is its comparative advantage
given the Chinese competitors are facing increased labor cost and unrest.
From the above literature, it is clear that different researchers have examined the RMG sector in different
viewpoints. In this paper, the main objectives are to draw a brief scenario of RMG industry in Bangladesh. The
specific objectives are as follows:
 To depict the history and growth picture of RMG sector in Bangladesh.
 To find out the economic contribution of RMG in Bangladesh.
 To explore the opportunities and challenges of RMG sector of Bangladesh.

Data Source and Methodology

Data were collected from secondary sources, such as various publications, research article and documents,
Export Promotion Bureau (EPB), and the Bangladesh Garment Manufacturers and Exporters Association
(BGMEA). In our study, a descriptive technique was adopted to analyze and represent collected data
and information in tabular form and represented by different graphs namely line diagram and bar
diagram. Regression analyses are also used for showing contribution of RMG export to GDP.

Results and Discussion

Growth of Garments Industry in Bangladesh
The journey of the RMG industry was started in 1978 when Reaz Garments exported its first consignment
in USA and earned 69,000 USD. But the actual milestone was led by the Desh Garments Ltd. established in
1979, the first 100 percent export oriented company. But nowadays, ready-made garments industry concaves up.
The growth of garments sectors are shown below:
Number of garment factories in Bangladesh. Figure 1 represents the number of garment
factories in Bangladesh from the fiscal year 1983-1984 to 2017-2018.The number of factories was gradually
increasing up to fiscal year 2012-2013, decreased in fiscal year 2013-2014, and thereafter increased up
to 2017-2018. Therefore, the growth factory showed a negative trend in year 2013-2014 due to utility
crisis and strong inspection from the regularity body to identify the risky factories.
Number of workers in RMG sector. Figure 2 shows the number of workers in RMG sector of
Bangladesh. From Figure 2, we can say that about 4 million workers are directly employed in RMG sector. The
number of workers trend is upward trend, i.e., the number of workers has increased at faster rates and reaches.
 Bangladesh RMG export to world. Table 1 represents the Bangladesh RMG export to world from fiscal
year 2015-2016 to 2017-2018. We have shown that the major importers of RMG products from Bangladesh are
USA and Europe. USA is the largest importer of Bangladeshi RMG products, followed byGermany, UK,
France, and other E.U countries. But there are some other countries that have a contribution to the total RMG
export of Bangladesh.

7000
Number of factories

6000
5400

44824328
4220 4490 5150
5000 4743
3618 3760
4925 5063 5876
4000 4107 4220
34803957
2503 2726 4222
3000 3200 4296
1537 18392503
2963
2000 2182 2353
685 725 759 834
1000 594 629
384 1163
685

2015-16
0
97
1984-85 88 - 1997-98 1998- 06

2016-17
1985-86 1992-93 1993- 99 1999-00
1987 1988-89
1986-87 88 94 1994-95 2000-01 2001-02 2002- 2005 2006-07
1989-90 1990- 1995-96 1996 2007-08 2008-0911
03 2003-04
91 1991-92 Fiscal 2009-10 2010
2004-05 2005
- 2010 2011-12
Figure 1. Number of garment factories in Bangladesh.
- -

4.004.00
4.50
Workers (in million)

4.00 4.00
3.50 3.60 4.00 4.00
4.00 60
3 60 .3
3.50
3.00 2.80
2.40
2.50 2.00 2.00
1.80
2.000 0 2.20
1.50 1.50 2.00
1.50 1.20 1.29 1 3 1.80
1.60
1.000 1 0.80 0.83 .1
0 0.12 0.20 . 0.58
0.5 00.32 0.34 0.40
0.28 0 3
0.00
2015-16

0
88 97 2006-07 2007-
88 08 2008-09 11
2016-17

1987 1988-89 1992-93 1993- 2009-10 11

1984-85 1985-
1989-90 1990- 94 1994-95 2010 2011-12
2001-02 2002-
86 1986-87
91 1991-92 1996 1997-98 Y 2012-13 2013-
1995-96 1996 03 2003-04
1987 1998-99 1999- 2004-05 2005- 14 2014-15
00- 2000-01
Figure 2 .Number of workers in RMG sector.
-
Table 1
Bangladesh RMG Export to World from Fiscal Year 2015-2016 to 2017-2018
Woven Knit Total (Woven+Knit)
Million US$
2015-2016 2016-2017 2017-2018 2015-2016 2016-2017 2017-2018 2015-2016 2016-2017 2017-2018
EU countries 7,731.96 7,857.02 8,619.61 9,421.40 9,893.58 11,009.41 17,153.36 17,750.60 19,629.02
% of World 52.46 54.59 55.88 70.54 71.92 72.49 61.06 63.06 64.12
Growth% 18.60 1.62 9.71 6.49 5.01 11.28 11.63 3.48 10.58
USA 4,228.62 3,901.94 3,977.70 1,396.30 1,302.06 1,374.37 5,624.92 5,204.01 5,352.07
% of world 28.69 27.11 25.79 10.45 9.46 9.05 20.02 18.49 17.48
Growth% 6.49 -7.73 1.94 6.01 -6.75 5.55 6.37 -7.48 2.85
Canada 575.71 541.49 552.13 422.73 404.81 411.02 998.44 946.30 963.15
% of world 3.91 3.76 3.58 3.17 2.94 2.71 3.55 3.36 3.15
Growth% 5.64 -5.94 1.97 10.15 -4.24 1.53 7.50 -5.22 1.78
Other countries 2,202.46 2,092.14 2,276.81 2,114.99 2,156.79 2,393.71 4,317.46 4,248.93 4,670.52
% of world 14.94 14.54 14.76 15.84 15.68 15.76 15.37 15.09 15.26
Growth% 8.53 -5.01 8.83 12.58 1.98 10.98 10.48 -1.59 9.92
Grand total 14,738.74 14,392.5 15,426.25 13,355.42 13,757.25 15,188.51 28,094.17 28,149.84 30,614.76
Growth % 12.81 -2.35 7.18 7.47 3.01 10.40 10.21 0.20 8.76
Note. Source: EPB, Compiled by: RDTI Cell, BGMEA.

Contribution of RMG Sectors

The ready-made garments (RMG) industry contributes to the Bangladesh economy in a distinctive manner.
The industry plays a significant role in terms of employment and income generation of millions of
people especially the poor. Some contributions of ready-made garment (RMG) sectors to the national
economy of Bangladesh are shown below:
RMG sectors contribution to export. RMG sector’s contribution to country’s export has
experienced phenomenal growth over the years. It has evolved as the main export earning sector of Bangladesh.
Table2shows the comparative statement between RMG export and total export of Bangladesh and we can
say that in 1983-1984, the garments exports are only 31.57 million and the hare of national export is
only
3.89%. The RMG export is increasing in a good way and it reached 30,614.76 and the share of national export is
83.49% as well as the major part of employment in Bangladesh getting from RMG sector. Table3 shows that the
monthly export performance of RMG of Bangladesh for 2016-2017 and 2017-2018 in million USD. The RMG
exports share in national export in fiscal year 2016-17 and 2017-18 are 81.23% and 83.49% i.e. RMG export is
the largest sector of national export in Bangladesh.
Contribution of RMG industry to the GDP. Garments industry is the largest exporting industry
in Bangladesh, which experienced phenomenal growth during last two decades. The sector has also
played a significant role in the socio-economic development of the country.To show the contribution of RMG
exports to GDP, graphical representation and regression analysis are used here.
Graphical representation. In such a context, Figure3 shows the percentage of ready-made garments
(RMG) contribution to gross domestic product (GDP) of Bangladesh. It shows that the percentage of
ready-made garments (RMG) contribution to theGDP is 2.74% in FY 1990-191. The contribution of
RMG sector to GDP almost is given up growing pattern. In FY 2017-2018, the percentage of ready-made
garments (RMG) contribution to GDP was 12.26%. Therefore, we can say that the RMG sectors play an
important role in our national economy.
 Regression analysis. Since the demand of RMG products is increasing day by day in the world, so RMG
export helps to build up the economy of Bangladesh. To show the contribution and significance relationship
between them, we have used here simple linear regression model where GDP is considered as the dependent
variable (ܻ௧ሻ and RMG export as the independent variable (ܺ௧ሻ. The estimated regression equation is as follows:
ܻ෡௧ ൌ
21482.86൅6.22ܺ௧

Table 2
Contribution of RMG in Total Export of Bangladesh
Export of RMG Total export of Bangladesh % of RMG’s to total export
Year (in million US$) (in million US$)
1983-1984 31.57 811.00 3.89
1984-1985 116.2 934.43 12.44
1985-1986 131.48 819.21 16.05
1986-1987 298.67 1,076.61 27.74
1987-1988 433.92 1,231.2 35.24
1988-1989 471.09 1,291.56 36.47
1989-1990 624.16 1,923.70 32.45
1990-1991 866.82 1,717.55 50.47
1991-1992 1,182.57 1,993.90 59.31
1992-1993 1,445.02 2,382.89 60.64
1993-1994 1,555.79 2,533.90 61.40
1994-1995 2,228.35 3,472.56 64.17
1995-1996 2,547.13 3,882.42 65.61
1996-1997 3,001.25 4,418.28 67.93
1997-1998 3,781.94 5,161.20 73.28
1998-1999 4,019.98 5,312.86 75.67
1999-2000 4,349.41 5,752.20 75.61
2000-2001 4,859.83 6,467.30 75.14
2001-2002 4,583.75 5,986.09 76.57
2002-2003 4,912.09 6,548.44 75.01
2003-2004 5,686.09 7,602.99 74.79
2004-2005 6,417.67 8,654.52 74.15
2005-2006 7,900.80 10,526.16 75.06
2006-2007 9,211.23 12,177.86 75.64
2007-2008 10,699.80 14,110.80 75.83
2008-2009 12,347.77 15,565.19 79.33
2009-2010 12,496.72 16,204.65 77.12
2010-2011 17,914.46 22,924.38 78.15
2011-2012 19,089.73 24,301.90 78.55
2012-2013 21,515.73 27,027.36 79.61
2013-2014 24,491.88 30,186.62 81.13
2014-2015 25,491.40 31,208.94 81.68
2015-2016 28,094.16 34,257.18 82.01
2016-2017 28,149.84 34,655.90 81.23
2017-2018 30,614.76 36,668.17 83.49
Note.Source: Export Promotion Bureau compiled by BGMEA.
23 READY-MADE GARMENTS SECTOR OF BANGLADESH 23

Table 3
Monthly Export Performance of RMG of Bangladesh for 2016-2017 and 2017-2018 in Million US ($)
Export performance of RMG in FY 2016-2017 (in million USD)
Year Month Knit Woven Total
July 1,077.23 1,040.35 2,117.58
August 1,395.61 1,330.68 2,726.29
September 927.95 894.08 1,822.03
October 1,134.35 1,021.19 2,155.54
2016
November 1,097.6 1,212.31 2,309.91
December 1,180.84 1,397.51 2,578.35
January 1,246.72 1,456.81 2,703.53
February 1,015.95 1,209.7 2,225.65
March 1,067.3 1,222.65 2,289.95
April 1,110.62 1,097.86 2,208.48
2017
May 1,250.77 1,236.69 2,487.46
June 1,252.31 1,272.76 2,525.07
Total FY 2016-2017 13,757.25 14,392.59 28,149.84
Share in national export (%) 39.70 41.53 81.23
July 1,263.34 1,215.95 2,479.29
August 1,605.53 1,439.45 3,044.98
September 878.08 741.77 1,619.85
October 1,239.25 1,054.36 2,293.61
2017
November 1,258.1 1,266.41 2,524.51
December 1,350.97 1,459.58 2,810.55
January 1,311.11 1,571.22 2,882.33
February 1,219.28 1,381.63 2,600.91
March 1,195.48 1,382.93 2,578.41
April 1,219.15 1,251.97 2,471.12
2018
May 1,399.77 1,423.23 2,823
June 1,248.45 1,237.75 2,486.2
Total FY 2017-2018 15,188.51 15,426.25 30,614.76
RMG Export Share in GDP (%)

Share in national export (%) 41.42 42.07 83.49

Note.Source: Export Promotion Bureau compiled by BGMEA.
2.743245266

18
3.819980984

16
14
12
10
4.557146914

8
6
4
2
0
1990-91
1991-92

Fiscal Year
Figure 3. RMG exports contribution to the GDP.
Table 4
OLS Results
ଶ
Variable Coefficient Std. error t-statistic Prob. r ܴ Adjusted ଶ
ܴ
C 21482.86 3505.996 6.127464 1.77E-06 0.98 0.96 0.95
RMG export 6.22 0.245597 25.32124 7.55E-20
2
Form Table 4, we can say that the value of R = 0.96 indicated that 96% proportion of the
dependent variable (GDP) is explained by the independent variable (RMG export) and is close to 1 therefore the
model is better fit the data. There is highly significant relationship between GDP and RMG export since the
values of correlation coefficient (r) is 0.98. The coefficient of RMG export measures that if the RMG export
increases 1
USD, then on an average, GDP increases by 6.22 USD. Therefore, we can say that the contribution of RMG
export to GDP has a significant relations and it helps us to the economy of Bangladesh.
Challenges of RMG Sector in Bangladesh
Since 2005 the RMG of Bangladesh has become the top export earner of Bangladesh and positioned itself
in the frontline of the world apparel market. Some of the problems that threatened the remarkable success of
Bangladesh garment sector that are the financial crisis of 2008,Tazreen fire accident, Rana Plaza collapse, the
Trans-Pacific Partnership Agreement (TPP) and the withdrawal of generalized system of preference (GSP) by
America. But every success comes along with the new challenges. Some of challenges are shown as follows:
Unskilled workers. Growth and development of an industry requires sufficient skills and expertise.
However in spite of the growth of the industry, its development is constrained by lack of skilled workforce. Out
of its current 4 million workers, 90 percent is women, most of who are illiterate, unskilled and come from the
rural part of the country.
Insufficient infrastructure. Transportation Infrastructure: Infrastructure like transport and utilities is the
single largest issue hampering Bangladesh’s RMG industry. The Chittagong port, which handles nearly
85 percent of the country’s trade merchandise, suffers from labor problems, poor management, and lack
of equipment (World Bank, 1999). The alternative mode of transportation such as Bangladesh railways
and Dhaka-Chittagong Airports provides very less carrying and handling facilities.
Safety issue. At the point of inception of the RMG industry, factory buildings were in an
unplanned manner that resulted into conversion of common buildings for factory purpose. As a
consequence, several disastrous collapses took place such Rana plaza and Tazrin incidents which took away
thousands of lives and injured another thousand. These have brought the safety issue as a priority concern.
Raw materials. Bangladesh imports raw materials for garments like cotton, thread color etc. This dependence
on raw materials hampers the development of garments industry. Moreover, foreign suppliers often supply low
quality materials, which result in low quality products. Besides prices of cotton and other raw material used in
textile industry fluctuate rapidly in Bangladesh.
Energy Crisis. Energy crises such as gas, oil, and electricity foiled the lucrative investment policy
towards RMG sector development. Gas, oil, electricity, and water are the basic prerequisite of
industrial development. The load-shedding of electricity caused a rapid decrease in production that led to
reduced export supply. Gas and Electricity shortage and was unable to accept export orders from around the
globe.
Political Crisis. Political volatility has a common issue in the country. According to European and US
CPO report, (Berg et al., 2011) economy and political stability are the fifth in Bangladesh stated that they will
25 READY-MADE GARMENTS SECTOR OF BANGLADESH 25

reduce the sourcing from Bangladesh if the political stability were to decrease. Political unrest, strike
and corruption are the main obstacles to hamper economic growth.
Coverage of Accord and Alliance. The Accord and Alliance are now become one of the major challenges
for Bangladeshi apparel industry. The Accord and alliance are two different independent organization
empowered by apparel brands, retailers and importers both from Europe and USA. The objective of accord and
alliance is to work towards a safe and healthy RMG industry in Bangladesh. So meet the guidelines and safety
instructions regarding the fire and building safety of accord and alliance is a major challenge.

Conclusion and Recommendation

RMG sector has emerged as the single most important contributor towards employment generation,
income and foreign earning, and growth of Bangladeshi economy. However, different factors such as
weak infrastructure, lack of energy and supportive regime, inefficient management, and lack of industrial
integration have prevented the RMG sector to realize its full potential. It is expected that over the next
20 years, international trade will become the lifeline of Bangladesh economy than today. The share of exports,
especially ready-made garments, in GDP could be expected to increase many folds. Therefore, trade policy
reforms at the border and within the border will have to be undertaken to utilize the potentials of garments
industry and to grow the economy out of poverty and under-employment. It is also time to change the
conventional trade and trade policies. Special focus should be given on RMG sector in Bangladesh’s
five-year plans and other longer-term plans to ensure a sustainable growth of the industry, which means
incorporating RMG issues into every stage of the development planning cycle. Bangladesh economy may
realize its development dream and enhance the standard of living and approach towards a middle-income
economy.
RMG industry in Bangladesh has already proved itself to be a resilient industry and can be a catalyst for
further industrialization of the country. To face the upcoming challenges in RMG sector, some new thinking and
new directions in trade policy are as follows:
 To develop productivity and efficiency level, capacity building training and re-training activity for
employers and workers in RMG sector should be undertaken.
 Multi-modal transport facilities, sound infrastructure facilities including consistent supply of energy
through public-private initiatives is to be set up.
 Sound initiatives in research, training, and development to innovate new product ideas and to increase the
workers efficiency are to taken especially by the BGMEA.
 The civil society and other socio-political stakeholders must take able initiatives to ensure
congenial political environment to reduce corruption and maintain a trade supportive environment.
 RMG owners must pay adequate attention to workers welfare, safety, and health, and the buyers should
help to increase the supply chain’s efficiency through investment in backward industry.

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