Rmg Industry Of Bangladesh Essay

4646 words - 19 pages


The shift from a rural, agrarian economy to an urban, industrial economy is integral to the process of economic development. Policymakers in the least developed countries (LDCs) have, at various times, attempted to make agriculture the primary engine of economic growth and employment generation but this approach has not worked. The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh economy. Bangladesh has a total population of over160 million. Among of vast population about 3.5 million people are working in the garments industries. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during the last 20 years ...view middle of the document...

The growth and development of the RMG industry in Bangladesh was the result of an international “managed trade” regime in the apparel. Thanks to the quota restrictions, many companies were obliged to relocate their sourcing and production facilities in the low cost under-developed developing countries. The operation of MFA quotas in the process led to exporting opportunities in countries where textile and clothing were not traditional export items. Many international business firms, facing binding quota restrictions in their own countries, had relocated part of their production and trade to other relatively poor developing countries including Bangladesh. The quota system ensured the time to develop and learn the skills required in the production and marketing. Thus the RMG business started in Bangladesh as are salt of a joint-venture between a South Korean and Bangladeshi firm in the late 70s as a negligible nontraditional sector with a narrow export base. Within five years of the start, it emerged as a promising export earning sector in the ‘90s.Over the past two decades, RMG export earnings have increased by more than 8 times with an exceptional growth rate of 16.5 percent per annum. In 2006, earnings reached 8.93352 billion USD, which was only less than a billion USD in 1991. Excepting 2002, the industry registered significant positive growth throughout this period.

Contribution of the RMG Industry

Bangladesh exports garments to some 30 countries, its exports are highly concentrated in two major markets, the USA and EU. The USA as the largest importer country imported 43.24% of total garments exported from Bangladesh in 1998-99. Bangladesh was the sixth largest supplier of apparels in the US markets in the same year. However, if European Union is considered as a single market, the US market becomes the second largest. Bangladesh exported 52.38% of its apparel exports to the EU in 1998-99. The EU is the single most important destination of knitwear export from Bangladesh. The growth has continued almost without interruption and the value of garment exports reached three-quarters of the value of total exports at the end of the 1990s. Though a negative impact from September 11 is apparent in 2001, garment exports quickly picked up after that. Thus, the rapid growth Top of Formof garment exports has continued for a quarter of a century with little disturbance (Yamagata-2007). Presently RMG contributes around 75 percent of the total export earnings. Over the past one and half decade, RMG export earnings have increased by more than 8 times with an exceptional growth rate of 16.5 percent per annum. In FY06, earnings reached about 8 billion USD, which was only less than a billion USD in FY91. Excepting FY02, the industry registered significant positive growth throughout this period. In terms of GDP, RMG’s contribution is highly remarkable; it reaches 13 percent of GDP which was only about 3 percent in FY91. This is a clear indication of the...

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