Historical Background of Garment Industry in Bangladesh

Introduction:

    Garments Industry of Bangladesh is economically most important and one of the most emerging sector of the country.

   

    This is an assignment on “Problem and Prospects of Garment Industry in Bangladesh”.

For writing sequentially this topics is divided into three stages.

   

    First stage includes outlook or front page presentation.

    

    Second stage is divided into followings: Contents, Introduction, Historical Background of Garments Industry in Bangladesh, Present Status of Garments Industry in Bangladesh, Prospects of Garments Industry in Bangladesh, Problems of Garments Industry in Bangladesh, Recommendations and Conclusion.

    Third stage includes References.

    With the help of specific and related data all the points are described in the body part of the assignment. Related pictures and graphical presentations are also included with the points.

    Many points are described deeply with the help of related data, graph and references.

    Finally, almost all the references are mentioned in the last stage of the assignment. References are taken from related books, research papers and publications, project papers, websites and related writings of different authors and organizations.

   

Historical Background of Garment Industry in Bangladesh:

    Large-scale production of readymade garments (RMG) in organized factories is a relatively new phenomenon in Bangladesh. Until early sixties, individual tailors made garments as per specifications provided by individual customers who supplied the fabrics. The domestic market for readymade garment, excepting children wears and men's knit underwear was virtually non-existent in Bangladesh until the sixties.

    Since the late 1970s, the RMG industry started developing in Bangladesh primarily as an export-oriented industry although; the domestic market for RMG has been increasing fast due to increase in personal disposable income and change in life style. The sector rapidly attained high importance in terms of employment, foreign exchange earnings and its contribution to GDP. In 1999, the industry employed directly more than 1.4 million workers, about 80% of whom were female.

    The hundred percent export-oriented RMG industry experienced phenomenal growth during the last 15 or so years. In 1978, there were only 9 export-oriented garment manufacturing units, which generated export earnings of hardly one million dollar. Some of these units were very small and produced garments for both domestic and export markets. Four such small and old units were Reaz Garments, Paris Garments, Jewel Garments and Baishakhi Garments. Reaz Garments, the pioneer, was established in 1960 as a small tailoring outfit, named Reaz Store in Dhaka. It served only domestic markets for about 15 years. In 1973 it changed its name to M/s Reaz Garments Ltd. and expanded its operations into export market by selling 10,000 pieces of men's shirts worth French Franc 13 million to a Paris-based firm in 1978. It was the first direct exporter of garments from Bangladesh. Desh Garments Ltd, the first non-equity joint-venture in the garment industry was established in 1979. Desh had technical and marketing collaboration with Daewoo Corporation of South Korea. It was also the first hundred percent export-oriented company. It had about 120 operators including 3 women trained in South Korea, and with these trained workers it started its production in early 1980. Another South Korean Firm, Youngones Corporation formed the first equity joint-venture garment factory with a Bangladeshi firm, Trexim Ltd. in 1980. Bangladeshi partners contributed 51% of the equity of thee new firm, named Youngones Bangladesh. It exported its first consignment of padded and non-padded jackets to Sweden in December 1980.

    Within a short period, Bangladeshi entrepreneurs got familiar with the world apparel markets and marketing. They acquired the expertise of mobilizing resources to export- Foreign buyers found Bangladesh an increasingly attractive sourcing place. To take advantage of this cheap source, foreign buyers extended, in many cases, suppliers' credit under special arrangements. In some cases, local banks provided part of the equity capital. The problem of working capital was greatly solved with the introduction of back-to-back letter of credit, which also facilitated import of quality fabric, the basic raw The government assigned high priority to the development of RMG industry.

    Over the last fifteen years or so the garments industries have emerged as the largest source of earning foreign currency. About half of the foreign currency from the ready-made garments is earned from European Union and the U.S.A. Besides, Canada, Japan, Australia, New Zealand; Russia etc. also are other garments importing countries. At present about 20 countries of the world are importers of our garments. Its market is being expanded in the Middle East, Russia, Japan, Australia and many other countries.

Table 1: World’s Leading Textile and Clothing Exporters
Leading Exporters of Clothing	% Share in world export				Leading Exporters of Textile	% Share in world export
	1980	1990	2000	2006		1980	1990	2000	2006
China	4.0	8.9	18.2	30.6	EU (25)	49.4	48.7	35.6	32.6
EU (25)	42.0	37.7	26.9	26.8	China	4.6	6.9	10.2	22.3
Hong Kong, China	12.3	14.2	12.2	9.1	Hong Kong, China	3.2	7.9	8.5	6.4
Turkey	0.3	3.1	3.3	3.8	US	6.8	4.8	6.9	5.8
India	1.7	2.3	3.1	3.3	Korea,	4.0	5.8	8.0	4.6
Bangladesh	0.0	0.6	2.1	2.8	Taipei, Chinese	3.2	5.9	7.5	4.5
Mexico	0.0	0.5	4.4	2.0	India	2.4	2.1	3.8	4.3
Indonesia	0.2	1.5	2.4	1.8	Turkey	0.6	1.4	2.3	3.5
US	3.1	2.4	4.4	1.6	Pakistan	1.6	2.6	2.9	3.4
Viet Nam	...	...	0.9	1.7	Japan	9.3	5.6	4.4	3.2
Source : WTO Trade Statistics

The regional flow of the T&C export shows that China is the leading world exporter whose clothing export share has immensely increased from 4.0% in 1980 to 30.6% in 2006. The other major exporters are EU (union of 25 countries), Hong Kong, Turkey, India, and Bangladesh. It is evident from the Table 1 that the share of EU in the world export of clothing has significantly declined from 42.0% in 1980 to 26.3% in 2006.While the shares of some developing countries such as China, Turkey, Bangladesh, India, Mexico, and Indonesia among others, have increased (Table 1). For instance, share of India’s clothing export has increased from 1.7% in 1980 to 3.3% in 2006.

Contribution of the RMG Industry:

    RMG business started in the late 70s as a negligible non-traditional sector with a narrow export base and by the year 1983 it emerged as a promising export earning sector; presently it 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.1

Figure 1: Trend of RMG Export Volume, Export Growth and Contribution to GDP.

Table-2: Employment in RMG Factories in Fiscal Years1996/97-2005/06:

   

    The export of world RMG has grown through quantitative restrictions of Multi Fiber Arrangement (MFA) from 1974 to 1994. These restrictions were phased out during 1994 - 2004 in four phases. Now, with the opening of market, since January 1, 2005, the RMG industry has been fully integrated into the World Trade Organization (WTO).