challenge and p respect of rmg

7/28/2019 challenge and p respect of rmg

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topic:

course code: MKT-105course title: Fashion Marketing

Prepared for :

MD. Idris ali

Assistant Professor

Department of business administration

BUFT.

Prepared by:Md. Shohag islam

ID: 121-339-0-35

Batch:121(KMT-1)

BGMEA UNIVERSITY OF FASHION AND TECHNOLOGY

Date of Submission: 27-05-2013


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Bismillahir Rahmanir Rahim

TITLE: challenges and prospectsof fashion industries in

Bangladesh


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ACKNOWLEDGEMENTAt first I desire to express my deepest sense ofgratitude of almighty Allah.

With profound regard I gratefully acknowledge my respectedcourse teacher Mohammed Idris ali Assistant Professor Departmentof business administration for his generous help and day to daysuggestion during preparation of the report. He is so much aninspiration and guidance to me that I am, short of words inexpression my gratitude.

I like to give thanks especially to our friends and many individuals,for their enthusiastic encouragements and helps during thepreparation of this report us by sharing ideas regarding this subjectand for their assistance in typing and proof reading thismanuscript.

Once more time to sir, I owe more than I can mentionmostlyfor teaching us to see the silver lining in every hard work


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Executive summary:Worldwide Clothing Production Is a$335 Billion Business

11 Million Workers/75% WomenCompared to 1960s, consumers are spending 50% less but buyingtwice as many garments (28.7 outerwear items per person in the US.) Labor Costs: China $0.93, India $0.55-0.68, Sri Lanka $0.46,Pakistan $0.37, Indonesia $0.35, Cambodia $0.24, Bangladesh $0.21

For a $100 dress..

Retailers get $50

Manufacturers get $12-$16Fabric costs $22Contractor gets $9Garment Workers get $2-$6

The challenges facing Bangladeshi garment manufacturing firms. The costcomponents of a shirt that is sold at the wholesale price of $6.75: $4.75 isspent purchasing fabric, $1 is spent purchasing labels and accessoriesspecified by the retailer, and the last $1 is divided among cutting andmaking (includes wages), capital expenses, securing credit for future

inventory, and profits.Imagine an order for 400,000 shirts is spread over a four-line (meaning fourrows of sewing machines, each row with 50 workers) factory of 1,600 squaremeters. Those 400 workers produce 3,077 pieces per day. The wage costworks out to about 38 U.S. cents per shirt. Another 15 cents goes to sendingthe shirt for a fine washing spin. Rent and utilities for the factory floor worksout to about 11 cents per shirt, and head-office and marketing costs for the

factory are 11 cents.As for the remaining 25 cents, that will just about cover repaying a 10-yearbank loan at 18% interest, which the factory owner has used for set-up costsalong with a home and car. All is at a delicate equilibrium, until the ownerfeels compelled to give in to a firmly worded request from the retailer for anadditional discount, or a demand to air-freight, at the manufacturersexpense, some boxes of shirts that suffered a two-week production delay and


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now wont be accepted by the retailer if they are any later than they alreadyare. In light of these very narrow margins.It can be suggested that a substantial increase in the statutory minimum wage willprove problematic. The Bangladeshi government has actually proposed aretroactive increase in the minimum wage, which will prove extremelyburdensome to garment manufacturing firms locked into supply contracts. IfBangladeshi garment manufacturing firms didnt face competition from Indonesiaand other low-cost locations, theyd presumably have enough pricing power toraise prices and to finance upgrades in safety standards and much else.Just such an outcome is possible, because there arent many good alternativesto Bangladesh as a hub for garment manufacturing:Many in Bangladesh fear that if the country becomes too expensive a place tomake clothes, countless sewing machines will be sent to new factories in Nigeria,Kenya or Ghana. This outcome is unlikely. African countries may have a steady

supply of unskilled labor, but a higher cost of living should keep them fromcompeting with Bangladesh. We tried to figure out what countries might inheritBangladeshs T-shirt phase. Other than Burma, a long shot, we couldnt think ofany. For now, Bangladesh might be where this centuries-long T-shirt journeyends, which means that their race to the bottom may be rooted in amisunderstanding. The countrys manufacturers can afford to take a step or two upthe value chain. Not only can they pay their workers more, treat them better andhouse them in safe and clean factories, but there is also a significant economicincentive to do so.However, is that countries more affluent than Bangladesh, like Indonesia, can alsopick up the slack, as many of these countries are unevenly developed, and so theystill have scope, and an appetite, for an increase in labor-intensive manufacturing.India, which has a GDP per capita (PPP) twice as high as that of Bangladesh, hasmany regions that are just as poor, and which are desperate for labor-intensivemanufacturing work.Labor laws t match recent progress made by Vietnam andBangladesh:With the wages in China reaching levels at which it is likely to be forced out ofthese sectors, India is well positioned to become the worlds manufacturing hub.But if the costs of employment remain as they are, that opportunity is likely to be

seized by a large number of smaller countries, such as Vietnam and Bangladesh.These countries allow firms to hire and fire workers under reasonable conditionsand maintain a balance between the rights of both workers and employers. As aresult, large firms in sectors such as apparel can be found aplenty in both countriesand both have also seen significantly faster growth of the sector and doneextremely well on the export front.


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It should go without saying that not everyone believes that Bangladesh has done agood job of balancing the rights of workers and employers, yet it is true thatemployment in garment manufacturing has been a driver of poverty alleviation inVietnam and Bangladesh alike, and that the unevenness of Indias economicdevelopment with growth concentrated in knowledge-intensive services and othersectors that are not very labor-intensive while most workers remain in a moribundagricultural sector is a profound problem. Garment manufacturing could facilitatethe transition from low-productivity agriculture to higher-productivity export-oriented manufacturing, and its hard to imagine that India will keep screwing upon this front forever.An economic policy analyst who has long been critical of freetrade, has an opened inBloomberg View which makes the case that the best wayforward for Bangladesh and other developing countries is a reimposition of thequotas established under the Multifibre Arrangement, which expired in 2005. Hisbasic argument is that quotas took the pressure off of manufacturing firms in

exporting countries, as they could be confident that they wouldnt be undercut byforeign rivals:Without quota-granted guaranteed market access, cost-cutting became all the moreimportant for smaller exporting countries simply to preserve their new gains. AsU.S. trade data demonstrate, most of the freed-up customers were won by the hugeAsian producers that enjoyed big natural and government-created cost advantages.For example, Chinas share of U.S. apparel imports rose to 33.44 percent from26.07 percent during the first two years of quota-free trade (2005-07) alone.Indonesian and Vietnamese sales boomed, too.Significantly, Bangladesh also excelled, and like China, Indonesia and especiallyVietnam, its market share has continued to grow, reaching 5.25 percent last year,despite the sluggish U.S. economy.Unfortunately, however, much of the surge in Bangladeshi exports can beattributed to that countrys reliance on rock-bottom wages and firetrap factories,with the tragic consequences we recently witnessed. Worse, the dynamics oftodays quotaless apparel trade practically guarantee that better, costlier workconditions in Bangladesh will simply drive much production and jobs elsewhere.That is what occurred in higher-cost garment exporters such as Turkey and SouthAfrica, as well as smaller Western Hemisphere and African producersmost of

whose U.S. exports have fallen in absolute terms since the quotas ended in 2005.Extremely skeptical about the wisdom of this approach, which would, amongother things, raise the cost of apparel in the consuming countries. No intrinsicproblem with higher apparel costs, particularly if they reflect changing consumertastes and preferences, but To nelson is explicitly counseling the re politicizationof global trade in apparel, a process that can easily be gamed by, for example,domestic manufacturers seeking to raise prices. That said, Tonelsons op-ed


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Acronyms

RMG Ready made garmentsGSPGDPLTA long-term arrangement

MFA Multi-fibre arrangementWTO World Trade Organization

BTMA Bangladesh Textile Mills Association

IBA Institute of Business AdministrationR &D Research and Development

IBM International Business Machines

BGMEA Bangladesh Garments Manufacturersand Exporters association

BKMEA Bangladesh Knitwear Manufacturersand Exporters association

STA Unilateral restriction, short-termarrangement


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Contents

1. Cover page2. Title page3. Acknowledgements4. Executive summary5. Acronyms6. Table of contents

7. Introduction8. Objective 0f the study9. methodology10. limitation11. Overview of ready-made garments of Bangladesh12. Reason behind the Growth of RMG in Bangladesh13. Exporting Condition of Fashion Industry14. Bangladeshs fashion Industry and its Challenge

15. Bangladesh Faces the Challenge of Globalization16. Prospects of the Fashion Industry17. Recommendation18. Conclusion19. References


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WOMEN's

Clothing

68%

Girl's and

Children's

3%

Other products

21%

men's and boy's

8%

WE sew in california

WOMEN's Clothing Girl's and Children's Other products men's and boy's

INTRODUCTION : The ready-made garment (RMG) industry of Bangladeshstarted in the late 1970s and became a prominent player in the economy within a

short Periodof time. The

industry hascontributedto exportearnings,foreignexchangeearnings,employmentcreation,poverty

alleviationand the

empowerment of women. The export-quota system and the availability of cheaplabor are the two main reasons behind the success of the industry. Shirts, T-shirts,trousers, sweaters and jackets are the main products manufactured and exportedby the industry. Bangladesh exports its RMG products mainly to the United Statesof America and the European Union. The Ready Made Garments (RMG) sectorplays a pivotal role in the economy of Bangladesh. This sector accounts forapproximately 79% of the total export earnings and nearly 10% of GDP.

Like other 3rd world countries Bangladesh is a developing country. Her economicdevelopment depends firstly on Agriculture and secondly on Industry. Although

Bangladesh is not developed in industry, it has been enriched in Garment

industries in the recent past years. For Bangladesh, the readymade garment export

industry has been the proverbial goose that lays the golden eggs for over fifteen

years now. Traditionally, the jute industry dominated the industrial sector of the

country until the 1970s. Since the early 1980s, the RMG industry has emerged as

an important player in the economy of the country. In the field of Industrialization

garment industry is a promising step. It is making significant contribution in the

field of our export income and in the economical development of our country. At

present the government of our country earns billions of dollars by exporting

ready-made garments products to other countries. We have not achieved this

success over night; we have some elements that help us to achieve this success. At

present we are competing with our neighboring country; India and China. Though

we are earning a handsome amount of profit each year from this sector, the ready-


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made garment sector is suffering with a lot of problems. We should solve these

negative situations by ensuring proper steps.

Objective of the study

Followings were the objectives of the study. Broad objective: To gather knowledge about the overall scenario of Ready-

Made Garments (RMG) Sector in Bangladesh. Specific objectives: To attain the broad objective following specific objectiveswere pursued.

To know briefly about economic significant of RMG.

To identify what factors are affecting an entrepreneur

To identify the performance of an entrepreneur

To know Overview of a organization of readymade

Current scenario of ready-made garment industry. Reasons for a healthy growth

Reasons for having comparative advantages in the world market.

Economical and financial contribution of this industry in Bangladeshieconomy.

Beside these, we also brought several foreign benchmarks and statistics fordoing the research work in a better way.

MethodologyThis report has been prepared on the basis of experience gathered through learningannual report. For preparing this report, I have also get information from websiteof BGMEA, BKMEA Export Promotion Bureau and many Government and nongovernment organization. I have presented my experience and finding by usingdifferent tables, which are presented in the analysis part. The details of the workplan are furnished below:

Relevant data for this report has been collected primarily by directinvestigations of different leasing companys annual report and website.

The information and data for this report have been collected from

secondary sources. The secondary sources of information are annualreports, websites and different manuals

Data collected from secondary sources have been processed manually andqualitative approach in general and quantitative approach in some cases hasbeen used throughout the study.


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Qualitative approach has been adopted for data analysis and interpretationtaking the processed data as the base. So the report relies primarily on ananalytical judgment and critical reasoning.

Limitations

Since our study is based on secondary data, there is a possibilityof getting fake information. If the surveyed personnel provide uswith any fabricated information about their opinion of theirorganization, then the report findings may be erroneous. Aboveall, this study is weak in some points. The notable ones are asunder:Conducted in a very short time so we were not able to collectmore information.

Made on crisis situation of Bangladesh, so it was difficult tocollect more samples. Only the big and the reputed Garments Company consider hereas sample. Lack of experience on study. Lack of properauthority to conduct the fashion industry

Overview of the Bangladesh fashion Industry

History: Once upon a time the cloth of Bangladesh achieved worldwide

fame. Maslin and Jamdani cloth of our country were used as the

luxurious garments of the royal figures in Europe and other countries.

The British rulers in India didnt develop our cloth industries at all.

Rather they destroyed them and imported cloths from England. After

the emergence of Bangladesh radical change has come to our garment

sector. Garment industries started working from the 10's of the late

century.

Bangladesh fashion industry: The RMG industry is the only

multi-billion-dollar manufacturing and export industry in Bangladesh.

Whereas the industry contributed only 0.001 per cent to the countrys

total export earnings in 1976, its share increased to about approximate

80 percent of those earnings in 2010. Bangladesh exported garments


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worth the equivalent of $12348 Million in 2010, which was about 3.00

percent of the global total value ($276 billion) of garment exports. The

countrys RMG industry grew by more than 15 percent per annum on

average during the last 15 years. The foreign exchange earnings andemployment generation of the RMG sector have been increasing at

double-digit rates from year to year. Some important issues related to

the RMG industry of Bangladesh are noted in table 1

Table 1. Important issues related to the Bangladesh ready-madegarment industry

Year(s) Issue

1977-1980 Early period of growth

1982-1985 Boom days

1985 Imposition of quota restrictions

1990s Knitwear sector developed significantly

1993-1995 Child labor issue and its solution

2003 Withdrawal of Canadian quota restriction

2005 Phase-out of export-quota system

Source: Compiled by the author from Quddus and Rashid (2000), Mainuddin (2000) anddatabases of the Bangladesh Garment Manufacturers and Exporters Association, and the ExportPromotion Bureau, Bangladesh

Currently, there are more than 5,000 RMG firms in Bangladesh. More than

95 percent of those firms are locally owned with the exception of a few foreign

firms located in export processing zones (Gonzales, 2002). The RMG firms arelocated mainly in three main cities: the capital city Dhaka, the port city Chittagong

and the industrial city Narayangonj. Bangladesh RMG firms vary in size. Based

on Bangladesh Garment Manufacturers and Exporters Association (BGMEA)

data, Mainuddin (2000) found that in1997 more than 75 per cent of the firms

employed a maximum of 400 employees each. Garment companies in Bangladesh


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form formal or informal groups. The grouping helps to share manufacturing

activities, to diversify risks; horizontal as well as vertical coordination can be

easily found in such group activities. Ready-made garments manufactured in

Bangladesh are divided mainly into two broad categories: woven and knit

products. Shirts, T-shirts and trousers are the main woven products andundergarments, socks, stockings, T-shirts, sweaters and other casual and soft

garments are the main knit products. Woven garment products still dominate the

garment export earnings of the country. The share of knit garment products has

been increasing since the early 1990s; such products currently account for more

than 40 percent of the countrys total RMG export earnings (BGMEA website).

Although various types of garments are manufactured in the country, only a few

categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the

major production-share (BGMEA website; andante, 2001). Economies of scale forlarge-scale production and export-quota holdings in the corresponding categories

are the principal reasons for such a narrow product concentration.

Reason behind the Growth of RMG in Bangladesh

The prime reason why garment industries have come out to be the champion in the

field of xport is obviously the cheap labor. Women contribute to the working force in

these garment factories, as they are relatively cheaper than men.

Low cost labor:As Bangladesh is an overpopulated country it is very easy for the

garment industries to hire labors at a lower rate. At present the government of our

country has announced minimum wage to the garment workers but the industries can still

earn a handsome amount of profit by exporting their product. Although it has increase but

comparatively it is still low.

Export-quota system:The export-quota system in trading garment products played

a significant role in the success of the industry. However, that quota system came to an

end in 2004. Therefore, the competitiveness issue needs to be addressed, with special

attention given to the long-term sustainability of the industry. Unilateral restriction,

short-term arrangement (STA), long-term arrangement (LTA), Multi-fibre arrangement

(MFA) and finally the WTO Agreement on Textiles and Clothing (ATC) are the


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chronological steps through which the export-quota system was administered until it

was finally abolished on 31 December 2004, making worldwide textile and garment trade

quota-free.

Easy Communication:It is very easy industries to collect raw materials from

other countries and they can easily export their produced goods to the other countries.

Government Support: Government is supporting directly and indirectly the

industries and monitors their activities so that they can perform properly. Government

reduces tariff and supply production factors like electricity and water to them.

Product Tree:Bangladesh exports about 63 items to different apparel markets. Ready-made

garments manufactured in Bangladesh are divided mainly into two broad categories: woven and

knit products. Shirts, T-shirts and trousers are the main woven products and undergarments,

socks, stockings, T-shirts, sweaters and other casual and soft garments are the main knit

products. Woven garment products still dominate the garment export earnings of the country.

The share of knit garment products has been increasing since the early 1990s; such products

currently account for more than 40 per cent of the countrys total RMG export earnings

(BGMEA website).Although various types of garments are manufactured in the country, only a

few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the majorproduction-share (BGMEA website; and Nath, 2001). It needs to be mentioned here that

Bangladesh produces a very limited categories of expensive and fashion oriented garments.

Economies of scale for large-scale production and export-quota holdings in the corresponding

categories are the principal reasons for such a narrow product concentration. Main apparel items

exported from Bangladesh is shown in the treediagram drawn below:


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Exporting Condition of Garments Industry: The Ready-Made

Garments (RMG) industry occupies a unique position in the Bangladesh

economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal

growth during the last 20 years. By taking advantage of an insulated market under the provision

of Multi Fibre Agreement (MFA) of GATT, it attained a high profile in terms of foreign

exchange earnings, exports, industrialization and contribution to GDP within a short span of

VALUE AND QUANTITY OF TOTAL APPAREL EXPORT

CALENDAR YEAR BASIS(VALUE IN MN. US$ QUANTITY IN '000 DOZEN)

YEAR

TOTAL APPAREL EXPORT IN MN.US$ TOTAL APPAREL EXPORT IN MN DZ

WOVEN KNIT TOTAL WOVEN KNIT T1994 1544.89 341.53 1886.42 41.64 13.77

1995 1976.40 512.18 2488.58 49.38 19.83

1996 1942.37 686.27 2628.64 47.54 26.11

1997 2621.33 810.49 3431.82 60.56 27.99

1998 2871.06 976.29 3847.35 64.23 34.59

1999 2987.73 1169.90 4157.63 64.93 41.3 1

2000 3376.49 1448.22 4824.71 71.63 51.58 1

2001 3162.28 1432.72 4595.00 67.72 50.18 1

2002 3076.28 1573.40 4649.68 83.44 70.71 1

2003 3398.84 1850.36 5249.20 85.83 80.50 1

2004 3686.78 2532.62 6219.40 94.22 104.90 1

2005 3689.60 3210.48 6900.08 96.39 138.19 2

2006 4544.79 4388.72 8933.51 125.65 190.60 3

2007 4608.40 4741.93 9350.33 133.62 212.08 3

2008 5654.12 6222.95 11877.07 161.51 272.17 4

2009 5695.42 6196.58 11892.00 163.27 279.91 4

2010 7067.04 7787.76 14854.80 203.48 357.76 5

2011 9251.62 9961.36 19212.98 42.36 51.84

Data Source Export Promotion Bureau & Bangladesh Bank Compiled by BGMEA


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time. The industry plays a key role in employment generation and in the provision of income to

the poor. Nearly two million workers are directly and more than ten million inhabitants are

indirectly associated with the industry. Over the past twenty years, the number of manufacturing

units has grown from 180 to over 3600. The sector has also played a significant role in the

socio-

economic development of the country.

COMPARATIVE STATEMENT ON EXPORT OF RMG AND TOTAL EXPORT OF BANGLADESH

YEAR

EXPORT OF RMG

(IN MILLION US$)

TOTAL EXPORT OFBANGLADESH

(IN MILLION US$)

% OF RMG'S TO

TOTAL EXPORT1983-84 31.57 811.00 3.89

1984-85 116.2 934.43 12.44

1985-86 131.48 819.21 16.05

1986-87 298.67 1076.61 27.74

1987-88 433.92 1231.2 35.24

1988-89 471.09 1291.56 36.47

1989-90 624.16 1923.70 32.45

1990-91 866.82 1717.55 50.47

1991-92 1182.57 1993.90 59.31

1992-93 1445.02 2382.89 60.64

1993-94 1555.79 2533.90 61.40

1994-95 2228.35 3472.56 64.171995-96 2547.13 3882.42 65.61

1996-97 3001.25 4418.28 67.93

1997-98 3781.94 5161.20 73.28

1998-99 4019.98 5312.86 75.67

1999-00 4349.41 5752.20 75.61

2000-01 4859.83 6467.30 75.14

2001-02 4583.75 5986.09 76.57

2002-03 4912.09 6548.44 75.01

2003-04 5686.09 7602.99 74.79

2004-05 6417.67 8654.52 74.15

2005-06 7900.80 10526.16 75.06

2006-07 9211.23 12177.86 75.642007-08 10699.80 14110.80 75.83

2008-09 12347.77 15565.19 79.33

2009-10 12496.72 16204.65 77.12

2010-11 17914.46 22924.38 78.15

2011-12 19089.69 24287.66 78.60

Data Source Export Promotion Bureau Compiled by BGMEA


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Contribution in National Income:

When the garment industries 1st started to export, the sector was not paid muchattention but the situation has changed and at present it is earning the highest amount of

foreign currencies in our country.

Major Product Export from Bangladesh

Year Product Export %

Frozen Food 12347.77 79.33Tea 12.29 0.08

Raw Jute 148.17 0.952008-09 Chemical 421.58 2.71

Product

Jute Goods 373.18 2.40Leather 177.32 1.14

Agricultural 122.3 0.79


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Products

Others 1508.06 9.69Total 15565.19 100.00

Source: Export Promotion Bureau, Bangladesh (Value in Million US$)

These three steps are integrated into each other as shown in table 1. It shows that these

three steps are essential for backward linkage integration (BGMEA, January 2005)

Bangladeshs fashion Industry and its Challenge

The casualties at Rana Plaza have prompted a far-reaching discussion of the

economics and the ethics of the global garment manufacturing supply chain. The

scramble among retailers to identify new low-cost garment manufacturing

locations in the developing world, a scramble that has taken on new urgency as

Bangladeshs reputation has been tarnished. Indonesia, which has a GDP per

capita (PPP) two-and-a-half times as high as that of Bangladesh and a governmentthat has improved markedly in recent years Garment factories in Bangladesh

provide employment to 40 percent of industrial workers. But without the proper

laws the worker are demanding their various wants and as a result conflict is

began with the industry. Labor unrest is a great problem in the RMG sector. Low

working salary is another r vital fact which makes the labor conflict. Workers

made strike, vandalize industry

After Bangladesh, seeking new sources:Garment manufacturing makes up a

fifth of the economy in Bangladesh and four-fifths of its exports, which means that one of the

worlds poorest, most densely populated countries is desperately dependent on continued export

orders to stave off soaring unemployment and possibly further political unrest. Some executives

say that many multinationals will continue buying from Bangladesh, although some may

diversify their orders to more countries


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Heavy Dependence on a Few Export Market :Heavy dependence on quota

markets is a major concern in the textiles and garments industry

Total (EU) 3277.43 3805.50 16.11 5149.58 5352.28 3.94 8427.01 9157.78 8.67

EU % of World 46.11 47.04 73.60 70.55 59.75 58.42

USA 2,617.90 2,825.49 7.93 739.40 803.43 8.66 3357.30 3628.92 8.09

% of USA 36.83 34.92 10.57 10.59 23.80 23.15Canada 355.26 383.96 8.08 286.05 343.60 20.12 641.31 727.56 13.45

% of Canada 5.00 4.75 4.09 4.53 4.55 4.64

Low working salary is another vital fact which makes the labor conflict. Worker made

strike, layout to capture their demand. Some time bonus and the overtime salary are the

important cause of crisis. Insufficient government policy about this sector is a great

problem in Garments Company.

Picture:Labor- Management conflict in Garments Industry

According to our survey in five leading Company we found some problem which are

given in a chart with their percentage-Primary Problems

Problems high medium low total

3 2 0 5

Bangladesh's RMG Export to World (Jul-Mar, FY11-12 & FY 12-13 )Million US$ Woven Knit TotalJul-Mar

Jul-Mar

Growth%

Jul-Mar

Jul-Mar

Growth%

Jul-Mar

Jul-Mar

Growth%

Jul-Mar

Jul-Mar

Growth%

Jul-Mar

Jul-Mar

Growth%

Jul-Mar Jul-Mar

Major EU Countries 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13


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01.Raw-materials 60% 40% - 100%

02. Marketing problems

1 3 1 5

20% 60% 20% 100%

03. Machinery problem

5 0 0 5

100% - - 100%

04. Inefficient workforce

3 2 0 5

60% 40% - 100%

05. Licensing problem

1 1 3 5

20% 20% 60% 100%

06. Quota problem

4 1 0 5

80% 20% - 100%

07. Poor government policy

3 2 0 5

60% 40% - 100%

08. Labor unrest/strike

5 0 0 5

100% - - 100%

Chart: Primary problems of Garments Industries

Secondary problems

Problems high medium low total

01.Middle man affect

1 3 1 5

20% 60% 20% 100%

02. Sluggish business linkage

0 2 3 5

- 40% 60% 100%


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03. Unloading(RM) takes time

2 2 1 5

40% 40% 20% 100%

04. Time consuming schedule

2 3 0 5

40% 60% - 100%

05. Communication gap

1 2 2 5

20% 40% 40% 100%

06. Dependency on foreign market

5 0 0 5

100% - - 100%

07. Trade block

0 2 3 5

- 40% 60% 100%

08. Credit problem

2 3 0 5

40% 60% - 100%

Chart: Secondary problems of Garments Industries

Graph: Secondary problems of Garments Industries

Safety Problems; Safety need for the worker is mandatory to maintain in all the

organization. But without the facility of this necessary product a lot of accident is

0

50

100

150

1 2 3 4 5 6 7 8

Percentage (%)

Problems

Primary Problems

High Medium Low


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occuincurred every year in most of the company. Some important cause of the accident

are given below-

Routes are blocked by storage materials

Machine layout is often staggered

Lack of signage for escape route

No provision for emergency lighting

Doors, opening along escape routes, are not fire resistant.

Doors are not self-closing and often do not open along the direction of escape.

Adequate doors as well as adequate staircases are not provided to aid quick exit

Fire exit or emergency staircase lacks proper maintenance

Lack of proper exit route to reach the place of safety

Parked vehicles, goods and rubbish on the outside of the building obstruct exits to the

open air

Fire in a Bangladesh factory is likely to spread quickly because the principle of

compartmentalization is practiced

Lack of awareness among the workers and the owners

But now the situation is much improved and we found, all the surveyed garments are

fulfilling the requirement of emergency exit. It is provided in all the cases, signage is

present and fire fighting equipments are up to date, a departure from the past. Even fire

drill is held once in a month..

Bangladesh Faces the Challenge of Globalization Bangladesh faces the

challenge of achieving accelerated economic growth and alleviating the massive poverty

that afflicts nearly two-fifths of its 135 million people. To meet this challenge, market-

oriented liberalizing policy reforms were initiated in the mid-1980s and were pursued

much more vigorously in the 1990s. These reforms were particularly aimed at moving

towards an open economic regime and integrating with the global economy.


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The relentless search for new locations has taken on more urgency after the deadliest industrial

accident in the global garment industrys history, a multistory factory collapse in Bangladesh

that left 1,127 people dead. Buying from Bangladesh, Bangladesh has been politically incorrect

ever since problems started there, so a lot of major players had already been looking for

alternatives

Prospects of the Fashion Industry

Despite many difficulties faced by the RMG industry over the past years, it continued to

show its robust performance and competitive strength. The resilience and bold trend in

this MFA phase-out period partly reflects the imposition of safeguard quotas by USand similar restrictions by EU administration on China up to 2008, which has been the

largest supplier of textiles and apparel to USA. Other factors like price competitiveness,

enhanced GSP facility, market and product diversification, cheap labor, increased

backward integration, high level of investment, and government support are among the

key factors that helped the country to continue the momentum in export earnings in the

apparel sector. Some of these elements are reviewed below.

Low cost labor:As Bangladesh is an overpopulated country it is very easy for thegarment industries to hire labors at a lower rate. At present the government of our

country has announced minimum wage to the garment workers but the industries can still

earn a handsome amount of profit by exporting their product. Although it has increase but

comparatively it is still low

Country Hourly WageUnited States $8.25-14.00

United Kingdom $7.58-9.11


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Venezeula $2.73

Costa Rica $2.19

Guatemala $1.21

Colombia $1.20

Honduras $1.02

Philippines $0.94-1.00China $0.93

Peru $0.92

El Salvador $0.92

Jordan $0.74

Malaysia $0.73

Nicaragua $0.65

Bahrain $0.57

Thailand $0.56

India $0.55-0.68

Mauritius $0.55-0.65

Vietnam $0.52Egypt $0.50-0.87

Mexico $0.50-0.53

Sri Lanka $0.46

Pakistan $0.37

Indonesia $0.35

Cambodia $0.24

Bangladesh $0.21

US retailers bear responsibility for BD tragedy: The factories housed inthe collapsed Rana Plaza produced clothes for numerous global retailers, and

suppliers and retailers around the world bear much of the responsibility for this

outrageous health and safety disaster.

Market Diversification : Bangladeshi RMG products are mainly destined to theUS and EU. Back in 1996-97, Bangladesh was the 7th and 5th largest apparel exporter to

the USA and European Union respectively. The industry was successful in exploring the

opportunities in markets away from EU and US. In FY07, a successful turnaround was

observed in exports to third countries, which having a negative growth in FY06 rose

three-fold in FY07, which helped to record 23.1 percent overall export growth in the

RMG sector. It is anticipated that the trend of market diversification will continue and

this will help to maintain the growth momentum of export earnings. At the same time a

recent WTO review points out that Bangladesh has not been able to exploit fully the

duty free access to EU that it enjoys. While this is pointed out to be due to stringent rules

of origin (ROO) criteria, the relative stagnation in exports to EU requires further

analysis.


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Product Diversification:The growth pattern of RMG exports can be categorizedinto two distinct phases. During the initial phase it was the woven category, which

contributed the most. Second phase is the emergence of knitwear products that powered

the recent double digit (year-on-year) growth starting in FY04. In the globalized

economy and ever-changing fashion world, product diversification is the key tocontinuous business success. Starting with a few items, the entrepreneurs of the RMG

sector have also been able to diversify the product base ranging from ordinary shirts, T-

shirts, trousers, shorts, pajamas, ladies and childrens wear to sophisticated high value

items like quality suits, branded jeans, jackets, sweaters, embroidered wear etc. It is clear

that value addition accrues mostly in the designer items, and the sooner local

entrepreneurs can catch on to this trend the brighter be the RMG future.

Backward Integration :RMG industry in Bangladesh has already proved itself to

be a resilient industry and can be a catalyst for further industrialization in the country.However, this vital industry still depends heavily on imported fabrics. After the

liberalization of the quota regime some of the major textile suppliers Thailand, India,

China, Hong Kong, Indonesia and Taiwan increased their own RMG exports.

Figure: Trend to back-to-back linkage

If Bangladesh wants to enjoy increased market access created by the global open market

economy it has no alternative but to produce textile items competitively at home through

the establishment of backward linkage with the RMG industry. To some extent the

industry has foreseen the need and has embarked on its own capacity building.

Flow of Investment

It is plausible that domestic entrepreneurs alone may not be able to develop the textileindustry by establishing modern mills with adequate capacity to meet the growing RMG

demand. It is important to have significant flow of investment both in terms of finance

and technology. Figure 3 indicates that the investment outlook in this sector is

encouraging, although the uncertainties before the MFA phase-out period caused a

sluggish investment scenario. In part the momentum in the post-MFA phase-out period

is indicative of the efforts underway towards capacity building through backward


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integration. This is evident in the pace of lending to the RMG sector and in the rising

import share of RMG related machinery. However further progress would be necessary

to improve and sustain competitiveness on a global scale.

Policy Regime of Government

Government of Bangladesh has played an active role in designing policy support to the

RMG sector that includes back-to-back L/C, bonded warehouse, cash incentives, export

credit guarantee scheme, tax holiday and related facilities. At present government

operates a cash compensation scheme through which domestic suppliers to export-

oriented RMG units receive a cash payment equivalent to 5 percent of the net FOB value

of exported garments. At the same time, income tax rate for textile manufacturers were

reduced to 15 percent from its earlier level for the period up to June 30, 2008. The

reduced tax rates and other facilities are likely to have a positive impact on the RMG

sector.

Infrastructural Impediments :The existence of sound infrastructural facilities isa prerequisite for economic development. In Bangladesh, continuing growth of the RMG

sector is dependent on the development of a strong backward linkage in order to reduce

the lead time. However, other factors constraining competitiveness of Bangladeshs

RMG exports included the absence of adequate physical infrastructure and utilities.

Labor Productivity : The productive efficiency of labor is more important

determinant for gaining comparative advantage than the physical abundance of labor. InBangladesh, the garment workers are mostly women with little education and training.

The employment of an uneven number of unskilled labors by the garment factories

results in low productivity and comparatively more expensive apparels. Bangladesh

labor productivity is known to be lower when it compared with of Sri Lanka, South

Korea and Hong Kong. Bangladesh must look for ways to improve the productivity of

its labor force if it wants to compete regionally if not globally. Because of cheap labor if

our country makes the labor productivity in the apex position, then we think the future of

this sector is highly optimistic.

Research and Training : The country has no dedicated research institute relatedto the apparel sector. RMG is highly fashion oriented and constant market research is

necessary to become successful in the business. BGMEA has already established an

institute which offers bachelors degree in fashion designing and BKMEA is planning

on setting up a research and training institute. These and related initiatives need


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encouragement possibly intermediated by donor-assisted technology and knowledge

transfer. A facilitating public sector role can be very relevant here.

Supportive Government Policy : In contrast to the publicsector-led import-substituting industrialization strategy pursued during the first few

years after independence, the industrialization philosophy of the government changed

rather dramatically from the late 1970s when the emphasis was on export-oriented

growth to be spearheaded by the private sector. Towards this end, various policy reforms

were implemented in the 1980s and 1990s. Some of these reformed policies contributed

considerably to the growth of the RMG industry in Bangladesh.

During the 1980s, a number of incentives were introduced to encourage export

activities. Some of them were new like the Bonded Warehouse Facility (BWF), while

others like the Export Performance License (XPL) Scheme

37 were already in operation and were improved upon. Also, rebates were given on

import duties and indirect taxes, there were tax reductions on export income, and export

financing was arranged. Under the XPL scheme, exporters of non-traditional

The discussion in this section clearly points to the positive contribution made by

policy reforms to the growth of the RMG industry in Bangladesh. In particular, two

policiesthe SBW facility and the back-to-back L/C system- led to significant reduction

in cost of producing garments and enhanced competitiveness of Bangladeshs garments

exports. It also allowed garment manufacturers to earn more profit which, when

necessary, could be used to overcome difficulties arising from weak governance.Furthermore, poor governance, reflected in the leakage of duty-free imported fabrics in

the domestic market, paradoxically enough also helped the garment manufacturers to

earn extra profit and thereby enabled them to absorb the high cost of doing businesses

a fall out of bad governance.

Recommendation

Bangladesh economy at present is more globally integrated than at any time in the past.

The MFA phase-out will lead to more efficient global realignments of the Garments and

Clothing industry. The phase out was expected to have negative impact on the economyof Bangladesh. Recent data reveals that Bangladesh absorbed the shock successfully and

indeed RMG exports grew significantly both in FY06 and (especially) in FY07. Due to a

number of steps taken by the industry, Bangladesh still remains competitive in RMG

exports even in this post phase-out period.


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Our Garments Industries can improve their position in the world map by reducing the

overall problems. Such as management labor conflict, proper management policy,

efficiency of the manager, maintainable time schedule for the product, proper strategic

plan etc.

Government also have some responsibility to improve the situation by providing- proper

policy to protect the garments industries, solve the license problem, quickly loading

facility in the port, providing proper environment for the work, keep the industry free

from all kind of political problem and the biasness. Credit must be provided when the

industry fall in need.To be an upper position holder in the world Garments Sector there

is no way except follow the above recommendations. We hope by maintaining proper

management and policy strategies our country will take the apex position in future.

Suggestions Regarding Fire Safety

We need to remember that when there is a fire, the first thing one should do is to run

away from it. And this is what everyone does in such a situation. But the situation

become dangerous and tragic when the escape doorways and gates are found locked.

Precautionary should need to be adopted are given below:

Building should be constructed with fire resisting materials

Adequate exits and proper escape routes should be designed

Protection against fire and smoke should be ensured

Electrical wiring must be properly designed, installed and maintained Escape routes should be lighted at all times, kept clear, be indicated by signs

Regular fire drills should be held

Doors should be protected and should open along the direction of escape

Doors should not open on the steps and sufficient space should be provided.

Smoke/Fire alarm systems must be installed

adequate number of extinguishers should be provided

Prior relationship with local Fire services should be established

Conclusion

First-world consumers have been the chief beneficiaries of the growth of garment

manufacturing in Bangladesh and other developing countries. Americans are reaping

bargains by importing more than 97 percent of what they wear.


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Since 1998, womens clothing costs have fallen 7 percent, and mens have fallen 8

percent. In the U.K., costs have dropped 20 percent since 2005.

The relentless search for new locations has taken on more urgency after the deadliest

industrial accident in the global garment industrys history, a multistory factory collapse in

Bangladesh that left 1,127 people dead. Buying from Bangladesh, Bangladesh has been

politically incorrect ever since problems started there, so a lot of major players had already

been looking for alternatives.

When a senior executive from one of the largest American mass-market retailers called him

last week with worries about suppliers in Bangladesh and plans for a trip to Vietnam and

Cambodia to seek alternatives.

Many Western executives are taking such trips this spring. A lethal factory fire in Bangladesh

last November, 33 regional or national strikes there since January, hundreds of deaths in

factional street fighting there since February, and the Rana Plaza collapse in late April have

left multinational corporations scrambling for other options.Right now, the name of

Bangladesh just gives a bad rep to a company the dapper chief executive of Joseph Model

Associates, which designs and distributes the Annabelle New York brand of high-end apparel

and also makes private-label brands for various department store chains.

Western executives are checking on potential new suppliers in southern Vietnam, central

Cambodia and the hinterlands of Java in Indonesia. Yet safety problems could exist anywhere.

The ceiling of a small factory that makes shoes in central Cambodia collapsed on Thursday

morning, killing at least two people and injuring nine, three of them severely.

A Western garment buyers, is nonetheless so full these days that it is hard to book a room on

short notice. Indonesian garment executives say they have seen a steady procession of arrivals

in recent weeks and months, always asking the same questions about political stability, labor

laws, safety compliance and wages.

At first it was because of China getting too expensive, then came the Bangladesh fire tragedy,

and then there have been so many steps in Bangladeshs troubles.Some buyers feel

uncomfortable placing orders in Bangladesh.

Many multinationals are exploring their options in case street clashes and politically

motivated national strikes worsen in Bangladesh, which is the worlds second-largest garment

manufacturer after China. A new faction in the countrys Islamist movement has staged more

violent protests lately that have sometimes resulted in the temporary closure of factories.


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Garment manufacturing makes up a fifth of the economy in Bangladesh and four-fifths of its

exports, which means that one of the worlds poorest, most densely populated countries is

desperately dependent on continued export orders to stave off soaring unemployment and

possibly further political unrest. Some executives say that many multinationals will continue

buying from Bangladesh, although some may diversify their orders to more countries.

Bangladeshs export target for FY 2011-12 is $26.5 billion. The market is forecasted tobe developed at an annual rate of 7 to 9 percent resulting in ten years time to an export value of

approximately US D 36 to 42 billion,

References

http://www.bgmea.com.bd/

http://www.bkmea.com/

http://www.epb.gov.bd/

http://www.bbs.gov.bd/

http://www.bangla news 24.com./

http://www.btmadhaka.com/

http://www.epzbangladesh.org.bd/

http://www.bangladesh-bank.org/

http://www.bangladeshknitwear.com/

http://www.nbr-bd.org/

http://www.fbcci-bd.org/

http://www.bdgarments.wordpress.com/history/

http://www.ideas.repec.org/p/pdb/opaper/50.html

http://www.en.wikipedia.org/wiki/Bangladeshi_RMG_Sector


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http://www.libcom.org/tags/bangladeshi-garment-workers

https://www.cia.gov/library/publications/the-world-factbook/geos/bg.html


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Documents

challenge and p respect of rmg