Policy for Rmg Sector Development in Bangldesh

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This report was prepared as a compulsory requirement of EMBA program. To finish a course, a student has to complete an assignment on a specific topic.

In Bangladesh, agriculture has been the backbone of economy and chief source of income for the people. Government wants to decrease poverty by getting highest productivity from agriculture and achieve self-reliance in food production. Apart from agriculture, the country is much concerned about the growth of export division. Bangladesh have accelerated and changed her exports substantially from time to time. After Bangladesh came into being, jute and tea were the most export-oriented industries. But with the continual perils of flood, failing jute fiber prices and a considerable decline in world demand, the role of the jute sector to the country's economy has deteriorated. After that, focus has been shifted to the function of production sector, especially in garment industry.

In 1994/95, export earnings registered a phenomenal growth rate of 37. 04%. At that time the govt. redirected trade policy towards a competitive export oriented economy by liberalizing the trade regime. Around this time there was a significant shift from jute centric export to RMG centric export. Gradually non-traditional items became more dominant as against traditional and primary commodities. Incremental export earnings have come mostly from the RMG sector in recent years. Concentration of export market is also quite visible with EU and USA accounting for almost 80% of Bangladesh’s total exports. Our external sector was under considerable strain in1998-99 when export growth decelerated to 2.9%, the lowest since 1990s. The devastating flood of 1998 and a slump in the prices of our commodities contributed to this decline. In the aftermath of 9/11, export earnings came down by 7.44% during 2000-2001. A positive development in the structure of export growth, which has important policy implications, relates to performance of the knit RMG sector. This sector has been able to demonstrate robust growth performance over the recent years.

More than eighteen months ago, on January 1, 2005, the Multi Fibre Arrangement (MFA), which had governed world trade in textiles and clothing for thirty years, came to an end. With the expiry of MFA, the quota system and trade restrictions, initially meant to protect the industry in developed countries, were lifted, opening the door to free competition for all. In the post-MFA era, large competitive countries like China and India were expected to take full and unrestricted advantage of their low production costs and impose fierce competition on smaller producing countries like ours that had developed their ready-made garment (RMG) industry based on access to quotas rather than on their international competitiveness. In addition, EU are putting stringent conditions that must be fulfilled by Bangladesh RMG exporters so our graments are not rising in EU. The basic objective of the present paper is to highlight the most important issues and challenges facing the RMG industry in EU market and to make a five years strategy to overcome this situation.


The RMG industry occupies a very significant position in the economy of Bangladesh. It accounts for about 5% of the gross domestic product (GDP) and 25% of gross value addition in the manufacturing sector of the country. It is a major source of employment and absorbs about a third of the industrial workforce. Currently, the sector employs approximately 2.2 million workers, of whom almost 80% are females. It is also the most significant item of export, comprising 75% of total exports, and source of foreign exchange earning, with a contribution of more than three times that of foreign aid. From a modest start in the 1970s, the ready-made garment industry grew phenomenally over the period of MFA during the last two decades and a half. The number of...
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