Report on Readymade Garments

Topics: Recession, Economy of Bangladesh, Chittagong Pages: 31 (9080 words) Published: March 19, 2011
Executive Summary

Beginning in the United States in December 2007 (and with much greater intensity since September 2008, according to the National Bureau of Economic Research), the industrialized world has been undergoing a recession, a pronounced deceleration of economic activity. This global recession has been taking place in an economic environment characterized by various imbalances and was sparked by the outbreak of the financial crisis of 2007–2009. This global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices.

The crisis affected all countries in some ways, but certain countries were vastly affected more than others. Experts deemed the export sector to be potentially the most vulnerable in Bangladesh since it depends heavily on US and EU economies. The RMG sector of Bangladesh which contributes 76% of the total export earnings of Bangladesh was the subject of concern for all its stakeholders including the Garments owners, intermediaries, its millions of workers as well as the government and policy makers of Bangladesh. This paper is an analysis of the post recession era of the RMG sector of Bangladesh. Its findings focus mainly in three different areas of this sector which are a. The current position of the Garments sector of Bangladesh in the global market. b. The SWOT (Strength, Weakness, Opportunity and Threat) analysis of the sector. c. And finally a quantitative analysis of post recession export volume of the garments industry. This report reveals that Bangladesh till now has survived virtually unscathed by the global recession. After the main hit of the recession in the end of 2008 the exports of the RMG had slowed down in early 2009 but by March had picked up in full force so that an end of the year analysis shows an increase in the exports of the RMG sector of the country which contrarily to the experts who predicted a doom for this sector post recession. Other than an increased level of haggling over price by foreign buyers there is no other significant effect in the RMG sector of Bangladesh. 1. INTRODUCTION

The Ready Made Garments (RMG) sector plays a pivotal role in the economy of Bangladesh. This sector accounts for approximately 76% of the total export earnings and nearly 10% of GDP. At present there are about 4,000 garments factories employing approximately 2.5 million people, among which 80% are women. (International finance Corporation, 2008)

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 a result of a joint-venture between a South Korean and Bangladeshi firm in the late 70s as a negligible non- traditional 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.

Meantime, Bangladesh Bank Quarterly Report released recently recommended a close watch on the impact...

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