Growth and Development of Readymade Garment Industry in Bangladesh

Abstract

The Readymade Garment Industry is the main industry of Bangladesh which has been playing a significant role in the overall industrialization. Maximum foreign earnings of the country come from the sector. In 2006, 76% of total foreign exchange earnings has been earned by RMG sector. The sector employs 3.6 million people. 85% of whom are women. The contribution of this sector to GDP is increasing day by day . In 2004-2005 its contribution was 12.64% of GDP whereas it was only 5.87% in 1989-90 .In fiscal year 19.81, the contribution of this sector was only .47%($3.36 million )of total exports which increased to 79.3%($12.34 billion ) in the fiscal year 2009.Once Bangladesh enjoyed absolute facility due to GSP and MF J\ during MFA regime. From Ist January 2005, the MFA has been phased out and the import duties on apparels have been eliminated. Experts are of the opinion that Bangladesh may have to face keen competition in US market because of phasing out MFA. The garment industry of Bangladesh has been facing very high competition from China , Pakistan , other Southeast Asian countries . Bangladesh has to import all her required raw materials from aboard at high price . Our productivity is very low , because of irregular supply of gas and electricity , inefficiency of labor , problem of importing of raw materials , lack of developed technology, unfavorable environment of work , delay in exports and political unrest and mismanagement of Chittagong port .There is serious shortage of skilled manpower in the Readymade Garment Industry of our country. To make her more competitive in the changed world markets Bangladesh has to follow some preconditions such as decreased lead time, increased communication, easy port facilitie, simple and dynamic banking facilities, decreased complexity of bureaucracy, implementation of industrial and capital investment policy. After the phase out of MF A , some Sub-Saharan countries are enjoying more facilities due to USTD Act, 2000 . The objectives of the study are to examine the nature of growth of the Readymade Garment industry (RMG) in Bangladesh; to identify the factors affecting the growth of RMG industry in Bangladesh; to trace the opportunities and threats that may be encountered by RMG Industry: to diagnose the financial health of the RMG industry; to examine the nature of health, safety and velfare measures of the RMG industry and its influence on the labour management relations and to suggest a proper strategy of the RMG industry of Bangladesh. We have selected 10 readymade garment factories out of 4825 RMG factories as the subject of our study. Our study covers a period of six years starting from 20 We have prepared three sets of questionnaire. One set only for Managers, the another set for Entrepreneurs , BGMEA, Accountants and Export Promotion Bureau and the third set for Workers. We have used different statistical tools such as mean, standard deviation, and t- test, Cronbaeh's alpha test, chi-square test for analysis and interpretation of data and for testing the hypotheses. Our study shows that there is no significant difference in growth factors during pre and post MFA periods. The factors affecting the growth were cheap labour, low capital investment, quota market, energetic entrepreneurship, government supportive policy, availability of liberal bank loan , supply of technical staff assistance, imposition of quota restriction on neigh bouring countries, high demand of readymade garment products in aboard etc. It is evident from the study that the threats to RMG are political instability, dependence on outside source for buying raw cotton, MFA phasing out, power failure, unskilled workers, drop out of female workers, lack of social recognition, pollution of environment, job security of workers, lack of working environment, duty free access of 72 Sub-Saharan countries in USA market, changing fashion etc. From an over view of diagnosis of the financial health of RMG industry, we see that its liquidity position, solvency position are not satisfactory but management efficiency is satisfactory. The respondents almost agreed about the adequacy of health, safety and welfare measure taken by RMG industry. To maintain sustained growth and development, the factories should be shifted to separate area from the densely populated area to maintain healthy working environment. Bangladesh should increase the number of RMG products and should produce high end product. The Labour efficiency has to be increased to decrease the production cost of RMG products. Bangladesh should establish more and more backward linkage industry and should develop infrastructural facilities such as regular supply of electricity, gas and increasing communication and port facility. Labour unrest should be eliminated. Bangladesh should communicate with the customers directly to export her products to abroad. Bangladesh should arrange the national and international fair of RMG products. Lead time should be reduced by establishing backward linkage industry, training of workers , regular supply of electricity and gas, cultivation of cotton, elimination of political disturbance the development of road and railway communication. The financial institutions should come forward to arrange loan to RMG industry in favourable terms and conditions. Modern technology should be applied to swell the productivity and quality of RMG products. Bangladesh should find out new market niches. To maintain sustainable development of RMG industry, Bangladesh should motivate workers, develop human resource and construct deep sea port. It is very necessary to establish bonded warehouse. The management of Chittagong port should be improved .Government needs to establish more and more training institution to train up efficient workers and take other welfare measures. From analysis of the SWOT factors, we suggest to sequential combination strategy for the sample firms.