Bangladesh is known across the world by its readymade garments (RMG). It's like Hollywood that signifies world-class movies, Nepal symbolising the Himalayas and Egypt connoting the pyramids. Though these locations do have other landmarks, the countries are still overwhelmingly identified with such major attractions.
Bangladesh and its RMG have now become synonymous. The country does have other products but nothing is comparable with garments. The RMG industry has drawn attention of the world to the unique capabilities of the country's entrepreneurs and workforce. Bangladesh, which was almost synonymous with natural disasters and dependency on foreign assistance, is now the world's second largest garment exporter and its economy has become much more self-sufficient than what many experts couldn't even imagine after its independence (reference: the infamous 'bottomless basket' comment of former US Secretary of State Henry Kissinger).
Bangladesh has earned its political independence by sacrificing millions of lives and is now poised to earn its economic full independence by virtue of business development of the country, led by the garment sector.
A visionary bureaucrat-turned-businessman late Nurul Quader is credited for the birth of the RMG industry in Bangladesh. His Desh Garments, with the partnership of Daewoo, immensely contributed to the development of the early stage of the RMG industry. Prior to starting its operations, Desh, which means 'a country' in Bangla, sent a 130-member team, including 18 women, to Korea in 1978 for developing the skills of the newly-recruited workforce for the industry. Desh Garments started its operation in 1979 and its first shipment was made in January, 1980. Those trained professionals were the first generation of Bangladeshi garment experts who later became the pioneers in developing the industry.
Almost at the same time, in 1979, Kihak Sung, a business graduate from the prestigious Seoul National University, visited Bangladesh for the first time and decided to establish a garment facility at Agrabad, Chittagong with 250 workforce in 1980. Youngone, which was founded in 1974 in Korea, is the first foreign direct investment (FDI) venture in Bangladesh's apparel sector. Now, it is the largest employer in the export processing zones of Bangladesh, having around 55,000 workforce. Youngone is the first jacket exporter from Bangladesh, which is also credited with employing a large number of women workers who were trained and developed locally. The Desh-Daewoo business initiatives had created the first general professionals of the RMG industry, many of them later becoming very successful entrepreneurs. Youngone has introduced many world-class customers to Bangladesh and developed an excellent pool of human resources which have been contributing immensely to the development of the industry.
The history of Bangladesh's garment industry would be incomplete without acknowledging the contributions of Desh Garments and its founder Nurul Quader as well as Youngone Corporation and its founder Kihak Sung. Bangladesh now exports garments worth US$ 24 billion annually and plans to export apparels valued at US$50 billion in 2021 when the country will celebrate the golden jubilee of its independence.
Strengths of Bangladesh's RMG industry can be categorised as: (i) more than 35 years of garment manufacturing experience, (ii) globally appreciated competitive prices (iii) internationally-accepted standard of product quality, (iv) sincere and dedicated workforce, (v) a large number of young population with English communication efficiency (vi) duty-free market access to most of the developed world including the European Union (EU), Canada, Australia, Japan, Korea and also to the developing economies like India, China and many other countries and (vii) government incentives and supporting measures to develop the RMG industry.
Around 4.4 million workers, mostly women, are now employed in the RMG industry. Almost 80 per cent of the country's export earnings depends on garment exports. The industry also has a huge spill-over impact on many sectors and industries. For example, bank and insurance earn Tk 40 billion, shipping industry Tk 25.50 billion, transportation sector Tk 10 billion and the port Tk 12.40 billion from the garment industry annually.
There is no denying the fact that the industry has now become the main driving force for the country's steady economic growth. What is more encouraging is that a bright future is waiting for Bangladesh's garment industry provided it meets some challenging but of course not unattainable requirements for its sustainable growth.
McKinsey & Co forecast that Bangladesh would be able to export apparels worth $45 billion by 2020. It opined that Bangladesh has the potentials to grow much more, if 5 Ps - people, power (electricity and gas), place (workplace), politics (stable political environment) and ports (infrastructure) can be properly developed and utilised for the industry. Goldman Sachs has included Bangladesh in 'Next 11' after the BRICS countries (Brazil, Russia, India, China and South Africa). JP Morgan ranks Bangladesh as a 'Frontier Five' country in the coming days.
Bangladesh's strategic location in between two emerging economies, China and India, also shows the enormous potentials of the growth of the RMG industry. Both India and China have around 40 per cent of global population altogether. Bangladesh actually exports only 4 per cent of the world's apparel requirements and China, the number one, supplies around 35 per cent.
Due to its great economic development, China is now having double-edged constraints to the growth of its garment industry - (i) continuous rise of wages, losing its competitiveness and (ii) increased demand from domestic market, attracting many manufacturers to feed the local market, instead of export. Bangladesh has started exporting to China, which has been growing steadily. Japan, the traditional market for Chinese garments, has adopted 'China plus one' policy - has opened up a new door for the growth of Bangladesh's garment industry. India also became an export destination for Bangladeshi garments despite the fact that it is competing with the latter to grab global apparel business.
At present, the volume of the world garment trade is estimated at around US$450 billion. It is predicted that the global apparel market would be $650 billion by 2020. It means that a fresh demand for $200 billion garments will be created within the next few years. Thanks to its vast experience and business exposures to the global markets, it is expected that Bangladesh would gain a reasonable chunk from this new demand, provided the country's RMG industry successfully overcomes the existing challenges.
The challenges for the Bangladesh garment industry's expected growth are coming mostly from within the industry. After tragic incidents of Rana Plaza building collapse and Tazreen Fashions inferno, the importance of workplace safety came to the fore. Two international buyers' platforms, namely, Accord and Alliance, and the National Tripartite Action Plan were formed to inspect all the garment factories in Bangladesh. So far more than 2,000 factories have been inspected by all the three platforms. Among the inspected garment facilities, less than 2 per cent has been found risky. The inspected factories are also undertaking corrective action plans, as suggested by the inspectors. This is a positive development but in no way the industry should be complacent. Instead of criticising global initiatives to improve the country's workplace safety, both the government and the business should develop their own uncompromising mechanisms which would ensure safety and security of the workers.
Bangladesh's RMG industry should now focus higher-end apparel markets instead of lower-end products; in fact, it would be an embarrassment for the industry if it is portrayed that after 35 years of its inception, it is still relying on the basic garments business. It is obvious that to uplift its market segment, the RMG industry of Bangladesh should address strictly safety, compliance and environmental issues.
Shortage of electricity and gas has strangling the RMG sector. While new enterprises cannot emerge due to lack of gas connections, production in the running factories is hampered due to low pressure of gas and load-shedding. Cost of production is also a big challenge for its growth. Over the last few years, utility and service charges have increased manifold and the minimum wages were increased 219 per cent in the last four and half years. But keeping pace with the increased cost of production, productivity and efficiency of the local RMG factories have not improved. The bank interest rate in Bangladesh is higher than that in our competing countries, another bottleneck for the growth of the industry.
The garment industry now needs skilled human resources in terms of both skilled workers and mid-level management. A large number of expatriates are still working in the mid-management and higher positions in our garment industry. It is sad that Bangladesh's RMG industry is yet to be successful to attract a large number of brilliant youth who are entering the job market. Very few young graduates from the country's best institutions are interested to work in the garment industry despite recognition by everyone of the importance and contribution of the RMG industry to the country's economy.
Political stability is a pre-requisite for growth of any industry. But the garment industry has become the worst sufferer in political unrest in Bangladesh as time, being lost in such turmoil, is a determining factor in the international apparel market as timely shipment should be the topmost priority. Labour management is another challenge that the garment industry needs to address. While the industry has to show total respect and commitment to uphold labour rights, stakeholders have to be farsighted as well as courageous enough not to kneel down to any undue and illogical pressure from outsiders. The government officials, the entrepreneurs and the labour leaders should have a consensus on the rights of workers as well as the rights of protecting businesses.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is convinced that the industry can achieve $50 billion export mark when the country celebrates 50 years of its independence in 2021. Md. Atiqul Islam, President of the BGMEA, has emphasised that the challenges should be addressed by all the stakeholders and 'Made in Bangladesh with Pride' tag should be the mantra of future garment business. The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) has been leading the knit sector, export performance of which is better than that of woven garments. Aslam Sunny, 1st Vice President of the BKMEA, has underscored the importance of ethical buying from customers-end. He pointed out the fact that despite promise of buyers to raise the prices after the Rana Plaza incident to tackle safety and wage increase issues, in reality, many buyers now offer lower prices. It is very important to establish ethical business practices from all parties which should be ready to shoulder the responsibility to improve standards of business environment of the industry.
Despite all the limitations and sometimes rowing against the tide, the RMG industry of Bangladesh has been maintaining a steady growth because of its resilient entrepreneurs, vibrant workforce and policy supports from the successive governments. The industry has eliminated successfully child labour in 1995 and efficiently phased out the quota regime of the MFA in 2004. Now concerted efforts are required to ensure workplace safety of international standard, workers' rights and overcome all other challenges that hinder the growth of the RMG industry. The industry that lays golden eggs in the Bangladesh economy has to be protected and allowed to grow as per its potentials.
The writer, a business consultant and analyst, is the CEO of the Best Sourcing Business Advisory Services. He is a planner, researcher and host of Bangladesh's first and only regular TV talk show on readymade garment industry, namely, 'RMG: Past, Present & Future'. mehdi.mahbub@bestsourcing.biz
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