SWOT Analysis on Readymade Garment Industry in Bangladesh

RMG is the leading industry in Bangladesh. It is basically a labor-intensive industry and it needs
limited financial investment and relatively simple technology compared to other high technical
industries. The success story of Garment Industry in Bangladesh is the story as to how the
readymade garments starting in the late seventies as an insignificant non-traditional item of
export. In 1998-99 this sector has earned 4019.98 million US$ through exporting which is
75.67% of the total export (Redwan, 1995).

The tremendous success of Readymade Garment (RMG) exports from Bangladesh over last two
decades has surpassed the most optimistic expectations. At present Bangladesh is the 6th largest
exporter to USA and in 1997 Bangladesh becomes 18th largest exporter in the world. Now
Bangladesh ranks first export of T-shirts to Europe (BGMEA, 1997-98)

The overall impact of the readymade garment export industry is certainly one of the most
significant social end economic developments in contemporary Bangladesh. The remarkable
achievement of RMG sector is now exposed to each and every country. Despite these impressive
achievements and the probable challenges in the near future, if properly managed, the prospects
for further expansion and growth for this sector remain bright. There are some major threats still
exits in this sector but Bangladesh has the ability to overcome these threats.

Readymade Garment (RMG) industry holds a key position in the economy of Bangladesh in
terms of foreign exchange earning, employment generation and poverty alleviation. Right now
RMG sector is the highest foreign currency earner in Bangladesh. Apart from contributing to
huge foreign exchange earnings, RMG industry has become the largest source of employment
generation. Around 2 million people are presently involved of whom 90% are distressed women
in the RMG industry of Bangladesh. In addition a rough estimate shows that the sector through
linkage effects is currently generating about US$ 2 billion worth of domestic economic activities
(Bhattacharya, 2000)

RMG industry is the most important sector for the economy of Bangladesh. It accounts for
75.14% in 2000-2001 of the country’s total export earnings (BGMEA Newsletter, 2001) About
1.5 million workers of whom 90% are distressed women are engaged in about 3200 garment
factories as on June 2000(BGMEA, 1997-98).

It is largest manufacturing sector contributing about 5% to the GDP. But this RMG sector is now
facing some challenges especially after 2004. Bangladesh is still at its infancy in terms of
quantity production in the readymade garments industry. We still have problems in our country
for the production of quality goods. Standard is also not satisfactory. The quality of the
readymade garments of Korea, Hong Kong, Taiwan and other countries is far superior to that of
ours.
In RMG sector, value-addition is 30% only because a RMG unit has to import 70% of the total
value of the product. The low value added represented that the backward linkage industries such
as fabrics and accessories, which directly feed into the garment sector, have not satisfactorily
developed. The weakest point of the Bangladeshi apparel industry is that it is still at the mercy of
the exterior suppliers of its main raw materials namely the fabrics. Right now Bangladesh has a
very limited capacity to produce fabrics required by the RMG factories. Her competitors India,
Pakistan, Thailand, Malaysia and other countries have their textiles mills that can produce
quality fabrics for the respective apparel industries.

This sector will remain in intense competition in the context; it is very necessary to find out
opportunities and challenges of RMG industry of Bangladesh in order to face firm competition in
the free market environment. Japan is one of the potential markets for exports from Bangladesh.
Quality and fashion conscious Japan is importing readymade garments from Bangladesh at an
increasing rate even though this increase is very negligible. An extremely large program has to
be taken to increase the exports. There exists supportive policy environment in the RMG sector
of Bangladesh. The package of textile sector incentive has been aimed at primarily to boost up
the exporters. Government has extended some major incentives and facilities for the local and
foreign investors to help increase investment in the country for all industrial sectors including
textiles and clothing

Still there are some threats existing in our RMG sector. According to the Ministry of Textiles,
the local fabric manufacturers currently supply less than 19% of total woven fabric requirement.
About 70% of the total fabric requirement of the knit sector is domestically produced as reported
by the BTMA. Textile policy 1995 envisages established of 246 spinning mills with 25000
spindles each, 481 weaning mills each with capacity to produce 17 million meters of fabrics, 481
dyeing-printing-finishing units each with same capacity for yarn and woven fabric by the year
2005. Thus it is a challenge for RMG sector in Bangladesh to get right quantity of fabrics. The
recent US Trade and Development Act 2000 provide duty free and quota free access to the US
market from 48 countries of Sub-Saharan African (SSA) from October 1, 2000 to September 13,
2008.Though after 2004 quota system will be benefited for access duty free to USA till 2008. As
USA is the single largest importer of Bangladesh RMG, Bangladesh will lose competitive
position relative to those 72 countries.

A lot of research works should be done cordially how to face challenges of the coming changes
in the world business for the continued existence of this sector. From the above discussion we
have found some weaknesses and threats of RMG sector. Bangladesh can overcome its
weaknesses if it formulates and implements some strategies like cost reduction strategy, product
diversification strategy, market diversification strategy. The findings show that the workers
needed significantly shorter time to produce a shirt of a given specification than the time
presented in another study completed by Khan and Chowdhury in 1986.
This means that labor productivity in RMG factories has improved during the last 9 years. The
experiences of Japan, Hong Kong, South Korea and other suppliers of RMG confirm this type of
relationship between productivity and wages. Unlike in the public sector of Bangladesh, in RMG
sub sector, wages have increased during the last 9 years but productivity has increased more than
wages have. Quality and standard of RMG products can be improved by practicing Total Quality
Management, preparing and following a quality manual for the products, training Quality
Control and Quality assurance Personnel etc.

The growth and development of Bangladesh Ready Made Garment is highly satisfactory as it is
found in number of factories, share in total foreign exchange earnings and value added to the
economy. The major problems of RMG are low net exporting, low value addition, low quality
and standard, low productivity, elimination of quota and GSP, intense competition, scarcity of
backward linkage industries etc. to comply with the set standards by the importing countries and
global RMG marketers, Bangladesh need to improve its working condition. Appropriate training
to the workers focusing on awareness of safety and what is to be done during the time of
emergency will be effective in improving employee morale. Government of Bangladesh,
Ministry of commerce, Ministry of textile, Export Promotion Bureau, BGMEA, Institute of
Fashion Technology and other concerned authorities should work strengthening the RMG
industry of Bangladesh.