Bangladesh Rmg Sector Article

Whither Bangladesh's RMG market


In beginning of the eighties, the readymade garments (RMG) sector of Bangladesh trapped the eye from the Western suppliers, who were facing high costs of production and were trying to find countries with low making costs. Benefiting from low wage and abounding labor, RMG sector of Bangladesh features only blossomed since then. During the last three decades the country has become the second largest global garments exporter annually transferring garments items worth USD $18 billion. The path to success had not been smooth. For example , with the removal of the Multi-Fiber Agreement (MFA) in 2005, fear of imminent doom stroked in the minds of the clothes owners. Inspite of the adverse predictions of different research, the RMG sector of Bangladesh were able to pull through the abolishment of the MFA untouched. Bangladesh afterwards secured a posture under the Generalized System of Inclination (GSP), which usually allowed the region to enjoy privileged trade relates to the Western producers. However , after the most current tragedy of Rana Plaza where a lot more than 1200 clothing workers misplaced their lives, the US government suspended the GSP of Bangladesh. Even though EU promised to not withdraw GSP for Bangladesh it comes with stipulations fastened. In this situation, the question that everyone is forced to ask themselves is- " Will the RMG sector of Bangladesh break with the new crisis it is faced with, or perhaps will it be capable of hold their ground? ” The Major Path from the RMG Sector

Before delving further in to the recent problems and its affects, let's initially identify the contribution of RMG sector in Bangladesh economy and its strengths that led to it is immense progress over the last many years. RMG sector is the highest foreign exchange making sector of Bangladesh, constituting 79% of total export and around 22 percent of total GDP in FY 2012-13. It is noticeable from graph 1 which the sector's contribution to total foreign trade and economic climate as a whole provides only increased over time. Presently it engages 44 , 000, 000 worker 80 percent of which happen to be women. Therefore , it would not be wrong to say that RMG sector has become the personal assistant of Bangladesh economy. Graph1: RMG export and Total Export Chart 2: Minimal hourly salary rate of RMG Sector

Supply: BGMEA Resource: ILO The global hegemony of Bangladesh in RMG sector can be attributed to the fact that it enjoys a competitive benefit in terms of low wages and lax regulation that changed into competitive global prices. Using a minimum wage of UNITED STATES DOLLAR 0. 26 per hour, the pace is one of lowest on the globe (see Graph 2). The most important earner of foreign exchange in Bangladesh has also been showered with favorable bonuses such as back-to-back LC, importance and customs duty rebates and brief and permanent interest rates lower price. Harnessing on its cheap labor, Bangladesh RMG sector has found a solid foothold to sustain by itself. For example , the MFA sampling system which had initially acted for the Bangladesh RMG sector was phased out in june 2006 but the RMG sector authorized a growth of 19 percent in the 1st six months following abolishment. According to the Mckinsey survey 2011, Bangladesh has all the potential of becoming the number 1 attire sourcing hotspot replacing Cina. Buyers on the cost of labor wages

In respect to Doug Miller, teacher emeritus of supply cycle ethics, " In Bangladesh, you have a glut of buyers looking for a cheap merchandise wanting to place enormous purchases, and the capability is built immediately. ” Which has a clause of deferred payment in letter of credit (L/C) i. e. the formal financial loan agreement to get purchases, stores in Bangladesh get products shipped away and relieve payments to manufacturers after months of delay of as much as 6 months. With repayment being deferred, Bangladeshi producers are actually required to subsidize the buyers....