Experience in Readymade Garments Export: A Study on ...

The Millennium University Journal

Vol. 2, No. 1; 2017

ISSN 2225-2533

Published by The Millennium University

25

Experience in Readymade Garments Export: A Study on Global

Context

Dr. Anup Kumar Saha

Assistant Professor Department of Accounting & Information Systems

University of Dhaka, Dhaka, Bangladesh

Md. Sajidul Islam

Assistant Professor

Netrokona Government College, Netrokona, Bangladesh

E-mail: [email protected]

Abstract

This research investigates potential markets for Readymade Garments (RMG) sector to facilitate the sustainable

development goal (SDG) of Bangladesh. The economic contribution from RMG through export income,

industrialization and employment to the overall economy of the country is on an increasing trend. This research takes a mixed approach based on both primary interview and secondary data on the RMG sector potentials in the

country. This study is timely, as the recent financial crisis in the developed world has drawn an element of threat on

the sustainability of this sector. This calls for search of alternative markets, which are less vulnerable to such global

financial crisis. This study suggests a few potential markets, which may become prospective alternatives, such as

China, Brazil, Russia, South Africa and India.

Keywords: RMG, Knitwear, Woven wear, Export Promotion Bureau (EPB), BGMEA, BKMEA, BRICS.

1. Introduction

The role of the readymade garments (RMG) industry in the economy of Bangladesh is very important. RMG sector

makes the largest contribution towards the enhancing economy of Bangladesh. RMG industry contributes to the

foreign exchange earnings, export earnings, poverty alleviation, employment creation, and empowerment of women (Haider, 2007). The potentiality of RMG sector is very bright in Bangladesh (Robbani, 2000). Thus, the

sustainability of this sector is necessary for the development of the national economy.

Under current world trade and financial situation, the RMG export needs to be diversified into new

untapped markets. This would ensure the sustainability of the sector. Exports increase significantly to other BRIC

countries. If Bangladeshi apparels can also be exported to less conventional destinations in addition to the

conventional market, that would ensure a diversified growth. In fact, this alternative market contributed positively to

our sustainable export during the last global economic crisis. Most developed countries suffered including USA and

the EU, still Bangladeshi RMG export sustained because of its alternative markets. The entrepreneurs, mostly the

apparel makers are seriously looking for new markets due to the acute impact of the financial crisis in developed

countries, which are the main markets for our RMG products.

This research investigates potential markets for Ready Made Garments (RMG) sector to facilitate the sustainable development goal (SDG) of Bangladesh. This research also explores the importance of RMG sector for

the export revenue of Bangladesh. This paper aims to explore alternative markets for RMG export besides the

conventional markets we have. This will ensure the sustainable and continuing export revenue in the present

competitive and ever-changing world economy.

This research is designed by six sections. Following is the literature review. Third section talks about

conceptual framework of the study. Research methodology is described in section four. Fifth section comprises of

major findings and analysis. Finally, the fifth section presents concluding remarks with policy implications.

2. Literature Review

Bangladeshi ready-made garment (RMG) industry emergedin the late 1970s and become a major sector in the

national economy very quick (Haider, 2007). Delahanty (1999) discovered that average garment manufacturing

www.themillenniumuniversity.edu.bd/journal/index.php/TMUJ The Millennium University Journal Vol. 2, No. 1; 2017

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labor cost in Bangladesh is $0.16 per hour, while the corresponding figures for India and China were $0.27 and 0.25

respectively during 1993.

Quddus (1993) presented a profile of the Bangladeshi apparel sector and discussed some other aspects of

the industry. In addition, heshowed results from a survey of apparel entrepreneurs and evaluates the performance of

entrepreneurs and their contribution to the success of this industry. Islam and Quddus (1996) presented an overall

analysis of the industry to evaluate its potential as a catalyst for the development of the rest of the Bangladesh economy.

One of the successful areas of product diversification was knit-RMG, which was outside the purview of

MFA. The growth of knit-RMG was spurred by a growing demand in the EU market and was also stimulated by

domestic incentives in the form of cash compensation and duty drawbacks (Battacharya and Rahman 2001:4). In

addition, industry-related technical and economic factors promoted the development of the knit-RMG industry.

Despite the high growth rate of RMG exports, 27 percent per year over the period between 1983/84 and 2003/04, the

elimination of MFA was considered to have adverse impacts on Bangladesh RMG industry in the coming years. The

post-MFA trade environment would pose a dual challenge to Bangladesh: accessing raw materials at competitive

prices and competing with hitherto restricted countries in a quota-free context (Battacharya and Rahman 2001:12).

The major cause of concern lies in Bangladesh’s competitive strength with respect to the limited backward linkages,

particularly still heavy dependence on imported fabrics, lower labor productivity, and infrastructural constraints such

as undeveloped port facilities, corruption and administrative red-tape. All these negative elements were considered to have imposed constraints on Bangladesh.

The competing growth of other industries drawing on the labor force, migration to higher value added and

high technology sector and buyer’s preference for diversified portfolio of sourcing locations are likely to slow the

sharp growth of Chinese apparel export and unlikely to create the 2005 type of apparel export floods. Mayer (2005)

argues that the shift of labor-intensive activities in textiles and clothing away from the first tier NIEs towards other

Asian countries has clearly reflected industrial upgrading associated with wage increases and a move in production

and export patterns towards more technology-intensive goods. Based on a Heckscher-Ohlin type trade model that

concentrates on relative endowments of labor, land, and human capital, Mayer and Wood (2001) show that China's

comparative advantage is not in low-skill-labor-intensive production, such as clothing, but in manufacturing sectors

with higher skill content. This phenomenon has been reflected in higher unit prices for US apparel imports from

China and India in the first five months of 2006 (source: Apparel Magazine).In comparison, Bangladesh’s apparel falls in low-end volume driven segment. According to Professor Zhan SU(source BKMEA website),China has also

adopted new industrial policy since 2004 with a view to concentrating more on high technology and knowledge

intensive sector and reducing the dependence on the labor intensive quantity driven mass production sector such as

garments.

3. Conceptual Framework of the Study

Few important concepts relating to this study are as follows (Definitions are taken from Wikipedia)-

Ready-made garments are mass-produced finished textile products of the clothing industry. They are not

custom tailored according to measurements, but rather generalized according to anthropometric studies. They are

made from many different fabrics and yarns.

Woven fabric only stretches diagonally on the bias directions (between the warp and weft directions),

unless the threads used are elastic. Woven fabric cloth usually frays at the edges, unless techniques are used to counter it, such as the use of pinking shears or hemming.

The knitted fabric is a material with interlaced loops called also knitted fabric (example: knitwear’s). It

differs from the other textiles usually composed of by a crisis-crop of warp yarns and by weft yarns, because it is

constituted of a single rolled up thread by curling on itself.

The term export means sending of goods or services produced in one country to another country. The seller

of such goods and services is referred to as an exporter; the foreign buyer is referred to as an importer.

4. Methodology for the Study

This research paper has been prepared with the assistance of secondary data. This paper mainly involves mixed

approach, though some quantitative data, which were used for helping the decision making process. In order to get

the present scenario of RMG sector in Bangladesh and also in the world, information have been collected from Bangladesh Garments Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers

and Exporters Association (BKMEA), Export Promotion Bureau (EPB), several local and international journals &

publications and newspaper articles. In the light of available information the future of Bangladeshi RMG sector in


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terms of its export has been explored to figure out in this research article. Mean values, standards deviation, CV,

average annual growth rates, compound annual growth rates have been shown based on time series data.

5. Major Findings and Observations

5.1 Importance of RMG Export

RMG manufacturers said that they started foraging markets because of the fluctuating demand for apparel items e.g. fluctuation happened during the recent global recession. According to the statistics from the two major national

associations of apparel manufacturers, BGMEA and BKMEA, although export growth is very astonishing for the

new destinations, it is not high enough in terms of value as compared to the traditional markets. Figure-1 shows that

the growth of export from non-traditional market is high but the growth rate is less than the traditional market.

Figure 1: Comparison of growth percentage in the sector

Source: EPB, Compiled by: RDTI Cell, BGMEA

Bangladesh depends on its RMG sector largely for its export income. RMG is a major contributor in the

continual push for national development. Arguably, RMG industry is the sole credible player in the national

economy. Therefore, the sustainability of this highly valuable sector is of much concern. In recent past, due to the

global financial crisis RMG export has declined in the traditional destinations, such as, USA and Europe. Figure-2

shows the export in diversified products of RMG sector.

Figure 2: Product wise export percentage from BD


The Export Promotion Bureau (EPB) sets out in search of new overseas markets for Bangladeshi potential

merchandise including RMG to accelerate the country's economy. "We are planning to go for aggressive market

exploration in a planned way" said Salahuddin Mahmud, director general of EPB. EPB is now exploring new export

markets in Russia and Latin American countries apart from the established European and US markets. This study

focuses on finding out the potential alternative market for RMG sector of Bangladesh, such as Brazil, China, Russia,

India and South Africa among others. Despite RMG being the prime sector for export revenue for Bangladesh, the

growth rate is less as compared to total export revenue (Figure-3).


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Figure 3: Comparison of Total Export and RMG


Since early eighties RMG sector is playing a major role in the national export income of this country. From

then the sector is flourishing with time and showing a high contribution in the total export income of the country

(Table 1). From the informative table of EPB, it can be seen that since its inception the RMG export value is getting

higher and higher year to year and so as its contribution in total export income of Bangladesh. Also, we can see there

is a great contribution in the industrialization and employment creation in the country.

Table 1: Comparative Statement on Readymade Garments (RMG) &Total Export of Bangladesh

Year Export

Of

Woven-

Wear

(In

Million

Us$)

Export Of

Knitwear

(In Million

Us$)

Export

Of RMG

(In

Million

Us$)

Total Export

Of Bangladesh

(In Million

Us$)

% Of

RMG

To

Total

Export

Number

Of

Garment

Factories

Employment In

Million Workers

1983-84 - - 31.57 811.00 3.89 - -

1984-85 - - 116.20 934.43 12.44 384 0.12

1985-86 - - 131.48 819.21 16.05 594 0.20

1986-87 - - 298.67 1,076.61 27.74 629 0.28

1987-88 - - 433.92 1,231.20 35.24 685 0.31

1988-89 - - 471.09 1,291.56 36.47 725 0.32

1989-90 - - 624.16 1,923.70 32.45 759 0.34

1990-91 - - 866.82 1,717.55 50.47 834 0.40

1991-92 - - 1,182.57 1,993.90 59.31 1,163 0.58

1992-93 1,240.48 204.54 1,445.02 2,382.89 60.64 1,537 0.80

1993-94 1,291.65 264.14 1,555.79 2,533.90 61.40 1,839 0.83

1994-95 1,835.09 393.26 2,228.35 3,472.56 64.17 2,182 1.20

1995-96 1,948.81 598.32 2,547.13 3,882.42 65.61 2,353 1.29

1996-97 2,237.95 763.30 3,001.25 4,418.28 67.93 2,503 1.30

1997-98 2,844.43 937.51 3,781.94 5,161.20 73.28 2,726 1.50

1998-99 2,984.96 1,035.02 4,019.98 5,312.86 75.67 2,963 1.50

1999-00 3,081.19 1,268.22 4,349.41 5,752.20 75.61 3,200 1.60

2000-01 3,364.32 1,495.51 4,859.83 6,467.30 75.14 3,480 1.80

2001-02 3,124.82 1,458.93 4,583.75 5,986.09 76.57 3,618 1.80


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2002-03 3,258.27 1,653.82 4,912.09 6,548.44 75.01 3,760 2.00

2003-04 3,538.07 2,148.02 5,686.09 7,608.99 74.79 3,957 2.00

2004-05 3,598.20 2,819.47 6,417.67 8,654.52 74.15 4,107 2.00

2005-06 4,083.82 3,816.98 7,900.80 10,526.16 75.06 4,220 2.20

2006-07 4,657.63 4,553.60 9,211.23 12,177.86 75.64 4,490 2.40

2007-08 5,167.28 5,532.52 10,699.80 14,110.80 75.83 4,743 2.80

2008-09 5,918.51 6,429.26 12,347.77 15,565.19 79.33 4,925 3.50

2009-10 6,013.43 6,483.29 12,496.72 16,204.65 77.12 5,063 3.60

2010-11 8,432.89 9,482.06 17,914.95 22,924.38 78.15 5,150 3.60

2011-12 9,603.34 9,486.39 19,089.73 24,287.66 78.60 5400 + 4.00

Mean 3911.26 3041.21 4938.13 6750.95 59.78 2785.32 1.58

SD 2208.61 2979.16 5238.19 6475.31 22.67 1654.94 1.14

CV 0.56 0.98 1.06 0.96 0.38 0.59 0.72

AAGR 0.03 0.03 0.07 0.08 0.00 0.02 0.00

CAGR 0.08 0.15 0.20 0.12 0.07 0.10 0.13

Source: Export Promotion Bureau, Complied by BGMEA

Here,

SD= Standard Deviation CV= Coefficient of Variance

AAGR= Average Annual Growth Rate

CAGR= Compound Annual Growth Rate

To ensure the continuing growth in the RMG export we need to ensure ample opportunity in the

international market. In the present scenario of financial crisis we need to explore the untapped market for RMG

products. Some opportunities are discussed in this research

5.2 Potentiality in China

Of the total revenue of US$19.089 billion from garment exports in the last fiscal (2011-12), US$1.326 billion came

from 9 new destinations, showing a 53.26 percent rise from a year ago. Markets except the USA, Europe and

Canada, which import more than 90 percent of Bangladeshi garments, are considered the new export destinations. Of the total earnings from the sector, US$ 11.375 billion came from Europe, US$ 4.529 billion from the US and $

874.85 million from Canada in the last fiscal (2011-12). Other countries accounted for US$ 1.598 billion. Among

the new destinations, an unexpected growth took place in the case of China that registered a growth of 97.91 per

cent (Figure 4). According to statistics, Bangladeshi apparels worth about US$ 104.52 million were exported to

China in last fiscal as against US$ 52.81 million in the previous year.

Figure 4: Year-wise export in China



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As China has decided to shift its focus from RMG to high-end products more, this opens up a good

opportunity for other neighboring RMG exporters to get into the Chinese forgone markets. In addition, this gives a

rise of a new and big market in China. As Bangladesh produces basic RMG, it can export to Chinese market as well,

which was previously supplied by the Chinese domestic production. The Chinese market is big consisting of 1.3

billion Chinese customers, according to the vice-president of China National Garment Association - Feng Dehu,

who led a high-powered Chinese business delegation to Dhaka. China used to be a global leader in apparel exports; however, it has shifted its focus to high-end garments

manufacturing due to spiraling wage rates. The vice-president of China National Garment Association also informed

that the China could become a very attractive market for Bangladeshi RMG products as imported garments items are

now catering the Chinese middle-income group. As a result, Bangladesh has an opportunity to export one billion

dollar worth of garment items to China. In a joint press conference in Dhaka with the Bangladesh Garment

Manufacturers and Exporters Association (BGMEA) at the BGMEA office it was the vice-president president that

the one billion dollar expectation might go even higher - likely to go higher than $300 these days - as the garments

export of China was $143 billion in 2011 and was climbing every year.

In that same press conference, the BGMEA president said that Bangladeshi export to Chinese market

increased to $102 million in 2010, which was almost $0 in 2009. In 2010, a duty free facility was offered by Chinese

government to 4,721 Bangladeshi products, mainly RMG items. Exports to China are rising ever since. According to

the BGMEA president, China is not only important as a major export destination for Bangladeshi RMG, but also important for foreign direct investment (FDI) provider. He said“A number of Chinese entrepreneurs are coming to

Bangladesh to set up garment and textile factories”. He also added that eighty-seven percent of Bangladeshi RMG

export goes to North American and European region. This concentration on a few markets is very risky. Unforeseen

phenomenon like the global recession can be very risky, given the high market concentration.

The then commerce minister reassured the Chinese delegation team of the continuous support by the

present government for setting up industries in Dhaka and around. He stated that Bangladesh would need to

diversify its products and markets for its sustainable growth. According to BGMEA, during 2011-12 fiscal year,

Bangladesh exported total of $320 million, while imported $5.9 billion worth of goods.

A memorandum of understanding (MoU) to develop bilateral trade was signed between BGMEA and

Ningbo Yinzhou Textile and Garment International Chamber of Commerce when a ten-member delegation headed

by the President of Bangladesh Garment Manufacturers and Exporters Association Shafiul Islam Mohiuddin visited China during June 9-11. The MoU focuses on development of networking among businessmen, entrepreneurs and

investors of both countries, steps to remove trade barriers, assistance to transfer technology and raise human skill.

The entrepreneurs in Ningbo -- the fifth largest city of China -- showed interest to shift their production in

Bangladesh following the high production cost there due to wage hike. Both the countries' entrepreneurs focused on

investment in apparel industry including suit and oven textile. The Asian giant is the single largest apparel exporter

in the world contributing about 36 per cent to the global market. Bangladesh's export will get a big boost if it gets

the production share of the big market.

Manufacturers said China has concentrated more on high-tech industrialization and is gradually

withdrawing from the manufacture of apparels that involves high cost. The move has forced China to look for

sources that can offer apparels for its domestic consumption at cheap and competitive prices and Bangladesh

remains a potential source, they said. China is a lucrative destination for Bangladesh's garment as apparel exports to

that country saw an extraordinary 179 per cent growth in the fiscal year (FY) 2010-11 over that of FY 2009-10, they said. Bangladesh exported apparel products, both knit and woven items, worth $52.81 million during the July-June

of FY 2010-11, which was $18.95 million in FY 2009-10. Country's export to China was only $9.49 million in FY

2008-09. During July-December of current fiscal year, apparel export to China stood at $132.26 million.

Additionally, China has issued an import quota for cotton of additional 400,000 tonnes to textile mills in

order to find cheaper international source. Chinese mills lobbied to its government for boosting import quotas from

abroad to lower the import prices to 40 percent in comparison to domestic sources. This new quota took the total

quota to 2.8 million tonnes for the year. The National Development Reform Commission (NDRC) approved the

quotas. In addition, textile mills availed the quota to export their cotton stockpiled at bonded warehouses. Around

700,000 to 800,000 tonnes of cotton is stored in bonded warehouses at major ports of the country. The government

preferred to sell off the cotton reserves in order to boost supplies in the domestic market so that the new harvest has

a market, according to the industry sources. China offloaded 1 million tonnes of cotton from state reserves in 2012 including 300,000 tonnes of stocks from 2008 harvest. China had 4.4 million tonnes of cotton reserved in 2012,

including 3.13 million tonnes from 2011.

Although the country failed to raise wages of its RMG workers to maintain a standard living, China - one

of its major competitors - has increased workers’ wages significantly. But the rising labor costs in China has created


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an opportunity for Bangladesh as Chinese RMG sellers are more interested to buy Bangladeshi RMG products due

to low prices.

Besides high labor costs, the production costs of RMG products have also increased in China. As a result,

China’s biggest e-commerce website and RMG selling organization Vancol Import and Export Co Ltd is facing

serious difficulties to offer low-cost apparels to their buyers. For this, Vancol has decided to buy low-cost RMG

products from Bangladesh this year also, banglanews24 reports. Leo However, Production Manager of Vancol

Import and Export Co Ltd said: “Last year we bought shirts from Bangladeshi producers. Buyers welcomed the

products due to low price and quality. So, this year also we have decided to buy Bangladeshi RMG products.”

“During the last several years, labor cost has increased significantly in China. Monthly wage of a Bangladeshi

garment producing labor is $80 to $ 90 on average, whereas in China it is $316. Chinese sellers can save 5 to 10

percent costs if they buy the products from Bangladesh,” he added.

On the other hand, new generation of China is no more interested to work in garment factories, creating

lack of expert laborers. Chinese manufacturers are now interested to set up their garment factories in Bangladesh

due to these two reasons and cheaper labor cost. Bangladeshi garment manufacturers and exporters informed that

RMG production cost in Bangladesh is 30 percent less than China. Moreover, our RMG sector is much matured

now.

In this regard, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Shafiul

Islam Mahiuddin said: “The issue was discussed between the entrepreneurs of both the countries and the matter has

advanced a lot. Not only Vancol, many other renowned Chinese manufacturers are also showing interests to invest

in Bangladesh.” According to BGMEA information, during the last fiscal, the growth rate of RMG export to China

was 149 percent. Moreover, China has provided tax-free export facilities to a number of Bangladeshi products which

will obviously increase the volume of export to China from Bangladesh.

Bangladesh has significant trade deficits with China, which is in focus because of the geographical

proximity. Bangladeshi products had a duty free access to China. Because of the duty free access, the export to

China from Bangladesh has increased. In 2011, exports to China were $320 million while import was around $6.0

billion. Apparels produced in Bangladesh were $102 billion in the year. China National Garment Association

(CNGA) sent a high-powered delegation in that year and at a joint press conference with the leaders of the

Bangladesh Garments Manufacturers and Exporters Association (BGMEA) in Dhaka expressed the planned

marketing of Bangladeshi products for Chinese market.CNGA delegation and BGMEA hoped that Bangladesh

would export $1.0 billion of apparels annually to China within next few years. China has shifted its focus to high

end products because of the recent wage hike, which makes the production of such low ended garments product

uneconomical. Thus, the production of low-value garments for both home consumption and export has become quite

uneconomical for it. That potential opportunity needs to be addressed to increase the export from Bangladesh to the

domestic market of China and other markets leftover by China.

However, an issue exists here, is that whether China would like to meet its need by importing the products

from Bangladesh or it will go for its own FDI in the EPZ area to take the opportunity of low wage in Bangladesh.

The direct investment would bypass the local manufacturers and thus BGMEA wants to emphasize the importance

of policy for the benefit of local exporters. However, Chinese RMG producers are likely to take the cheaper FDI

opportunity by setting up their production units here through FDI in low segment. Chinese firms reportedly have

already opened their offices in Dhaka to source quality garments at cheaper rates for consumption in their home

country. Bangladesh government should match adequately the readiness of the Chinese importers and local apparel

units offering the former the incentives they are looking for. This export opportunity must not be missed under any

circumstances.

5.3 Potentials in Indian market

India extended the zero-tariff benefits to RMG exporters to 46 Bangladeshi clothing items. Bangladesh lobbied the

Indian government to get duty waiver on 61 products. Of the products, 47 were apparel items including pants, shirts,

blouses, skirts, kids wear, cotton nightwear, jeans, swimwear and tracksuits. India agreed to give the tariff


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exemption facility to 46 apparel items out of the 47 items sought by Bangladesh. Bangladeshi exporters welcomed

the benefit, as exports would rise without any tariff barriers.

Figure 5: Year-wise export in India


In an interview the chairman of Viyellatex Group – a leading clothes maker – said the duty-free benefit will

help boost garment exports to India, a market with a population of more than 100 crore and a growing middle class.

However, increase in exports depends largely on the non-tariff barriers. In absence of non-tariff barriers, exports

should rise. However, many Bangladeshi products already enjoy a duty free facility but they cannot take advantage

of it as non-tariff barriers prevail. Hasnat commented that Bangladeshi clothes are more quality than those of India

in terms of quality. He said that Bangladeshi RMG is of better quality than India’s. However, there exists a decline

in the trade imbalance between the nations. India, the third largest economy of Asia enjoys a trade surplus with

Bangladesh. The deficit between the neighbors have got more than double to $4,057 million in 2010-11 from

$1,998.58 million in fiscal 2006-07, according to official data. Viyellatex chief said that their exports would rise;

however, that might not be enough to narrow the trade gap to a significant proportion.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) marked that Bangladeshi apparel makers

would do well in the Indian market. The BKMEA president Salim Osman said “I am hopeful that our clothes will be

competitive in terms of both quality and prices”. He said that the export earnings might get double in the future due

to an opening in Indian market. He also said that the zero duty benefit should give a boost to the hosiery industry,

which employs three lakh people, by widening the market opportunities for undergarments. The excess hosiery

production after export to India, are sold in the domestic market as the excess cannot be exported to Europe. The

undergarments are expensive in India. Thus Osman marked “If we can make undergarments for 20 crore users in

India, it will be a great opportunity.” He also said that the duty-free benefit would give rise to opportunities for

contract manufacturing by Indian firms as well.

According to the Cotton Advisory Board (CAB), the production for 2011-12 was 353 lakh bales and export

was 127 lakh bales. In 2012, production was 347 lakh bales and exports were 115 lakh bales. At the same year,

about 340 lakh bales came to the market with close to 10,000 bales arriving per day. The mills had 15 lakh bales

(approx.) of cotton and about 15-day stock. In 2012, nearly 28 lakh bales were in the closing stock. The imports

were 12 lakh bales as against the estimation of six lakh bales. The global ending stock for the season was higher and

thus international prices remain stable. In India, the minimum support price for cotton increased and domestic prices

remained in proportion with the international prices.

5.4 Bangladesh looks into Russian markets

Salahuddin Mahmud, director general of EPB said a number of delegations comprising representatives from trade

bodies and government officials recently visited those destinations. He added that Russia could be the potential

market for Bangladeshi apparel. Last year Russia imported RMG products valuing USD 700 crore. 50%of these

were imported from China. But recently China has moved out from this sector. On the other hand, due to financial

crisis the export market of Bangladesh is facing challenges. In these circumstances, Bangladesh needs to tap into the

potential market of Russia. In these view, BKMEA attended the 39th trade fair held at Moscow.


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Figure 6: Year-wise export in Russian Federation


Russia has earned membership of World Trade Association (WTA). Therefore, Russia has to lower its

import duty rate. By 2013, Russia lowered its present import duty of 9% to 7.40%. In the next two years this rate

was further lowered to 6.90% and 6% respectively. This continuous decrease of import duty opened up the potential

of exporting knit wears from Bangladesh. Referring to the non-tariff barriers (NTBs) on both Dhaka and Moscow

sides, the EPB official said a process is underway to remove the NTBs to scoop out huge export potential of Russian market.

In 2011, Bangladesh exported knit wears valuing USD 18 crore 32 lakh. However, their total import was

USD 678 crore. This year it will surpass USD 700 crore. This time China is moving out of this business.

5.5 BGMEA targets larger opportunity in Brazil

According to a senior BGMEA official, the RMG export is expected to increase in Brazil as this country is emerging

as a prospective market for Bangladeshi apparels. In a meeting at the BGMEA office with newly appointed

ambassador of Bangladesh to Brazil M Shameem Ahsan, the then acting president of the BGMEA, M Siddiqur

Rahman discussed issues relating to the RMG market expansion in Brazil. The president informed the high

commissioner about the barriers to accessing the Brazilian market, especially tariff and non-tariff barriers, and

sought due role in removing the barriers.

Figure 7: Year-wise export in Brazil


Meanwhile, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has thanked the government for introducing Bangladesh High Commission (HC) in Brazil considering Readymade Garment (RMG)

export potential to Brazil. BGMEA acting president M Siddiqur Rahman Sunday met Bangladesh’s High

Commissioner to Brazil M Shameem Ahsan at the association’s head office.

5.6 Export potentials to South Africa

Export to South Africa witnessed a healthy growth of 15.13 per cent. Export potentials to South Africa is getting

higher with policy supports and removal of tariff &non-tariff barriers. On June 12, 2012 a team from South Africa

headed by Mr. Anil Sukla, Deputy Director General-Department of International Relations and Cooperation,


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Ministry of Foreign Affairs sat in a bilateral meeting with BKMEA leaders at Hotel Sonargoan, Dhaka. Mr.

Mohammad Hatem-2nd Vice President led the BKMEA team. While making a brief to the visiting team, Mr. Hatem

sought policy supports from South African government in order to facilitate RMG export from Bangladesh. The case

was further clarified following the power point presentation. In the presentation, BKMEA secretary Mr. Sulav

Chowdhury made an elaborated account highlighting the areas of possible cooperation and engagements between

the two countries. He laid out specific trade barriers that need to be addressed at the earliest.

Figure 8: Year-wise export in South Africa


H E Mr G Q M Doidge, High Commissioner Extraordinary and Plenipotentiary accredited to Sri Lanka,

Bangladesh, Nepal and Maldives in his briefing promised of all necessary supports to businessmen from

Bangladesh. Here he mentioned that the long due complications over visa processing have now been simplified to

foster business and trade between the two countries. BKMEA leaders opined that once the existing tariff and non-

tariff barriers are addressed, South Africa could be a major destination for Bangladesh knitwear products.

5.7 Japanese Market prospects for Bangladesh

China happened to be the main exporters in Japanese RMG market. Japanese readymade garments market used to be captured by the Chinese products. However, in recent days China is focusing on new types of products rather than

RMG. In this scenario China may lose its competitiveness in the sector, which may bring good news for

Bangladeshi export. Moreover, the newly developing hostility between the two giant neighbors is adding to our

potentiality. All these are adding to the potential exploration of new big market in Japan for Bangladeshi RMG

exporters.

Japan is also becoming a highly potential market for Bangladeshi ready-made garments because of their

quality and lower cost, according to the industry insiders. Bangladesh RMG export to Japan reached at US$ 403.65

million in the last fiscal as against US$ 247.51 million in the previous year marking a growth of 63.34 per cent. The

demand for Bangladeshi RMG in Japanese market has been increasing significantly.

Figure 9: Year-wise export in Japan


EPB is giving special emphasis on Japan also for Bangladesh's export destination, said Salahuddin

Mahmud, director general. Japan used to import from China, however, Japan now looks for diversified sources as


35

China now prioritizes to sell high-end products, he said. "We should make our efforts to have huge volume of export

like RMG to widen our export basket," said EPB DG.

5.8 Latin American market for Bangladeshi garments

BGMEA did its first scoping mission to Latin America in 2010May, along with the support of GIZ. This scoping

mission aimed and successfully contributed to the overall growth of RMG export into these markets. Outstanding developments in new market exploration have been experienced in those years—apparel exports to non-traditional

markets have increased from 7.11% in 2005–06 to 15.46% in FY2010–11. Specifically, RMG exports to Brazil,

Mexico and Chili grew by 109.53%, 32.16%, and 59.77% respectively in FY2010-2011. Continuous follow up visits

to Latin America is necessary to keep the momentum already gained in these markets.

5.9 Other markets

The European Union has introduced a relaxed GSP facility for the Bangladesh RMG products from January 1, 2011.

RMG export to new markets, including Australia, South Africa and Turkey has increased. Japan, Australia and New

Zealand provide duty-free access to RMG products from Bangladesh. The global recession has helped the local

manufacturers to explore new markets around the world and thus it was proved to be a blessing in disguise. If the

trend continues, the earnings from RMG export will exceed the target of $15 billion this fiscal. During the first

quarter of 2010, Bangladesh earned more than $6 billion from RMG. Bangladesh RMG export to Korea also marked a 69.47 per cent growth in 20111-12. According to sources, apparel products worth about US$ 80.01 million was

exported to South Korea in 2011-12 as against US$ 47.21 million in the previous fiscal. The Australian market also

experienced a growth of 59.42 per cent. According to statistics, RMG worth about US$ 307.54 million was shipped

to Australia in 2011-12 as against US$ 192.9 million in the previous fiscal.

Figure 10: Year-wise export in Australia


However, amongst the RMG export to emerging countries – e.g. Turkey experienced a reverse trend, as the

country imposed a “safeguard duty” at a rate of 17 per cent on apparel imports from the least developed countries including Bangladesh.

The executive director of Centre for Policy Dialogue (CPD) – Mustafizur Rahman said that there are two

key RMG types -- inner RMG and outer RMG. He suggested that Bangladesh should target to produce and enter the

middle segment from low-end products. In addition, it needs to improve fashion, design, multi-tasking, upgrading

workers' skill and quality control; he termed this as inner RMG sector. In contrast, Rahman suggested that outer

RMG means products including leather, footwear, shrimp and jute and jute goods, plastic, melamine, cement and

shipbuilding and footwear. In addition, he suggested that increased efforts should be put into these potential

merchandises. This will also result in technology transfer by FDI.

6. Concluding Remarks

This paper has demonstrated about how important the RMG sector is for the export revenue of Bangladesh. This

sector is contributing major role in the export income of our country. In the context of global financial crisis and other turmoil, we are losing our share of export in the traditional markets, such as USA and European Union

countries. Thus, it is the high time to look for alternative viable markets where we can make our additional exports,

like China, India, Brazil, Russia, South Africa and some other Latin American countries. Even in case of any


36

reduction in export in the present markets the alternative markets can provide a backup for export volume to

stabilize the national export income. It also requires continuous development of the sector and allied industries.

Development of this sector would facilitate to penetrate the untapped markets. Although some favorable scenarios

can be seen in the alternative markets so that the opportunities can be pursued, related stakeholders need to forward

necessary initiatives from their own parts. The government, businessmen, professionals, intellectuals, bureaucrats

and journalists have to work together to build up positive image of the Bangladeshi RMG industry, so that its export horizon can be broadened to the future markets. Future research can be on the quantitative analysis on potential and

present markets based on actual data, trends, determinant factors and the impact on national economy.

7. Policy Implications

This study suggests a few policy implications to ensure the sustainable development of the RMG sector. These

includes reduction of interest rate, better supply chain management, providing financial and non-financial

incentives, improve garments factory’s security measures, ensure compliance of labor law, decentralization of

garment sectors into export zone, research of garments product and market, ensuring human resource development,

and competitive leadership in cost, price, quality & service.

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