Investment Opportunities for Bangladesh's Readymade Garments. Contribution in the Country's Sustainable Development Goal


Academic Paper, 2021

15 Pages, Grade: A


Excerpt

Abstract

This research examines investment opportunities for Bangladesh's Readymade Garments (RMG) industry to contribute to the country's sustainable development goal (SDG). RMG's economic contribution is growing as a result of increased export earnings, industrialization, and employment of the country. This paper represents a combination of methods approach, depending upon descriptive and inferential statistics to assess the RMG sector's potential in the country. This analysis is crucial, as the developed world's current financial crisis raised doubts about the industry's long-term survival. This requires the investigation of substitute marketplaces that are less vulnerable to future economic collapse. This report suggests a few other marketplaces, including Brazil, China, South Africa, Russia and India.

Keywords: Woven Clothing, Export Promotion Bureau (EPB), RMG, BGMEA, BKMEA, and BRICS

1. Introduction

The readymade garments (RMG) industry plays a critical part in Bangladesh's economy. The RMG sector contributes the most to Bangladesh's economic growth. The RMG sector contributes to foreign currency profits, export earnings, poverty alleviation, job development, and women empowerment (Islam et al., 2018). Bangladesh's RMG sector has enormous potential (Ahlquist, JS and Mosley, 2000). Thus, the sector's sustainability is critical for the country's economic progress.

Under the current global trade and financial conditions, RMG exports must diversify into previously undiscovered areas. This would secure the sector's sustainability. Exports to other BRIC countries expand dramatically. If Bangladeshi apparel were exported to less conventional marketplaces in addition to the conventional market, diversified growth would be ensured. Indeed, this alternate market aided our enduring exports during the most recent global economic crisis. Although most industrialized countries, particularly the United States and the European Union, suffered, Bangladeshi exports to RMG continued to grow due to alternate markets. Due to the acute impact of the financial crisis in developed countries, which are the primary customers for our RMG products, entrepreneurs, mostly apparel makers, are actively seeking new markets.

This study explored prospective markets for Bangladesh's Readymade Garments (RMG) sector to contribute to the country's sustainable development goal (SDG). Additionally, this research examines the value of the RMG sector to Bangladesh's export revenue. This research will examine potential markets for RMG export in addition to the established markets. This will assure long-term export revenue sustainability in today's competitive and ever-changing global economy.

Six sections comprise this research. The following is a review of the literature. The third section discusses the study's conceptual structure. Section four discusses the research technique. The next(fifth) section contains the most significant findings and analyses. Finally, the final segment concludes with policy-relevant observations.

2. Review of Literature

Bangladesh's readymade garment (RMG) industry began in the late 1970s and quickly became a significant part of the national economy (Nur, 2019). Alamgir and Banerjee (2019) discovered that the average cost of garment manufacturing labor in Bangladesh is $0.16 per hour, compared to $0.27 and 0.25 in India and China in 1993.

Hasan et al., 2020 provided an overview of the Bangladeshi garment industry and covered some of the industry's other facets. Additionally, he presented findings from a study of garment entrepreneurs and evaluated entrepreneurs' effectiveness and endowment to the industry's development. Islam, Rakib and Adnan, (2016) conducted a comprehensive analysis of the segment to assess its potential as a stimulus for Bangladesh's economic growth.

One of the effective product diversification strategies was knit-RMG, which fell outside the scope of MFA. Local benefits including financial compensation and duty discounts have contributed to knit-rapid RMG's growth within EU market (Haque and Azmat, 2015). Additionally, the growth of the knit-RMG industry was fostered by factors unique to that firm's operations and economics. Despite the rapid increase of RMG exports, which averaged 27% per year between 1983/84 and 2003/04, the repeal of MFA was expected to have a detrimental effect on the Bangladesh RMG industry in the following years. In the post-MFA trade climate, Bangladesh would face twofold difficulties: obtaining raw resources with formerly prohibited countries and competes in a tariff-free marketplace in the absence of quotas (Talapatra et al., 2019). The primary source of concern is Bangladesh's competitiveness in light of its inadequate links that go back in time, specifically its continued dependence on imported textiles, poor worker productivity, and infrastructure barriers for example less developed facilities of port, corruption, and bureaucratic red tape. All of these unfavorable factors were deemed to have placed restrictions on Bangladesh.

The competition for labor from other industries, transition to greater-value-added and technological fields, as well as customers' desire for a diverse portfolio of procurement regions, are essential to minimize China's garment export growth and are rarely results in the form of catastrophe’s that happened in 2005. Hasan et al., (2016) argue that the movement from with first NIEs and into other Countries in Asia of employment operations in textiles and clothing implies upgradation of industries linked with wage rises and a transfer in manufacturing and export habits towards more digital-intensive products. Sarker et al., (2001) demonstrate that China's competitive edge is not in lesser-skilled- labor-intensive industries like clothes, however in higher-skilled manufacturing sectors. This trend was mirrored in the very first five months of 2006 by increasing unit prices for US garment imports from China and India. (source: Apparel Magazine). By comparison, Bangladesh's apparel is geared for the low-end, volume-driven market. According to Professor Zhan SU (from the BKMEA website), China has also implemented a new industrial policy since 2004 intending to increase its reliance on high-technology and knowledge-intensive sectors and decrease its reliance on labor-intensive mass output sectors such as clothing.

3. The Study's Conceptual Framework

Several critical principles pertinent to this subject include the following: (Definitions were taken from Wikipedia)-

Readymade garments are the clothing industry's mass-produced finished textile items. They are not custom-made to fit specific measurements but instead based on anthropometric studies. They were crafted from a variety of materials and yarns.

Unless the threads employed are elastic, woven cloth only extends diagonally on the bias directions (between the warp and weft directions). Unless procedures such as pinking shears or hemming are utilized, woven fabric material typically frays at the edges.

Knitted fabric is a term that refers to a material having interlaced loops (for example, knitwear). It is distinct from other textiles, which are often made up of a crisis-crop of warp threads and weft yarns in that it is made up of a single wrapped-up thread that curls on itself.

The term "export" refers to moving commodities or services manufactured in one country to another. Exporters are those who offer such goods and services; importers are those who purchase them from foreign buyers.

4. The Study's Methodology

This research article was created using secondary data. This paper primarily uses a mixed approach and includes some quantitative data to aid in the decision-making process. To discover the present situation of the RMG sector in Bangladesh and throughout the world, data were gathered from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), the Export Promotion Bureau (EPB), and a variety of local and international journals & publications, as well as newspaper articles. The future of Bangladesh's RMG sector in terms of export has been studied in this research study using accessible data. Mean values, standard deviations, CVs, average annual growth rates, and compound annual growth rates have been calculated based on time-series of data.

5. Significant Conclusions and Observations

5.1 The Value of RMG Exports

Manufacturers of RMGs stated that they began scouring marketplaces because of fluctuating demand for garment goods, such as the volatility that occurred during the recent global recession. According to figures from the two most significant national garment makers, the BGMEA and the BKMEA, while export growth is phenomenal for new destinations, it is not sufficient in terms of value compared to traditional markets. As illustrated in Figure 1, export growth from non-traditional markets is significant, although slower than growth from traditional markets.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Comparison of growth percentage in the sector Source: EPB, Compilation credit: RDTI Cell, BGMEA

Export of Bangladesh revenue is heavily dependent on the RMG sector. RMG is a significant contributing factor to the country's ongoing development efforts. Possibly the only legitimate actor in the national economy is the RMG industry. As a result, the sector's sustainability is a significant worry. In present years, due to the global financial crisis, RMG exports to traditional markets such as the United States and Europe have plummeted. Figure-2 illustrates the RMG sector's exports of varied items.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Product-wise export percentage from BD

Source: EPB, Compilation credit: RDTI Cell, BGMEA

The Export Promotion Bureau (EPB) is tasked with identifying new outside markets for potential Bangladeshi merchandise, particularly RMG, to spur the country's economic growth. "We intend to conduct aggressive market exploration in a structured manner," EPB Director-General Salahuddin Mahmud stated. Except for the core European and US markets, EPB seeks new export markets in Russia and Latin America. This study identifies prospective alternative markets for Bangladesh's Garment Sector, including Brazil, China, Russia, India, and South Africa. Even though RMG is the primary source of export money for Bangladesh, the growth rate is lower than the overall export earnings (Figure-3).

Abbildung in dieser Leseprobe nicht enthalten

Figure 3: Comparison of Total Export and RMG

Source: EPB, Compilation credit: RDTI Cell, BGMEA

Ever since the early 1980s, the RMG sector has contributed significantly to this country's national export revenue. Since then, the sector has thrived and contributed significantly to the country's total export revenue (Table 1). According to the EPB's instructive figure, from its start, the RMG export value has increased year after year, as has its proportion to Bangladesh's total export income. Additionally, we can see that the country has made significant contributions to industrialization and job development.

Table 1: Comparative Analysis of Readymade Garments (RMG) and Bangladesh's Total Export

Abbildung in dieser Leseprobe nicht enthalten

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 assure continued growth in RMG exports, we must ensure sufficient opportunity in the worldwide market. We need to discover the untapped market for RMG products in the current financial crisis. This study examines several possibilities.

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Details

Title
Investment Opportunities for Bangladesh's Readymade Garments. Contribution in the Country's Sustainable Development Goal
College
American International University-Bangladesh  (American International University-Bangladesh)
Grade
A
Author
Year
2021
Pages
15
Catalog Number
V1152022
ISBN (Book)
9783346561152
Language
English
Keywords
investment, opportunities, bangladesh, readymade, garments, contribution, country, sustainable, development, goal
Quote paper
Al Moontasir Shifat (Author), 2021, Investment Opportunities for Bangladesh's Readymade Garments. Contribution in the Country's Sustainable Development Goal, Munich, GRIN Verlag, https://www.grin.com/document/1152022

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