Macroeconomic Analysis of Bangladesh's Ready-Made Garments Industry

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Macroeconomic Analysis of Bangladesh's Ready-Made Garments Industry The Ready-Made Garments (RMG) industry contributes to the Bangladesh economy in a distinctive manner. The last 20 years witnessed unparalleled growth in this sector, which is also the largest exporting industry in Bangladesh. It has attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a significant role in terms of employment generation. Nearly two million workers are directly and more than ten million inhabitants are indirectly associated with the industry. In addition to its economic contribution, the expansion of RMG industry has caused noticeable changes by bringing more than 1.12 million women into the workforce. Hence it is quite apparent that this sector has played a massive role in the economic development of the country. RMG’s contribution in terms of GDP is highly remarkable; it has reached 13 percent of GDP which was only about 3 percent in 1991. It also plays a pivotal role to promote the development of other key sectors of the economy like banking, insurance, shipping, hotel, tourism, road transportation, railway container services, etc. One of the key advantages of the RMG industry is its cheap labor force, which provides a competitive edge over its competitors. The sector has created employment opportunities for about two million people of which 70 percent are women who mostly come from rural areas. Thus the industry helps in the country’s social development, women empowerment and poverty alleviation. Currently RMG earns the lion's share of foreign exchange earnings. INDUSTRY ANALYSIS The Readymade Garment (RMG) industry of Bangladesh marked the leadership of private enterprise and the country’s successful transition to a major export-oriented economy. The key products of this industry are Knit and Woven Shirts and Blouses, Trousers, Skirts, Shorts, Jackets, Sweaters, Sportswear and many more casual and fashion apparels. RMG industry has enjoyed an impressive rise from less than 50 factories in 1983 to over 3600 in 2006. Garments sector’s continual success can be attributed to the following:  Quotas under Multi-Fiber Arrangement (MFA) in the North American market  Preferential market access to European markets The country has a small textile industry, but the volume and quality of its output are unable to fully meet the demand of the garments industry. Most of Bangladesh’s garments exports are made from imported textiles. RMG exports have grown rapidly after extensive trade and other economic reforms were undertaken in the early 1990s.

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