Noakhali Science & Technology University
Noakhali Science & Technology University
Noakhali Science & Technology University
Assignment on:
Assessing industry attractiveness of “Readymade Garments (RMG)” Industry
applying Michael Porter five forces model.
Submitted for:
Masum Mia
Assistant Professor
The production cost of different competing countries is shown in the following table:
Country Production Cost % Position
Japan 100% First
Thailand 81% Second
Indonesia 78.5% Third
India 78.5% Third
China 77.8% Fourth
Vietnam 73.2% Fifth
Shri-lanka 70.8% Sixth
Bangladesh 48.7% seventh
Source: Compiled by author depend on the JETRO report.
The production cost is lowest in Bangladesh compare with the other countries like Japan,
Thailand, Indonesia, India, China, Vietnam and Sri Lanka. According to the above table,
Japan stood highest position as production cost is 100 percent. On the other hand,
Bangladesh stood lowest position as the production cost is 48.7 percent only.
3. RMG Industrial Park:
To set up a garment industrial park was a dream of BGMEA. From the beginning of 1990
this sector looking for a suitable place outside of Dhaka city with all contemporary industrial
facility. Finally, the Government agreed to provide all kind of support to build in the name
of Garment Industrial Park close to Dhaka-Chittagong highway on bank of Meghna River
(Munshiganj). The area 492 acres where about 300 knit, woven, dyeing, sweater,
accessories factories will be set up. The stakeholders of the RMG sector and scholars now
have been opining that the incidents of Rana Plaza and Tazreen Fashion Flame were not
only curse but also blessing by sack of the deceased workers. As last couple of years after
Rana Plaza collapse and Tazreen Fashion Flame, the development of the RMG sector is
enormous than that of any other sectors in Bangladesh.
However, the main purpose of this industrial park will be to relocate the non-compliant
factories that have been marked after all the inspections by Accord, Alliance and NAP. None
the less, accordingly implementation of the said park willenhance economic activities of the
country and about 3 billion USD per annum will be gained from this industrial park when it
becomes fully operational. BGMEA is also trying to build this park on the basis of EPZ
model so that all sorts of facilities including fiscal incentives can be provided like those
provided in EPZ. Many foreign investors are showing their attention to financially and
technically help BGMEA for building this industrial park. As BGMEA has no adequate fund
for setting up this park, it signed a Framework Agreement following signing of an MoU with
Oriental International Holding (OIH), a Chinese Company, which agreed to invest in the
industrial park with zero investment from BGMEA. So, the BGMA and OIH as a Joint
Venture (JV) Company has been formed and a definitive agreement will be signed by both
parties. As per Framework Agreement, OIH will pay the project cost including land price in
the name of the JV Company and it is expected that the proposed project land will be handed
over by the middle to BGMEA-OIH JV Company. BGMEA members, especially the owners
of non-compliant and vulnerable garment factories, will get special preference and priority
to relocate their factories in this industrial park.
The facilities that are supposed to be provided in the industrial park are as follows:
i. Fire station,
ii. Bank and insurance services,
iii. Central Effluent Treatment Plant (CETP p),
iv. River Jetty,
v. Power Plant,
vi. Clinic,
vii. Deep well with Pump house,
viii. Administrative buildings,
ix. Gas connection provision,
x. Solid waste &Dump station,
xi. Road, Drainage system,
xii. Kids will have schools and playgrounds;
xiii. Elders will have community work etc.
The other facilities including sufficient linking internal roads, approach road, drainage
system (both surface and waste water) will be there with proper design and as per
requirement. Every factory will be connected with Central Effluent Treatment Plant (CETP)
for disposal of industrial liquid and sewerage water.
4. Export Growth & Vision (2021):
Even during political turmoil from the beginning of the year, export growth rate has brought
a ray of brightness amid the depressing economic prospects. According to BGMEA, ―RMG
exports could have grown more as they have a lot of work orders from international buyers.
Garment products account for more than 81 percent of the country's total export basket. It is
indeed a good sign that the US also has started positive movement from March, 2019, after
the long downward trend.
Export earning in Billion $
3.5
2.5
1.5
0.5
0
Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19
According to data from the central bank, the total export earnings so far in fiscal 2018-19 to
$23.24 billion year-on-year. It means export rose 7.43 percent year-on-year to $2.93 billion
in March, 2019.
According to data from the US Department of Commerce, in between the January- February
2019 garment exports to the US registered 2.82 percent growth from the previous year.
The first Apparel Summit held in Dhaka; December 7-9, 2018 set a new vision to export
clothing goods worth $50 billion by 2021. In order to accomplish the target, the RMG sector
has to need at least 15 % year-on-year increase in exports. Bangladesh’s total exports to the
EU are more than $18 billion a year, of which more than $15 billion are
garments.9However, it will not a big challenge to reach this target. According to the
following figure, the average annual growth of Bangladesh readymade garments from fiscal
year 2013 to 2019is 15 per cent. Even though, in between this time various heinous tragedies
were happened including Tazreen Fashion flame and Rana Plaza tragedy.
It is a good sign that after the Rana Plaza devastation Bangladesh has taken some excellent
scheme i.e. more than 200 trade unions have permitted in the RMG industries, hazardous
industries have been stopped, government have increased so many new inspectors for
inspect the factories, remediation of the factories is underway and transparency has been
recognized in the business sector. So due to the considering above all the US will support
Bangladesh in reaching its $50 billion RMG export target by the end of 2021.
5. Progress:
Now RMG sector in Bangladesh are more careful regarding the workplace safety. After the
Tazreen Fashion flame and Rana Plaza collapse, no more industrial tragedy took place
across the country. It is going to extensive development towards fulfilling the required 16
conditions given by the USA for regaining the GSP facility.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is demanded to
the Government for duty free import fire safety equipment such as sprinkler, fire door and
other safety and environment-friendly equipment due keep the factories safe and secured.
BGMEA also demanded duty withdrawal on import of pre-fabricated ‘materials required for
building construction. According to the demand the government has agreed to reduce duty
on some safety equipment from 61 percent to 15 percent.It is a good mark that after Rana
Plaza collapse a Memorandum of Understanding (MoU) was signed between Japan
International Cooperation Agency (JICA) and Bangladesh Bank (BB) due to provide Tk 100
crore loan for the development of RMG sector in Bangladesh. Bangladesh Bank (BB) also
insisted on the other commercial banks to lend RMG owners at lowest interest and owners to
ensure good terms with workers. Considering good client any bank can lend at 6 % interest
rate even standard instruction to allow 10 % interest rate. And any bank can borrow at 5%
interest rate from BB.13
According to BGMEA, there are 1110 factories in Gazipur and Kona Bari, about 600 at
Ashulia and Saver and 444 factories in Narayanganj. Along with above, till now, 2,643
factories have been inspected by three initiatives:
I. 1,261 by Accord15,
II. 647 by Alliance16 and
III. 735 factories by National Action Plan (NAP).
Around only 1.25 percent of the inspected factories were found vulnerable and closed down
immediately.17And a significant progress has been made in the areas of safety, including
fire, and electrical and building structural safety, in the readymade garment factories.
Moreover, factories are implementing corrective action plans provided by Accord and
Alliance. Alliance holds up democratically elected workers contribution committee in the
RMG factories with an aim to raise the voice of the Labors on the safety issues. Alliance
intends to improve and empower worker in this sector. In this regard Alliance organized a
common set of fire and building safety standards for the RMG sector in Bangladesh which
line up with the Bangladesh National Building Code (BNBC), Bangladesh Labor Law,
International Labor Organization (ILO) and also maintain the National Tripartite Plan of
Action (NTPA). The Alliance promised $100 million in low-cost capital funding to improve
fire and structural safety in Bangladeshi factories.18However, all work with the
collaboration process of the National Action of Plan.
Conclusion:
Considering all, pertinent to RMG, this sector has enormous prospect in Bangladesh. The
constructive export rate to the traditional and non-traditional market, for the sake of lowest labor
cost and manufacturing cost, Bangladesh is the number one choice in the eyes of foreign
investor. Building collapse and fire flame in the RMG sector is the past and just will remain in
the archive as Accord, Alliance and NAP have been ensuring the stander of building and
declared safe. This sector is also affirmed an industrial zone and going to be shifted in
Munshiganj. It has a new vision know as vision 2021 for reaching US$ 50 billion export. The
sustainable development and huge progress (after Rana Plaza and Tazreen Fashion flame) will
make the branding Bangladesh in the world market. And the prospect of RMG does not mean
only the gain of business persons but also the gain and empowerment of women and employment
of people, development of socio-economic condition and at large the overall development of the
nation in a sustainable manner. So we should concentrate to this sector for the sake of better
Bangladesh.
References
1. Ahamed, Ferdous. ―Can Trade Unions play an effective role in defending workers
‘rights in the Bangladesh Ready-made Garment industry? ‖. Middle East Journal of
Business, Volume 7, Issue 3, (July 2012): 12, Retrieved from
<http://www.mejb.com/upgrade_flash/pdfs/July2019.pdf>accessed on April 25, 2019.
2. http://www.mejb.com/upgrade_flash/pdfs/July2018.pdf
3. http://www.annemain.com/pdf/APPG_Bangladesh_Garment_Industry_Report.pdf
4. The International Labor Organization (ILO). ―Bangladesh, Improving working
conditions in the readymade garment industry: Progress and achievements‖. (April 2015).
Available it<http://www.ilo.org/dhaka/Whatwedo/Projects/WCMS_240343/lang--
en/index.htm> accessed on May 3, 2015.
5. www.bgmea.bd.com.