Govt.
College of Applied Human Science
Azimpur, Dhaka-1205
Department of Clothing and Textile
Course No: CT 305
[Link] 3rd Year
Session: 2020-2021
Group: 14
Submitted to
Jesmin Masuma
Assistant Professor
Department of Clothing & Textile
Government College of Applied Human Science
Azimpur, Dhaka-1205
Topic: Competitiveness of the Bangladesh Ready-made Garment
Industry in Major International Markets
Submitted by:
Name: Poushi Hajong Puja
Department: Clothing & Textile
Exam Roll:5231
Registration No:5738
Session: 2020-2021
Competitiveness of the Bangladesh
Ready-made Garment Industry in
Major International Markets
ABSTRACT
T he ready-made garment (RMG) industry of Bangladesh started in the late 1970s and
became a prominent player in the economy within a short period of time. The industry
has contributed to export earnings, foreign exchange earnings, employment creation, poverty
alleviation and the empowerment of women. The export-quota system and the availability of
cheap labour are the two main reasons behind the success of the industry. In the 1980s, the
RMG industry of Bangladesh was concentrated mainly in manufacturing and exporting
woven products. Since the early 1990s, the knit section of the industry has started to expand.
Shirts, T-shirts, trousers, sweaters and jackets are the main products manufactured and
exported by the industry.
Bangladesh exports its RMG products mainly to the United States of America and the
European Union. These two destinations account for more than a 90 per cent share of the
country’s total earnings from garment exports. The country has achieved some product
diversification in both the United States and the European Union. Recently, the country has
achieved some level of product upgrading in the European Union, but not to a significant
extent in the United States. Bangladesh is less competitive compared with China or India in
the United States and it is somewhat competitive in the European Union.
The phase-out of the export-quota system from the beginning of 2005 has raised the
competitiveness issue of the Bangladesh RMG industry as a top priority topic. The most
important task for the industry is to reduce the lead time of garment manufacturing. The
improvement of deep-level competitiveness through a reduction in total “production and
distribution” time will improve surface-level competitiveness by reducing lead time. Such a
strategy is important for long-term stable development of the industry, but its implementation
will take time.
In contrast, the establishment of a central or common bonded warehouse will improve
surface-level competitiveness by reducing lead time, but deep-level competitiveness will not
be improved and long-term industry development will be delayed. Therefore, granting
permission to establish in the private sector such warehouses with special incentives, such as
the duty-free import of raw materials usable in the export-oriented garment industry for
reducing the lead time in garment manufacturing, is a critical issue for Bangladesh.
Second, Bangladesh needs to improve the factory working environment and various
social issues related to the RMG industry. International buyers are very particular about
compliance with codes of conduct. Third, issues related to product and market diversification
as well as upgrading products need to be addressed with special care. Moreover, the
Government of Bangladesh needs to strengthen its support. The development of the port and
other physical infrastructure, the smooth supply of utilities, a corruption-free business
environment and political stability are some priority concerns for the Government to consider
in its efforts to attract international buyers and investors.
INTRODUCTION
The RMG industry of Bangladesh has expanded dramatically over the last three
decades. Traditionally, the jute industry dominated the industrial sector of the country until
the 1970s. Since the early 1980s, the RMG industry has emerged as an important player in
the economy of the country and has gradually replaced the jute industry. The “export-quota
system”1 in trading garment products played a significant role in the success of the industry.
However, that quota system came to an end in 2004. Therefore, the competitiveness issue
needs to be addressed, with special attention given to the long-term sustainability of the
industry.
The term “competitiveness” itself is a broad concept. Its meaning, implications,
adaptation and achievement vary from firm to firm, industry to industry, or country to country.
Michael E. Porter is a pioneer of the “competitiveness theory” (Porter, 1990) at the national
or macro level (Cho and Moon, 2000). Firm/industry-level (micro level) competitiveness
depends on various parameters. However, the literature provides no universal agreement on
the definition of competitiveness. For example, some researchers consider the labour cost,
unit cost, exchange rate, interest rate, prices of material inputs and other price- or cost-related
quantitative factors for measuring the competitiveness of a manufacturing firm/industry
(Edwards and Golub, 2004; Fukunishi, 2004; Cockburn and others, 1998; and Edwards and
Schoer, 2002). Some other researchers consider product quality, innovativeness, design,
distribution networks, after-sales service, transaction costs, institutional factors relating to the
bureaucracy of export procedures and other non-price factors for measuring the
competitiveness of a manufacturing firm/industry (Abdel-Latif, 1993; Chen and others, 1999;
and Sachwald, 1994). The influences of both price and non-price factors on the
competitiveness of a firm/industry are reflected by market share and profit (Toming, 2006).
This study attempts to incorporate price, non-price and result (for example, market share)
factors in order to address the international competitiveness of the Bangladesh RMG industry.
The majority of the competitiveness-related research studies focus on the
“competitive performance” or on the “factors influencing competitive performance”. The
studies consider product price, market share and other indicators to measure competitive
performance, while considering wages, costs, productivity and other issues as factors
influencing competitive performance. However, Fujimoto (2001) puts special emphasis on
the “capability”2 factor that influences the competitive performance of a firm. According to
him, improvement in the “capability” of a firm enhances its “competitive performance”. This
improvement takes time, but it ensures the long-term sustainability of a firm. In contrast,
improving only “competitive performance” and not “capability” may not be sufficient to
ensure the long-term development of the firm.
This study addresses the competitiveness issue from two broader dimensions:
surface level and deep-level competitiveness.3 Surface-level competitiveness reflects the
“competitive performance” of a firm or industry that is directly observable to consumers.
Deep-level competitiveness reflects the “capability” of a firm or industry that is not directly
observable to consumers. An improvement in the deep-level performance enhances the
performance at the surface level. The severe competition under the quota-free trading
environment pressures the RMG industry of Bangladesh to enhance its surface-level
competitiveness at the earliest convenient time. However, the long-term sustainability of the
industry demands enhancement of deep-level competitiveness. Therefore, the future
development of the industry will depend on how much importance will be given to which
factors/dimensions, and how the individual firms will respond and how government policies
will influence the industry. Hence, the discussion of the competitiveness of the Bangladesh
RMG industry requires simultaneous consideration of both the surface and deep dimensions.
In particular, this study uses (a) export value, product price, market share and lead time as
surface-level indicators, and (b) linkage expansion, factory environment, product/market
composition, and “production and distribution” time as deep-level indicators for measuring
the international competitiveness of the Bangladesh RMG industry.
The paper is structured as follows. Section 1 sets the research agenda. Section 2
provides an overview of the Bangladesh RMG industry. Section 3 discusses the surface level
competitiveness of the Bangladesh RMG industry. Section 4 focuses on the deep-level
competitiveness of the industry. Section 5 deals with the indirect influences of governmental
policies on the competitiveness of the Bangladesh RMG industry. Finally, section 6 concludes
the study.