Bangladeshi RMG Sector

The economy of Bangladesh is largely dependent on agriculture. However, the Ready Made Garments (RMG) sector has emerged as the biggest earner of foreign currency. In 1972, the World Bank approximated the gross domestic product (GDP) of Bangladesh at USD 6.29 billion, in 2014, the GDP stood at USD 173.82 billion, growing by almost 27 times in a matter of four decades. Bangladesh's exports industry alone comprised USD 31.2 billion in FY 2014-15, 81.69% of which was made up by ready-made garments. On its own, the knitwear sector encompasses 39.83% of total exports—a staggering USD 12.43 billion. The RMG sector has experienced an exponential growth since the 1980s. The sector contributes significantly to the GDP. It also provides employment to around 4.2 million Bangladeshis, mainly women from low income families.

1950 was the beginning of RMG in the Western world. In order to control the level of imported RMG products from developing countries into developed countries, the Multi Fibre Agreement (MFA) was made in 1974. The MFA agreement imposed an export rate 6 percent increase every year from a developing country to a developed country. In the early 1980s Bangladesh started receiving investment in the RMG sector. Some Bangladeshis received free training from the Korean Company Daewoo. After these workers came back to Bangladesh, many of them broke ties with the factory they were working for and started their own.

In the 1980s, there were only 50 factories employing only a few thousand people. Currently, there are 4296 manufacturing units. Owing to the emergence of strong backward linkages within the country, the Knitwear Industry is adding up to 75% value, which opens up enormous potential for foreign and domestic investors to spend in the areas of spinning, weaving, sewing, packaging, and accessories manufacturing. In the last five consecutive fiscal years, knitwear constituted 7.2% of the national GDP on average, demonstrating that RMG continues to serve as a strategic and commercially beneficial sector to the country, which has had to overcome hurdles to compete in the changing international climate time and time again. This sector also contributes around 13 percent to the GDP, which was only around 3 percent in 1991. Of the estimated 4 million people employed in this sector, about 50 percent of them are women from rural areas. In 2000, the industry consisting of some 3000 factories employed directly more than 1.5 million workers of whom almost 80% were female. USA is the largest importer of Bangladeshi RMG products, followed by Germany, UK, France and other E.U countries.

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