The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during the last 25 years. The industry plays a key role in employment generation and in the provision of income to the poor. Nearly four million workers are directly and more than twelve million inhabitants are indirectly associated with the industry. Over the past twenty five years, the number of manufacturing units has grown from 180 to over 5000. The sector has also played a significant role in the socio-economic development of the country. It continued to show robust performance, competitive strength and, of no less importance, social commitment. RMG’s contribution to Bangladesh economy is well-known, well-appreciated and well-respected.

1. PRICE MECHANISMRMG INDUSTRY
TOTAL
$13.22
TOTAL
$3.72
HOW MUCH DOES IT COST TO MAKE A SHIRT IN BANGLADESH vs THE USA
BANGLADESH
$0.20
$3.30
$0.22
MATERIALS
LABOR COST
INDUSTRIAL
LAUNDRY
USA
$0.75
$5.00
$7.47
MATERIALS
LABOR COST
INDUSTRIAL
LAUNDRY

2. INDUSTRY OVERVIEW
STRENGTH
• Considerable qualified workforce available at low labor charges
• Energy at low price
• Membership of Multilateral Investment Guarantee Agency (MIGA)
• Bank interest@ 7% for financing exports

3. INDUSTRY OVERVIEW
WEAKNESS
• Absence of easily on-hand middle management
• A small number of manufacturing methods
• Low acquiescence
• Speed money culture
• Time-consuming custom clearance

4. INDUSTRY OVERVIEW
OPPORTUNITY
• Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD & Cellular
services
• EU is willing to establish industry in a big way as an option to china particularly for
knits, including sweaters
• Bangladesh is included in the Least Developed Countries
• Sweaters are very economical even with china and is the prospect for Bangladesh

5. INDUSTRY OVERVIEW
THREAT
• Lack of marketing tactics
• Lack of training organizations for industrial workers, supervisors and managers
• Speed money culture
• Communication gap created by incomplete knowledge of English

6. INDUSTRY OVERVIEW
CONTRIBUTION TO OTHER SECTORS
Banking and
Insurance
Shipping and
Logistics
Contribution
to Government
Exchequer
Transport and
Communication

7. INDUSTRY OVERVIEW
CONTRIBUTION TO OTHER SECTORS
Professional
Services
Engineering
Sector
Real Estate
Utility
Services

8. INDUSTRY OVERVIEW
CONTRIBUTION TO OTHER SECTORS
Information and
Communication
Technology
Hotel and
Tourism
Emerging
Consumer
Market
Waste Recycling
Industry

9. INDUSTRY OVERVIEW
• RMG Exports starts in the late 1970s
• There were only 9 RMG units in 1978
• Estimated 5000 RMG units are now in business
• Share of RMG export to GDP: About 16%
• Contribution in National Export:
– 78.96% in FY 2011-12
– 78.15% in FY 2010-11
– 77.12% in FY 2009-10
TWO MAIN CATEGORIES:
1. WOOVEN: SHIRT, TROUSER
2. KNIT: SWEATERS, SOCKS

10. INDUSTRY OVERVIEW
• Direct employment: 4.0 million (est.)
– Indirect employment: About 1 million (est.)
• Women workers constitute 80% of work force
• 17.77% Average growth rate in last 20 years
• 14.59% Average growth rate in last 10 years
• Average growth gradually diminished up to 2002-03 then began to move
upwards till economic recession and started rising again in the post
recessionary period.

11. INDUSTRY OVERVIEW
Product Value
(billion USD)
Export Share Growth
1 T-Shirts
4.69
26.22% 49.31%
2 Trousers
4.16
23.24% 37.19%
3 Sweaters
2.48
13.89% 38.59%
4 Shirts
1.56
8.74% 57.68%
5 Jackets
1.88
10.54% 39.77%
Source: EPB

12. SOCIAL IMPACTS OF THE
RMG SECTOR
Women Empowerment
Savings
Child Labor
Population Control

13. PRICE MECHANISM
History
• Buyers coming over during season
• Agents
• Buying houses
• Setting up of own office

14. Internal Factors
Scale of operations
Larger operations tend to enjoy economies of scale
PRICE MECHANISM

15. Internal Factors
Backward and Forward linkages
Leads to cost savings and better control over quality
PRICE MECHANISM

16. Internal Factors
Cost of Inputs
International prices fluctuate leading to fluctuating
cost prices
PRICE MECHANISM

17. Internal Factors
Value Added Services
Specialized value added services such as designing,
quality lab, shipping tend to demand a premium
PRICE MECHANISM

18. Internal Factors
Future orders
Firms with lacking future orders are more likely to
lower prices than firms who are neck high on orders
PRICE MECHANISM

19. Internal Factors
Volume of order
Firms are more willing to offer lower prices on orders
with high volume of work
PRICE MECHANISM

20. External Factors
Exchange Rate
Weak local currency
Local Currency getting stronger
International Factors
PRICE MECHANISM

21. External Factors
Hartal
• Days of little to no productivity
• Problems for meeting deadlines
• Goods at risk when being delivered
on these days
Extortion
• Extortion where the factory is
located
• Extortion while the shipment is
being sent to the port
• These costs add to the overall cost
PRICE MECHANISM

22. External Factors
Minimum Wage
Government sets minimum wage
Increases the price
PRICE MECHANISM

23. External Factors
Imperfect Knowledge
Sellers bid among themselves
Do not know the price bid by the competitors
Compete among themselves
Buyers take advantage of that
PRICE MECHANISM

24. Looking forward
A gradual shift from buyers market to suppliers
market
PRICE MECHANISM

25. INDIA
Forward Chain:
 fixed price Internationally
 reluctant to export more
 $20 billion export in 2012-2013
Backward Chain:
Majority of imports from china
steady increase in imports after
phasing out of quota
cotton knitted fibres are done locally
other fabric and fibres varies from
5% to 100% in import

26. Trade association :
CMAI: 20000 members
deals with government and policies
helps tax and vat reduction
Govt. Initiatives :
1019 crore financial assistance
30% raise in target
INDIA

27. VIETNAM
Backward Chain:
 3 sectors
 2% fibre from local source
 20% fabric from local source
forward Chain:
2007: Fair trade policy problems with us
department of commerce
2009: Failure to prove dumping
Apparel export $11.5 billion

28. VIETNAM
Trade association :
VITAS: Non government umbrella : 635
companies, 70% of market
VINATEX: Biggest state owned
organization, 90 member, helps in
production process
Govt. Initiatives :
2008: president requested VINATEX to increase
local materials by 36%
Strong renovation and economic reform
Improved trade relations: capturing china’s
market

29. MEXICO
Backward chain stakeholders
Protecting labor rights
Gearing for makeover
Forward chain stakeholders
Fashion becomes affordable
Emergence of new distribution channels
Multinational's enter the market
Trade association involvement
Nafta
EU-FTA
Government strategies
Trade policies
Entrepreneurial mindset
Competitive workforce
Strategic locations
Supportive environments

30. Backward chain stakeholders
Trade unions-ACFTU
Forward chain stakeholders
Changing environment
New distribution channels
Multinational's enter the market
Trade association involvement
WTO-2001
ITMF
CHINA
Government strategies
Existence of trade zones
Entrepreneurial mindset
Advantages
Challenges

31. Backward chain stakeholders
Procurement of raw Materials
Trade unions and legislations
Forward chain stakeholders
Shift to high value added item
Designer clothing
Strategic locations
Trade association involvement
Custom unions with EU
Free trade agreements- Israel, Romania,
Croatia, Macedonia
TURKEY
Government strategies
Liberal Trade policies
Entrepreneurial mindset
Flexibility among production sites
Qualified Human resources
Developed Sub-category
Trade Fairs

32. SYNTHESIS
• Comparison in Government Strategies
• Comparison in Trade Association and Union involvement
• Comparison in Entrepreneurial Mindset
• Comparison in Forward Chain Stakeholders
• Comparison in Backward Chain Stakeholders

33. Comparison in Government Strategies
Bangladesh China
Existence of business Zones EPZ can be compared with this kind of
measures. Though number of foreign
companies is quite low the industry
enjoys great facilities in the zones.
The garment sector in China is based mainly on the east coast, in
Guangdong, Zhejiang and Jiangsu provinces. Most factories are within
'Special Economic Zones'. They are predominantly privately owned
and foreign investment is common. For example in Guangdong
province, 62% of garment factories are foreign owned, many by
Hong Kong and Taiwanese companies.
Specialized Markets Specialized markets are unavailable in
Bangladesh.
The so-called "Superior Goods Zone" within the fabric market
includes overseas textile companies having annual sales of more
than US$30 million, international chain enterprises and
merchandising offices of well-known charitable and welfare
institutions; as well as China's top 100 textile companies and national-
level branded textile companies and the top 10 large operators in
China's top five professional textile markets.
SYNTHESIS

34. Comparison in Government Strategies
Bangladesh India
Endorsement of cultural uniqueness in
apparel
Bangladesh government has yet to recognise local
craftsmanship as a POD to establish new market
abroad
India has endorsed its weavers and the handloom
sector to export as part of the apparel industry.
Investment in research and
development
Bangladesh has yet to take necessary investments
in research to make the industry more sustainable
The Cabinet Committee on Economic Affairs (CCEA)
has approved an Integrated Processing
Development to make textiles processing units
more environment-friendly and globally competitive
Encouraging new entrants Since the 80s RMG industry has enjoyed incentives
from tax exemption in importing capital goods as
well as exporting them. Even subscription to utility
and other government services is easier with
respect to other industries.
The Government of India plans to set up Rs 100
crore venture capital fund to provide equity
support to start-ups in the textiles sector.
SYNTHESIS

35. Comparison in Government Strategies
Bangladesh Mexico
Import Tariffs
Apparel import in Bangladesh is quite low considering
the high exports. This kind of initiatives were not
necessary in Bangladesh.
The Mexican Government formally notified the
World Trade Organization that it would increase
tariffs to protect its apparel industry. The
announced tariff increase, from an average of
about 20% to 35%, will apply to apparel imports
from non-Nafta countries.
Growth Plan
Bangladesh exports after fending for its local market.
The growth of the industry outmatches the growth of
market size.
As a result of the steep tariff decline, Mexican
imports of apparel increased 74% from 2005 to
2007. During the same period Mexican domestic
production grew just 3% in volume, not keeping
pace with growing demands for higher volume,
better quality and lower prices.
SYNTHESIS

36. Comparison in Government Strategies
Bangladesh Vietnam
Initiatives of Government to create
strong backward link
Government has not been involved with any initiatives but
the industry itself has become self-sufficient in many
ways
In mid-2008, Vietnamese President Nguyen Minh
Triet requested that VINATEX increase the amount
of domestic textile material it uses from 36
percent to a higher amount to help supporting
industries grow.
Annual increment in labour wage In Bangladesh no such labour law is at work There is a mandatory 10% increment every year
in vietnam
SYNTHESIS

37. Comparison in Government Strategies
Bangladesh Turkey
Existence of Free Zones Moderately open economy in the Export Promotion
Zones. These EPZs are furnished with all possible
facilities.
As a tool of market orientation, Turkey has given
importance to establishment of Free Trade Zones
and Industrial Free Zones. Readily, there are 19
Free Zones in operation.
Terms of investment Investment assured under Foreign Private
Investment (Promotion and Protection) Act, 1980
which secures all foreign investments in
Bangladesh.
Foreign companies are treated equally with
Turkish companies, in terms of investment in
Turkey, transfer of profit and capital and access
to incentives.
SYNTHESIS

38. Comparison in Trade Association involvement
Bangladesh China
International affiliations Investment assured under Foreign Private Investment
(Promotion and Protection) Act, 1980 which secures all
foreign investments in Bangladesh. Overseas Private
Investment Corporation, USA insurance and finance
agendas operable Bangladesh is a member of Multilateral
Investment Guarantee Agency (MIGA) under which
protection and safety measures are available.
When China became a WTO Member in 2001, it committed to
lowering its tariff rates, opening its domestic retail and distribution
market, granting trading rights to qualified enterprises and
individuals, and providing access to foreign-funded retailers
interested in doing business in China’s second-tier cities.
International Exposure BGMEA also organizes international events but all in a
very small scale.
In April 2008, the China National Textile and Apparel Council, which
represents China's textile industry, joined the Switzerland-based
International Textile Manufacturers Federation (ITMF) as a member
association, and in October 2009 hosted the ITMF Annual
Conference in Shanghai.
Worker Conditions Bangladesh is trying its best to regain the confidence
after Rana plaza incident.
It is rumoured that their compliance scenario is worse than
Bangladesh. Accusations of physical torture has been denied by
China
SYNTHESIS

39. Comparison in Trade Association involvement
Bangladesh India
Material testing by association No centralized quality measurement by BGMEA. They are
planning to open up one soon.
The Association runs a well-equipped testing
laboratory to test the Physical and Chemical
characteristics of Yarn, Fabrics and Garments. The
services of the Laboratory are open to Members as
well as Non-Members.
Trade Association involvement in supply
chain
BGMEA consists of 4000 members but almost all of them only
are the manufacturers and forward chain members. The
number of backward chains members are quite low
CMAI has a membership base of over 20,000
companies, including RMG Manufacturers, Exporters,
Retailers and Ancillary Industry. It consists of all the
parts of the supply chain
Centralized labour union No centralized labour union was allowed but the path has been
paved for this in the recent years.
Garments and Textile worker union (GATWU) advocates
for labours in the whole industry.
SYNTHESIS

40. Comparison in Trade Association involvement
Bangladesh Mexico
Trade agreements Bangladesh is a member of WTO
and enjoys GSP benefits under
its umbrella in many countries.
Mexico had a huge upswing in 1990s after entering into NAFTA (North
America Free Trade Agreement) with Canada in 1994, becoming the
world's one of the largest textile manufacturers. With the NAFTA
agreement the sales hiked and Mexico attained large chunk of market
share.
Local Blocks Bangladesh has not made any
local trading blocks in south
Asia. SAARC is trying to evolve
into one.
Under Nafta, for textiles and apparel to be considered North American, it
must generally be made from North American yarn -- allowing only the
fibers to be imported from outside North America. This is termed the
"yarn forward" rule, and requires "triple transformation:" fiber
transformed to yarn, transformed to fabric, transformed to apparel.
Trade Benefits Bangladesh has lost its GSP
status in USA. It is trying to get
back this status.
Under Nafta, duties on almost all North American textiles and apparel
traded between the United States and Mexico will be eliminated within 6
years. The remainder will be eliminated within ten years. All quotas will be
phased out.
SYNTHESIS

41. Comparison in Trade Association involvement
Bangladesh Vietnam
Reach of trade association Government has not been involved with any initiatives but the
industry itself has become self-sufficient in many ways
The Vietnam Textile and Apparel Association (VITAS) is
a non‐governmental umbrella association working in
the field of textile and garment industry in Vietnam with
15 branches in Vietnam and in total of 635 members,
account for 70% of the total capacity of the industry.
Centralized labour union No centralized labour union was allowed but the path has been
paved for this in the recent years.
VIET labour federation also works in the Garments
industry. They have pushed a law to increase worker
salary by 10% every year.
SYNTHESIS

42. Comparison in Entrepreneurial Mind set
Individual profit mentality overall industry growth
Lack of foresight in Bangladeshi small manufacturers
India and Mexico and Turkey has open minded entrepreneurs
China and Vietnam are quiet conservative in Business practices
SYNTHESIS

43. Comparison in Forward Chain Stakeholders
Bangladesh China
Changing environment Bangladeshi garments owners are not keen
to change the technology used for more
environment friendly technologies
Due to pressure from the population
and also from the international
market, environment friendly
technologies are making headway
Distribution channels Bangladesh have fairly established
distribution channels
China has increased the distribution
channels, especially apparel specialty
stores
Multinational entries Leading international fast fashion players
are expanding in the country though at not
a very fast rate
Leading international fast fashion
players are expanding in the country
at a very fast rate
SYNTHESIS

44. Comparison in Forward Chain Stakeholders
Bangladesh India
New orders from overseas buyers In Bangladesh, exporters are enthusiastic about
taking orders from overseas buyers.
Due to volatility of raw material prices,
exporters are reluctant to take new orders
from overseas buyers.
Bangladesh Mexico
Affordability Fashion has generally been affordable in
Bangladesh
Advent of new competitors in 2012 led to
reduction in market price of fashion
products in Mexico
Distribution channels Retailers are the most prominent distribution
channel followed by apparel specialist stores
Apparel specialist stores are the most
extensive distribution channel
SYNTHESIS

45. Comparison in Forward Chain Stakeholders
Bangladesh Turkey
High value added items Because of the rigidity in the Value Addition
criteria, high value items manufactured in the
country are failing to enter the international
market.
Shift to high value added items resulted in
Turkey being very competitive in high
quality products in the international
market
Designer clothing In Bangladesh whatever design work is done in
the country, these are mostly carried out with
foreign workers and experts.
Turkey has lots of investment in fashion
and designing.
Strategic location Compared to Turkey, shipments take longer to
be delivered from Bangladesh.
One of Turkey’s key competitiveness
stems from its strategic location being
very bear to both Asia and Europe.
SYNTHESIS

46. Comparison in Backward Chain Stakeholders
Bangladesh China
Workforce Bangladesh has a workforce of 4 million workers China, with the advantage of larger population,
has workforce of 15 million workers
Dedicated association Bangladesh has BGMEA for all garments related issues China has only one trade union, the ACTFU
Bangladesh India
Import of man-made fabrics Bangladesh is becoming more and more independent
in terms of providing fabric
India imports most of its fabrics from China
due to low cost.
Indigenously produced fabrics Imported fabrics are generally cheaper due to
transaction and overhead costs
Price of indigenously produced fabrics are very
high due to low labour productivity, high power
and labour cost, etc.
SYNTHESIS

47. Comparison in Backward Chain Stakeholders
Bangladesh Mexico
Labour right protection Labour right protection in Bangladesh is not
implemented at all
Mexico has one of the best
implementations of labour right
protection
Workforce Workforce of Bangladesh are very unqualified Mexico offers qualified and competitive
workforce with considerable
manufacturing and marketing expertise.
Finished garment products Bangladesh has been producing finished
garment products for a long time
Mexico has recently shifted their
attention to finished garment products
SYNTHESIS

48. Comparison in Backward Chain Stakeholders
Bangladesh Vietnam
Sub sectors Bangladesh has mainly two sub-sectors, fabric
production and garment manufacturing.
Vietnam has three sectors, fiber production,
fabric production and garment manufacturing.
Cotton production Bangladesh produces a huge portion of the cotton that
is required
Though Vietnam has potential, it only produces
2% of the cotton required and imports the rest
CMT garment production Bangladesh has been using the CMT process for value
addition
Vietnam has moved from CMT to better
technologies, increasing total yield
Bangladesh Turkey
Cotton production Bangladesh has been using the CMT process as value
addition
Turkey is also a major producer of cotton, they
rank 8th in the world
SYNTHESIS

49. POSSIBLE STEPS TO BECOMING PRICE SETTER
Current Supply Chain :
Too many intermediaries
Intermediary bias becomes a big
management challenge
Possible remedies:
Ensure flow of information between businesses
Re-establish US GSP and advocate inclusion of
RMG
Minimum Price Caps
Policies and other measures

50. Centralized Information Hub
Create a virtual portal for B2B
interaction :
Model to expose buyers to sellers and
vice versa
Secure platform for information
exchange
Alibaba.com used as model- custom
tailored for Bangladesh RMG sector
THE ALIBABA STORY :
E-commerce business
Started in 1999 – relatively new
One of the 20 most visited websites in the
world
Accounts for 60% of parcels delivered in China

51. THE ALIBABA MODEL
 Suppliers and buyers post listings
Listings searched, contact made and
information is exchanged
Customers negotiate to finalize
transaction
Communication through alibaba’s
software
Points of Difference :
Provides credit rating (trustpass) to protect
buyers and sellers from fraud
Payment through secure AliPay
Websites translated to multiple languages

52. RISE TO FAME
Product :
Tailored to consumer preference
Picture banks, product displays
3rd party payment system to avoid
fraud
Credit rating system
Price :
Free registration in early years
Pricing introduced when client base increased

53. RISE TO FAME
Place :
Different websites for different
countries
Tailored to country culture, language
Promotion :
Targeted SME’s from the start
Directly linked with their success
Goodwill and word of mouth

54. US GSP STATUS
RMG not a part of US GSP
Narrow basket of goods for
Bangladesh
Unfair treatment to an LDC like
Bangladesh
Pre GSP Status:
Not favorable due to narrow basket
RMG denied access due to import sensitivity
Only duty free access of sleeping bags revoked
in 2010

55. BENEFITS OF GSP FOR RMG
Market Expansion :
Duty free access to major trading
partner
Can reduce current tariff penalty of
$652 million
Quantitative gains :
Allows price leverage for up to 15% of export
value
Bangladesh can gain as much as 0.8 billion USD
in tariff exemptions which accounts for 3.2%
of national budget
Allows for mark-up up to the tariff range

56. OTHER MEASURES
Buyer Complaints :
Infrastructure
Compliance
Supplier Performance and workforce
supply
Raw Materials- nationalized backward linkage
for woven products
Economic and Political Stability

57. GOVERNMENT SIDE (PLAN AHEAD!)
Strategically introduce Minimum price
cap of $5.00
Take plans for establishing a deep sea
port
Investment in management and
vocational training
Regulate illegal establishments
Encourage use of technology to vendors with
high turnover and investment
Improve Public Relations management

58. SUPPLIER SIDE (THINK BEYOND!)
Improve management skills
Provide in-house training for lower
and middle management
Adopt clever CSR schemes for
compliance e.g. Garments without
Guilt (GWG) in Sri Lanka
Take fair wages and incentive scheme
Pursue lean workshops, streamline production
Incorporate ERP, PPS, ETP into the system to
increase efficiency

59. BUYER SIDE (BE REALISTIC!)
Keep supplier capacity and ability in
mind. The information hub will help
streamline the selection
Governance and monitoring within own
setup
Cooperate with NGO’s to promote compliance.
Actively participate to shape the industry.
Incentive is a tailor made industry.
Honor supplier efforts instead of wrong
comparisons at the negotiation table.

60. THANK YOU
“By 2019, Bangladesh has the potential to become
the largest manufacturer of RMG in the world”
-McKinsey & Co.