The Ready-Made Garment Industry in Bangladesh and Upcoming Opportunities

Introduction

People’s Republic of Bangladesh is a country located in the region of South Asia, it shares its borders on three sides with India and with Myanmar on the south east side.

In the last 30 years Bangladesh has passed from being an agricultural economy to the second garment exporter in the world (the first being China) and its products have presence in the biggest markets in the world.

Brief analysis of the Ready-Made Garment industry of Bangladesh

With the independence of India in 1947 Bengal (nowadays Bangladesh) became the East territory of the newly established Pakistan but given the 1,600 km that separated East and West Pakistan, the cultural, linguistic and economical differences in 1971 with the Bangladesh Liberation War a new state was formed (Ullah, 2015 and Chesneaux, 1969) developing an agricultural economy based on cotton and jute harvest that was later exported to Europe and it was not until 1974 that the Bangladeshi economy invested towards an industrialized economy and fomented Direct Foreign Investment mainly to the apparel sector.

The biggest industry in Bangladesh is the Ready-Made Garment Industry (RMGI). This industry represents almost 91% of the Bangladeshi total exports (see Graphic 1) being the second largest garment exporter country and the main supplier of big conglomerates like Walmart, Walt Disney Co., H&M, Sears, Inditex, etcetera.

The effectiveness of the RMGI in Bangladesh can be explain with two main reasons, first we can observe the establishment of a Knowledge Base Network that implicates that a Firm that has established itself in global competitive markets move its production to small and medium enterprises (SME) located in less develop countries that can offer the possibility to assemble the same quality product with less investment.

Second, the Bangladeshi RMGI were not subject of the Multi Fiber Agreement quotas which caused the foreign direct investment and the growth of the Garment Industries. Although when this agreement[1] ended, there was a concern that the investment may scatter to other countries factors like cheap labour, the country’s weak labour law, the quality of the production, etcetera, helped to maintain and even gain more market.

Taking advantage of new opportunities: OBOR and its benefits for Bangladesh

Bangladesh economy is ranked in the thirty-ninth position by the International Monetary Fund with a GDP valued in 249,724 billion dollars in 2017. Its main Trade Partners are the European Union, accounting for around 66% of Bangladesh's total exports (OEC, n.d.) that represents around 90% of the European Union total clothing imports (European Commission, n.d.) and East and South East Asia, representing 76% of the imports from Bangladesh.

Taking the previous data into account we could surmise that The Belt One Road Initiative (BRI) could bring great profits to Bangladesh. The BRI is an initiative proposed by China in 2013 that will allow a more efficient and productive free flow of trade as well as further integration of international markets (LehmanBrown, n.d.), it counts with the participation of 49 countries that represents 30% of the habitable surface and 60% of the world population (Oropeza, 2018).

The sixth route proposed by BRI is the "Bangladesh- China- India- Myanmar" Corridor, that even though it is currently baulk by Myanmars political instability and the distancing of India, has a great importance for both land and sea routes that can enhance and make more efficient the commercial trade for Bangladesh.

Conclusion

The garment Industry in Bangladesh is relatively new and has quickly become main source of income for Bangladesh and the base for a stable and constant growth. Its main commercial partners are within the region otherwise know as Eurasia, making the BRI proposed by China a favorable measure to secure a greater connectivity and routes that could not only ameliorate the industry, quality of products and labor conditions in Bangladesh but also make products more affordable for its population.

The South Asia corridor involves both a maritime and terrestrial investment that if used at its full capacity could become a key location for the transfer of merchandise from all around the world.

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[1] The MFA (1974-1994) imposed quotas or quantitative restrictions on the volume of exports from any country that grew at a rate higher than levels established bilaterally.

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References
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Fecha de Publicación 28/06/2019