Major Economic Contributions of RMG Sector in Bangladesh

RMG sector is one of the important sectors which has so many contributions to the economic development of Bangladesh. In this article, some major economic contribution of RMG sector is described. It will be helpful to know the condition, impact, ways of development, future scopes of the RMG sector in our country for economic development. Over the years we found that Major Economic Contributions of RMG Sector in Bangladesh economy.

Major Economic Contributions of RMG Sector in Bangladesh

Major Economic Contributions of RMG Sector in Bangladesh

Spinning and Knitting/Weaving

With increasing garments sector spinning, weaving, knitting, dyeing & chemical sectors adding value in the economy. PTS (Primary Textile Sector) is the backbone of the garments sector, which produces yarn & fabric. This sector has the opportunity of various diversification of yarn production. According to Bangladesh Textile Mills Association(BTMA), Now there are 425 yarn mills, 796 fabric mills & 240 dyeing-printing-finishing mills. Investment in PTS over six billion dollars. The textile sector contributes more than 13% in GDP. Almost 86% of export earning comes from textile & textile related products. 90% yarn demand for knit RMG & 35-40% for woven RMG are fulfilled by PTS. There are mainly four types of spinning mills we have. They are ring spinning, ring spinning with open end capacity, rotor/ open end, synthetic yarn mills. In the overall scenario, 87 lakh spindles, 2.3 lakh rotor, production capacity 205 core kg (Approx. data).

Bangladesh is well known for its well quality knit goods at the lowest price. While spinning sector growth reaches 77% to 99% from 1986 to 2002, the knitting sector catches the market with its various kinds, Dias, or combined fabrics. The actual production capacity in weaving increased from 190 million meters in 1996 to 830 million meters in 2000. Dyeing finishing capacity also increased from 366 million meters to 680 million meters within this time. Weaving mills producing woven (561 mills), denim (21 mills) & home textiles (18 mills). Here looms-17000 shuttles less and 13000 shuttles, production capacity 215 core meters (Approx. data). There is a power loom & handloom sector also. In power loom sector share, lungi, gauche also produced. There are 1065 no. of units & capacity 40 core meter & around 43000 people earn their livelihood by this sector. In the handloom sector, Jamdani & Banarosi types of luxurious shares are produced. Around 183512 small to large units exist, capacity 837 core meters, around 5.05 lacks handlooms and around 10.20 lacks people work in this sector were 50%, women.

Textile and Garments

Garments sector growth has a positive impact on widen the co-relative sectors. At starting we needed to import fabrics, trims, chemicals, accessories, etc. from abroad. With the vast growth of the RMG sector, we have our own knitting sector, yarn sector, chemical sector, accessories sector, and so on. According to Bangladesh Bank report on RMG, the rate of value addition stood at 74.86% in the fiscal year 2013-2014 & the highest was 75.67% in 2014-2015. Now the knitting sector added value more than the wove sector. According to the RMG sector, people value addition rate of the knitting sector is 90% while for women it is 55%. Once upon a time, we were fully dependent on imported denim fabric, in the current scenario 50% of the fabric locally produced.  The average value addition from the Denim sector is around 70%. During an interview with The Daily Sun, Bangladesh Textile Mills Association (BTMA) director Mohammad Khorshed Alam told they have a capacity to meet around 98% of demand for fabrics & around 55% of woven fabrics for the export-oriented industry. BTMA director also added that by setting 28 denim textile mills it improved significant progress in denim fabric. Bangladesh Garments Accessories & Packaging Manufacturers and Exporters Association (BGAPMEA) president Abdul Kader Khan admit that the local industry now meets up 95% of the requirements of exporters. The industry also adds a 30% value addition to its products.

Banking & Insurance

RMG growth has a positive impact on the growth of financial sector in Bangladesh. With the help of letter of credits(L/C) both garments & textile sectors flourishes. Banking sectors facilitates payments, deeds, finance & risk management services to the RMG traders while contributing to global trade integration. The success story of RMG began with the launched of the back to back L/C practice in late 1970’s. Desh Garments Ltd. Initiated this first. More than 10 million people are indirectly associated with this industry. According to Bangladesh Bank data, import price of raw materials stood at 3716 M $ during the first half of fiscal year 2018, which is around 25% of total RMG export value. Thus, the gross value addition from this sector stood around 75%. The major importing countries of RMG products are the US, UK, Germany, France, Italy, Spain, Belgium, Denmark & Canada. In recent, the export financing business of the commercial banks is largely dependent on the textile and RMG sectors. A study conducted by the world bank found that about 98% organization looks for working capital from commercial bank and 57% of their financing of machineries and equipment’s.

RMG sector also has an immense contribution to Insurance services. On average, every year the RMG sector premium paid to the insurance companies was about 6 million dollars. All firms insured their machines and plants and, 87% of importers of input and 15% of the RMG exporters insured their imports/exports. The health insurance policy reduced the absenteeism of the RMG sector. By analyzing a study, Syed Abdul Hamid, director of the Institute of Health Economics of Dhaka University, said that the insurance companies believe that workers tend to seek more healthcare adding that many of the workers want to take maximum benefits, worth about 15000 takas against their premium of 575 Taka. That study also found that owners of the factories wished to increase 50% of the premium contribution while beneficiaries showed a willingness to contribute up to 50%. 

Shipping and Logistics

In accordance with the growing garments sector shipping & logistics sector become an important part of the economy. Setting up large warehouse facilities, distribution channels, supply chain forum, shipping, logistics become business trends as RMG is export-oriented. RMG sector earns more than 40% of the income of the port authority. For shipping charges there includes documentation fee, inbound manifest correction fee(CMA), Container lift on or port charge, Clear/cleaning charge & security deposit. The contribution of the RMG sector for shipping is logistics is mainly for international shipping and logistics where different duty, commission, tax, insurance, freight charge are paid.

Transport & Communication

Along with the tremendous improvement of the garments sector, the transportation system of our country becomes more developed. Not only railroads but highway roads also developed & increased. Previously for export shipping system was the only way. But nowadays roads & airways are equally used. From covered van to cargo services, it becomes a large portion of the bridge, flyovers paying tolls as revenue. Every year a large portion of ship, airways, railroads earned vat & tax take great contribution to the economic development of our country.

RMG sector also has a great impact on the communication sector. It includes ICT, telecommunication system, web system, software & hardware, etc. Most of the technology-oriented apparel industries are tends to use ERP, Fast-react, GSD, payroll management software, etc. Some are creating by their own specialists, some are buying as customer requirements. People are interested to use social sites of communicating with foreign buyers by using skype, emails, twitter, WhatsApp, LinkedIn, etc. Now even people are searching for their jobs on social sites or job portals. Nowadays foreign buying houses fixing video conferences to set up order taking sessions. In these regards, RMG has a great impact on ICT sector revenue earning.

Engineering & Utility

With the growth of the RMG sector, engineering & utility services starting to expand its area. In most readymade garments industry electrical engineering, mechanical engineering, electro-mechanical engineering, automation engineering, or industrial engineering department play a vital role. According to a study, this sector pays 14.2 million dollars to the engineering sector which includes professional service payments; machine, transport or vehicle service or repair, electricity or generator setup & usage bill, water treatment & WASA bill, Machine automation or semi-automation, Industrial infrastructure setup, etc.

Hotel, Real Estate & Tourism

More than 1500 foreign apparel buyer’s representatives visit Bangladesh in a year. They like to stay three to five-star hotels in our country hence it increases the hotel & tourism business in our country. Along with this, restaurant & hotel business become more popular. There are so many five-star hotels in Bangladesh & they have luxurious food facilities also. Foreign people staying in our country use departmental stores for their one-way window shopping. Nowadays seafood, Chinese, Mexican, Italian, Japanese food courts become popular among these people.

The real estate industry is increasing day by day in our country. More than 4560 garments in our country & they need infrastructure facilities from real estate companies. People are tending to get things done in international standards so that foreigners are interested to visit their places. Some renowned apparel industry has large & magnificent infrastructure facilities along with international standard parking system, indoor playground, swimming pool, restroom, medical center, ATM booths, dormitories, etc. Hence real estate business becomes more popular as there is a large source of income from this sector.

Other Business Sectors

Some business sector growth increased with the RMG sector. Some of them are competing with RMG, for example, the electronic sector; some are anyway linked with the RMG sector, for example, accessories or footwear sectors. We are tending to go along western trends nowadays. So, some local companies using a mashup of western & our culture & making outfits, footwear, bags, ornaments & so on. For example, Arong, Vasabi, Yellow, Nabila, Fossil, Cats-eye, Desire, Vittate, Estacy, Richman, Westecs, le-Reve, Artisti, etc. These kinds of fashion house are tending to make fusion products like mixing western culture & our culture basically Sari, Salwar kameez, jeans, tops, shirts, t-shirts, polo shirts, Panjabi, formal suits, wristwatches, Bangs, shoes, etc.

The fashion industry becomes one of the most popular business sectors in Bangladesh. In accordance with the RMG revolution, this sector also developed. People from our country are joining international modeling, fashion shows, ramp, beauty contest, etc. There are so many private television channels. Some of our actors started work abroad also & achieving fame. Most of these parts credit goes to the RMG sector. Along with these, Cinematography, photography & its relevant product business like camera, lighting setup, etc. become more popular. So, in a sense, directly or indirectly the RMG sector has a great positive impact on the economic development of our country.

Written by

Sharmin Akther Diba

Industrial & Production Engineer

Rajshahi University of Engineering & Technology

Email: [email protected]

LinkedIn: Sharmin Akther Diba

Major Economic Contributions of RMG Sector in Bangladesh

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