Impacts of Rmg Sector in Bangladesh National Economy

At independence in 1971, most observers of the newly emerged country took a pessimistic view about the developmental prospect of Bangladesh. Many thought that the country would remain permanently locked in a ‘below poverty level equilibrium trap’. Although there is little room for complacency Bangladesh has come a long way from there. About two-fifths of the economy is now connected with the global economy through exports, imports, factor and commodity markets; the degree of openness of the economy currently stands at 40%. Bangladesh can now rightfully claim that she has graduated from a predominantly aid receiving nation to a trading nation.

The export-oriented RMG sector has made crucial contribution to this abovementioned transformation of the Bangladesh economy. The role of our RMG entrepreneurs ,domestic fiscal and financial, institutional policy support and incentives put in place by successive governments, substantial RMG-supportive linkage activities within the domestic economy and global market opportunities combined to create a story which is, to be honest and true, unparallel in the developing world. When jute and jute goods were losing their traditional markets, with the prospect of drastic fall in for ex earnings it is the RMG sector which came in first to replace it, and then to overtake it. While traditional export sector could not yield expected results, the RMG sector gradually injected dynamism in the export as well as in the domestic economy though backward and forward linkage economic activities.

The export-oriented readymade garments (RMG) sector in Bangladesh, started its journey in late 1970s as a small non-traditional sector of export. Bangladesh exported RMG worth only US$ 69 thousand when Reaz Garments exported its first consignment to USA in 1978. ByFY2002, within a span of about two decades exports have gone up to US$4.5 billion. Over the past decade alone, the sector registered a phenomenal growth rate of 15 percent per annum, which is impressive by any standard. In fact, this was an exceptionally high growth rate for an emerging industry anywhere in the world. The industrial base which sustained such high growths also enjoyed a robust expansion, from less than 50 factories in 1983 to more than 3,400 in 2002, with the number of RMG workers reaching approximately 1.5million.

Despite many difficulties faced by the sector over the past years, 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. However, often times the magnitude of its multiplier impact and implications will justify the support that this sector has been given over the past years and also the up port it is currently seeking from the government .In FY2002 Bangladesh exported RMG products worth 4.5 billion US dollars. Her share in total US imports of apparels was 3.2%; in EU it was 3.3% and in Canada it was 3.0%.Bangladesh is known in these countries as a small country with a strong presence.

Everywhere, RMG serves as a flagship product of our country, inducing people’s interest in Bangladesh both as a tourist and investment destination. These are the impacts which are difficult to quantify, yet without which the country perhaps would not have been able to project itself to a trajectory of high growth and higher standards of living. Thus ,RMG’s contribution to Bangladesh, both direct and indirect, needs to be recognized for what it is. In the following pages, an attempt is made to quantify the key role that RMG has come to play in the economy of Bangladesh. The RMG sector has also played a significant role in the social metamorphosis in a broader context. This paper attempts to qualify aspects such as women empowerment, population control, education, environmental awareness, elimination of child labour which contributed to overall improvement in the HDI (Human Development Index) Indicators. It should be noted that the study is not exhaustive, and can be further improved upon.

MACRO CONTRIBUTION

Contribution in GDP, Export Earnings and Local Currency Retention and Foreign Exchange Earnings by the Sector The Bangladesh RMG industry, with its woven and knit sub-components, is a pre-dominantly export oriented sector, with 95 percent of the woven and 90 percent of the knit exports being directed to foreign markets. The cumulative foreign currency earnings by the sector, since 1978, when first export was registered, is estimated at 36.6 billion dollars. Bangladesh’s RMG export earning stood at 4.58 billion US dollars in FY2002. In2002 this sector contributed 76.6% of the total Bangladesh export of 5.9 billion dollars in the same year. RMG export in FY2002 was equivalent to 9.5% of Bangladesh’s GDP over the corresponding year. At present the local value addition by the RMG sector is estimated to be 45%. Accordingly, local value addition by the sector in 2002 was about2.1 billion US dollars which was equivalent to 4.3% of GDP for the same year. The value addition created by the sector itself is estimated at 25% of total RMG export earnings which amounted to about 1.2 billion dollars or equivalent to 2.4% of GDP