From spinning to weaving, from knitwear to leisurewear and high street fashions, the textiles and clothing industry is Bangladesh’s biggest export earner with value of over $ 16 bn of exports in 2009-10. Our factories design and produce for the world’s leading brands and retailers. This rapidly growing sector of the Bangladeshi economy offers a unique competitive edge that supports profitable expansion into new strategic markets.

Key Statistics of RMG* Sector

Employment in RMG Sector

Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA)

Main Apparel Items Exported From Bangladesh (m US$)

Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA)

Sector Highlights

• Cost and quality of products that are produced on time, reliably and very competitively with a highly skilled labor force.
• A unique regional location for expansion into key Eastern and other markets.
• Favored trading status with the EU and the USA.
• Clusters of companies providing a local supplier base with real depth in skilled labor, training and technical development facilities.

The growing demand for yarn in the local market, comparatively low cost of doing business, lucrative incentive packages and a favorable investment policy regime are important reasons for investment in this sustainable sector.

RMG and Backward Linkages

The phenomenal growth in the ready made garment (RMG) sector in the last decade created many new factories and employment opportunities. Having enjoyed more than 70% of total investments in the manufacturing sector during the first half of the 1990s, RMG and knitwear now account for about 4,825 factories and a workforce of 3.1 m -80% of which are women. This sector now employs over 50% of the industrial workforce and accounts for 79% of the total export earnings of the country. The growing trend in the textile and the garments sector means that Bangladesh is perfectly positioned to appeal to foreign investors.

Size of Bangladesh Textile Industry

Source: Director's Report 2009, Bangladesh Textile Mills Association

Favored Trading Status

Bilateral agreements with 28 countries and Generalised System of Preferences (GSP) of the EU are key reasons for Bangladesh RMG products having access to global markets. The current cycle of GSP applied from 1 January 2009 to 31 December 2011.  Bangladesh is now a significant RMG supplier to North America and Europe. Bangladesh has also taken a better position in the USA market through competition. Bangladesh is expected to maintain its tariff-free access to EU under the European GSP, since the GSP is not covered by the Uruguay Round Agreement. Recently Canada has also provided tariff-free access for all the items from Bangladesh.

Meantime, the Bangladesh RMG industry has become very competitive as a global standard RMG source. Marketing investments have been made in trading partner economies; end users can often differentiate products with confidence.

Historically the Bangladesh RMG industry has depended largely on imported yarns and fabrics and produced only 10% of the export-quality cloth used by the garments industry. The need for establishment of backward-linkage industry has become an immediate concern to the government and the exporters and there are enormous opportunities to set up a composite textiles industry combining textile, yarn and garments.

Investment Opportunities and Government Support

Enormous investment opportunities exist in this sector. In the RMG industry demand for fabric significantly exceeds local supply and so is currently being met by imports. Backward linkage is a significant trading opportunity and is supported by a government backed incentive: 15% cash subsidy of the fabric cost to exporters sourcing fabrics locally.

Additionally the government has created a highly favorable policy framework for investment in these sectors offering investors the following choices:

• Establishment of new textile/RMG mill in the private sector
• Joint ventures with the existing textile/RMG mill
• Acquisition of public sector textile mills that are being privatised
• Indirect investment through financial services and/or leasing

The most beneficial public policy of introducing back to back LC* and bonded warehouse facilities provide a tremendous impetus to the export scenario in Bangladesh.

Spinning

The government is committed to fostering a strong spinning sector within the economy to support the robust textile and garment industry that has developed. The government is therefore supporting spinners by providing lower tariffs for machinery spares and raw materials, cash incentives, reduced tax rate, and low-cost funding etc.

*RMG=Ready made garments

LC=Letter of Credit