The Ready-Made Garments industry has historically been a major contributor to Bangladesh’s economy with 10.35 percent of the total GDP of the fiscal year 2023 coming from this industry. It is safe to say that the government heavily relies on this industry.
Hence, the government must identify the biggest risks to this industry and prepare to take proactive actions. If this industry falls, the entire nation will suffer dire consequences. Currently, there are 3 issues that need attention.
1. Restoring Order
With a change in government, the heads of ministries such as ICT and Fisheries and Livestock have changed as well. The case is no different for the Textile and Jute Ministry as Brigadier General Sakhawat Hussain takes charge. The Bangladesh Garment Manufacturers and Exporters Association also has a new president in Khandoker Rafiqul Islam.
This new leadership will take time to settle in and implement their strategies. Furthermore, pre-existing contracts that were signed by the previous governance need to be renegotiated. There are 29 bilateral trade agreements in place with countries such as the US, China, India, and the UK. The new government must prioritize preserving and renewing these agreements.
All the actors in the industry need to work hand in hand and ensure that they can help restore control. This sudden change may have been unexpected but unity is the key to ensuring that things continue to run smoothly.
2. Dealing With External Factors
REUTERS/Mohammad Ponir Hossain
The country is currently in a volatile state. The sparks of revolution have ignited a string of strikes across all industries and the case might be the same in the RMG sector. This industry is no stranger to worker strikes after all.
On top of that, floods are impacting multiple regions of the nation. This will, no doubt, have a negative impact on the economy as a whole. It is important to note that the effect will be minimized due to a large showing of communal unity.
Additionally, fire safety is also a concern to take note of. The garments industry is lagging behind in terms of working conditions. To avoid an international boycott and ensure worker motivation is at its highest, these facilities must be ensured.
Although the remittance revenues have gone up, the economy may take a downturn. This will of course affect the RMG sector. Industry leaders need to plan ahead and prepare for the worst economic conditions.
3. Keeping Up with International Competition
Competition hasn’t slowed down. China is the world’s top RMG exporter and they have quite the lead ahead of Bangladesh, who are in second place. India and Vietnam are hot on Bangladesh’s trail. If the local industry slips up, these two nations will surely take the lead.
Companies will always choose the most efficient and cost-effective option so Bangladesh needs to make sure its industry continues to excel. Otherwise, most big companies will go for the alternatives.
Unfortunately, with a rise in social awareness and increased need for CSR, companies need to pay higher wages. One of the primary ways Bangladesh kept an edge over the competition was the low wages. Bangladesh will have to find a way to pay better wages and be equally or more cost-effective for their importers.
The solution can be a focus on innovation. The use of technology in this sector is limited. The companies need to go for more capital-intensive production and increase their use of machinery to improve efficiency. The short-term cost of this decision may be high but it may reduce production costs in the future.
The RMG sector has a long history in the nation and holds great importance to the economy. It will be a vital force in combating a potential economic collapse. The government needs to keep an active eye on this industry and nurture it to the best of its abilities.
