Growth of the RMG Sector

The following key factors must be undertaken during market diversification strategy:

1.    Market research on product design

2.    Market research on product development,

3.    Market promotion through trade fairs, exhibition, etc.

4.    Human resources development by providing training.

Hoping for RMG Sector of Bangladesh:

According to the McKinsey survey, it’s seen that 86 percent of the chief purchasing officers in leading apparel companies in Europe and the United States planned to decrease levels of sourcing in China over the next five years because of declining profit margins and capacity constraints.

Also they said in that survey, “Western buyers are evaluating a considerable number of sourcing options in the Far East and Southeast Asia, many chief purchasing officers said in the survey that they view Bangladesh as the next hot spot”. Many chief purchasing officers mentioned Bangladesh as the hot spot in the readymade garments market.

McKinsey survey also reported that, with about $15 billion in exports in 2010, ready-made garments are the country’s most important industrial sector; which represents 13% and more than 75% of GDP and total exports, respectively. McKinsey forecasts, export-value growth of 7 to 9% annually within the next ten years, so the market will double by 2015 and nearly triple by 2020.

Bangladesh’s RMG sector has a bright future as close competitors like China are moving up the value chain, leaving value apparel manufacturing to more cost effective players. Mckinsey, a leading consulting firm, in their recent report on Bangladesh’s RMG sector, has testified to RMG sector’s growth potential as well. According to the report, RMG export is set to grow to USD 36 billion by 2020.

The Growth Story of the RMG Sector

The export oriented readymade garments (RMG) sector in Bangladesh started its modest journey as a small non-traditional sector of export in late 1970s. Within three decades, RMG has transformed itself as the country’s highest revenue generating sector, contributing 81%(USD 24.49 billion FY 13-14) of country’s total export.

Bangladesh is currently the largest RMG exporter behind China and India having the potential for growing in the coming years. With GSP facility in EU and duty free access to Canada and Japan, Bangladesh is benefiting from competitive cost advantages which have translated into higher export revenue.

Bangladesh’s RMG export has spiked in the post MFA regime from USD 6.9 billion in 2005 to USD 11.8 billion in 2008. The global financial crisis has had minimal impact on Bangladesh’s export, initially stagnating at USD 11.8 billion in 2009 before increasing to USD 19.2 billion in 2011.

Emerging Markets for Bangladesh Apparel

EU is Bangladesh’s largest RMG export destination constituting 58% of total export followed by US market with export of 23%.  Bangladesh has recently diversified into emerging export markets including Australia, Brazil, China, Japan and South Africa accounting for 14% of total export.