June 26, 2004

The post MFA challenge of Bangladesh RMG Sector

If you are wondering, what RMG (ready made garments) industry means for Bangladesh then you should know:

1. It accounts for more than 70% of the countries export earnings
2. Bangladesh is among the Top 5 largest garment exporter to the European Union & the US.
3. More than 10000 apparel manufacturers in the country which employ more than 3 million workers of which almost 80% are women.

Bangladesh garment industry was developed primarily because of the MFA (Multi-fiber Agreement) and other trade agreements. Multi fiber Arrangement introduced in 1974 provided the basis on which industrialized countries have been able to restrict imports from developing countries. Every year countries agree quotas - the quantities of specified items which can be traded between them. The exporting country then allocates licenses to firms to export a certain proportion of each quota. Bangladesh took advantage of this quotas and because of its competitive price and quality, it could secure a place in the world market.

Industrialist countries first drew up the MFA to protect their own garment producers. Then most clothing was produced by local manufacturers and they needed something to protect them from cheap imported goods. Now the industry operates in a very different way. It is mainly controlled by US and European based multinational companies which own no production facilities themselves but manage an international network of suppliers. Big companies like Walmart & Nike control the industry on a global scale without government protection and have no interest in maintaining quota restrictions.

With the phasing out of MFA, multinational companies will benefit from an increasingly open market where countries like Bangladesh & China will compete amongst themselves to give the lowest possible rate. Because of better infrastructure and inhumane wage rates, China will have advantage over countries like Bangladesh and Bangladesh will lose its export earnings leading to shutting down of many apparel manufacturing companies and unemploying many affecting the total economy.

Bangladesh Government has taken initiatives to tackle these challenges. It is taking measures to:
1. Promote establishing more textile manufacturing companies
2. Setting up a central-bonded warehouse, so that the lead-time for export can be reduced.
3. Establish linkage industries with priority on dying
4. Diplomatic efforts to boost export

The consumers of the industrialist nations also need to know that how they are contributing to the development of a country by buying certain products. They should know:

1. Bangladesh Garments industry have almost eradicated the use of child labor.
2. It has set up schools for the children of the garments workers.
3. The garments workers have standard wages to maintain their families. Their living standards will increase alongwith the growth and sustainability of this industry.
4. The fact that almost 80% of the workers are women, is making an impact in the establishment of empowerment of women in the society and equal rights.

So in fact Bangladesh will be fighting against those multinational companies who's main agenda is to earn more profit by outsourcing from a cheaper country. They do not follow the ethics that the competitors also have a right to their share of market. The business community should try to increase the market not taking away competitors share and causing a lot of misery to many people.

As a consumer do you care for these?


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