The history of the garment sector in Bangladesh can be traced back to the late 1970s. The Ready-Made Garments (RMG) industry embarked on its journey, initially focusing on exports, following the efforts of Nurul Quader Khan, a pioneer in the garment industry. Khan sent 130 trainees to South Korea to acquire expertise in producing ready-made garments, and these trainees played a crucial role in establishing the first garment factory, known as Desh Garments.
Today, Bangladesh stands as the world’s second-largest exporter of garments, firmly positioning itself within the global apparel supply chain. However, during the COVID-19 lockdown in 2020, Vietnam briefly overtook Bangladesh as the second-largest global apparel exporter due to its uninterrupted production.
In 2022, Bangladesh’s share of global garment exports reached 7.9%. During the fiscal year 2022-23, the country’s apparel exports totaled USD 46.99 billion, marking a 10.27% increase from the previous year and surpassing the set target for the fiscal year by 0.41%. In comparison, the sector generated USD 42.61 billion in the preceding fiscal year of 2021-22. Both the Woven and Knit segments have experienced steady growth, with Knit holding a larger share.
Despite its status as the second-largest global apparel exporter, the sector heavily relies on imports of raw materials, including raw cotton, synthetic/viscose fiber, synthetic/mixed yarn, cotton yarn, textile fabrics, and garment accessories from other countries. Notably, value addition in the knitwear sub-sector surpasses that in the woven segment, with knit exporters sourcing approximately 80% of their required raw materials locally, while woven entrepreneurs predominantly rely on imported fabrics.
Bangladesh boasts nearly 500 spinning mills and 828 fabric manufacturing/weaving mills, with native spinners collectively capable of processing approximately 13.43 million cotton bales annually. Around 80% of the yarn produced in these spinning mills is pure cotton yarn, while the remaining 20% consists of mixed yarn made from cotton and artificial fibers. Consequently, the country is home to over 4,000 garment factories.
The BCI score of +5.99 reflects the prevailing positive sentiment within the RMG & Textile industry. This optimistic perspective mirrors the industry players’ confidence in the sector’s sustained growth and resilience in the coming years. The sector has demonstrated its robustness and stability as it recovers from the global pandemic.
Key Factors Driving the RMG and Textiles Industry
Overview of Influential Factors: The growth of Bangladesh’s Ready-Made Garment (RMG) sector can be attributed to several pivotal drivers. These factors encompass the country’s extensive history of textile production, a cost-effective labor force, export facilitation measures (including duty-free import of machinery and raw materials, bonded warehouse facilities, and cash incentives for specific garment types), and trade agreements such as the Generalized System of Preferences (GSP).
Government Incentives Boosting Export Growth: These incentives involve the duty-free import of machinery and raw materials, the availability of bonded warehouse facilities, and the provision of cash incentives for specific garment categories.
Cost-Effective Labor: The presence of a plentiful and affordable labor force has significantly reduced production costs in comparison to other developing nations.
Special Economic and Export Processing Zones (EPZs): EPZs in Bangladesh play a substantial role in attracting foreign direct investment and local investment, collectively contributing to increased export volume and foreign exchange earnings. The majority of units in the country’s EPZs are engaged in the manufacturing of readymade garments.
Trade Agreements: Bangladesh’s participation in trade agreements like the South Asian Free Trade Area (SAFTA) and the Asia-Pacific Trade Agreement (APTA) has facilitated regional trade. Bangladesh also benefits from duty-free access in 52 countries.5. International Support: Bangladesh’s status as a Least Developed Country (LDC) has rendered it eligible for specific trade benefits. Notably, the European Union’s Everything but Arms (EBA) initiative grants duty-free and quota-free access to exports from LDCs. Additionally, GSP programs offered by developed
International Support: Bangladesh’s status as a Least Developed Country (LDC) has rendered it eligible for specific trade benefits. Notably, the European Union’s Everything but Arms (EBA) initiative grants duty-free and quota-free access to exports from LDCs. Additionally, GSP programs offered by developed nations, including the EU and Canada, have provided Bangladesh with preferential market access, notably benefiting the apparel sector and driving export growth.
Geographic and Demographic Advantages: Bangladesh’s strategic geographical location offers significant advantages for international business. The country enjoys convenient access to international seaports, air routes, and other critical infrastructure, enhancing its attractiveness for global commerce.
Export Potential
Apparel holds the dominant position in the country’s export industry, contributing approximately 82% to the total export value. Currently, Bangladesh exports apparel to more than 150 countries. The United States ranks as the top export destination for Bangladeshi garments, making up approximately 21.50% of the total exports. Following closely is the European Union, with countries like Spain, Germany, Italy, France, Belgium, and the Netherlands as key destinations, followed by the United Kingdom and Canada. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has set an ambitious goal of achieving a $100 billion export target by 2030. To ensure the sustained growth of Bangladesh’s RMG industry, it is essential to diversify the range of apparel products in the export portfolio. Such diversification has the potential to increase export earnings and extend the current growth trend.
Moreover, the technical textile sector presents an attractive opportunity for Bangladesh to explore and expand its business. The global market for technical textiles is projected to reach $298.1 billion by 2030. Europe is the largest regional market for technical textiles, accounting for approximately 28.8% of the global total.
Market Dynamics
Manufacturers: The largest industry in the country is represented by the Ha-Meem Group, which operates 26 garment factories across Bangladesh. Another prominent garment manufacturing company is Beximco, which commenced operations in 1997. BAL is a 100% export-oriented clothing manufacturer specializing in the production of woven material clothing. DBL Group is a leading multi-faceted garment and textile manufacturing company with a workforce of approximately 35,000 employees. Other significant players include the Faki Group, Square Fashions LTD, and the Epyllion Group, among others.
Buyers: Currently, there are more than 100 international brands that source apparel from Bangladesh. Some of the top clothing brands that engage in sourcing from Bangladesh include Marks & Spencer, Calvin Klein, Lee, H&M, Supreme, American Eagle, Zara, Gap, Tommy Hilfiger, and many others.
Government Support & Policy Incentives
Bonded Warehouse: Instead of using a duty drawback system, they introduced bonded warehouse facilities exclusively for 100% export-oriented garment factories.
Duty Drawback and Cash Subsidy: 100% export-oriented garment factories have the advantage of utilizing the duty-free system through bonded storage facilities to easily import essential fabrics and accessories.
Back-to-Back L/C: The Bangladesh Bank plays a significant role in aiding the apparel industry to meet compliance requirements through the Green Transformation Fund (GTF) facility. As per the Export Policy Order (EPO) guideline, authorized dealers have the authority to open internal back-to-back L/Cs in favor of local raw materials suppliers
Cash incentives: The cash incentives were set as follows: 4.0% for the export-oriented garment sector, 4.0% for small and medium-sized garment industry, and 3.0% for the expansion of new markets or new items in the garment sector.
National Adaptation Plan (2023-2050), promoting green banking and sustainable financing of green solutions. ETPs (Effluent Treatment Plants) have been set up in 80% out of the 2,894 industrial establishments that were targeted to be done by January 2023.
Investment Challenges and Mitigation Strategies
The garment industry in Bangladesh is facing a variety of difficulties. These encompass the escalation of labor expenses, heightened competition from other cost-effective nations, and the imperative to enhance both working conditions and ecological sustainability. Additionally, the sector is contending with the ramifications of technological progress and the automation revolution, which are fundamentally reshaping the worldwide garment industry.
Future Trends and Opportunities
Despite having a history in the industry spanning nearly four decades, Bangladesh has predominantly concentrated on a limited range of products and markets. Consequently, there exists a valuable opportunity for diversifying its product offerings to sustain competitiveness. Furthermore, the textile and apparel production facilities are currently in a transitional phase, poised between traditional manufacturing methods and the realization of highly specialized design and production of value-added clothing items. Therefore, the incorporation of automation throughout the industry is an essential step to maintain competitiveness on the global stage.
Additionally, there is a need for enhanced backward integration. Bangladesh not only exports raw materials but also reimports them for use within the same sector. By recycling the cotton waste that is currently exported, Bangladesh could potentially save an estimated USD 500 million in imports, reducing roughly 15% of recycled cotton imports. Presently, only about 5% of the total cotton-based scraps generated in the country are recycled, with the remainder being incinerated, despite the presence of more than 20 local recycling companies.
Additionally, as per the Sustainability Vision 2030, objectives include a 30% decrease in carbon emissions, a 50% shift towards sustainable raw material usage, a 50% reduction in groundwater utilization, complete adoption of ZDHC-approved chemicals, a 30% cut in energy consumption, a 20% incorporation of renewable energy sources, and a 30% reduction in deforestation. Furthermore, in the advent of the 4th IR revolutionizing sectors globally, the RMG sector aims to have 25% of automated jobs by 2025 from the current 8%.
