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1、School of ArchitectureFaculty of Built Environment, Art & DesignDepartment of DesignReadymade Garment Industry of Bangladesh:How the industry is affected in post MFA period?THIS DISSERTATION IS PRESENTED FOR THE DEGREE OFMaster of DesignofCurtin University of TechnologyMd. Abbas Uddin19 June 2006Ack
2、nowledgementsI am grateful to those firms who shared their experiences and perspectives while interviewed and extend my thanks to those who helped me to get the contact of the interviewee. Special thanks to Al-Mamun, who acted as my host in Dhaka for communication to different firms. Valuable assist
3、ance was gained from my friends in terms of informal information and data, I thank them all. I also thank the Australian Agency for International Development (AusAID) for the funding of my research trips to Bangladesh. The research was completed under the supervision of Prof. Dr. Suzette Worden, who
4、 has done it exceptionally well. Without her supervision the research wont be completed in structured manner and on time. AbstractThe Readymade Garment (RMG) industry Bangladesh, which is considered as the lifeline of Bangladesh economy, is facing a critical period after 2004, in the post Multi Fibr
5、e Arrangement (MFA) era. Many argue that Chinese apparel exports will surge and Bangladesh apparel exports and jobs will suffer most. This dissertation examines the impact of MFA and has found that, while the former is true the latter has surprisingly not happened. Through the fieldwork and intervie
6、ws with the Bangladeshi firms, this dissertation discusses the internal transformation that occurred in the RMG industry which was unnoticed. The global value chain framework is used to assess the development implications of the growth that altered the Bangladesh RMG industry over the past two decad
7、es. It also shows how the garment industry, which is essentially driven by the buyers in the buyer driven value chain, is linked to the industrial upgrading that occurred in different segments of the value chain. The industrial upgrading of RMG firms are associated with organization learning and inn
8、ovation along the value chain, namely mass to specialized products, assembly to full package production, which means gaining expertise in technical, sourcing and commercial capability. This expertise allows firm more autonomy towards the buyer supplier relationship and creates more opportunity for l
9、earning and stepping towards the other links of the value chain, both forward and backward. The dissertation addresses the history of the Bangladesh RMG industry, and acknowledges both international and national factors that contributed to the enormous growth. Based on open ended semi structured int
10、erviews with firms and buyers, and from secondary data, this study also reflects the hot topic of compliance from two perspectives, international and Bangladesh. The study also discusses the factors that are important for RMG industry in the open era. AcronymsADB Asian Development BankAQLAcceptable
11、Quality Level ASEAN Association for South East Asian NationsATC Agreement on Textile and ClothingB2BBusiness to Business BATEXPOBangladesh Apparel & Textile ExpositionBBS Bangladesh Bureau of StatisticsBGMEA Bangladesh Garment Manufacturers and Exporters AssociationBIDS Bangladesh Institute of Devel
12、opment StudiesBKMEA Bangladesh Knitwear Manufacturers and Exporters AssociationBTMA Bangladesh Textile Manufacturers AssociationBUETBangladesh Engineering University of Technology CCCT China Chamber of Commerce for Import and Export of TextilesCCSCash Compensation SchemeCEOChief Executive OfficerCLC
13、Child Labor CoalitionCM Cut and MakeCMT Cut, Make and TrimsCNFCost and FreightCPD Centre for Policy DialogueCTTCollege of Textile TechnologyEBA Everything But ArmsEC European CouncilEECEuropean Economic CommunityEPB Export Promotion BureauEPZ Export Processing ZoneERPEnterprise Resource PlanningEU E
14、uropean UnionFDI Foreign Direct InvestmentFOB Free on BoardGATT General Agreement on Tariffs and TradeGCCGlobal Commodity ChainGDP Gross Domestic ProductGSP Generalized System of PreferencesHSCHigher Secondary School CertificateIFCInternational Finance CorporationILOInternational Labour Organisation
15、IMFInternational Monetary FundIPEIndustrial & Production EngineeringITCInternational Trade CentreLC Letter of CreditLDC Least Developed CountryMDManaging DirectorMFA Multi Fibre ArrangementMoUMemorandum of UnderstandingNGONon Government organizationNIENewly Industrialized EconomyNUKNari Uddug Kendra
16、 (the Centre for Womens Initiatives)OBMOwn Brand name Manufacturing OECD Organization for Economic Cooperation and DevelopmentOEMOriginal Equipment ManufacturingR & D Research and DevelopmentRMG Readymade garmentRoO Rules of OriginSAARC South Asian Association for Regional CooperationSAFTA South Asi
17、a Free Trade AgreementSEDFSouth Asia Enterprise Development FacilitySSCSecondary School Certificate TFGThe Fielding Group TRADETariff Relief Assistance for Developing EconomiesTTCTripartite Consultative Committee UDUPUtilization Declaration and Utilization ProcessingUNUnited NationsUNCTAD United Nat
18、ions Conference on Trade and DevelopmentUNICEFUnited Nations International Childrens FundUSITCUnited States International Trade Commission WB World BankNOTEIn this dissertation $ refers to US dollars.GlossaryAgreement on Textiles and Clothing: A 10 year period transitional agreement, from 1 January
19、1995 to 31 December 2004, under the WTO, whose objective is to gradual integration of the textile and clothing trade, long subjected to bilateral quotas under the Multi Fiber Arrangement (MFA) into normal trade rules established in the Generalized Agreement on Tariffs and Trade (GATT) 1994. Antidump
20、ing: If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be dumping the product. The WTO agreement allows governments to act against dumping where there is genuine (material) injury to the competing domestic industryCentral bonded
21、warehouse: is where raw materials could be imported in advance without opening L/C and would be preserved centrally for avoiding unnecessary delay in import process. The importation would be duty and tax free like individual bonded warehouse. CM (Cut and Make): Manufacturer involves in cutting, maki
22、ng and finishing of a garment. Buyer has to provide fabric, trims and design to the manufacturer. Also known as assembly making.CMT (Cut-Make-Trim): Manufacturer involves in cutting, making, finishing and sourcing trims for any garment order. Buyer has to provide fabric and design to the manufacture
23、r. CNF (Cost and Freight): refers to price charged for a product, includes FOB price plus freight charge. Code of Conduct: A set of conventional principles and expectations that are considered binding on any person who is a member of a particular group. In case of apparel industry, it refers to a li
24、st of labour standards. Compliance: Conforming to a specification, standard or law that has been clearly defined. Synonymously used with Code of Conduct in the apparel industry. Countervailing duties: An extra duty to restrict international trade in cases where imports are subsidized by a foreign co
25、untry and hurt domestic producers. According to WTO rules, a country can launch its own investigation and decide to charge extra duties. Cumulation: Provisions that allow producers in one country to use a certain amount of inputs from another country without the final good being classified as non-or
26、iginating. SAARC cumulation will allow Bangladesh to use input from all the 8 members of SAARC country, without being classified as non-originating. Direct costs: Costs related to production of goods, for example the cost of materials, labor costs, transport and commission.Everything But Arms: An in
27、itiative adopted in 2001 by the EU, which grants duty free and quota free access to imports of all products from Least Developed Countries (LDCs) without any quantitative restrictions, except for arms, munitions, and (temporarily) certain agricultural products. These preferences are dependent upon m
28、eeting stringent rules of origin. FOB (Free on Board): Refers to the price charged for a product by a supplier. The price includes material to assembling but freight and insurance. Also known as OEM (Original Equipment Manufacturing). Generalized System of Preferences: A system maintained by 27 indu
29、strialized countries which grants generalized, non-discriminatory and non reciprocal preferences in favor of developing nation to increase export earnings, to promote industrialization and to accelerate rate of economic growth. Each importing nation determines the goods, margin of preferences, and t
30、he value or volume of goods that may benefit from preferential treatment. Import quota: A direct restriction on the quantity of a good that can be imported into a country. Indirect costs: Costs indirectly related to the production of goods, for example overhead costs, design costs, cost of samples,
31、cost of the factory building, and administration costs. Least Developed country: A country designated by the United Nations as least developed based on criteria of low GDP per capita, weak human resources and a low level of economic diversifications. There are currently 50 LDCs. Multi Fibre arrangem
32、ent (MFA): A 1974-1994 arrangement to govern the world trade of textile and clothing, imposing quotas by developed world on developing country to regulate and restrict import of textile and apparel.Rules of origin: Laws, regulations, and administrative procedures, which determine a products country
33、of origin. A decision by a customs authority on origin can determine whether a shipment falls within a quota limitation, qualifies for a tariff preference, or is affected by an antidumping duty. These rules may vary from country to country and products to products.Safeguards: An international law us
34、ed by a country to restrain international trade through temporary and selective measures (such as increased tariffs, tariff quota, or quantitative restrictions) to protect a certain home industry from foreign competition. In textiles and clothing, this allows members to impose restrictions against i
35、ndividual exporting countries if the importing country can show that both overall imports of a product and imports from the individual countries are entering the country in such increased quantities as to cause or threaten serious damage to the relevant domestic industry.Tariff: Customs duties on me
36、rchandise imports, either for protective or revenue purpose. Tariff peaks: Relatively high Tariffs, usually on sensitive products. For industrialized countries, tariffs of 15 percent and above are generally recognized as tariff peaks.CONTENTSACKNOWLEDGEMENT .i ABSTRACT .iiACRONYMS . iiiGLOSSARY . v1
37、INTRODUCTION42BACKGROUND62.1Global Picture of Apparel Trade before MFA62.2RMG Industry of Bangladesh72.2.1Growth on Other Sector as a Result of RMG Growth82.2.2Market Concentration102.2.3Product Concentration102.3RMG Industry post MFA: Bangladesh and China112.4Major Calendar Events in RMG History of
38、 Bangladesh143LITERATURE REVIEW164METHODOLOGY205THE PARTICIPANTS226THE START OF THE GARMENT INDUSTRY256.1Case Study: 1266.2Case Study: 2277FACTORS CONTRIBUTING TO THE RISE OF GARMENT INDUSTRY287.1Favorable Policy by Government287.2Availability of Cheap Labor297.3Quotas of USA and GSP provided by EU2
39、97.4Entrepreneurial Skill of Private Organization318VALUE CHAIN AND INDUSTRIAL UPGRADING IN THE CHAIN338.1Industrial Upgrading368.2Upgrading at Factory level388.2.1Upgrading from mass to complex, cheap to expensive products388.2.2Upgrading from Assembly to Full Package Supply408.2.3Upgrading in trad
40、ing pattern448.3Upgrading within the local or national economy478.3.1Backward linkage478.3.2Forward Linkage498.4Industrial upgrading within the region or international509KEY FACTORS FOR THE GROWTH OF RMG INDUSTRY529.1Infrastructure529.1.1Electricity539.1.2Gas539.1.3Chittagong port and road transport
41、549.1.4Telecommunication549.2Compliance issues559.2.1International Perspective559.2.1.1Child Labor559.2.1.2Fire Hazard569.2.1.3Other Issues579.2.2Bangladesh Perspective589.2.2.1Socio-economic Condition of Bangladesh589.2.2.2Tariff Rate Imposed by Developed Nation609.2.2.3Squeezing Pressure of Price
42、of Product619.3Information Technology669.3.1Electronic Communication669.3.2Software for machineries and daily use679.3.3Database709.4Capacity Building719.4.1Education719.4.1.1Structure of Education729.4.1.2Absence of Creative Learning Environment759.4.2Training769.5Regional Co-operation and New mark
43、et7710CONCLUSION8010.1Individual firms:8010.2Organizational Level:8110.3Government of Bangladesh8311REFERENCES8512BIBLIOGRAPHY9113APPENDIX: QUESTIONNAIRE94List of Tables and FiguresTable 1 Growth of RMG industry7Table 2 Major Export Destination and their share in total apparel export10Table 3 Compar
44、ison of China and Bangladesh Export to EU in Jan- Sep 200512Table 4 Facts about the firms those interviewed22Table 5 Hourly wages of apparel industry in SAARC country29Table 6 Net retention of knit exports31Table 7 Value of US imports, tariff rates and tariff revenue of top three imports from Bangla
45、desh in 200261Table 8 Comparison of FOB price for the Manufacturer and Selling price of the Buyer63Table 9 Cost Structure of Apparel Supply Chain64Table 10 Cost structure of a RMG unit65Table 11 Present garment training institutes and programs 74Figure 1 RMG statistics at a glance8Figure 2 Year wise
46、 share of five major export items i.e. shirt, trouser, t-shirt, jacket, sweater10Figure 3 Factors to start business by garment firms25Figure 4 Factors for rising garment business28Figure 5 comparison of market share in woven and knitwear 2004-0531Figure 6 Net exports of total products in 2003-0431Figure 7 Garment supply Chain with inputs in all direction34Figure 8 Industrial upgrading in the Asian apparel value chain.37Figure 9 Interfabs upgrading towards cheap mass product school shirts to girls casual wear39Figure 10 Industrial upgrading at the firm level, at the beginning and
