RMG sector plagued with multifaceted challenges: Report

The country’s Readymade Garments (RMG) industry has been facing a number of challenges lately. And the industry will undergo a significant transformation in its trade benefit regime by 2029 when its GSP moratorium ends, coinciding with Bangladesh’s exit from its Least Developed Country (LDC) status in 2026, according to a report.

LightCastle Partners, a prominent national management consulting firm, in partnership with Policy Exchange Bangladesh, unveiled the report’s findings on Saturday.

Challenges confronting the RMG sector encompass rising labour costs, heightened competition from low-cost nations, and the imperative to improve working conditions and sustainability practices, the report said.

To effectively align with global demand and mitigate risks, the industry must enhance operational efficiency through automation while fostering an environment that facilitates the workforce’s transition. Currently, less than 15 per cent of its operations are mechanised, said the study.

LightCastle Partners in collaboration with The Policy Exchange of Bangladesh conducted an extensive research endeavour titled: "Threads of Progress: A Comprehensive Landscape Study of the Apparel Industry and the Future for Women Workers".

The research findings were published at a discussion at a hotel in the capital this (Saturday) afternoon.

Over 42 national and international industrialists, International buyers, innovators and other officials of garment industries in Dhaka, Savar, Gazipur, Chattogram including more than fifty-plus women workers were interviewed as part of the research.    

The initiative—funded by the H&M Foundation with The Asia Foundation operating as the backbone organisation— is a part of the two-year-long ‘Oporajita: Collective Impact on the Future of Work in Bangladesh’ initiative, with a collective goal to future-proof livelihood of women garment workers in Bangladesh, equipping them for a future where the apparel sector is defined by automation and digitalisation.

According to the report, about 84.5 per cent of the country’s total export comes from the RMG sector where 4 million workers are engaged, most of whom are women. Hence, it is imperative to increase their skill along with ensuring fair wages.        

The report’s findings highlighted that the Covid-19 pandemic significantly impacted the industry, resulting in the cancellation of international orders and an estimated loss of US$ 3.15 billion. In 2022, our efforts to bounce back from the impact of the Covid-19 pandemic were hampered by the emergence of additional challenges, including geopolitical conflicts, a weakening global economy, and concerns about another recession.

The apparel industry faced multifaceted challenges including electricity and gas shortages, coupled with exchange rate fluctuations and dollar crises, which disrupted apparel production by increasing costs for factory owners. Reduced demand from the United States and the European Union also triggered a crisis in the industry. These led to adverse effects on garment workers' physical health and reduced employment opportunities.

Furthermore, trade tensions between the United States and China present opportunities for Bangladesh to expand its market presence. Sustainable sourcing of inputs is essential to reduce supply chain emissions and compete with other countries. Trade barriers may also intensify competition from other countries, necessitating improvements in logistics for reduced shipment time and costs.

Thus, developments in feeder vessels and deep seaports offer potential cost and time savings. Moreover, as technology evolves and reduces the need for labour, Bangladesh needs to enhance its production capacity in higher value-added product categories.

Md Abdus Samad Al Azad, Joint Secretary (FTA-1), Ministry of Commerce, and Shahidullah Azim, Vice President of BGMEA, spoke at the discussion as special guests.

Zahedul Amin, Co-founder & Director, Finance, Strategy & Consulting Services of LightCastle Partners, Samiha Anwar, Business Consultant of LightCastle Partners, were ‍also present.

Dr M Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh, moderated the discussion, while Radi Shafiq, Portfolio Manager of LightCastle Partners; and Mrinmoy T Sobhan, Business Consultant of LightCastle Partners, highlighted the research findings.

Md Abdus Samad Al Azad said, “We need to take proactive steps in shaping our policies and shifting our attention from cotton-based clothing to Man-Made Fiber (MMF) materials”.

Shahidullah Azim said, “At present, there are only 2-3 recycling centres for RMG waste in Bangladesh. If we export recycled yarn, it has the potential to generate revenue of 5-6 billion dollars. Moreover, we need to get ready for exporting more value-added products and encourage policy initiatives related to diversifying fibers.”

Over the past six years, LightCastle has been involved in numerous RMG sector-related interventions, making this comprehensive study a roadmap for the Bangladesh apparel industry.