RMG sector plagued with multifaceted challenges: Report
The readymade garments industry in Bangladesh is currently facing a number of challenges, said a report.
LightCastle Partners, a prominent national management consulting firm, in partnership with Policy Exchange Bangladesh, unveiled the report's findings today (4 November).
According to the report, 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.
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It also said the RMG industry will undergo significant transformation in trade benefit regime by 2029 as GSP moratorium ends, coinciding with Bangladesh's LDC graduation in 2026.
The report suggested that the industry must enhance operational efficiency through automation while fostering an environment that facilitates the workforce's transition in order to effectively align with global demand and mitigate risks.
Currently, less than 15% of its operations are mechanised, said the study.
LightCastle Partners in collaboration with The Policy Exchange of Bangladesh conducted an extensive research endeavor 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 on Saturday afternoon.
More than 42 national and international industrialists, international buyers, innovators and other officials of garment industries in Dhaka, Savar, Gazipur, Chattogram along with over 50 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 digitalization.
According to the report, about 84.5% of the country's total export comes from the RMG sector where 40 lakh workers are engaged, most of whom are women. Hence, it is imperative to increase their skill along with ensuring fair wage.
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 USD 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.
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.
