Double trouble for RMG Industry: Cooperation is the way

The Ready-Made Garments industry has been the main driver of extraordinary economic growth in Bangladesh. From the 1984-85 fiscal year to 2018-19 fiscal, the industry’s export earnings grew 293 folds. During the same period, non-RMG export earnings grew a little shy of eight folds. Meanwhile, the RMG export earning sky rocketed from 116 million dollar in 1984-85 to 34.13 billion dollars in 2018-19. The number of factories increased from 384 in 1984-85 to 4,621 in 2018-19[1](Chart-1). At the moment, these factories employ almost four million workers[2] and even though described as modest, these jobs ensure access to basic needs for the workers while maintaining a critical balance in the society. However, the Coronavirus pandemic is posing a serious threat to this balance as the industry is projected to shrink and many jobs are feared to be lost.

The RMG industry has witnessed a dramatic fall in trade because of the lockdown measures enforced in the buying destinations. [3]The comparison of the statistics of the months of March, April and May of the 2018-19 and 2019-20 fiscals shows that in 2019-20 the total trade (Woven+Knit) declined by 20%, 85% and 62% respectively (Chart-3). This dramatic decline indicates that industry is going to experience continuous trade decline, resulting in massive losses of income in the sector which a BRAC study estimates to be 2.3 million[4]. It is particularly important to understand that any massive job/income loss in export-oriented industry occurs when trade declines which means these job losses can be permanent, at least for a while. If policies to protect these jobs are not undertaken, it may result in a capacity reduction of the whole industry setting it back at least a decade.

The timing of the pandemic made the situation even more grim for the RMG industry because the industry has been witnessing decline in export since before the pandemic; more specifically, from the beginning of the fiscal year 2019-20. Chart-3 shows the export growth trajectory in July to May of the fiscal year 2018-19 and 2019-20 from the year before. The 11 months comparison shows, while fiscal year 2018-19 saw a steady positive growth from 2017-18, fiscal year 2019-20 saw dramatic decline from the year 2018-19. Out of the 11 months of the 2018-19 fiscal, ten of them saw a decent increase compared to the previous year. On the other hand, during the 2019-20 fiscal, only two months saw increase and there were reports of many factories being closed and workers losing jobs.

So, it can be said that if the crisis of the pandemic is not expertly dealt with, the RMG sector will face double trouble which in turn will pose serious problems for the national economy given that more than 84% of the export dollars are brought in by the RMG sector (Chart-2). Any decline in this sector will impact national economy directly. To mitigate the upcoming problem, specific government intervention is needed without which the sector risks losing its position in global apparel trade.

Policy suggestions have been pouring in from the various directions. The Center of Research and Information (CRI) study recommended that “In the post COVID-19 universe where safety is paramount, the sector should be incentivized to get into medical safety goods market. Manufacture of products such as masks, glovers and PPEs are quintessential due to increasing global demand and heightened uncertainty in the backdrop of a looming global recession.[5]”

The government of Bangladesh has taken steps to support the RMG sector. On May 2020, a five thousand crore taka stimulus package was rolled out for the RMG sector to pay salaries to its workers. [6]On June 11 the finance minister announced an additional one percent incentive for the industry[7].

The RMG sector is not only important for the export earning, rather this industry is important for other social aspects as well. Researchers and academicians have been saying that RMG played the key role to ensure gender equality in Bangladesh. Although modest in sum, but because of these earning females found a voice in the key decisions like marriage, family planning etc[8].

Needless to say, Bangladesh’s economy has been hit hard by global pandemic. World Bank estimates that Bangladesh’s GDP will grow only 1.6% in the current fiscal year[9] and Center of Research and Information (CRI) estimates that the pandemic may cause six million permanent job losses. This can double the poverty in the country, washing away the extraordinary achievements in poverty reduction in the last decade[10]. This is a looming national security issue as well as RMG sector is anticipating the hardest hit among all the sectors. The complete cooperation among government, associations, owners and workers is imperative to revive the industry and preserve the jobs.