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Abstract
This article, written before the event, provides a forward-looking analysis of the immense challenges and opportunities facing the ready-made garment (RMG) sector in Bangladesh with the impending phase-out of the Multi-Fibre Arrangement (MFA) quota system at the end of 2004. It examines how the quota system, while restrictive, had provided a guaranteed market access for Bangladeshi exporters. The study analyzes the major challenges of the post-2005, quota-free world, primarily the prospect of intense competition from more efficient producers, particularly China. The research then explores the key avenues for survival and growth. These include the need to improve productivity and efficiency, to move up the value chain from basic to more high-value products, to improve compliance with international labor and environmental standards, and to diversify export markets. The paper argues that the end of the MFA was both a grave threat and a major opportunity. The analysis concludes that the future of the sector would depend on the ability of the industry and the government to work together to implement a proactive strategy to enhance competitiveness.
Full Text
The year 2005 was set to be a moment of truth for the Bangladesh ready-made garment (RMG) industry. The end of the Multi-Fibre Arrangement (MFA) quota system, which had sheltered and nurtured the industry for decades, was fast approaching. This paper provides a detailed analysis of the challenges and the necessary strategies for survival and growth in the post-MFA era. The study begins by explaining the crucial role that the MFA quota system had played in the phenomenal growth of the Bangladeshi RMG sector, effectively guaranteeing a share of the US and European markets. The core of the article is an in-depth examination of the post-2004 challenges. The primary challenge identified is the anticipated surge in competition from China, which was expected to capture a much larger share of the global market once the quotas were removed. The paper also discusses the growing importance of non-price factors of competitiveness, such as lead times, product quality, and compliance with social and environmental standards, areas where Bangladesh was perceived to be weak. The second part of the paper outlines the key avenues for survival and growth. It makes a strong case for a strategic shift from a focus on low wages to a focus on high productivity. It explores the imperative of moving up the value chain, from simple "cut, make, and trim" operations to more integrated production that includes fabric sourcing and design. The paper concludes with a call for a strategic partnership between the government and the private sector to urgently address the infrastructure deficits, improve port efficiency, and invest in skills development to prepare the industry for the much more competitive global marketplace of the 21st century.