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Made in Bangladesh

Mamun Rashid
IT is a story built up over the last two and a half decades. It is a story of success, of winning against all odds. It is a story of a nation, which has vowed to overcome all the barriers with limited resources and immense passion. It is not a story of" Veni Vidi Vici." Rather, it is a tale of toil, a tale of rising, of starting small and finally finding glory
Yes, my dear readers, I am talking about the success story of our apparel sector. The sector which started with contributing only 1.1% of the country's total exports in 1982-83, ended up earning more than $10 billion in the fiscal year 2007-08. This is the sector in which more than two million people are employed, mostly women. This is the engine of our economy and the major source of earning foreign exchange.
The journey
The growth story of our apparel sector is _simply spellbinding. In 1983-84, the total apparel exports of Bangladesh were only $31.57 million, 3.9% of total exports. During this period there were only 134 factories, which employed around 400,000 workers. The breakthrough occurred during 1985-86, when the number of factories increased to 594 and volume of export grew to $ 131.5 million.
In FY90 it became a $624 million industry with a share of 41% of total exports. During 1985-90, the sector grew at a cumulative average growth rate (CAGR) of 40%. The earnings from this sector crossed the billion-dollar mark in FY92, with a total export of $1.18 billion.
In FY95, the share of apparel export increased to 64% of total exports and earnings doubled to $2.2 billion. The industry grew at CAGR of 29% during 1990-95. Within the next five years, the export proceeds from this sector again doubled to $4.35 billion and the share of apparel export to total exports grew to 76%. Since then, the apparel sector has continued to contribute more than 75%
of total exports.
Several internal and external factors contributed to the phenomenal growth of the RMG sector. The key factor behind the growth was the quota regime under the Multi-Fibre Arrangement (MFA). The General System of Preferences (GSP) facilities and RoO (Rules of Origin) offered by the developed nations also helped Bangladesh to accelerate its export.
In short, MFA provided market protection for Bangladesh, whereas GSP facilities offered preferential treatment and market access opportunities in developed economies. Moreover, the apparel industry also received support from the government, which included measures like duty drawback facilities, tax holidays, cash assistance, income tax rebate, creation of export processing zones, zero tariff on machinery inputs, rebate on freight and power rate, bonded warehouse facilities, provision of import under back-to-back letters of credit, loans at concessional rate, export development fund, etc. Finally, Bangladesh possessed a number of comparative advantages, like low labour costs, com-
pared to other Asian economies, growing share of local inputs (particularly in knit fabrics) and competence in mass-produced basic garments,(such as kpit cotton and woven cotton products).
Meanwhile, the sector survived the MFA phase-out at the end of 2004, despite fierce competition from neighbouring countries. However, the success story continued. Post MFA phase-out, export earnings from the apparel sector increased to $6.4 billion in FY05, $7.9 billion in FY06, and crossed the $10 billion mark in FY08.
It was apprehended that, post MFA phase-out, about 30% to 40% of garment factories would close down. On the contrary, the number of factories increased from 4,000 in FY04 to 4,740 in FY08, and employment generation increased from 2 million to 2.5 million.
For the full version of this article please read this month's Forum, available free with The Daily Star on Monday, February 2.
Mamun Rashid is a banker and economic analyst The writer is grateful to Allah Malik Kazemi from Bangladesh Bank for his guidance and intellectual support.