The Competitiveness of Ready Made Garments Industry of Bangladesh in Post MFA Era: How Does the Industry Behave to Face the Competitive Challenge?

The challenges that originate from changes in the global trade regime and the relative competitive environment in the global markets are reasons for deep concern for Bangladesh. Because of quota system abolition many of the less efficient suppliers will lose quota rents and market shares as they are forced to compete with more efficient suppliers among developing countries. Since 1974, Bangladesh was enjoying a quota free access of garments under the Multi- Fibre Arrangement (MFA). But the phase out of the Multi- Fibre Arrangement (MFA) has completed in 2005 under the Uruguay round of GATT (General Agreement for Tariffs and Trade) in 1994. The freeing of trade in textiles and clothing has created a formidable challenge to the Bangladesh Ready Made Garments (RMG) Industry. The phase-out of the MFA, emergence of competitors such as China, India, Vietnam, Turkey, Mexico and African nations have negatively impacted on the fortunes of Bangladesh RMG sector. Dependence on imported raw materials, political instability, turbulent economy, high bank interest rates, lack of government incentives, poor knowledge of international marketing, port problem, poor infrastructure and labor union are some of the internal problems of Bangladesh RMG. This sector is being incrementally faced with the burden of obligations imposed by the developed countries in the guise of compliance issues. There are two types of views about the future of Bangladesh Ready Made Garments (RMG) Industry after MFA era. The optimistic view emphasized that Bangladesh had held a strong position in the global market due to its abundant supply of cheap labor. On the other hand the pessimistic view revealed that there is no opportunity for Bangladesh to survive in the competition. This paper is prepared in the context of phasing out of the MFA and its impact on the export performance of Bangladesh Ready Made Garments (RMG) industry.