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Is the RMG sector ready for the future?

  • Published at 09:23 pm February 10th, 2020
rmg sector
An airtight industry? Rajib Dhar/Dhaka Tribune

The answer may surprise you

The Bangladesh garment sector has undoubtedly been the backbone of the country’s export earnings with 84% of the total export earnings contributed only through the RMG sector, Bangladesh’s balance-of-payment is outright reliant on this mega-industry.

But what if this backbone plunges into the dust and renders the country vulnerable on international grounds?

Beyond the shadow of a doubt, the growth of the garment-manufacturing sector in Bangladesh has escalated rapidly.

This is mainly because of competitive labour wages which function as an attractive investment haven for western clothing brands, markedly as China’s labour cost rises in the garments export centre. However, there are significant threats to our sole-treasured industry.

Educational equity and women empowerment 

The country is evolving both economically and socially, and through this literacy rates have elevated to 73% in 2019 according to UNESCO. As studies have concluded a positive correlation between education and earnings, the educational rise in the country will also lead to demand for higher wages.

This will certainly make the garment labour costs rise and will eventually revamp Bangladesh’s image of supplying “cheap labour.” This will likely cut down investments in Bangladesh and will contribute to the fall of the industry. 

Moreover, as women empowerment rises, the Bangladeshi women will become more aware of their rights and may engage in protests to counter the common exploitation they face by their employers. Hence labour unrest might come into action and further destabilize the industry.

Looming automation

Till now we have been observing the industry dependent on human capital; now bring in the inevitable epoch ahead of us where automation, robotics, and artificial intelligence will revolutionize the global industries. 

Emerging automation and augmentation of AI will beget a paradigm shift in the traditional labour-intensive production model. Sewing is the costliest and labour intensive process in the business, and it accounts for more than half of the total labour input per attire. 

However, sewing yet remains the most intricate function for a machine to operate given dynamic changes in fashion that require frequent changes in the algorithm of the machinery. 

However, with the current advancement of automation, The Wall Street Journal reported sewing may make an entry in places with more-expensive labour, including the US. 

They also reported Yuho Sewing Machine and Co is automating long-winded and convoluted sewing tasks. Though the perceptible effect may take more than a decade to emerge in the country, it still holds a potential threat to the existing firms who are planning to be dependent on labours. 

Besides, new technologies like gluing as a substitute for stitching fabrics are also progressing quickly; once the technology is finessed automotive manufacturing of garments will leap forward. 

If someday automation reduces production costs, nearshoring will be the most likely resolution of the global clothing brands. 

This might gradually divert the whole industry to the homeland of the respective brands. Local entrepreneurs should take the breakneck speed of innovation more seriously to thrive in the global market.

Strategic incompetence and low labour productivity

With China losing market share, Bangladesh had a scope to expand its share in the international market. However, countries like Vietnam, Cambodia, Myanmar, and Indonesia have grabbed the stakes. 

This is mainly due to Bangladesh concentrating only on a few items that China used to produce. Bangladesh produces mainly cotton-based products with low diversity whereas China dominated manmade fibres. 

Secondly, Bangladesh has a strong currency against the US dollar which is another reason for its low international price competitiveness. 

To add further, Bangladesh lags behind all garments producing country in terms of labour productivity per hour except for Cambodia according to APO database 2018.

So, what are the likely consequences of the downfall of the industry?

With Bangladesh fully dependent on RMG for its export earnings, the GDP of the country is also dependent to a great extent on our country’s RMG. Hence the downfall of the RMG sector will directly affect the country’s economic growth. 

This might result in a cut down in FDI in the country and foreign investors taking back their investments. However, the most striking sequel would be the large structural unemployment that would take place in the country. 

Either way, even if the RMG sector doesn’t debacle, the structural unemployment of nearly 45% of the domestic industrial workers is still a matter of great concern due to rising automation in this globalized world.

If Bangladesh cannot find plausible alternatives to reallocate the excess unemployed labours, the country might have to go through huge geopolitical and economic repercussions.

Syed Nazif Ishrak is a freelance contributor.