Contribution of the Knitwear in Bangladesh

 

Dynamics of Bangladesh Knitwear Sector:

Contribution on Socio-Economic Development

 

Bangladesh Knitwear sector contributes to the Bangladesh economy in a distinctive manner. The last 20 years witnessed unparalleled growth in this sector, which is also the largest exporting industry in Bangladesh. It has attained top notch stance in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a significant role in employment generation, women empowerment, poverty reduction, health and Nutrition improvement etc.

Women’s Empowerment:
Employment in the Knitwear industry has provided direct access to cash income for the first time to many poor women. A survey, conducted by the Institute of Business Administration (IBA) in 2012 showed that for 86 percent of the female workers in the non-EPZ areas, work in the garment industry was the maiden wage employment. The survey also showed that women were taking up such roles paying for house rents and schooling expenses for their children or brothers and sisters. Most significant change has been occurred in the empowerment of women. Now women can play important role in making decisions by their own.

Poverty Reduction:
It has been observed that out of 9.0 percentage point reduction in head-count poverty during 2000-2005, 2.5 percentage point reduction could be adduced to growth of RMG sector. The knitwear export growth has also a positive impact on service sector. The service sector has created huge job opportunity for the people. All these, amongst others, have positive impacts in reducing poverty and have resulted in change.
 
Employment Generation:
The effective way to reduce the poverty level is to create employment opportunities for the impoverished people. Bangladesh Knitwear Industry has played important role by creating employment opportunities for the poor and uneducated people who were previously engaged with the traditional agriculture sector. BKMEA has set up a training institute and developed different short, medium and long term courses on different issues related with knitwear production. Thousands of workers and mid-level management have got training from BKMEA. Many fresh graduates have already taken trainings from the institute and joined in the knitwear factories. The immediate result of rising knitwear sector translated into rapid urbanization. So far the industry creates 1.6 million direct jobs and 0.5 million indirect jobs.

Improvement of Purchasing Power:
The development of knitwear sector has a huge impact on the improvement of purchasing power capacity, particularly for rural female. The purchasing power of the low income people has increased significantly. Now People can afford more goods than before. This happens because the income level has increased considerably. The purchasing power of the garment workers has been increased significantly compared to the scenario back in 1980s and 1990s.

Improvement in health sector:
Employment facilities in Knitwear sector improve the income level as well as the purchasing power of poor people especially from the urban side. As a result access to medicine and access to registered doctor have increased significantly. Calorie intake of the workers has increased considerably. BKMEA has set up a hospital for the better treatment of the workers. BKMEA also strictly monitors the member factories so that each factory provides medical services to the workers.

Structural & Social Development:  
The Knitwear industry is contributing in a number ways to the Bangladesh national economy in poverty alleviation programs and has helped to create an awareness of women's issues at all levels. In addition to its economic contribution, the expansion of the RMG industry has caused noticeable social changes by bringing more than 2.92 million women into the work force.

In 1980, estimates show around 50,000 female garment workers in this sector (World Bank, 2008). According to Bhattacharya and Rahman, the number of people employed in the apparel sector had increased to more than 1.5 million in 1997-98, which constitutes about 70% of the total female employment in the country's manufacturing sector (Bhattacharya and Rahman, 1999). Currently the industry employs about 4.2 million workers, of whom 90% are women, mostly from rural areas.

Table: Female employment in South Asia Garment Industry


High female participation rates, as argued above, effectively result in lower wages and greater competition as evidenced by the size of the export market. As a result, in the knitwear sector female participation is higher.

Bangladesh Knitwear Sector: Macro contribution to the Economy:
Bangladesh’s RMG sector contribution in terms of GDP is highly remarkable; it has reached 13 percent of GDP, which was only about 3 percent in 1991. The contribution of Bangladesh Knitwear sector on GDP is 6.92% and the backward linkage sector has another 2% contribution on GDP of Bangladesh. It also plays a pivotal role in promoting the development of other key sectors of the economy like banking, insurance, shipping & Logistic industries, etc.

Robust Economic Growth:
Bangladesh has posted a robust and resilient economic performance over the past decade, accompanied by a sustained decline in poverty. This robust growth was accompanied by a uniform and steady decline in poverty headcount rates between 2000 (48.9 percent) and 2014 (24.7 percent), and a continuous decline in the number of poor people—from nearly 63 million in 2000 to 31 million in 2013, despite a growing population.

Table: Contribution of RMG sector on Export growth rate of Bangladesh

The growth of Bangladesh economy is led by the growth of RMG sector of Bangladesh during last five years. The contribution of RMG sector export on annual export of Bangladesh was almost 80 percent.

Value Addition from Knitwear industry:
In Bangladesh, normally the knitwear production process starts from cotton. Then the next processes are done in our country. Thus Bangladesh knitwear industry is playing a vital role in value addition of Gross Domestic Product (GDP).

Table: Value Addition and Net Retention Rate of Bangladesh Knitwear Sector

Year
1994
2000
2008
2012
2013
2014
Value Addition
50%
70%
75%
72%
75%
75%
Net Retention
40%
55%
61%
53%
50%
48%

The domestic value addition in this sector is about 75%, which is much higher than woven products. The Knitwear sector’s value addition contribution in the GDP is about 10%.

Backward linkage Development:
The core strength of the knitwear sector is its backward linkage. The entrepreneurs of the sector have not only increased their stitching capacity overtime, but also invested in the allied industry to augment the overall capacity of the total sector with the same pace. Over the period of time, knitwear sector gradually became almost self-sufficient in fabric and yarn development. As the export has increased in the knitwear sector, the capacity of backward linkage has also increased accordingly.

In 2013-14, the contribution of knitwear in national export earnings is 39.81%. The Direct contribution of Knitwear sector on GDP of Bangladesh is almost 7%, but the backward linkage sector of Knitwear sector has another 2% contribution on GDP.

Shipping and Logistics Industry Development:
The RMG sector has contributed to the expansion of the shipping business in Bangladesh and stimulated setting up of several container yards, expansion of port facilities to handle large container carrying trains, increase of cargo handling and storage facilities. RMG manufacturers also extensively use services of Clearing & Forwarding Agents for the purpose of customs clearance of inputs and finished goods.

Development of Banking and Insurance Sector:
Development of Bangladesh knitwear sector and the related activities has contributed a lot to the robust growth of the financial sector in Bangladesh. In FY 2002, the banking sector earned about 37 million dollars from business related with the RMG sector in the form of interest and charges and L/C charges. More than one-tenth of the commercial banks’ asset portfolio belongs to the RMG and textile sector in the country. In FY 2001 commercial banks lent Taka 4400 crore to the textile sector, while the amount lent to the woven-RMG sector was Taka 812 crore. The export financing business of the commercial banks is largely dependent on the textile and RMG sectors.

Cosmetic Industry Development:
There is a significant growth of female employment in the RMG sector of Bangladesh; one of the higher female labor markets within the Asia region. So the demand for cosmetic products like Color cosmetics, that includes lipstick, nail polish, eye and cheek shades and Personal care products, that includes skin and hair care products, like shampoo, conditioner, lotions, Beauty soap and creams are increasing day by day.