Rising star: Bangladesh's journey to RMG powerhouse status

December 15, 2020

Dhaka, 1978. The budding export firm of Reaz Garments Ltd ships a consignment of 10,000 men's shirts manufactured in Bangladesh to a Paris-based importer, valued at 13 million French Francs (then about USD 2.9 million). It was a considerable new business deal for the previously domestic market-focused company. Although just a modest movement in the global supply chain, the transaction was the first direct export of readymade garments (RMG) from Bangladesh to Europe, and a landmark moment for the South Asia nation's apparel export industry.

Fast-forward to 2020, and Bangladesh is at the forefront of the worldwide RMG business, with the country's apparel manufacturing industry ranking second only to China globally and Bangladesh on track to achieve Developed Nation status by 2024.

Join us as we chart Bangladesh's journey towards a global RMG exporting powerhouse.


  • World's second-largest apparel manufacturing economy
  • Exports apparel goods to around 160 countries worldwide
  • Accounts for 80% of total national export earnings
  • Contributes approximately 12% of national GDP
  • Employs approximately four million workers

Source: Dragon Sourcing Nov 2019, Forbes, The Financial Express

A New Beginning for Bangladesh Exporters

The RMG industry in Bangladesh rose from the ashes of the country's prior export leader, jute fibre. That commodity market was hit by persistent natural disasters coupled with falling worldwide prices in the 1970s. 

Thanks to government policy support, low labor costs and the entrepreneurial efforts of pioneering firms such as Reaz Garments, Bangladesh's economic focus shifted to the production sector, and the RMG industry was born. From that first shipment, apparel exports grew rapidly into the 1980s. And in the last three decades apparel exports have surged, rising from a value of US$868 million in 1990-91 to US$30 billion in 2018-19.

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Bangladesh apparel industry exports growth (Source: BGMEA)

The building blocks of Bangladesh's RMG industry

Hourly Apparel Labor Charges

United States: US$10.12

Bangladesh: US$0.30

Developing Nations' Share of World Apparel Exports

1965: 14% at a value of $3 billion 

1991: 59% at a value of $119 billion

Workforce in the RMG Industry


1991:  582,000 workers 

1998: 1,404,000 workers

United States: 

1991:  1,106,000 workers 

1998: 765,800

Driving a National Economy

The RMG industry has played a central role in the revitaliszation of Bangladesh's economy, making a crucial contribution to GDP, export growth, and employment. Today, the sector accounts for over 80% of total export earnings, contributes around 12% to GDP, and employs around four million workers, of whom the vast majority are female.

In the first half of 2019, apparel exports from Bangladesh to the US rose 11.5% to reach US$3.57 billion. Bangladesh is ranked sixth as a supplier of textiles and apparel to the U.S., after China, India, Vietnam, Pakistan and Mexico. However, Bangladesh's market share has been growing in double digits, while China’s is sliding.

Two major international agreements have helped to enable the RMG sector's success: firstly, quotas under the Multi- Fibre Arrangement1 (MFA) in the North American market, and secondly, special market entry to European markets. Agreements such as these, together with Least Developed Country (LDC) status enabling duty-free or reduced tariff to multiple global markets, coupled with extremely competitive manufacturing costs, have enabled Bangladesh to stake its place in the global apparel market. 

Share in world exports of the leading clothing exporters in 2019, by country (Source: Statista)

The growing number of garment factories in Bangladesh illustrates the significance of the RMG industry to the national economy. The chart below shows the total number of garment factories in the country from 2010 to 2018. The peak of 2013 was followed by a major contraction, as the Rana Plaza disaster of that year led to multiple shutdowns of facilities unable to meet higher safety and compliance standards. However, by 2018, there were about 4,560 garment factories recorded, indicating an increase of almost 80 factories compared to 2017.

Bangladesh's Garment Manufacturing Infrastructure

Number of garment factories in Bangladesh from 2010 to 2019 (Source: Statista)

Bangladesh's Trade Partner Structure

The United States, Germany and the UK are Bangladesh's top three export partners.

Source: Euler Hermes Bangladesh Country Report

Bangladesh's Trade Product Structure

Apparel and clothing accessories dominate Bangladesh's exports.

Source: Euler Hermes Bangladesh Country Report

The Road to Compliance

Bangladesh’s rise to the upper ranks of RMG sourcing destinations has not been without its issues and setbacks. While many well-known brands such as fast retailer Uniqlo have moved more production to Bangladesh, some brands have also pulled out or reduced their footprint. The 2013 collapse of the eight-story Rana Plaza multi-factory building outside Dhaka was a watershed for some companies. For example, following an internal review process, Nike terminated contracts with two Bangladeshi suppliers. International brands were an initial force for transparency and higher labor standards, with two landmark agreements on safety reached in 2013 and expiring five years later.

The “Accord on Fire and Building Safety in Bangladesh” (seen as the stronger of the two safety agreements) was legally-binding and applied primarily to European brands. The “Alliance for Bangladesh Worker Safety” agreement (enforced by fines) was signed by predominantly US companies. The agreements mandated that brands publicly disclose their supplier factories and put in place safety standards and mechanisms to enforce them.

Subsequently, the responsibility for worker safety has moved back to Bangladesh’s government and industry with domestic initiatives that replace the international brand agreements. The Ready Made Garments Sustainability Council, created with the government’s support by the Bangladesh Garment Manufacturers and Exporters Association, is a safety-monitoring group whose board consists of international brand representatives, labor rights groups and garment makers.  

This returning home of responsibility for worker safety is in parallel with increasing efforts by the Bangladesh government to grow the economy. Wooing of global investors and international garment brands - alongside digitalisation - are the centrepieces of this strategy. The impact of various government measures is starting to show, with the International Monetary Fund ranking Bangladesh ahead of India in per capita income in October 2020. Transparency, curbing graft, increasing efficiency and accelerating reform are all on the government’s priority list to continue the economic growth trend.

Taking a Look at Vietnam

The tariffs imposed as part of the U.S.-China trade war initially primarily benefited Vietnam. Increasingly, however, the Bangladesh government has positioned the nation’s garments-industry oriented, lower-wage economy as another haven for multinational companies looking to diversify away from China. Vietnam is both a competitor and a good model for what is possible for Bangladesh. Initiatives such as investing in human capital, developing local sources of raw materials and developing SME RMG company infrastructure to meet EU and US technical and compliance standards have served Vietnam well. These initiatives go beyond simply textiles and apparel to include the broader manufacturing infrastructure and major materials processing.

These types of systematic changes can enhance Bangladesh’s efforts to attract more foreign investment, and to keep the domestic economy growing.

New Growth Ambitions Ahead


  • Achieve US$50 billion in apparel exports by 2021 – representing up to 10% of global apparel exports, up from approximately 7% today
  • Maintain upwards value-chain movement, raising per-piece prices and adding greater value at design and manufacturing stages
  • Capture a growing share of supply chain diversification and trade redirection in the U.S.-China "trade cold war" and post COVID-19 environment
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Source: McKinsey

Moving away from China

McKinsey views Bangladesh as well positioned to benefit from supply chain movement out of China. In the McKinsey Apparel CPO Survey 2019, respondents view Bangladesh as a highly attractive country, although Vietnam follows close behind and is actually narrowing the gap, says the report.  More than half of the companies surveyed stated that they planned to increase the value of their sourcing from Bangladesh by more than 10 percentage points over the coming year. For Vietnam, the figure was four in ten companies. 

McKinsey also reports that there are some differences between European buyers, who rate Bangladesh more highly than their North American counterparts, who prefer Vietnam.  However, for both Bangladesh and Vietnam, the high rate of growth is already exposing production capacity issues for some buyers.

Tech investments

Bangladesh is supporting its growth ambitions with investment in technology. The government has made clear its prioritisation of the country's technological development, with policy measures for industries and the apparel sector including a commitment to develop and leverage Fourth Industrial Revolution (4IR) technologies such as AI, big data and 3D printing.  The comprehensive Digital Bangladesh initiative encompasses the areas of Digital Government, Human Resource Development, IT Industry Promotion and Connecting Citizens, and defines sustainable development goals and democratic rights, transparency and accountability towards ultimate nationwide full employment. 

Industry observers and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) are positive on how the anticipated transition to automation and digitally enabled work processes will provide an economic boost to the country, and in the near term, on RMG industries.

The view of Bangladesh as a rising star taking its place ever more confidentially as a major apparel producer is backed up by economic projections. HSBC Global Research's The World in 2030 report, published in September 2018, forecasts Bangladesh to achieve the largest move in global GDP rankings by the year 2030. The report places Bangladesh among the top six countries for projected growth, in a group that also includes India, Pakistan, the Philippines and Vietnam. If met, this forecast will see Bangladesh become the world's 26th largest economy.

Bangladesh is predicted to see the biggest economic rise by 2030

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Source: HSBC

The prospects for Bangladesh's RMG industry look good. From a first shipment of shirts in 1978 to an industrial engine driving an economy expected to become the world's 26th largest in a decade's time, RMG businesses are proud to say "Made in Bangladesh."