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RMG business in Bangladesh is very much challenging for small entrepreneurs

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Asad Zobayr

RMG

Photo courtesy- Silken Sewing Limited

Bangladesh RMG industry was started by Small & Medium Entrepreneur (SME) but now it not the time for SME. There is a revolution happened in Bangladesh RMG industry after the Rana Plaza incident. It’s very difficult to keep pass with this changes and many small entrepreneur had to shut down their factory. So many factories are shutting down and they are calming that they are not getting any support from Government and the retailers. But the giant companies are expanding their RMG units largely. As a result small factory owners has to shift their business from RMG.

According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA) 1200 factories closed after the Rana Plaza incident happened in April 2013. 273 factories are members of BGMEA and 80 factories are members of BKMEA rest of those are small factories and are not members of BGME & BKMEA. More factories closed before and after Eid ul Fitar. Reference to BGMEA 35 factories shut down due to ACCORD, ALLIANCE. 600 factories shut down due to ACCORD & ALLIANCE supervision and recommendation. Rest of the factories were closed due to shortage of orders.

Mr. Balayet Hossain, Director Operation of Leric Garment which is closed last week at Rampura, Dhaka was talking that after Rana Plaza incident it became difficult to continue business. They had the capacity to delivery 4000 Pcs clothing. “We tried a lot but could not. Finally we had to shut down after final settlement with the workers”, Mr. Balayet mentioned. Now they are trying to concentrate on another business like other.

While talking with Mr. Muhammad Nasir, Director, BGMEA, he said, “It has been difficult to continue RMG business in the long run. After Rana Plaza our “cost of doing business” has been increased 18%. But the order rate is continuously decreasing. Big industrialist are balancing by expanding their project with high end technology and value added products. It has been very difficult to run the business for small entrepreneurs as it’s not fully possible to run the business by maintaining all the observation by ACCORD & ALLIANCE as they don’t have such capacity and ability. As a result they are to exit from the business.”

As per the information to reform one factory according to the recommendation of ACCORD & ALLIANCE it requires almost 5 Core taka. In reality for SME project investment capital is 50 Lac to 5 Core taka. It required more than hundred core taka to establish a factory. That means RMG industry is not for the small and medium entrepreneurs, in fact today’s RMG industry is the result of continuous development result of small and medium entrepreneurs. All the big industrialist started as SME but in future there will be no SME.

While taking with Mr. Md. Fazlul Houqe, Former President of BKMEA, he mentioned, “ We are not encouraging small and medium entrepreneurs to invest in this sector. But for a developing economy this is very alarming situation, as SME projects are the driven force of developing country.” He also said that, “Once there was a time when a small entrepreneurs gradually invested in this sector and then gained some experience to expand. But the situation has been changed as large investment is required now a days. For this it is very much challenging for small entrepreneurs to invest in this sector. At present only industrialists are expanding their business and there are no new entrepreneurs.”

Professor Mustafizur Rahman distinguished Fellow at the Centre for Policy Dialogue mentioned that,” Group of companies are expanding their wings and venture which is a very positive sign for our economy. But we can’t ignore the contribution of small enterprises to our national economy. They can contribute more if we could support them. But reality is different.  He also said, “ I thought retailers would give support to the small factories. But they made us frustrated. Government could be by their side by providing loan at a low rate which was not followed. Somehow if we could make the factories functional, those could be a great hale to achieving health export revenue.”

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