RMG backward linkage factories in Bangladesh

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IN THE context of the global reach and size of the Bangladeshi ready-made garment industry, the backward linkage factories that support the industry are playing a vital role. The competitive pricing and delivery of finished goods to the international buyers within lead time are being achieved to a big extent owing to the existence of the large, various and efficient backward linkage industry.

It is popular that the RMG industry may be the key contributor to the economy of Bangladesh, nonetheless it is not well-publicised that the sector also largely will depend on an upstream supply chain of backward linkages supplying it myriad items which include, to name only a few significant ones, textile, dyeing, packaging, trim and accessories, apparel labels, and services such as washing, printing and embroidery.

Despite being a big employer of skilled and semi-skilled labour, and playing a pivotal role in the sustenance of the RMG sector and the growth of the economy, the backward linkage industries usually do not enter national debate and media coverage the same way the RMG sector does. This is why the results of national emergencies or contingencies on the backward linkages of RMG usually do not receive due attention from the federal government or international agencies, as does the RMG sector.

The COVID-19 outbreak in its wake has taken to the fore this matter of neglect and disregard as a large number of manufacturing units and companies representing the backward linkage sectors have remained out from the coverage of government economic packages and financial incentives, as the RMG sector commands all of the attention.
 
According to the Bangladesh Garments Accessories, Packaging Manufacturers and Exporters Association, there are 1,733 registered members in their trade body. Included in these are a good selection of manufacturing and service outfits (Figure 1).

The officials of the BGAPMEA declare that there are plenty of non-member operators in the region, and therefore using the size of the industry with regards to employment and value addition, and contribution to the economy are much higher than what's captured in statistics. The sector also provides livelihood to independent traders who usually do not own a manufacturing outfit, but become suppliers to the RMG factories.

There are 2,800 non-member factories in the sector. Therefore, the contribution of the textile and cognate manufacturing businesses to the economy is pretty significant. By some estimation, the size of the backward linkages industry is USD 5.1 billion in Bangladesh, and it employs a workforce of 5.5 million.

Because the backward linkages industry is linked with the RMG sector, it really is evident that the impact of COVID-19 will fall on the industry. The COVID-19 crisis and the consequent economical downturn precipitated the government to declare an monetary stimulus package of Tk 956 billion (about $11.2 billion). 

According to an Asian Development Bank report: ‘BDT 50 billion for RMG and other export-oriented industries that could only be used for paying salaries and allowances to employees and employees. How big is the Export Development Fund has been increased from USD 3.5 billion to USD 5.0 billion, which provides short-term facilities for importing raw materials for export-oriented industries.

Out of the package, the central bank will institute a USD 600 million Pre-Shipment Credit Refinance Scheme for RMG and other export-oriented industries. This highly welcomed package, though significant, will meet only a fraction of the massive requirements of the sector, which needs at least USD 470 million to pay wages on a monthly basis. The united states requires more support for the essential subsistence of the staff and to keep carefully the industry alive.’

Our brief research concurred with the Asian Development Bank estimation, and also discovered that the stimulus package was designed and directed and then provide recourse and sustenance to the large businesses and procedures in the backward linkages sector and didn't account for the many small and midsize businesses which constituted it.

The COVID-19 outbreak has put the smaller factories of the industry in imminent threat of completely shutting down their businesses as orders are being cancelled, new companies are not materialising, and funds are drying up. 
Source: https://www.newagebd.net

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