One of the successful areas of product diversification was knit-RMG, which was outside the purview of MFA. Figure 1 shows that there have been two clearly discernible phases in the growth dynamics of the RMG sector: in the initial period it was the woven-RMG sector that dominated the structure of RMG exports, while in recent yeas it has been the knit-RMG sector which has demonstrated the
demand in the EU market and was also
was spurred by a growing by domestic incentives in the
form of cash compensation and duty drawbacks
the development of the
industry-related technical knit-RMG industry7.
(Battacharya and Rahman economic factors promoted
Despite the high growth rate of RMG exports, 27 percent per year over the period
between 1983/84 adverse impacts post-MFA trade
and 2003/04, the elimination of MFA was considered to have
on Bangladesh RMG industry in environment would pose a dual
the coming challenge to
years. The Bangladesh:
raw materials at competitive prices and competing with hitherto countries in a quota-free context (Battacharya and Rahman 2001:12).
The major cause of concern lies in Bangladesh’s competitive strength to the limited backward linkages, particularly still heavy dependence
with respect on imported
fabrics, lower port facilities,
labour productivity, infrastructural constraints such as undeveloped corruption and administrative red-tape. All these negative elements
7 Dowlah (1998) lists several factors that contributed to the growth of knit-RMG. (1) The capital cost per unit of knitted output is considerably lower than for powerloom weaving. Unit machine costs are lower for knitting and space requirements per kilogram of output are modest. (2) The operating costs per units of knitting output are lower than for weaving. (3) Acceptable quality cotton knitting yarns are available from India and a few Bangladesh mills, and good quality acrylic knitting yarns can be obtained from countries like Korea, Taiwan and Indonesia (Dowlah 1998: 34-35).