Effect of Russia-Ukraine
war on RMG sector of
Submitted by-
Bangladesh Amina Jamal Chandrima (19411038)
March 2022
From the perspective of Independent Think Tank
March 2022
From the perspective of Independent Think Tank
◼ Globalization (the process of interdependence) that integrates cross-border
connection of states, free trade, flows of information and investment and fosters trade
K among the states. As the states are interdependent over each other in this globalized
era, so the continuing Russia- Ukraine war is generating turbulence in service sectors
E of Bangladesh and the RMG sector can not be excluded from list that is facing
serious economic downturn.
Y
◼ Bangladesh is a small state with extensive population in a limited territory. So, a
small amount of economic loss means an immense loss for its economy. For this
F reason, proper and long-term policy framework should be premised to tackle down
any kind of possible issue.
I
N ◼ The unethical war in Ukraine led by Russia is spreading in a full scale. So, China
may follow the same path of Russia by invading in Taiwan that will ultimately lead
D towards an economic recession in South Asian region. That is why policy should be
I reformed to confront any possible issues like the fall of economy and so on that may
affect the RMG sector in Bangladesh and around the world.
N
◼ The current malty polar world order is prone to economic vulnerability, So, the states
G who are more focused on RMG sector for economic betterment should foster
S domestic and international coherent policies to ensure safe environment for work,
proper incentives and so on.
Bangladesh as a low-income country, various service sectors like wholesale and retail trade,
transport, financial services, education, health care, real estate and so on hold an immense
importance in her Gross Domestic Product (GDP). For instance, In the fiscal year of 2015,
industry and agriculture sectors accounted for 28.1% and 15.5% respectively. As a global
RMG exporting powerhouse, Bangladesh is experiencing a rapid expansion in exportable
Ready made Garment Products (RMG) during 2002 to 2012. RMG sector is contributing to
C
the economy of Bangladesh more than 84% of total export. The ongoing Ukraine-Russia
O war emerged as a massive concern for Bangladeshi Ready made Garment Products (RMG)
N because it may generate imbalance across the whole Europe which is the prime destination
of Bangladeshi RMG product. On the other hand, Russia is a fast-growing destination for
T
Bangladeshi raiment products. But due to this Ukraine-Russia crisis, the whole world is
E
facing the sudden rise in crude oil price (US $120 barrel) that also impacted on
X Bangladesh’s RMG sector as it needs oil to run sewing machines and so on. Besides, this
T crisis may face shipment delay of RMG products that may resent the buyers and may
provoke them not to place order once again. This paper is aiming to address the challenges,
possible outcomes due to the current Ukraine-Russia crisis and it will try to suggest proper
recommendations to tackle this uncertain situation in RMG sectors in Bangladesh.
Challenges:
faced by RMG sector of Bangladesh…
External Issues: Internal Issues:
⚫ Bank Loan and High Rate of Interest: In ⚫ Unskilled workers, lack of professional qualified
Bangladesh, interest rate is higher than other trainers, weak training program, lack of
developed countries; that is why in stead of teaching/training aids, no structured training
taking loans from Bangladeshi Banks, needs assessment or evaluation facilities, no
Government is approaching towards developed follow up and feedback intervention, no corollary
countries more. Consequently, dependency on relation between training and benefits in terms of
the powerful countries is increasing gradually for cash or kind.
what Bangladesh is to accept all the terms and ⚫ Poor condition of the Transportation
conditions imposed by them. This is a great Infrastructure- highways, railways, seaports etc.
threat to not only on RMG sector but also to our ⚫ Energy crisis: Electricity crisis, Gas shortage oil,
sovereignty. etc.
⚫ Bangladesh is facing problems in attracting the ⚫ Improper building Infrastructure, lack of planning
new investment both international and Locally in and management skill.*
this sector. ⚫ Social Compliance
⚫ Our RMG products are mainly destined to the ⚫ Political crisis:Planning security, political unrest,
US and EU while in EU countries, Germany, strike and corruption are the main obstacles to
UK, France, Italy are the major sourcing country hamper economic growth.*
holding almost 80% of the total export in EU. So ⚫ High tax rate.
not having duty free access to Eu is a great ⚫ Lack of Research and Development
challenge for BD.
* The consequences of those unplanned issues are showing off now though the happening of destructive disaster
like Rana plaza and Tazrin garments which killed almost 2000 people and injured thousands of people. These
issues become serious now among the EU and USA buyers.
* US an EU has threatened BD about reduction of their investment if political stability can not be gained
* In the absence of a world class research and design institute, Bangladesh’s RMG factories make clothing items
in accordance with the designs supplied from buyers’ end, which is popularly known as ‘cut and paste
development’. Therefore Bangladesh is still concentrating on low value products. With proper research on
branding and fashion trend Bangladesh can capture the high value end products segments. The Research center
of both BGMEA and BKMEA conducting post export research that means crunching the export numbers.
Consequences
There is no immediate impact of Russia-Ukraine Conflict on Bangladesh but there are some
probable consequences which are to face hence………………
Price Hike
Oil Crisis
Plight in Wheat Import
Fertilizer crisis
Lower crop production
Increase of Transportation cost due to the increase of oil,gas and fuel
Recommendations
By implementing the recommendations mentioned below, government can initiate to uproot
the discussed muddle………..
Currently,the foremost duty of BD government is to find alternative countries for importing
Oil,Gas and fuel.Russia-Ukraine Crisis may end soon but the impact will stay longer to
hamper our economy. Oil crisis will cause huge damage to RMG sector decreasing
production rate as fuel is required to run the machines.
Besides, It is high time Bangladesh sought alternative exporting hub other than Russia as
from July to January of the current 2021-22 fiscal year, Russia exported ready-made
garments worth 42 crore dollars which is an alarming situation for BD.
▪ Mirdha, R.U. (2022). Over $600m garment exports to Russia at risk. [online] The Daily
Star. Available at:
https://www.thedailystar.net/business/global-economy/news/over-600m-garment-exports-
russia-risk-2972931 [Accessed 05 Mar. 2022].
▪ www.dhakatribune.com. (2022). No immediate impact on Bangladesh, but businesses
wary of oil and food price hike. [online] Available at:
https://www.dhakatribune.com/business/2022/02/27/no-immediate-impact-on-bangladesh
-but-businesses-wary-of-oil-and-food-price-hike [Accessed 05 Mar. 2022].
▪ Karmakar, S. (2022). Readymade garment exporters concerned by Russian invasion of
Ukraine. [online] Prothom alo. Available at:
https://en.prothomalo.com/business/local/readymade-garment-exporters-concerned-by-ru
ssian-invasion-of-ukraine [Accessed 05 Mar. 2022].
▪ New Age | The Most Popular Outspoken English Daily in Bangladesh. (2022).
Bangladesh seeks duty-free access for RMG to Russia. [online] Available at:
https://www.newagebd.net/article/33110/bangladesh-seeks-duty-free-access-for-rmg-to-r
ussia [Accessed 07 Mar. 2022].
▪ www.dhakatribune.com. (2022). No immediate impact on Bangladesh, but businesses
wary of oil and food price hike. [online] Available at:
https://www.dhakatribune.com/business/2022/02/27/no-immediate-impact-on-bangladesh
-but-businesses-wary-of-oil-and-food-price-hike.
