Contribution of Ready-Made Garments Industry on the Economic Development of Bangladesh: An Empirical Analysis

Abstract

The Ready-Made Garments (RMG) industry holds a strong position in boosting Bangladesh's economy through earning external currencies, contributing in Gross Domestic Product (GDP) and generating employment most notably. Secondary data based this study intended to draw the overall scenario and the growth trend of this industry, mainly to empirically analyze the contribution of ready-made garments industry on the economic development of Bangladesh. The results obtained from the Fully Modified Ordinary Least Squares (FMOLS) model reveal that, ready-made garments export significantly increases gross domestic product growth of Bangladesh. Results of Granger causality test affirmed the appearance of bidirectional causal association between gross domestic product growth and ready-made garments export. Though tremendous growth is achieved in last few decades, but some severe problems are prevailing in this sector those are highly responsible for the declining trend of the contribution of ready-made garments export to Bangladesh's gross domestic product for last five years. Therefore, it is highly recommended to take initiatives for attracting foreign direct investments, making investment friendly monetary and fiscal policies, minimizing dependency on foreign countries for technical and financial support and most importantly for ensuring the safety of workplace. Contribution/Originality: The paper's primary contribution is finding that export of RMG has a significant positive impact on the economic development of Bangladesh employing FMOLS technique and this finding may be beneficial for the RMG industry to initiate imperative steps to produce international quality standard products for more export earnings. which was once termed as a 'bottomless basket' by cynics (Rahman & Ehasan, 2017). Currently in the world market, RMG sector is known as the top representative of Bangladesh (Adnan, Rakib, & Rahman, 2015).

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