South Asia emerged as one of the major garment producing regions with the increase of north-south trade and is also deemed to be affected significantly because of the global financial crisis. Within South Asia, the case of Bangladesh, is important to be looked at-as to what  extent  the financial and the real sectors are impacted. Bangladesh�s financial markets are quite insulated from the rest of the world, but the probable impact of the global crisis on this country is routed through its real sector or the foreign trade sector. Bangladesh�s industrial production growth has averaged more than 6% over the last 5 years. The export sector has been the engine of industrial growth, with ready-made garments (RMG) leading the way–having grown at an average of 30% over the last 5 years and comprised more than 75% of the total exports in 2007-08. EC and USA are the largest markets for RMG from Bangladesh, together accounting for 90% of total exports in FY08. These statistics reflect the highly skewed pattern of exports, thus also reflect the vulnerability of the country. The World Bank has projected a lower economic growth for Bangladesh, from 6.5 percent to 5.4 percent for the current fiscal year (2009) and in the worse case 4.8%. As per their study, the global financial crisis is likely to affect Bangladesh’s exports in the near future. However, the Bangladesh Garments Manufacturers� and Exporters� Association (BGMEA) is optimistic about the exports of RMG to the West, particularly, the US. BGMEA asserts that the recession indicates both risks and opportunities for the RMG industry and Bangladesh’s lower-end basic garments have been forecasted to be less affected than the high value items.

Year on Year Percentage Change in Bangladesh�s Export Receipts of RMG
Source: Bangladesh Bank
The G exports of Bangladesh in September 2008 were 45.21% higher than its last financial year, despite the crisis taking its toll in the rest of the world around the third quarter of 2008. India is also an important textile exporter in the South Asian region with the share of textiles in total exports being almost 14% in the FY08. However, the massive slowdown in the west has led India to experience a decline in the export of RMG. As per the Apparel Export Promotion Council (APEC) in India, the apparel exports may be 9.3% down from 2007 and 24% lower than the earlier projections. Apart from this decline, by July 2008, up to five lakh people lost jobs in the garment export industry.
It is a general assumption that the global financial crisis will affect all economies that are integrated with the West, particularly the USA. But this does not hold true in case of Bangladesh. Bangladesh is highly dependent on the US for the Export of RMG, nevertheless, basic garments have inelastic demand and are less vulnerable to external shocks. This is so because the average unit value realization for Bangladesh (6.07) in RMG is much less than other South Asian countries (India�s value is 13.15), making it highly price competitive. Given the price competitiveness in Bangladesh, it has so far been able to withstand the crisis better and has been seemingly plaint to the global economic meltdown.