Govt extends cash incentives to RMG subcontractors

Staff Reporter :

The government has decided to extend special cash incentives to ready-made garment (RMG) exporters who subcontract production to smaller factories, finance ministry officials confirmed. Until now, only exporters operating their own factories were eligible for this benefit.

Under the new scheme, exporters who engage subcontractors will be able to pass on part of the 0.3percent cash incentive to these units, strengthening an industry that accounts for more than 80percent of Bangladesh’s exports.

Officials said the decision aims to increase production capacity at a time when Bangladesh is gaining competitiveness in the US market due to lower tariffs compared to rivals such as China and India.

The move follows an application from Ha-Meem Group, one of the countries largest RMG exporters, and consultations with the commerce ministry, BGMEA, BKMEA, and FBCCI. While the decision is final, a summary still awaits approval from the finance adviser.
Currently, subcontracted factories contribute about 10percent of Bangladesh’s RMG exports. Analysts expect this share to grow as exporters are now incentivised to engage more subcontractors.

Commerce Secretary Mahbubur Rahman welcomed the step, noting that subcontractors had been excluded from benefits because they do not export directly. “If required, we will even prepare a framework for them to receive incentives directly,” he said.

Business leaders have praised the move, saying it will help smaller firms survive and boost overall export earnings.

FBCCI administrator Md Hafizur Rahman said, “Although the incentive will go to exporters first, subcontracting companies will benefit indirectly. Exporters can share a portion through wages or other support, helping small factories grow and create jobs.”

The lack of incentives had previously discouraged subcontracting and forced many small units to shut down.

Some exporters had even misreported subcontracted output as their own in order to claim benefits. Industry insiders believe the new policy will reduce such practices while promoting greater transparency.

BGMEA President Mahmud Hasan Babu said he had not yet been fully briefed but welcomed any move that strengthens smaller units.

BKMEA President Mohammad Hatem confirmed that the Finance Ministry had consulted the knitwear exporters’ association before finalising the decision.

The shift comes as the government gradually phases down overall incentive rates ahead of Bangladesh’s graduation from the least developed country (LDC) category in 2026.
Still, BGMEA has urged the Finance Ministry to raise the incentive rate for the current fiscal year, citing mounting global competition.

In FY23, the RMG sector received Tk 5,696 crore in cash incentives. From humble beginnings with just $10,000 in exports in 1978, Bangladesh’s RMG industry has grown rapidly.
Bangladesh Bank data shows RMG exports reached nearly $37 billion in FY24, while Export Promotion Bureau figures put July-April FY25 exports at $40.20 billion, reflecting 9.83percent year-on-year growth.