400 RMG units shut in 3yrs
The country’s garment industry, the backbone of the country’s export economy, is confronting one of its most prolonged downturns in recent memory, with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) warning that around 400 factories have shut down over the past three years and many more are teetering on the financial edge.
The alarming disclosure was made in a written statement presented at a pre-budget discussion held at the National Board of Revenue (NBR) headquarters in Agargaon on Sunday. BGMEA President Mahmud Hasan Khan Babu and other sector leaders attended the meeting, where they urged the government to craft a business-friendly budget for the 2026-27 fiscal year that can help reverse the industry’s deteriorating fortunes.
“The country’s top export-earning garment sector is going through a difficult time,” the BGMEA said in its statement. “Around 400 factories have closed in the past three years, and many more are in a financially vulnerable position.”
The trade body identified two structural factors as the primary drivers of the slowdown: a sharp rise in the cost of doing business and the absence of a business-friendly operating environment.
Policy uncertainty, institutional complexities, and infrastructure limitations — compounded by rising financing and logistics costs — are collectively squeezing manufacturers, it said.
The figures paint a troubling picture of an industry that contributes approximately 83 percent of Bangladesh’s total export earnings.
Bank loan interest rates have climbed to between 12 and 15 percent, gas prices have surged by 286 percent between 2017 and 2023, and electricity prices have risen 33 percent over the last five years.
Minimum wages increased by 56 percent in 2024, and the annual increment was raised from 5 percent to 9 percent in December 2024. Chattogram Port tariffs were hiked by 41 percent in October 2025.
These mounting pressures, the BGMEA noted, have been compounded by a 60 percent reduction in export incentives since July 2023, causing investment in the sector to stagnate.
Capital machinery imports for the textile and garment sectors fell by 37.87 percent and 12.44 percent, respectively, during the first seven months of the current fiscal year— a sign that manufacturers are no longer investing in growth.
The crisis in factory numbers is borne out by more granular data. A total of 113 garment factories ceased operations between January 2024 and March 2025, forcing over 96,000 workers out of jobs, according to BGMEA figures.
During the August 2024 to March 2025 window alone, 69 factories shut down, affecting 76,504 workers — highlighting an accelerating trend of closures.
Industry insiders cited multiple reasons behind the closures, including shrinking global orders, price pressures from international buyers, rising production costs, delayed payments, and political changes.
The labour fallout has been severe. Labour leader Nazma Akter, president of the Bangladesh Sommilito Garments Sramik Federation (SGSF), said more than 100,000 workers lost their jobs due to factory closures, with around 75,000 having managed to find new employment, while a significant number remain jobless.
Compounding the domestic difficulties is a challenging global trade environment.
Despite rising export volumes, relentless price pressure from buyers and escalating production costs are undermining the economic foundations of sustainable manufacturing in Bangladesh’s garment sector.
The average unit prices of apparel from Bangladesh to Europe fell by as much as 5.86 percent between January and September 2025, as buyers exerted downward pressure on manufacturers to reduce prices.
Several large factories that closed after the political transition in 2024 have attempted to reopen but remain entangled in bureaucratic processes, adding to frustration among factory owners who say the system is not responsive to the sector’s needs.
To arrest the decline, the BGMEA has placed a series of fiscal demands before the government ahead of the upcoming budget.
These include lowering the source tax on garment exports from 1.0 percent to 0.65 percent and maintaining it for the next five years, exempting the 10 percent income tax on cash assistance provided against exports, and implementing a 1 percent concessional duty on the import of solar PV system equipment to encourage renewable energy use.
At the NBR meeting, an industry representative warned that changing the corporate tax rate would erode the confidence of local and foreign entrepreneurs and go against the spirit of the recently concluded investment summit.
In response, NBR Chairman Abdur Rahman Khan reiterated the board’s commitment to eliminating discriminatory tax practices and reducing exemptions, saying the government wants to move away from ad hoc exemptions granted over the years.
Industry leaders and stakeholders have called for comprehensive support measures, including government subsidies, reduced interest rates on bank loans, and investments in alternative energy sources to give the sector a fighting chance at stabilising.
