Published: 12:19 AM, 17 June 2026
Stabilizing Bangladesh’s RMG Sector in Times of Global Uncertainty
Bangladesh’s readymade garment (RMG) sector - long regarded as the backbone of the country’s export economy - is now entering a period of visible strain. The recent decline in export orders, coupled with rising production costs and persistent domestic bottlenecks, signals more than a temporary downturn. It reflects a structural vulnerability that requires urgent and coordinated policy responses.
The data emerging from industry leaders and the Export Promotion Bureau (EPB) paints a concerning picture. A year-on-year export contraction of over 5 per cent, a sharp drop in March shipments, and weakening order books for upcoming seasons collectively indicate that the sector is facing both cyclical and structural pressures. Given that RMG contributes roughly 85 per cent of Bangladesh’s export earnings and sustains millions of jobs, the stakes are exceptionally high.
The government, therefore, must respond with a carefully calibrated strategy that addresses immediate liquidity constraints while simultaneously laying the groundwork for long-term competitiveness.
At the global level, the challenges are largely demand-driven. Inflationary pressures in key markets such as the United States and the European Union have eroded consumers’ purchasing power. As a result, international brands are adopting conservative inventory strategies, reducing order volumes and pushing down prices. This shift is compounded by geopolitical uncertainties - from the Russia-Ukraine war to tensions in the Middle East - that have disrupted supply chains and increased freight and energy costs.
While these global factors are beyond Bangladesh’s direct control, their domestic impact can be mitigated through targeted policy interventions.
The first and most urgent area of action is financial support. The RMG sector is currently grappling with severe cash flow constraints, driven by rising input costs, delayed payments from buyers, and high domestic interest rates. The government should priorities the rapid disbursement of pending export incentives, highlighted by industry leaders. Delays in incentive payments effectively tighten liquidity at a time when firms are already under stress.
In addition, a temporary interest rate support mechanism could be introduced for export-oriented industries. This does not necessarily mean a blanket subsidy, but rather a targeted refinancing scheme through Bangladesh Bank that allows exporters to access working capital at concessional rates. Such measures would ease the immediate financial burden and help factories sustain operations without resorting to layoffs or capacity cuts.
Closely related to financing is the issue of trade facilitation. The reported difficulties in opening letters of credit (LCs) due to weaknesses in the banking sector are particularly alarming. Disruptions in LC operations directly affect the import of raw materials, thereby slowing down production cycles.
The government and the central bank must ensure that banks remain adequately liquid and capable of supporting trade transactions. Strengthening regulatory oversight and, where necessary, providing liquidity support to banks will be essential to maintain confidence in the financial system.
Energy supply represents another critical bottleneck. Gas shortages and rising fuel costs are not only increasing production expenses but also reducing capacity utilization by as much as 20–25 per cent in some cases. This is a structural issue that cannot be ignored. In the short term, the government may need to prioritize gas allocation for export-oriented industries, recognizing their strategic importance. In the medium term, investments in energy infrastructure - particularly LNG terminals and renewable sources - must be accelerated to ensure a more reliable and cost-effective supply.
Transport and logistics inefficiencies further compound the problem. Rising freight costs and longer lead times reduce Bangladesh’s competitiveness in a market where speed and reliability are increasingly critical. Policy efforts should focus on improving port efficiency, reducing customs clearance times, and investing in multimodal transport systems. Even incremental improvements in logistics performance can significantly enhance the sector’s attractiveness to global buyers.
However, addressing cost pressures alone will not be sufficient. The RMG sector must also adapt to changing global demand patterns. The current model - heavily reliant on large volumes of low-margin basic apparel - is becoming increasingly vulnerable. Buyers are diversifying sourcing destinations and demanding higher value-added products with shorter lead times and greater compliance standards.
This calls for a strategic shift towards product diversification and upgrading. The government can play a catalytic role by supporting investment in technology, design capabilities, and skill development. Incentives for producing high-value garments, technical textiles, and sustainable apparel could help the industry move up the value chain. Collaboration between industry bodies such as the Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Knitwear Manufacturers and Exporters Association, along with academic and training institutions, will be crucial in this regard.
Market diversification is equally important. Bangladesh’s heavy dependence on the EU and US markets exposes it to concentrated demand shocks. Expanding exports to non-traditional markets - such as East Asia, Latin America, Africa, and the Middle East - can help spread risk. The government should actively pursue trade agreements, reduce tariff barriers, and strengthen diplomatic and commercial ties with these regions. Export promotion initiatives, including trade fairs and buyer-seller matchmaking programs, should be intensified to support this effort.
At the same time, compliance and sustainability must remain central to Bangladesh’s RMG strategy. Global buyers are increasingly prioritizing environmental and social standards, and Bangladesh has made significant progress in factory safety and green manufacturing. Building on this foundation, the government can introduce incentives for energy-efficient technologies, waste reduction, and circular economy practices. Positioning Bangladesh as a leader in sustainable apparel could provide a competitive edge in a market where ethical considerations are becoming more prominent.
Another area that requires attention is exchange rate management. While a depreciating currency can, in theory, enhance export competitiveness, the reality for Bangladesh is more complex. The sector’s heavy reliance on imported inputs means that depreciation also raises production costs. A stable and predictable exchange rate policy - rather than sharp fluctuations - would be more beneficial for exporters, allowing them to plan and price their products more effectively.
Equally important is the issue of payment delays from international buyers. The reported increase in outstanding payments reflects a broader tightening of liquidity in global retail markets. The government could explore mechanisms such as export credit insurance and factoring arrangements to protect exporters from payment risks. Strengthening legal and financial frameworks for trade finance will help ensure that exporters are not unduly burdened by delayed receivables.
Labor stability and welfare must not be overlooked in this process. The RMG sector employs millions of workers, and any downturn has direct social implications. Ensuring timely wage payments, maintaining safe working conditions, and providing social protection measures during periods of reduced production will be essential to preserve social stability. At the same time, investing in workforce skills will enhance productivity and support the industry’s transition to higher value-added segments.
The RMG sector has been the cornerstone of Bangladesh’s economic transformation over the past decades. Safeguarding its future is not merely an economic imperative - it is a national priority. The policy choices made today will determine whether the sector continues to drive growth and employment or struggles to adapt to an increasingly complex global landscape.
Mehdi Rahman works in the
development sector. He also
writes on foreign trade and
monetary policies.
