Ashish Wagh, Mon Dec 29,
Bangladeshi textile and apparel organizations want domestic yarn incentives to be restored.
Bangladesh’s ready-made garment (RMG) exporters and textile millers have jointly intensified calls for the restoration and strengthening of government cash incentives on the use of locally produced yarn, warning that the current policy threatens the stability of the country’s textile–apparel supply chain and export competitiveness.
In a coordinated appeal, leaders from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Textile Mills Association (BTMA) have urged the Ministry of Finance to reinstate the cash incentive on local yarn at 5%. The request follows a recent reduction in the incentive to 1.5%, implemented as part of Bangladesh’s transition out of least developed country (LDC) status.
Industry representatives said the sharp cut had raised input costs for exporters and weakened the backward linkage textile sector. They argued that restoring a higher incentive would boost local value addition, which is increasingly critical for maintaining competitiveness under emerging tariff regimes, including the United States’ reciprocal tariff framework.
In a letter dated 24th December, BTMA president Shawkat Aziz Russell highlighted a combination of domestic and global pressures facing the sector, including geopolitical uncertainties arising from the Russia–Ukraine and Israel–Palestine conflicts, depreciation of the taka, significant increases in gas tariffs and labour costs, and persistent disruptions to energy supplies. The association has also sought an extension of the export cash incentive facility under Bangladesh Bank FE Circular No. 28, proposing that its expiry be moved from 31st December 2025, to 31st December 2028.
Exporters have further proposed a 10% direct incentive for spinning mills to revive local yarn production and counter competitive disadvantages posed by cheaper imports, particularly from India. Domestic mills are reported to be grappling with large volumes of unsold inventory, forcing many to scale back production and operate well below installed capacity.
Industry leaders cautioned that without a restoration of meaningful incentives, the backward linkage industry could weaken further, potentially disrupting yarn supplies to RMG manufacturers. Together, the textile and apparel sectors account for nearly 85% of Bangladesh’s total export earnings and play a critical role in foreign exchange retention.
Stakeholders have also pointed out that World Trade Organization rules allow graduated economies to maintain transitional support measures for a defined grace period. They questioned the rationale behind Bangladesh’s plans for a near-total withdrawal of cash incentives at a time when competing textile-exporting nations continue to extend government support to their industries.
With the fiscal year-end approaching, exporters and millers are closely monitoring the government’s response, viewing the incentive framework as a decisive factor in sustaining export growth and reinforcing Bangladesh’s industrial base.