Incentive packages alone will fail to deliver expected outcomes for Bangladesh’s ready-made garment (RMG) sector unless structural challenges are addressed, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) President Mohammad Hatem said.
Hatem identified three critical risks — high interest rates, energy uncertainty, and a weak business environment — as key barriers preventing the sector from fully benefiting from government support measures. He warned that without tackling these core issues, incentives cannot generate the desired results, urging policymakers to prioritize reforms alongside financial stimulus.
Industrial lending rates in Bangladesh have climbed to around 12–15%, significantly higher than competing apparel-producing countries such as Vietnam and China, where rates generally remain below 8%. The elevated cost of borrowing is constraining investment, particularly among small and medium-sized exporters, while increasing operational expenses. Many factories are delaying expansion plans and facing difficulties maintaining working capital, weakening their competitiveness in global markets.
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At the same time, uncertainty in gas and electricity supply continues to disrupt factory operations. Industry estimates suggest that many garment units are running at only 60–70% capacity due to intermittent energy shortages. This has increased production costs, extended lead times, and heightened the risk of order cancellations from international buyers who rely on timely delivery schedules.
The broader business environment remains fragile, with exporters citing delays in opening letters of credit, foreign currency shortages, and port congestion as persistent challenges. Bangladesh Bank data shows pressure on foreign exchange reserves has tightened import financing, affecting the availability of raw materials. Logistical inefficiencies and policy unpredictability are further complicating business operations.
The combined impact of these risks is already being reflected in export performance. Bangladesh’s apparel sector, which accounts for more than 80% of total export earnings, has shown signs of slowing in key markets. Industry data points to a decline in shipments to major destinations such as the United States in early 2025, while rising costs continue to erode profit margins.
With more than 4 million workers directly employed in the RMG sector, prolonged disruptions could have significant economic and social consequences. Hatem emphasized that only a coordinated policy response — including lower lending rates, stable energy supply, and improvements in the business climate — can ensure that incentive packages translate into sustainable growth for the industry.