The timing could hardly be more crucial. Bangladesh’s readymade garment (RMG) sector, the country’s export powerhouse, has been navigating rough waters. Export earnings have slipped, average unit prices have fallen, raw material imports have slowed, and nearly 400 factories have shut their doors over the past three years, as per the reports.
Bangladesh’s proposed FY2026-27 budget offers major relief to the apparel sector through tax cuts, lower import and export levies, support for MMF diversification, renewable energy incentives and reduced compliance burdens.
Will it be able to provide the much-needed thrust to the RMG sector which continues to grapple with multiple challenges?
Rising production costs, weak global demand and the looming challenge of graduating from Least Developed Country (LDC) status only added to the pressure.
Against this backdrop, the budget delivers several long-awaited measures that manufacturers have been demanding for years. Lower advance tax on industrial raw material imports promises to ease working capital pressures, while a cut in withholding tax on export cash incentives is expected to leave more money in exporters’ hands.
Further, reduced deposit requirements for tax appeals are expected to make dispute resolution less financially burdensome, providing much-needed breathing space for businesses.
Perhaps even more significant is the Government’s clear signal that it wants Bangladesh’s apparel industry to move beyond its traditional strengths. By removing the supplementary duty on synthetic woven fabric imports, the budget supports the country’s push into the rapidly expanding man-made fibre (MMF) segment, where global demand is growing much faster than conventional cotton apparel.
This opens fresh opportunities for Bangladeshi manufacturers to diversify into higher-value products such as sportswear, outerwear etc.
The budget also reflects a growing emphasis on sustainability. Duty exemptions on solar power equipment are expected to encourage factories to invest in renewable energy, reducing dependence on increasingly expensive conventional power. Additional allocations for the energy sector could also improve gas supply, a persistent concern for manufacturers relying on captive power generation.
Equally welcome are reforms aimed at cutting the red tape. The exemption of annual bond audits for fully export-oriented garment factories, expansion of online tax filing and greater use of private laboratories for product testing all promise to reduce delays, compliance costs and bureaucratic hassles that have long frustrated exporters.
However, the industry’s applause comes with a note of caution. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has reportedly welcomed the budget while urging the Government to address some critical unresolved issues, including reducing the export source tax, eliminating the remaining taxes on cash incentives, removing double taxation on subcontracting, and protecting existing corporate tax rates.
Except for a few odd issues, the budget overall appears to provide the apparel industry with a stronger policy foundation as it grapples with global headwinds and prepares for a post-LDC future.
Fibre2Fashion News Desk (DR)
