In an effort to boost Bangladesh’s ready-made garment sector, the government has announced a historic move to extend cash incentives to sub-contract factories for the first time. Previously, only exporters operating in their own factories received such benefits. Under the new policy, sub-contract factories will now be able to access a share of the special cash support through their exporting partners.
Officials from the Finance Ministry explained that the decision aims to safeguard the survival of sub-contract factories and enhance the global competitiveness of Bangladeshi garments. This development is expected to bolster Bangladesh’s position in the lucrative US market, where the current tariff on Bangladeshi garments stands at 20%, compared to India’s 50% and China’s 30%, giving Bangladesh a competitive edge.
At present, around 10% of Bangladesh’s total garment exports are routed through sub-contract factories. Industry analysts believe this share could grow further following the implementation of the new incentives. While sub-contractors will not receive direct government support, they will benefit indirectly through their exporting partners.
The move has been welcomed by key industry bodies, including the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI). However, they have called for an increase in the level of cash assistance to sustain growth amid ongoing global challenges.
BGMEA President Faruque Hassan emphasised that despite disruptions caused by geopolitical crises, the Russia-Ukraine war, banking sector instability, and labor unrest, international garment prices have declined, exerting pressure on sector investment and expansion. He urged the government to raise incentives, especially as Bangladesh prepares to graduate from the Least Developed Countries (LDC) status, which will likely lead to a gradual reduction in support measures.
In this context, BGMEA has proposed increasing the special cash assistance from 0.3% to 1% and raising incentives for small and medium enterprises (SMEs) from 3% to 4% during the current fiscal year.
According to Bangladesh Bank, garment exports exceeded US $ 37 billion in the 2023-24 fiscal year. In the first ten months of the current 2024-25 fiscal year (July-April), exports reached US $ 40.20 billion, reflecting a growth of nearly 9.83% compared to the previous year.
Industry stakeholders believe that including sub-contract factories in the incentive scheme is a timely and positive step. Nonetheless, they stress that increasing incentive rates and addressing banking sector issues promptly are vital for ensuring the sector’s sustainable growth and maintaining Bangladesh’s competitive edge in the global market.
