Bangladesh’s readymade garment (RMG) industry is facing one of its most severe downturns in recent years, marked by falling exports, rising production costs, factory closures and mounting financial stress, according to Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
Hatem described the situation as “extremely alarming”, warning that the challenges extend beyond the garment sector to the wider economy. He said weak policy support and inadequate backing from the banking system had accelerated the crisis, adding that long-standing concerns raised by the industry had yet to translate into practical solutions.
While acknowledging that the government has taken steps to curb banking irregularities, ease inflationary pressures and stabilise the currency, Hatem said these measures have failed to address the structural weaknesses of the export-oriented RMG sector. He pointed to a lack of timely, coordinated and business-friendly policies, as well as limited engagement with industry stakeholders on key issues such as trade, banking and industrial strategy.
The sector has also been hit by the withdrawal of critical financial support in recent years. Hatem highlighted the closure of the Taka 5,000 crore Pre-shipment Credit Fund in April 2024, which had offered loans at a preferential 5% interest rate, alongside reductions in the Export Development Fund allocation.
According to BKMEA estimates, around 250 to 260 garment factories have shut down over the past 18 months, resulting in the loss of more than 220,000 jobs. Although some new factories have opened during the same period, creating an estimated 30,000 to 40,000 jobs, the net employment impact remains sharply negative. In Narayanganj, a major knitwear hub, factory closures have left thousands of workers without livelihoods, underscoring the broader social consequences of the downturn.
External pressures have further compounded the industry’s difficulties. Demand in the United States, Bangladesh’s largest export market, has weakened amid persistent inflation and reduced consumer spending. Uncertainty over future tariff policies has also made buyers more cautious, leading to fewer orders. Hatem warned that any move to impose elements of a general tariff structure of around 20% on Bangladeshi goods would further erode the country’s competitiveness.
At the same time, exporters from China and India, facing challenges in the US market, have shifted their focus to Europe, intensifying competition and reducing Bangladesh’s share of orders. As a result, many factories are operating well below capacity, with some running 40 to 50% under normal levels and most operating 20% to 30% below capacity, a situation Hatem described as unsustainable.
Hatem also criticised the banking sector for failing to support manufacturers during the crisis, citing prolonged delays of 20 to 30 days in processing back-to-back letters of credit, which he said were disrupting production cycles and exacerbating financial strain across the industry.
