Bangladesh's textile industry is raising alarms over a budget proposal for fiscal year 2026 that would increase the import duty on polyester staple fiber (PSF) from 1% to 5%. While the 4-percentage-point hike appears modest, it could significantly impact the country's ambitious man-made fiber (MMF) expansion strategy. Bangladesh, the world's second-largest garment exporter, has long relied on cotton-based textiles, with MMF accounting for only about 25% of its fiber mix. The government's roadmap aims to raise that share to over 40% by 2025, making affordable PSF imports critical.
The Cost Implications
Bangladesh imports roughly 300,000 tons of PSF annually, primarily from China, India, and Southeast Asia. At current CIF prices of $800-1,000 per ton, the proposed 5% duty would add $32-40 per ton in costs. For a mid-sized weaving mill consuming 10,000 tons annually, that translates to an extra $320,000-400,000 in raw material expenses. This cost increase comes at a time when Bangladesh is trying to attract investment in MMF spinning and weaving capacity.
Supply Chain Ripple Effects
The duty hike would directly raise production costs for MMF fabrics, which are increasingly demanded by fast-fashion brands like H&M, Zara, and Uniqlo. Garment manufacturers face a dilemma: absorb the margin squeeze or pass costs to buyers. Compared to Vietnam, which maintains a 0% PSF import duty and has a well-integrated polyester supply chain, Bangladesh would lose price competitiveness. Sourcing managers may need to reevaluate their supplier portfolios, potentially shifting some MMF garment orders to Vietnam or China.
Policy Dynamics and Industry Response
The proposal is still under budget deliberation, and the final outcome remains uncertain. The Bangladesh Textile Mills Association has publicly opposed the hike, warning it could undermine export competitiveness and affect millions of textile workers. In 2019, the government actually reduced PSF duty from 5% to 1% to support MMF growth. The reversal reflects a tension between fiscal revenue needs and industrial policy goals. Large mills may explore backward integration into polyester chip production or long-term purchase agreements, while smaller players have limited options. Bangladesh's reliance on Chinese PSF imports also introduces geopolitical considerations; a duty hike could accelerate efforts to diversify sourcing from India and Southeast Asia.