The Bangladesh Textile Mills Association (BTMA) has submitted a bold proposal to the government ahead of the FY2026-27 budget, centered on four structural policy adjustments. This move reflects the growing pressure on Bangladesh's primary textile sector in global competition—while garment exports remain strong, weaknesses in upstream yarn and fabric production are becoming a critical bottleneck for the supply chain.
The Logic Behind the Policy Demands
BTMA's four proposals are not ad hoc. Lowering import duties on raw materials directly targets Bangladesh's limited capacity in processing man-made fibers and cotton. Currently, primary textile mills heavily rely on imported polyester chips and cotton, with high tariffs eating into already thin margins. Industry data shows that raw material costs account for over 60% of total production costs, with tariffs contributing 15%-20%.
The call for export subsidies reflects another reality: Bangladesh's primary textile products lack price competitiveness internationally. Although garments enjoy zero-tariff benefits under schemes like the EU's EBA, yarn and fabric exports do not receive similar support. BTMA wants the government to raise export subsidies to levels comparable with the garment sector to stimulate upstream export growth.
Infrastructure improvement and technical training address deeper systemic issues. Many mills suffer from unstable power supply and inefficient port logistics, while a shortage of skilled workers limits high-end fabric production. These measures, if implemented, may take years to show results but are essential for long-term industrial upgrading.
Transmission Effects on Bangladesh's Textile Chain
From a supply chain perspective, these four measures will trigger cascading effects. Lower raw material tariffs will directly reduce yarn and fabric production costs, potentially enhancing Bangladesh's price advantage in regional markets like India and China. However, if the policy only targets imported materials, it could discourage local cotton farming—though Bangladesh's domestic cotton output meets only 3%-5% of demand, so the impact on agriculture would be limited.
Export subsidies could reshape Bangladesh's textile export structure. Currently, garments account for over 80% of textile exports, while primary products (yarn and fabric) make up less than 10%. With subsidies, upstream mills will have more incentive to explore overseas markets, particularly supplying intermediate goods to China and Vietnam. For Chinese textile firms, this could mean cheaper imported yarns and fabrics, especially cotton and blended varieties.
But infrastructure and training improvements take time. Many mills still use looms from the 1990s. Even with increased government funding, grid expansion and port automation will require 3-5 years to show tangible results. This means in the short term, Bangladesh's primary textile sector will still rely on cost advantages rather than technological edge.
Implications for Chinese Textile Enterprises
For Chinese buyers and investors, BTMA's budget proposal sends multiple signals. First, Bangladesh is trying to transform from a pure garment processing base into a full-chain supplier. This could pose competition for Chinese fabric exporters—if local fabric capacity expands, China's exports of greige goods and synthetic fabrics to Bangladesh may face pressure. On the flip side, Chinese textile machinery makers may benefit: as Bangladesh mills upgrade, Chinese-made air-jet looms and twisters offer cost-effective alternatives to Japanese and European brands.
Second, tariff reductions will directly lower the cost for Chinese firms importing yarn from Bangladesh. Currently, China mainly imports cotton and blended yarns from Bangladesh. Every one percentage point drop in tariffs reduces import costs by about 1.5%. For coastal spinning mills, this could be an opportunity to adjust raw material sourcing.
Finally, enhanced technical training may improve the quality consistency of Bangladeshi textiles. Chinese buyers often complain about issues like color fastness and yarn uniformity. If the government pushes vocational training, these pain points could gradually ease, boosting acceptance of Bangladeshi textiles in the Chinese market.