Bangladesh Textile Mills Association Pushes Four Budget Measures to Bolster Upstream Sector

Bangladesh's textile growth engine is shifting from garment assembly to upstream yarn manufacturing, but this transition faces policy bottlenecks. The Bangladesh Textile Mills Association (BTMA) has proposed four core demands in the FY2026-27 budget proposal, directly targeting the competitiveness issues in the primary textile sector.

Policy Demands: Cost Reduction and Incentives

The four measures BTMA advocates focus on cost and policy aspects. First, further reduction of import duties on raw materials such as man-made fibers and cotton yarn—about 70% of raw materials for local yarn mills rely on imports, and high tariffs directly inflate production costs. Second, lowering manufacturing loan interest rates, currently ranging between 10% and 12%, higher than competitors like India and Vietnam. Third, stable subsidies for natural gas and electricity—energy accounts for over 25% of total yarn production costs, and price volatility squeezes margins. Fourth, adjusting export incentives by raising cash subsidies from the current 4% to 6% to offset international price competition.

Industry Context: Upgrading from Garments to Fabrics

Bangladesh is the world's second-largest garment exporter, but its self-sufficiency rate for upstream yarn and fabric is only about 40%, with high-end fabrics still imported from China and India. BTMA's budget demands reflect a strategic vertical integration—by lowering upstream manufacturing costs, encouraging local investment in spinning and weaving capacity, and reducing dependence on imported fabrics. Success would enhance Bangladesh's bargaining power in RCEP and EU markets.

Regional Competition: Reshaping South Asian Textile Landscape

Bangladesh's upstream policy adjustments will directly impact India, Pakistan, and China in the yarn market. Indian cotton yarn exporters are already feeling pressure—if Bangladesh cuts local yarn prices by 5%-8% through tariff reductions, it could capture about 15% of India's EU market share. Meanwhile, Vietnam and Indonesia are also grabbing high-end fabric market share through free trade agreements. Bangladesh's moves will accelerate the reshuffling of the South and Southeast Asian textile supply chain.

Practical Recommendations

For Buyers - Monitor the final FY2026 budget outcome in Bangladesh; if all four measures pass, local yarn prices may enter a downward trend in the second half of the year, so consider locking in long-term purchase agreements early - Compare price spreads between Bangladeshi and Indian cotton yarn; if the gap widens to over 10%, consider shifting some orders from India to Bangladesh - Watch for potential temporary raw material shortages during the BTMA-government negotiation period, and build inventory to hedge against short-term supply fluctuations

For Foreign Trade Companies - If your company exports man-made fibers or cotton to Bangladesh, be aware that lower import duties may compress margins; shift focus to high-value specialty fibers - As Bangladesh expands yarn capacity, it may reduce imports of premium Chinese yarns; Chinese suppliers should pivot to high-end blended or functional yarns - Monitor Bangladesh's supporting policies for textile machinery imports; if tax exemptions are introduced simultaneously, it could create export opportunities for domestic Chinese machinery manufacturers