Bangladesh's textile industry is sending a clear signal for policy relief to the government. A delegation from the Bangladesh Textile Mills Association (BTMA) recently held a meeting with the Prime Minister, with core demands focusing on tax cuts, energy subsidies, and export credit facilitation. This move comes against a backdrop where Bangladesh's textile export growth has slowed from double digits in 2022 to single digits in 2023, while production costs continue to rise due to electricity price hikes, natural gas shortages, and Taka depreciation.
Industry Pressure and Policy Demands
The most urgent item on BTMA's policy list is a reduction in corporate income tax for textile enterprises from the current 30% to 20%, along with expanded duty-free import quotas for export-oriented firms. On energy, the association calls for differentiated electricity tariffs for the textile sector and raising the priority of natural gas supply to the same level as the garment processing industry. These demands reflect widespread margin compression among mills—according to industry public data, the average net profit margin of Bangladesh textile enterprises has fallen from 8% in 2020 to below 4.5% in 2023.
The financing environment is equally challenging. Bangladesh central bank data shows that the textile industry's non-performing loan ratio rose to 12.3% in 2023, making banks generally cautious about new credit. BTMA therefore proposes establishing a dedicated textile industry fund and asks the central bank to relax collateral requirements for export credit. If implemented, these measures would directly improve mills' cash flow, but also test Bangladesh's fiscal and monetary policy.
Chain Reaction in Global Supply Chains
Bangladesh's textile woes are not isolated. Major textile exporting countries like Vietnam, India, and Pakistan are also facing order shrinkage and rising costs. However, Bangladesh's uniqueness lies in its heavy reliance on imported raw materials—the country imports about 2 million tons of cotton and 800,000 tons of chemical fibers annually, and the Taka's depreciation against the dollar has increased raw material costs by over 15%. This means even if BTMA secures policy support, it cannot fully offset the cost disadvantage from exchange rate volatility in the short term.
For international buyers, the bargaining power of Bangladesh textile mills is weakening. Some European and American brands have begun shifting orders from Bangladesh to African countries like Ethiopia and Kenya, which enjoy more favorable trade agreements and lower labor costs. However, Bangladesh's scale and technical expertise in knitwear and denim remain hard to replace in the short term, buying time for policy adjustments.
Window for Industrial Upgrading
BTMA's demand list also hints at directions for industrial upgrading. In the meeting, the association specifically mentioned seeking government support for textile enterprises to invest in wastewater treatment and energy-saving equipment, in response to the EU's upcoming Carbon Border Adjustment Mechanism (CBAM). This indicates Bangladesh's textile industry is shifting from pure "cost competition" to "compliance competition"—factories that fail to meet environmental standards may be locked out of the EU market.
Another notable trend is that Bangladesh textile mills are accelerating their shift to higher value-added products. BTMA data shows that in 2023, exports of functional fabrics and home textiles grew 12% year-on-year, far outpacing traditional apparel fabrics. This structural change requires supporting policies, including technical worker training, R&D tax credits, and tariff reductions on textile machinery imports.