Experts call for trade deals as RMG faces rising global pressure

Highlights

• RMG sector faces mounting global cost and trade pressure
• EU FTA urged as LDC graduation risks loom
• New EU sustainability rules to shift heavy compliance burden to factories
• Middle East tensions threaten supply chains and export orders
• Soaring interest rates and energy insecurity squeeze industry survival

Bangladesh's readymade garment (RMG) sector is facing mounting pressure from global crises, shifting trade rules and rising costs, prompting experts to call for urgent trade agreements and structural reforms to sustain competitiveness.

The observations came today (2 May) at the closing ceremony of the Bangladesh International Textile, Knitting and Garment Industry Exhibition (BTKG) 2026, jointly organised by the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Inforchain Digital Technology Co Ltd.

Speakers warned that geopolitical tensions and supply chain disruptions could further reduce export orders and increase financial stress in the sector.

At a seminar titled "Geopolitical Conflicts and Global Supply Chain Disruptions: Implications for the RMG Industry", EuroCham Bangladesh Chairperson Nuria Lopez called for immediate negotiations on a free trade agreement (FTA) with the European Union.

She said Bangladesh's graduation from least developed country (LDC) status without a durable alternative to preferential market access would be a major setback.

"An FTA with the EU would offer a permanent and predictable framework, unlike complex and uncertain schemes such as GSP+ and should be treated as a national priority," she said.

Lopez noted that European regulations are reshaping global supply chains, particularly the Corporate Sustainability Due Diligence framework, which has been in force since 2024 and will extend to suppliers by 2027-2028. 

Although the legal obligation lies with buyers, the operational burden will fall on manufacturers, she said, stressing that non-compliance is not optional and that lagging countries risk losing competitiveness.

"This is no longer about ticking boxes. Due diligence requires full corporate governance, with owners and managing directors directly involved," she said, adding that traceability, environmental and chemical management, and digital systems are becoming integral.

She urged manufacturers to prepare early, warning that factories cannot bear compliance costs alone as requirements originate in buyer markets. Calling for shared responsibility among buyers, government and producers, she noted that small and medium enterprises are particularly vulnerable.

Lopez also highlighted a key contradiction, saying buyers continue to demand lower prices despite rising wages, energy costs and compliance expenses, and urged stronger, more data-driven negotiations. 

She further pointed to gaps in renewable energy policy, stressing the need for affordable storage and supportive fiscal measures.

Riad Mahmud, president of National Polymer Industries Ltd, said the sector is facing interconnected macroeconomic and structural challenges.

He said heavy dependence on imported raw materials and global disruptions were causing production gaps, halting operations and affecting a large labour-intensive workforce. He warned that the Middle East crisis could reduce future export orders, leading to underutilised factories and rising financial stress.

"We cannot ignore this reality. The cumulative impact could weaken both industry and banks and raise the risk of broader economic instability," he said.

Mahmud added that repeated reliance on government support is not sustainable and suggested targeted mechanisms, such as dedicated funds linked to specific disruptions, instead of blanket incentives. 

He also emphasised that long-term resilience depends on strengthening infrastructure and addressing widespread undercapitalisation in the manufacturing sector.

He urged policymakers to consider tax incentives, lower-cost economic zones and financial restructuring tools, including bonds or equity participation, to ease pressure on balance sheets. 

He also called for a shift towards capital market financing, noting that high bank interest rates and limited long-term lending capacity are constraining growth.

"If industries remain undercapitalised, banks will weaken, growth will slow, and the risk of unemployment and social unrest will rise," he said.

Bangladesh Employers' Federation Director Akhter Hossain Apurbo said the current disruptions represent a permanent structural shift rather than a temporary challenge, requiring changes in sourcing, inventory and energy management.

He said the era of just-in-time, low-cost sourcing is effectively over due to global uncertainties, including the crisis in the Middle East, which has disrupted supply chains.

"To remain competitive, manufacturers must maintain higher levels of raw material stock to ensure uninterrupted production and timely delivery," he added.

Apurbo said borrowing costs have surged from around 9% to as high as 14-15% within a short period, with hidden charges pushing effective rates to 16-17%.

He also highlighted energy security as a critical concern, noting that uninterrupted electricity and gas supply is essential for production, particularly in processes like dyeing, where disruptions increase costs through reprocessing.

He urged the government to prioritise both short- and long-term energy solutions, including accelerating solar and other renewable energy adoption. While solar panels are duty-free, key components such as lithium batteries remain heavily taxed, limiting wider use, he added.

At the closing ceremony, BKMEA President Mohammad Hatem thanked guests, partners and participants.

BKMEA Vice-President Mohammad Rashed moderated the event, while Inforchain CEO Spencer Lin was also present.

The four-day expo, inaugurated on 29 April, featured around 900 exhibitors from nearly 28 countries, including Canada, China, Taiwan, Belgium, France, Hong Kong, India, Indonesia, Japan, Vietnam, Malaysia, Turkey and the United Arab Emirates.

Across some 1,200 booths, exhibitors showcased innovations in textiles and garments, including advanced machinery, dyes and chemicals, knitting and weaving technologies, embroidery, cutting and sewing equipment and washing and dry-cleaning solutions.

The expo also hosted three seminars, including "Circular Fashion in Bangladesh: From Waste Crisis to Competitive Advantage", "Building Innovation Competitiveness for Reducing Cost and Increasing Value" and "Smart Wearable E-Textiles for Healthcare Monitoring".