The readymade garment (RMG) sector is grappling with a range of internal challenges, including rising interest rates, soaring energy costs, and unreliable gas and electricity supplies, all of which are taking a heavy toll on productivity and profitability.

This domestic turbulence coincides with external trade hurdles, including US President Donald Trump's higher tariffs, making international trade more difficult.

In this context, industry leaders urged the government to urgently address these domestic constraints.

At a roundtable titled "Impact of US Tariffs on Bangladesh's Garment Industry: Challenges and Opportunities", organised by The Daily Star at its office yesterday, business leaders warned that internal inefficiencies could cost Bangladesh dearly.

"When Bangladesh is facing international challenges, domestic issues are also squeezing our competitiveness," said Anwar-ul Alam Chowdhury, president of the Bangladesh Chamber of Industries (BCI).

"Gas prices have increased, and bank interest rates have doubled in three years. Even after paying more, industries still are not receiving sufficient gas or electricity," he added.

Chowdhury, a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), contrasted the situation with that in Pakistan, where electricity rates have dropped from 10.7 to 7.57 rupees per unit, and solar power has become cheaper.

"In Bangladesh, every cost of business is climbing. There has been no serious effort to cut expenses or improve competitiveness."

He cautioned that even without US tariffs, the deteriorating business environment could derail the industry.

AK Azad, a former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), voiced similar concerns.

He said senior US embassy officials had recently visited his factory and stressed the need to reduce non-tariff barriers (NTBs).

"For example, American exporters need six licences just to send goods to Bangladesh. That must go," said Azad.

Citing US import data, the business leader said that while China's garment exports to the US dropped nearly 40 percent, from $27.37 billion to $16.5 billion in 2024, Bangladesh's exports to the US rose by 35.9 percent during the same period, reaching $7.34 billion from $5.4 billion in 2018.

Vietnam's exports jumped by 22.6 percent to $15.3 billion, India's rose 23.3 percent to $3.95 billion, and Pakistan's soared by 58.6 percent to $1.75 billion.

Pakistan's performance was helped by currency depreciation and domestic raw material availability. "Pakistani suppliers don't agree to price cuts. Instead, they ask buyers to raise prices," Azad added.

Azad urged the government to call a meeting with all exporters to discourage undercutting on prices.Besides, he warned against complacency.

"Officials assume orders won't shift because Bangladesh is cheap. But Indian states like Odisha, Karnataka, and Bihar are offering hefty incentives to attract investment," he said.

In Odisha, for example, investors can receive a 40 percent subsidy on plant and machinery costs up to Rs 50 crore, a 25 percent rebate on land prices, and monthly wage subsidies of Rs 6,000 for female workers and Rs 5,000 for male workers for five years.

"Compare that to Bangladesh. For the past few days, there has been no gas pressure. We are entirely dependent on diesel," Azad said. "We have no gas, no electricity. And now, possibly, tariffs."

Orders have already started to drop since July–August last year, he said, with buyers hesitating to place new ones or shifting deliveries elsewhere.

He called on the government to enlist experienced diplomats and lobbyists, extend export incentives, and remove the source tax on export proceeds to help cushion the blow.

Faruque Hassan, another former BGMEA president, emphasised reducing lead times by importing raw cotton more efficiently.

"We've long discussed setting up a cotton warehouse. That would allow faster access, cut freight costs, and improve our advantage," he said.

Hassan noted that Trump's tariff announcement mentioned three issues: tariffs, currency manipulation, and trade barriers.

"We're not manipulating our currency," he said, adding that a previous non-tariff barrier related to US cotton fumigation had already been resolved.

The former BGMEA president said Bangladesh meets less than 2 percent of its cotton needs domestically.

He predicted that once the deep-sea port construction is over and it goes into operation, cotton prices would fall with larger vessels arriving directly.

"But our production costs must also come down," he said. "Interest rates are too high, utility costs and wages are rising, so rates must be adjusted."

He added that Vietnam sources many raw materials from China, while Bangladesh imports little to no cotton from there.

"In Vietnam and Mexico, Chinese inputs are re-exported to the US. We need to draw attention to these dynamics."

On market diversification, Hassan said that while 75 percent of exports once went to the US, the share has dropped to 19 percent.

"We've made gains in Australia, Japan, India and South Korea. But we must keep diversifying both markets and products."

Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, "When external threats such as Trump's tariffs are looming, we must address our internal problems, especially productivity. But we're not doing enough."

He pointed out that Bangladesh's productivity still lags 10–20 percent behind China and Vietnam.

"If we can narrow that gap, we'll be in a better position to tackle price and wage pressures."

Hoque acknowledged progress in technology adoption over the past decade. "But we must pick up the pace. Our rivals are moving faster, and the government must help accelerate improvements."
Regarding Trump's tariffs, he estimated that a 10 percent tariff on $2 billion worth of upcoming US orders would amount to $200 million in added costs.

If exporters share that equally with buyers, they will shoulder $100 million themselves.

"Large exporters might weather the storm, but small and medium manufacturers will struggle," he said, especially since banks have grown increasingly risk-averse.

"Big firms can negotiate with bank discount committees, small ones can't even get a meeting with a branch manager."

He urged policymakers to direct banks to offer more flexibility, saying that supply chain disruption could lead to labour unrest.

Negotiations for new orders are already slowing, Hoque said. "Uncertainty about what will happen after the 90-day tariff pause is making buyers cautious. If big exporters shift to Europe, that market could get crowded, triggering price drops there too."

Syed Sultan Uddin Ahmed, executive director of the Bangladesh Institute of Labour Studies (BILS), stressed the importance of diversification.

At the programme, he talked about the reputational damage to the local apparel industry caused by a few non-compliant factories. "If two or ten out of 2,500 don't pay wages, the entire industry's image suffers."

He urged the industry to distance itself from such actors and to build a unified platform involving international and national stakeholders, including the International Labour Organization (ILO).
"United voices make stronger cases," he added.

Humayun Rashid, managing director and CEO of Energypac Power Generation PLC, called Trump's tariff threat "terrible".

He said the government and BGMEA must jointly seek new markets, much like China did when it faced steep US duties.

"China redirected exports to Asia. We need to do the same, look at regional markets, South America and ASEAN," said Rashid.

He also called for public-private collaboration in policymaking.

The CEO said that poor infrastructure, including chronic traffic congestion, deters buyers from visiting factories.

Despite paying for utilities, factories are not getting enough gas or quality electricity, Rashid said.

He urged improvements at the port authority and better cooperation from tax officials.

"Bangladesh has brilliant entrepreneurs who built this industry against all odds. They deserve both respect and support."

He recommended shifting from basic garment manufacturing to producing higher-value goods like car seats, aircraft seats, and technical textiles.

"BGMEA should set up dedicated desks for Europe, Asia, South America and North America to monitor market trends and provide exporters with research support," Rashid said.

Mohammad Abdur Razzaque, chairman of local think-tank RAPID, said Bangladesh's competitiveness is slipping due to high inflation, currently around 10 percent, compared to just 2 percent in Vietnam.

"That's an 8-point loss in competitiveness each year," he said.

"The refusal to allow a market-based exchange rate is also hurting exporters," said the economist. "Greater flexibility could boost both exports and remittances."

He urged the government to continue supporting the industry through targeted subsidies.

Wrapping up the discussion, The Daily Star Editor and Publisher Mahfuz Anam said the paper is committed to addressing the issue.

"This is the time to be innovative," he said.

The event was moderated by The Daily Star Deputy Editor Arun Devnath.

Kihak Sung, chairman of Youngone Corporation, joined the event virtually.

The South Korean entrepreneur warned against relying on low-margin exports and highlighted Korea as an attractive market, where Bangladeshi goods are exempt from tariffs.

"If we're not making money, we shouldn't keep exporting," he said. "Profitability must come first. We need to move up the value chain and focus on high-quality, high-end clothing."

He emphasised the importance of timely deliveries and operational efficiency, noting that inefficiencies could hold Bangladesh back.

"Korea remains an opportunity. But we must be faster, better, and smarter if we want to compete. Bangladesh can build a strong supply chain to replace China in many areas," he added.