The government is considering an additional 3.5% cash incentive on garment exports manufactured using locally produced yarn, a move aimed at supporting domestic spinning mills and providing relief to the country’s struggling textile sector.
The Ministry of Finance has given its initial consent to the proposal during a meeting attended by Finance Secretary Khairuzzaman Mozumder, Commerce Secretary Mahbubur Rahman, and representatives from the Bangladesh Textile Mills Association (BTMA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
At present, garment exporters receive a 1.5% cash incentive. If the proposed increase is approved, the total incentive would rise to 5%. Industry stakeholders believe the measure would encourage greater use of locally produced yarn and help mitigate the ongoing crisis faced by spinning mills.
Before a final decision is taken, a 10-member committee has been formed to assess domestic and international market conditions. The committee includes representatives from the Ministries of Finance and Commerce, BTMA, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), and BKMEA, and is expected to submit its recommendations within the next 10 working days.
On the same day, during a separate meeting with BGMEA leaders, the finance secretary said the government would release Taka 2,500 crore in outstanding cash incentives for the garment sector within the coming week. The total backlog of unpaid incentives in the sector currently stands at around Taka 6,000 crore.
BKMEA’s executive president said that following Bangladesh’s graduation from least developed country (LDC) status, direct cash incentives would no longer be permitted, making the remaining transition period critical for exporters.
With around seven months remaining, exporters have sought a higher incentive to address declining exports and rising inventories of unsold yarn at local spinning mills. While there is broad agreement on the proposed 3.5% increase, differences remain over BTMA’s proposal to withdraw bonded warehouse facilities for imported yarn in the 10 to 30 count range.
Due to these unresolved issues, the matter has been referred to the committee, and a resolution is now considered unlikely within the current government’s term.
A BTMA director said the proposed incentive could provide temporary relief to the textile sector but warned that illegal imports of yarn from neighbouring countries—through forged documents and false declarations—were severely affecting local mills. He added that such imports typically rise ahead of Eid and cautioned that unless these practices are curtailed, the sector’s difficulties would persist.
Meanwhile, a BGMEA vice president attributed recent tensions between textile and garment sector associations, including public disputes and press conferences, to actions taken by the commerce secretary. He alleged that recommendations on removing bonded facilities for yarn imports were made without consulting BGMEA and BKMEA, despite their direct involvement in yarn consumption.
He also said that Bangladesh’s garment exports had declined for six consecutive months, describing the trend as unprecedented. BGMEA has sought access to low-interest loans to prevent the closure of small and medium-sized garment factories amid the ongoing downturn.
