Bangladesh’s ready-made garment (RMG) sector could see a significant decline in exports to the European Union (EU) due to the EU-Vietnam Free Trade Agreement (EVFTA) and the country’s impending graduation from Least Developed Country (LDC) status, experts have warned. During a discussion organised by the research firm Research and Policy for Development (RAPID) in Dhaka, industry leaders emphasised the need for immediate policy reforms to counter these challenges.
Abdur Razzaque, chairman of RAPID, highlighted projections indicating that Bangladesh could experience a 20 per cent drop in its EU exports if proactive measures are not implemented. The expiration of the current duty-free access under the Generalised System of Preferences (GSP) following the 2026 graduation could lead to increased tariffs and further slow the country’s export growth.
Razzaque pointed out that while Bangladesh enjoys zero-duty benefits today, transitioning to the Standard GSP scheme could impose average tariffs of 9.5 per cent on apparel exports, 7 per cent on leather goods, and 5.8 per cent on processed food. Even eligibility for GSP+ benefits, which would typically provide preferential rates, may be jeopardized by new safeguard measures under the EU’s upcoming GSP regime.
The EVFTA poses a significant threat as it allows Vietnam to eliminate duties on 71 per cent of its goods immediately, with tariffs expected to reach zero by 2027. Bangladesh, while currently leading Vietnam in apparel exports, must enhance its export competitiveness amid these challenges, especially given Vietnam’s more diversified export portfolio.
Abu Sayed Belal, trade counsellor at the EU Delegation to Bangladesh, echoed Razzaque’s concerns, stating that Vietnam has successfully implemented reforms and streamlined processes that have positioned it favorably for foreign direct investment. In contrast, the protective measures of Bangladesh’s economy, while serving local manufacturers, may inhibit innovation and global market competitiveness.
Fazlee Shamim Ehsan, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), acknowledged that although export growth may decelerate, the overall volume is unlikely to decline. He pointed to potential shifts in orders to Bangladesh from countries facing labor shortages, such as China and Vietnam. However, he noted persistent issues such as unreliable banking services and inconsistent utility supplies that hinder the business environment.
Similarly, Anowar Hossain from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) stressed the critical need for reliable energy supplies, which continue to challenge productivity in the textile sector.
Calling for an adaptation to rapid global shifts and consumer preferences, Masrur Reaz, chairman of Policy Exchange Bangladesh, emphasised that traditional business practices will not suffice for sustained growth. He urged comprehensive reforms to enhance the country’s global competitiveness.
Ayesha Akhter, additional secretary at the commerce ministry’s Free Trade Agreement (FTA) branch, indicated that a potential FTA with the EU could serve as a “best possible opportunity” to mitigate the impacts of LDC graduation. The government is actively pursuing discussions with multiple countries, including China, Japan, and Indonesia, to bolster trade partnerships.
