The Bangladesh Textile Mills Association (BTMA) has declared an indefinite shutdown of mills, leading to a dispute over duty-free yarn imports between textile millers and garment exporters. This development has sparked concerns regarding Readymade garments (RMG) exports in Bangladesh, especially with the national election approaching on February 12. RMG exports constitute around 85% of the country’s total export earnings, impacting over 10 lakh workers who may face uncertainties over wages and benefits, potentially resulting in labor unrest.
The Bangladesh Ministry of Commerce’s decision to impose duties on cotton yarn imports from India and other countries has once again stirred instability in the RMG sector. Economists caution that widespread closures in the textile industry could further strain an economy already grappling with various challenges. Commerce Secretary Mahbubur Rahman acknowledged the severity of the crisis and mentioned that the government is exploring potential solutions to address the textile industry’s issues.
Textile mill owners have threatened to close factories starting from February 1, citing prolonged government inaction in safeguarding the $23 billion textile industry. This move comes at a critical juncture, just ahead of the national election scheduled for February 12. BTMA President Showkat Aziz Russell emphasized the gravity of the situation, labeling it a national crisis and criticizing the sluggish policymaking process. He highlighted the disparity in decision-making speed between India and Bangladesh, expressing concerns over the impact on garment manufacturers if domestic textile mills collapse.
Russell further explained that any rise in production costs under the open costing method is eventually transferred to buyers. However, the potential collapse of domestic textile mills could compel garment manufacturers to import yarn from India at higher prices, diminishing their competitiveness in the long run. The disruption in yarn production could disrupt the garments supply chain, and challenges in loan repayment might escalate non-performing loans (NPLs) at a time when banks are already under pressure, with NPLs estimated at approximately 35%.
