The Bangladesh RMG sector is navigating a complex fiscal transition, with export earnings for H1, FY2025–26 (July–December) contracting by 2.19 per cent to $23.99 billion. This softening follows a high-growth period in FY25 and reflects a cooling global appetite in traditional Western strongholds. Data from the Export Promotion Bureau (EPB) highlights a particularly sharp downturn in December 2025, where shipments plummeted 14.25 per cent Y-o-Y. While the industry has historically relied on volume-driven growth, current market dynamics are forcing a shift toward specialized, high-margin categories to offset rising domestic overheads.
Knitwear contraction and home textile resilience
Structural shifts within the apparel basket show knitwear under significant duress, with exports declining by 3.22 per cent to $10.48 billion in H1, FY25-26. In contrast, Home Textiles emerged as a rare bright spot, posting a 2.93 per cent growth to reach $423 million. This segment’s resilience is attributed to a strategic focus on value-added bedding and towels, where Bangladesh maintains a distinct price advantage over rising-cost hubs like Vietnam and India. However, manufacturers face a ‘margin squeeze’ as global buyers demand lower unit prices while domestic production costs - fueled by a 30 per cent rise in energy and wage expenses over recent cycles - continue to climb.
Strategic competitiveness and the LDC graduation hurdle
The sector’s immediate challenge is maintaining its edge against India, which recently secured a reduction in US tariffs to 18 per cent, effective February 2026. Meanwhile, Bangladesh faces an average combined duty of 35 per cent in the American market. As the country approaches its 2026 graduation from Least Developed Country (LDC) status, the looming loss of duty-free access to the EU is accelerating the adoption of AI-driven sizing and automated cutting to enhance efficiency. Industry leaders emphasize, the ‘low-value trap’ of basic cotton tees is no longer sustainable, necessitating a pivot toward man-made fibers (MMF) and high-fashion technical apparel.
The RMG sector is Bangladesh’s economic backbone, contributing over 80 per cent of total export earnings and employing 4 million people. Key markets include the EU and the US, with a strategic focus on expanding into China and the Middle East. Following a record $48.28 billion in FY25, growth plans for 2026 center on high-value MMF diversification and sustainable green factory certifications.
