Garment manufacturers in Bangladesh used to buy fabrics and yarn from domestic suppliers. But now they are increasingly sourcing their raw materials from abroad. The reason: prices of domestic fabrics have gone up. As a result, production capacity of local textile mills remain unutilized.

Readymade garment units have been increasingly turning to other destinations, such as China and India, for sourcing. After the declaration of one-step GSP (generalised system of preferences) by the European Union, local readymade garment owners got the right to purchase cotton and cloth from any destination at competitive prices. Mills in Bangladesh which increased their production capacity following tremendous export growth in the financial year 2010-11 are the worst victims of the present situation.

Relaxation of rules of origin by the EU and low pressure of gas and electricity and some other bottlenecks have pushed up production cost of local fabrics and put the local millers in an uncertain situation. A considerable number of small and medium textile mills are facing the threat of closure.

Bangladesh achieved over 40 per cent export growth in the readymade garment sector in 2010-11 but due to global economic meltdown and the euro zone crisis, the sector could not maintain continuity and made only a marginal growth.