The Bangladesh Textile Mills Association has formally requested that the government maintain the existing 30 percent value-addition requirement on imports of garment raw materials. During a press conference held at the Gulshan Club in Dhaka, industry leaders warned that removing this mandate could severely impact the domestic primary textile sector. The association expressed concerns that such a policy shift would incentivize garment exporters to favor imported yarn over local supplies, potentially leading to a market saturated with foreign products.
In the proposed budget for the 2026-27 fiscal year, the government suggested eliminating the 30 percent value-addition rule to streamline business operations. However, Showkat Aziz Russell, president of the association, argued that this measure could jeopardize approximately $23 billion in existing investments within the industry. He noted that maintaining the Textile Value-Addition Rule is essential for preserving national competitiveness as the country prepares for LDC graduation.
Economic Pressures and Industry Challenges
The primary textile sector is currently facing significant operational hurdles. According to data provided by the association, 114 out of 234 spinning mills owned by its members have ceased operations since 2019. The facilities that remain active are reportedly running at only 60 to 70 percent of their total capacity. These difficulties are attributed to inconsistent gas supplies and the increasing presence of Indian yarn imports in the local market.
Reports indicate that Indian yarn imports saw a 22.07 percent year-on-year increase, reaching a value of $1.79 billion in the 2024-25 fiscal year. This follows a previous year where imports stood at $1.48 billion. Russell highlighted that regional competitors benefit from substantial government backing, including capital investment subsidies and interest assistance, allowing them to offer lower prices that pressure local textile millers.
Strategic Importance of Local Production
Industry experts emphasize that relying on foreign supply chains poses a risk of disruption. There have been instances where exporters from neighboring regions prioritized other international markets without notice, leading to local shortages and price spikes. As the nation approaches LDC graduation, meeting double-transformation requirements will become vital to retaining trade benefits. This transition necessitates a robust domestic capacity for producing garment raw materials to ensure long-term stability.
Proposed Fiscal Adjustments for Growth
To bolster the industry, textile millers have proposed a reduction in the corporate tax rate. Currently set at 27.5 percent, the association is seeking a decrease to 12 percent, maintained until 2030. This adjustment is intended to attract foreign direct investment and address what the association describes as a discriminatory tax structure. Currently, export-oriented garment factories benefit from rates between 10 and 12 percent, while the primary textile sector faces higher obligations following the expiration of a previous tax benefit in mid-2025.
The association maintains that the Textile Value-Addition Rule must remain in place to safeguard the massive investments made in the country and to ensure that the domestic industry remains a cornerstone of the national economy during its upcoming developmental transitions.
