Bangladesh’s Garment Sector at a Crossroads: Tariff Relief, Wage Pressures, and the Quest for Long-Term Competitiveness
By: Rajiv Kamrul Huq, Managing Director, Aspire Garments Ltd.
Introduction
Few industries in the world embody both resilience and fragility as much as Bangladesh’s ready-made garment (RMG) sector. From the bustling factory floors of Gazipur, Savar and Ashulia to the export warehouses in Chattogram, garments stitched in Bangladesh find their way to wardrobes across Europe, North America, and beyond.
The statistics are staggering: the sector employs around 4 million workers—most of them women—provides livelihoods for countless families, and contributes over 80% of Bangladesh’s total export earnings. It has made Bangladesh the second-largest garment exporter in the world, trailing only China.
But behind the “Made in Bangladesh” label lies a sector at a turning point. Rising wages, shifting trade policies, volatile input costs, and heightened global competition are reshaping the landscape. A recent breakthrough in U.S. trade negotiations has given the industry breathing room and even a competitive edge against regional rivals like India and China. Yet the story is not one of triumph alone—it is also about the urgent reforms needed to secure a sustainable and fair future for both businesses and workers.
Wage Hikes and Worker Realities
At the heart of the industry are its workers, whose wages have long been a subject of debate. In late 2023, the Bangladeshi government announced a 56% increase in the minimum wage—raising it from about 8,300 taka (US $75) to 12,500 taka (US $113) per month.
In 2024, another milestone followed. After tense negotiations among government officials, factory owners, and labour unions, the annual wage increment was raised from 5% to 9%. This means workers are now entitled to automatic yearly increases in their base pay, a significant change that offers greater wage predictability.
For workers, these moves were a partial victory. For factory owners, they represented higher fixed costs at a time when profit margins were already razor-thin. “We want to pay fair wages,” one Dhaka-based factory owner told a trade roundtable, “but if international buyers don’t increase prices, it becomes nearly impossible to survive.”
Cost Pressures and the Buyer Dilemma
The central challenge for the industry is a familiar one: costs rise at home, but prices paid by international buyers often do not. Energy and fuel costs have been volatile; shipping disruptions following global crises have pushed logistics expenses upward; and now, higher wages add another layer of pressure.
The problem is compounded by the nature of global fashion retail. Big-name brands—whether based in London, New York, or Paris—typically dictate terms. They push suppliers to deliver faster, cheaper, and at higher volumes, while keeping wholesale prices stagnant. For many factories in Bangladesh, particularly small and medium-sized enterprises, this imbalance has become a source of existential stress.
Tariff Breakthrough: A New Competitive Edge
Amid these challenges, one development has given Bangladesh a strategic edge. The United States, a key export market, had initially proposed 35–37% tariffs on Bangladeshi garments—a level that would have crippled exporters. After tough negotiations, the rate was settled at 20%.
While still a significant cost, this tariff is lower than those faced by major competitors:
- India: 25–50%
- China: often higher, especially for sensitive apparel categories
- Myanmar & others: also subject to steep duties
The result is that Bangladesh is now more competitive in the U.S. market than both India and China. U.S. retailers, under pressure from their own tariff burdens and inflationary challenges, have already begun shifting more orders to Bangladesh. Industry insiders report new buyers visiting Dhaka, scouting suppliers who can meet both volume and compliance demands.
This tariff advantage, however, is a window of opportunity—not a permanent guarantee. To sustain it, Bangladesh must address its structural weaknesses.
Competition and the Race for Speed
Vietnam, India, Turkey, and even smaller players like Cambodia are racing ahead in logistics, efficiency, and product diversification. For example, Vietnam’s proximity to key shipping lanes and its investment in high-tech garment facilities allow it to serve the fast-fashion model with shorter lead times. Turkey’s geographic closeness to Europe makes it a preferred supplier for rapid replenishment cycles.
Bangladesh, by contrast, still struggles with port congestion, energy shortages, and over-reliance on basic apparel categories such as t-shirts and sweaters. These products are vulnerable to price wars, leaving factories trapped in the low-margin game.
Efficiency, Automation, Utility and Worker–Management Relations
Long-term competitiveness will not come from tariffs alone. The future of Bangladesh’s garment sector depends on a transformation in how factories operate:
- Efficiency Gains: Factories must invest in leaner production processes, reduce waste, and adopt global best practices in supply chain management.
- Automation: While the industry has traditionally relied on low-cost labor, automation in cutting, sewing, and finishing is becoming essential. Smart adoption of technology can boost productivity, offset rising wages, and open the door to more complex, higher-value products.
- Worker–Management Dialogue: Social stability is just as critical as economic reform. Stronger communication, fairer contracts, and investment in worker welfare can reduce disruptions and strengthen the industry’s global reputation for responsible production.
- Uninterrupted Utility Supply: Bangladesh struggles with frequent power outages and low to zero gas pressure. Only by ensuring a constant supply of power and gas to the industries would result in significant improvements in productions and enable factories to remain competitive.
These four pillars—efficiency, automation, utility and improved relations—are arguably as important as tariff advantages in determining the sector’s long-term trajectory.
Beyond the U.S. and EU: Diversifying Markets
Over 70% of Bangladesh’s garment exports go to just two markets: the European Union and the United States. This dependence leaves the industry vulnerable to external shocks, whether economic downturns or political disputes. Diversifying exports to Asia, the Middle East, and Africa is no longer optional—it is a strategic necessity.
Markets like Japan, South Korea, Saudi Arabia, and South Africa are showing growth potential. Targeting these regions will require adapting product lines, understanding new consumer preferences, and building new trade relationships.
Conclusion: Turning a Crisis into Transformation
Bangladesh’s garment sector stands at a crossroads. The 56% wage hike and 9% annual increments represent long-overdue recognition of workers’ contributions. The 20% tariff deal with the U.S. offers a competitive advantage over India and China, opening new commercial doors. Yet, these gains are fragile without deeper reforms. The way forward is clear: improve efficiency, adopt automation, strengthen worker–management relations, and diversify both products and markets. With these steps, Bangladesh can turn today’s pressures into a platform for sustainable growth—ensuring that “Made in Bangladesh” remains not just a global label, but a global success story for decades to come.
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By: Rajiv Kamrul Huq, Managing Director, Aspire Garments Ltd.
Introduction
Few industries in the world embody both resilience and fragility as much as Bangladesh’s ready-made garment (RMG) sector. From the bustling factory floors of Gazipur, Savar and Ashulia to the export warehouses in Chattogram, garments stitched in Bangladesh find their way to wardrobes across Europe, North America, and beyond.
The statistics are staggering: the sector employs around 4 million workers—most of them women—provides livelihoods for countless families, and contributes over 80% of Bangladesh’s total export earnings. It has made Bangladesh the second-largest garment exporter in the world, trailing only China.
But behind the “Made in Bangladesh” label lies a sector at a turning point. Rising wages, shifting trade policies, volatile input costs, and heightened global competition are reshaping the landscape. A recent breakthrough in U.S. trade negotiations has given the industry breathing room and even a competitive edge against regional rivals like India and China. Yet the story is not one of triumph alone—it is also about the urgent reforms needed to secure a sustainable and fair future for both businesses and workers.
Wage Hikes and Worker Realities
At the heart of the industry are its workers, whose wages have long been a subject of debate. In late 2023, the Bangladeshi government announced a 56% increase in the minimum wage—raising it from about 8,300 taka (US $75) to 12,500 taka (US $113) per month.
In 2024, another milestone followed. After tense negotiations among government officials, factory owners, and labour unions, the annual wage increment was raised from 5% to 9%. This means workers are now entitled to automatic yearly increases in their base pay, a significant change that offers greater wage predictability.
For workers, these moves were a partial victory. For factory owners, they represented higher fixed costs at a time when profit margins were already razor-thin. “We want to pay fair wages,” one Dhaka-based factory owner told a trade roundtable, “but if international buyers don’t increase prices, it becomes nearly impossible to survive.”
Cost Pressures and the Buyer Dilemma
The central challenge for the industry is a familiar one: costs rise at home, but prices paid by international buyers often do not. Energy and fuel costs have been volatile; shipping disruptions following global crises have pushed logistics expenses upward; and now, higher wages add another layer of pressure.
The problem is compounded by the nature of global fashion retail. Big-name brands—whether based in London, New York, or Paris—typically dictate terms. They push suppliers to deliver faster, cheaper, and at higher volumes, while keeping wholesale prices stagnant. For many factories in Bangladesh, particularly small and medium-sized enterprises, this imbalance has become a source of existential stress.
Tariff Breakthrough: A New Competitive Edge
Amid these challenges, one development has given Bangladesh a strategic edge. The United States, a key export market, had initially proposed 35–37% tariffs on Bangladeshi garments—a level that would have crippled exporters. After tough negotiations, the rate was settled at 20%.
While still a significant cost, this tariff is lower than those faced by major competitors:
- India: 25–50%
- China: often higher, especially for sensitive apparel categories
- Myanmar & others: also subject to steep duties
The result is that Bangladesh is now more competitive in the U.S. market than both India and China. U.S. retailers, under pressure from their own tariff burdens and inflationary challenges, have already begun shifting more orders to Bangladesh. Industry insiders report new buyers visiting Dhaka, scouting suppliers who can meet both volume and compliance demands.
This tariff advantage, however, is a window of opportunity—not a permanent guarantee. To sustain it, Bangladesh must address its structural weaknesses.
Competition and the Race for Speed
Vietnam, India, Turkey, and even smaller players like Cambodia are racing ahead in logistics, efficiency, and product diversification. For example, Vietnam’s proximity to key shipping lanes and its investment in high-tech garment facilities allow it to serve the fast-fashion model with shorter lead times. Turkey’s geographic closeness to Europe makes it a preferred supplier for rapid replenishment cycles.
Bangladesh, by contrast, still struggles with port congestion, energy shortages, and over-reliance on basic apparel categories such as t-shirts and sweaters. These products are vulnerable to price wars, leaving factories trapped in the low-margin game.
Efficiency, Automation, Utility and Worker–Management Relations
Long-term competitiveness will not come from tariffs alone. The future of Bangladesh’s garment sector depends on a transformation in how factories operate:
- Efficiency Gains: Factories must invest in leaner production processes, reduce waste, and adopt global best practices in supply chain management.
- Automation: While the industry has traditionally relied on low-cost labor, automation in cutting, sewing, and finishing is becoming essential. Smart adoption of technology can boost productivity, offset rising wages, and open the door to more complex, higher-value products.
- Worker–Management Dialogue: Social stability is just as critical as economic reform. Stronger communication, fairer contracts, and investment in worker welfare can reduce disruptions and strengthen the industry’s global reputation for responsible production.
- Uninterrupted Utility Supply: Bangladesh struggles with frequent power outages and low to zero gas pressure. Only by ensuring a constant supply of power and gas to the industries would result in significant improvements in productions and enable factories to remain competitive.
These four pillars—efficiency, automation, utility and improved relations—are arguably as important as tariff advantages in determining the sector’s long-term trajectory.
Beyond the U.S. and EU: Diversifying Markets
Over 70% of Bangladesh’s garment exports go to just two markets: the European Union and the United States. This dependence leaves the industry vulnerable to external shocks, whether economic downturns or political disputes. Diversifying exports to Asia, the Middle East, and Africa is no longer optional—it is a strategic necessity.
Markets like Japan, South Korea, Saudi Arabia, and South Africa are showing growth potential. Targeting these regions will require adapting product lines, understanding new consumer preferences, and building new trade relationships.
Conclusion: Turning a Crisis into Transformation
Bangladesh’s garment sector stands at a crossroads. The 56% wage hike and 9% annual increments represent long-overdue recognition of workers’ contributions. The 20% tariff deal with the U.S. offers a competitive advantage over India and China, opening new commercial doors. Yet, these gains are fragile without deeper reforms. The way forward is clear: improve efficiency, adopt automation, strengthen worker–management relations, and diversify both products and markets. With these steps, Bangladesh can turn today’s pressures into a platform for sustainable growth—ensuring that “Made in Bangladesh” remains not just a global label, but a global success story for decades to come.