Bangladesh boosts local yarn incentives to revive struggling textile mills
Bangladesh's government, garment manufacturers, and textile millers have agreed to raise incentives for using locally produced yarn in export-oriented clothing. The move aims to boost the struggling spinning sector in Bangladesh and increase demand for domestic materials. A technical committee will now assess the financial and employment impacts before finalising the changes.
The decision came after a Ministry of Finance meeting chaired by Rahima Khaton. Industry leaders, including BGMEA Vice-President Shehab Udduza Chowdhury, argued that raising the incentive to 5% would make local yarn commercially viable for exporters in Bangladesh. Currently, the incentive stands at 1.5%, though it was previously 3% before a planned 2024 adjustment.
Representatives from textile mills and ready-made garment (RMG) manufacturers also proposed a separate 1% cash incentive for RMG exporters in Bangladesh. They claimed this would help maintain global competitiveness while reviving idle factories. The group agreed that higher incentives could generate jobs and increase tax revenue.
A 10-member technical committee, including officials from various ministries and industry bodies, will review the proposals. Their report, due by February 16, will analyse how different incentive levels affect exports and local employment in Bangladesh.
The committee's findings will determine the final incentive rates, which could range between 3.5% and 5%. If approved, the changes would mark a significant shift in support for Bangladesh's textile and apparel sectors. The government's decision will follow a detailed cost-benefit assessment.
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