Bangladesh's RMG Sector Faces Uncertainty as LDC Graduation Looms
Bangladesh's trade bodies, including the International Chamber of Commerce, have urged the government to defer the country's graduation from the Least Developed Countries (LDC) group. This comes as the government has spent Tk 14,000 crore in cash subsidies and tax rebates for exporters in the 2024-25 financial year, with the readymade garment (RMG) sector being the primary beneficiary.
Upon graduation, Bangladesh must withdraw these cash subsidies and tax benefits as per World Trade Organisation rules. This has raised concerns among exporters, particularly RMG manufacturers, who fear the end of these incentives. The Dhaka South City Corporation (DSCC) has also called for a postponement of graduation by three to five years, citing challenges such as port inefficiency, customs procedure hassles, and energy shortages.
The government initially planned to withdraw cash subsidies by January 2026, but due to pressure from businesses, this has been extended until November 24, 2026. The RMG sector, which accounts for over 80% of Bangladesh's exports, will face significant challenges during this transition.
The government has spent a substantial amount on cash subsidies and tax rebates to support exporters, with the RMG sector being the primary beneficiary. As Bangladesh prepares to graduate from the LDC bloc, it must address the concerns of exporters and navigate the challenges that lie ahead. The extension of the cash incentive regime until 2026 provides some breathing room, but the government must also work to improve infrastructure and streamline procedures to ensure a smooth transition.
