The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has broadly welcomed the proposed national budget for the fiscal year 2026-27, titled “Journey Towards a Democratic, Humane and Inclusive Economy,” presented by the Finance Minister. The apex body of the country’s apparel industry praised the government’s efforts to maintain macroeconomic stability, facilitate business operations, and ensure long-term policy consistency amid global and domestic economic challenges.
According to BGMEA, the proposed budget is both people-oriented and business-friendly, placing emphasis on overall development rather than solely focusing on economic growth. The association noted that priority has been given to key sectors such as education, healthcare, and social protection, while a 6.5 percent GDP growth target has been set for the next fiscal year. It also highlighted ten strategic priorities, including investment-driven employment, a production-oriented economy, deregulation, financial sector stability, and energy security, which are expected to support industrial growth and Bangladesh’s transition from the Least Developed Country (LDC) category.
Positive and Reform-Oriented Features
BGMEA appreciated several measures aimed at enhancing industrial competitiveness, promoting digitalization, and strengthening institutional reforms.
Among the notable initiatives are the government’s commitment to maintaining tax policy consistency for at least five years and reducing dependence on Statutory Regulatory Orders (SROs) through the introduction of risk-based audits. The association believes these steps will boost investor confidence and support industrialization.
The reduction of income tax deduction on cash incentives from 10 percent to 5 percent was also welcomed. Furthermore, BGMEA praised the introduction of automated and faceless tax refund systems and the proposal to treat tax deducted at source as advance tax rather than minimum tax, describing these measures as major relief for taxpayers.
The association also commended the government’s efforts to simplify business procedures through mandatory online single-window services, issuance of licenses within seven days, and company registration within 48 hours. Provisions to facilitate foreign investment, streamline repatriation of profits, and provide work permits to foreign experts within seven days were described as highly encouraging.
BGMEA lauded the budget’s focus on renewable energy and green industrialization. The proposal to maintain a zero percent tax rate on solar power generation until 2035, offer a 5 percent tax rebate on solar electricity bills, and exempt duties and taxes on solar sector imports until 2031 was termed a milestone for sustainable industrial development. The reduction of the tax rate on recycled products from 3 percent to 1 percent and the continuation of duty exemptions on ETP chemicals were also welcomed.
The association further appreciated reforms in the bond and VAT systems, including the withdrawal of the 10 percent supplementary duty on synthetic woven fabric imports, permission for non-bonded direct exporters to supply goods to deemed exporters, and the introduction of quarterly VAT returns instead of monthly submissions.
Additional support for environmentally friendly battery manufacturing, banking sector reforms, equal competition among investors, and tax-free turnover thresholds for SME, women, and disabled entrepreneurs were also cited as positive measures. BGMEA noted that several important policy proposals had been introduced to promote industrial and export diversification in sectors such as pharmaceuticals, information technology, and electronics.
Concerns Over the Apparel Sector’s Current Challenges
Despite welcoming the reform-oriented measures, BGMEA emphasized that the ready-made garment (RMG) industry is currently facing significant challenges and requires additional policy support.
The association noted that due to the global economic slowdown and rising domestic production costs, apparel export earnings declined by 3.41 percent during the current fiscal year, while average unit prices fell by 1.55 percent and back-to-back letters of credit for raw material imports decreased by 7.93 percent. These challenges have reportedly led to the closure of nearly 400 garment factories over the last three years.
BGMEA’s Key Recommendations
To help the sector overcome the ongoing crisis, BGMEA urged the government to incorporate several recommendations into the final budget.
The association called for reducing the source tax on apparel exports from the existing 1 percent to 0.65 percent and maintaining the rate for the next five years to ensure policy stability.
Although welcoming the reduction of income tax on cash incentives from 10 percent to 5 percent, BGMEA requested a complete waiver considering the industry’s liquidity constraints.
It also demanded the removal of the double source tax imposed on subcontracting activities to support small and medium-sized factories and sought further simplification of VAT exemption procedures.
BGMEA stressed the need to ensure that the preferential corporate tax rates of 12 percent for apparel manufacturers and 10 percent for green factories are not increased under other income-related assessments.
In addition, the association urged the withdrawal of the proposed 5 percent import duties on Polyester Staple Fibre (PSF), PVC Resin, and PET Resin, citing the growing importance of man-made fiber-based apparel exports.
Ensuring Competitiveness in the Post-LDC Era
BGMEA reiterated that the garment industry remains the country’s largest source of foreign exchange earnings and one of the biggest generators of employment. To remain competitive after Bangladesh’s graduation from LDC status, the association emphasized the importance of reducing business costs, ensuring uninterrupted and affordable gas and electricity supplies, and further simplifying customs and port procedures.
Expressing optimism, BGMEA said it hopes that Prime Minister and the Finance Minister will consider the industry’s reasonable proposals in line with the budget’s broader investment-friendly and reform-oriented objectives.
