Bangladesh’s export sector is entering a critical phase. Sluggish global demand, rising production costs, expensive financing, and persistent logistics bottlenecks are putting increasing pressure on exporters and raising concerns about the country’s ability to remain competitive in international markets.
Against this backdrop, the upcoming FY2026-27 national budget has outlined a series of reforms aimed at boosting exports, attracting investment, and improving trade facilitation.
While business leaders have welcomed several of the measures, many argue that the budget falls short of addressing the deeper structural challenges confronting exporters as Bangladesh prepares for life after graduation from the Least Developed Country (LDC) category.
Export Growth Losing Momentum
Bangladesh’s export performance has become increasingly volatile in recent years. Following the COVID-19 pandemic, export earnings surged by 37.4 percent in FY2021-22, surpassing $52 billion as global demand rebounded sharply.
That momentum, however, weakened in subsequent years amid geopolitical tensions, high global inflation, and foreign exchange pressures. Although exports recovered in FY2024-25, posting an 8.58 percent growth to reach $48.28 billion, concerns remain about the sustainability of that growth.
According to recent trends observed by the Export Promotion Bureau (EPB), export growth in the first half of FY2025-26 slowed compared with the previous year. While the ready-made garment (RMG) sector has shown signs of recovery in some key markets, exporters continue to face pricing pressure from international buyers and uncertainty over future orders.
The situation is even more challenging for non-RMG sectors such as leather, home textiles, agricultural products, and IT services, where export growth remains uneven.
Costs Continue to Rise
Exporters are currently navigating multiple challenges at once.
Industrial gas and electricity tariffs have risen significantly over the past few years, increasing manufacturing costs across sectors. Labor expenses and inland transportation costs have also climbed steadily.
At the same time, businesses are facing borrowing costs ranging between 12 and 15 percent—substantially higher than those in competing export destinations such as Vietnam and China.
Foreign exchange constraints have added further pressure. Many exporters continue to report difficulties in opening import letters of credit (LCs), resulting in delays in sourcing raw materials and disruptions to production schedules.
Logistics costs have also become a major concern. Increased container handling charges, higher off-dock and inland container depot (ICD) costs, and revised tariff structures at Chattogram Port have significantly raised the cost of moving goods.
Adding to the challenge is Bangladesh’s graduation from the LDC category in 2026, which will gradually reduce several preferential trade benefits that have supported export growth for decades.
Budget Focuses on Logistics and Trade Facilitation
The FY2026-27 budget seeks to address some of these challenges through a series of structural reforms focused on trade facilitation and investment.
One of the most significant proposals is the creation of a legal framework for Free Trade Zones (FTZs). The government plans to amend customs laws to allow duty-free import, storage, processing, packaging, and re-export of goods within designated zones. Policymakers believe this could strengthen Bangladesh’s position as a regional manufacturing and logistics hub.
The budget also proposes removing the existing 49 percent cap on foreign ownership in private off-docks and Inland Container Depots, a move expected to attract foreign investment and improve logistics services.
New regulations are also being planned to facilitate private-sector participation in air cargo operations. If implemented effectively, Dhaka, Chattogram, and Sylhet airports could gradually evolve into integrated logistics hubs, helping reduce export lead times.
In addition, the government intends to introduce a private port and terminal operator policy aimed at attracting greenfield investments and modern management practices to improve port efficiency.
These initiatives represent a notable shift toward addressing one of Bangladesh’s long-standing weaknesses—its logistics infrastructure.
Sector-Specific Support Continues
The budget also extends several industry-specific incentives intended to support export diversification.
Tax exemptions on raw material imports for consumer electronics manufacturing—including mobile phones, refrigerators, freezers, air conditioners, and washing machines—are proposed to continue until 2030.
Concessional facilities have also been retained for shipbuilding and dredger manufacturing industries, while the pharmaceutical sector is set to receive additional support through duty-free import facilities for 17 new raw materials.
To improve transparency in the bonded warehouse system, the government has proposed reducing the supplementary duty on synthetic woven fabric imports from 10 percent to zero, a measure aimed at preventing misuse of bond facilities while ensuring easier access to industrial inputs.
Industry Welcomes Reforms, Seeks Faster Action
Industry leaders have welcomed several of the proposed reforms, particularly those related to logistics.
Rafiq Chowdhury, Vice President of BGMEA, said private ICDs in Chattogram currently lack sufficient capacity to efficiently handle the growing volume of export cargo.
“The combined handling capacity of private depots remains inadequate compared to demand. To support future export growth, ICD capacity needs to be significantly expanded,” he said.
He added that reforms such as liberalizing foreign ownership rules, expanding Free Trade Zones, and encouraging investment in logistics infrastructure could positively impact the export sector if implemented effectively.
Sakeef Ahmed Salam, Deputy Managing Director of Asian Group and a BGMEA director, said exporters continue to face mounting pressures from rising production costs and uncertainty in global demand.
“The budget contains positive measures, including NBR automation, trade facilitation reforms, and continued export support. However, stronger and faster policy actions are still needed to fully address current challenges,” he said.
Incentives Shrink as Costs Increase
Exporters have also expressed concerns about the gradual reduction of cash incentives.
Only a few years ago, agricultural exporters received cash incentives of up to 20 percent. Under the current structure, incentives range from 0.30 percent to a maximum of 10 percent across 43 export sectors.
Imran Hosen, owner of agricultural exporter BD Trade, said the earlier incentive regime played a crucial role in creating new exporters and expanding Bangladesh’s presence in international markets.
“Export incentives helped many entrepreneurs enter the sector. Now that the maximum rate has been reduced to 10 percent, exporters are losing an important source of support at a time when production and logistics costs are rising,” he said.
