The country's readymade garments (RMG) sector is facing one of its toughest periods in recent years, with falling exports, rising production costs, factory closures, and financial instability putting immense pressure on manufacturers, Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said.

In an interview with The Daily Star, Hatem described the situation as "extremely alarming," blaming ineffective policies and a lack of banking support for worsening the crisis.

"Not only the RMG sector, but the entire economy, business environment, and flow of money are not functioning smoothly," he said. "We have raised these issues for a long time, but effective solutions are still missing."

Hatem acknowledged some government measures, including action against large-scale bank irregularities, partial control of inflation, and easing the dollar crisis, but said they do not address the deep structural problems of the export-driven RMG sector.

"The government has failed to introduce business-friendly policies in a timely and coordinated way. We are not against the government; we have praised several initiatives. But on key economic issues -- trade, banking, and industrial policies -- there has been little consultation with stakeholders like us," he added.

Over the past few years, major financial support for the sector has been withdrawn. Hatem cited the reduction of the Export Development Fund (EDF) allocation and the closure of the Tk 5,000 crore Pre-shipment Credit Fund in April 2024, which offered loans at just 5 percent interest.

"With borrowing costs now around 15-16 percent, businesses are struggling to survive. How can an industry survive under such intense financial pressure? We are fighting just to stay afloat," he said.

The removal of export incentives, part of Bangladesh's plan to phase them out ahead of its graduation from Least Developed Country (LDC) status, has added further pressure. "From February 1, 2024, previous export incentives were discontinued. The remaining 0.3 percent is almost unusable due to heavy paperwork and red tape. For us, it is effectively cancelled," Hatem said.

He said around 250-260 RMG factories have closed over the past 18 months, leaving more than 2.2 lakh workers unemployed. "Some factories have opened during this period, creating 30,000 to 40,000 jobs, but overall job loss remains very high," he added.

In Narayanganj, a major knitwear hub, individual factory closures have left thousands unemployed. "These are not just statistics. They represent families, livelihoods, and entire communities," he said.

GLOBAL MARKET PRESSURES AND BANKING CHALLENGES

The global economic climate has also become less supportive for Bangladeshi exporters. In the United States, the country's largest export market, inflation and weaker consumer purchasing power have reduced demand. "Buyers are cautious. They are uncertain about future tariffs and are taking a wait-and-see approach. As a result, we are receiving fewer orders," Hatem said.

Some US quarters have tried to impose parts of the general tariff structure -- about 20 percent -- on Bangladeshi goods, which could further undermine competitiveness.

Meanwhile, exporters from China and India, facing barriers in the US, have shifted focus to Europe, creating "unhealthy competition" and reducing Bangladesh's flow of orders.

As a result, many factories are running well below capacity. "Most are running 20-30 percent below capacity, and some are 40-50 percent lower than normal. This is not sustainable," Hatem said.

Hatem criticised the banking sector for failing to support industries in their time of need. "Banks are completely uncooperative, especially with small and medium-sized enterprises. In some cases, it's worse than neglect -- it's active obstruction," he said.

Bank credit limits have not been adjusted with changing exchange rates. "For example, a Tk 50 crore credit limit when the dollar was Tk 83 allowed LCs worth $6 million. Now that the dollar is Tk 122, I can only open LCs worth around $4 million with the same limit. Yet banks refuse to revise it," Hatem added.

He also highlighted long delays in back-to-back LC processing -- sometimes 20-30 days -- which disrupt production cycles. "Banks give all sorts of excuses -- margin issues, documentation problems, or that your limit is used up. It's the same story every time."

Exporters are struggling to access their own funds, with banks charging 15-16 percent interest on export proceeds needed for salaries. "Earlier, we could access this money interest-free for 30 days. Now, we are being charged even for that," he said.

Hatem also accused banks of manipulating exchange rates. "They buy dollars from us at lower rates but sell them back at higher rates when we need to make payments. This dual pricing is unfair."

He urged the government and Bangladesh Bank to act quickly. "We need targeted, sector-specific policies. Most importantly, the banking system needs urgent reform. If this trend continues, more factories will close, and the impact on the national economy will be severe," he said.

"This is not just about factories -- it's about exports, jobs, and the economic future. If we don't act now, we may not get a second chance," Hatem warned.