Bangladesh’s Ready-Made Garments (RMG) sector, the backbone of its economy, is facing a severe crisis in 2025. Contributing 84% of total exports and employing 4.4 million workers, the industry is struggling with falling orders, rising costs, and global competition.
This article explores the key challenges behind the RMG crisis, its economic and social impacts, and possible solutions to revive the sector.
Current State of Bangladesh’s RMG Industry (2025)
Key Statistics:
- Export Earnings (2024-25): $42 billion (projected, down from $46 billion target)
- Growth Rate: 5% (lowest in a decade)
- Major Markets: EU (61%), USA (18%), UK (8%), Canada (3%)
- Workforce: 4.4 million (70% women)
Signs of Crisis:
✔ Order cancellations & reduced demand from Western brands
✔ Factory closures & worker layoffs
✔ Unpaid wages & labor unrest
✔ Rising production costs & shrinking profit margins
6 Major Reasons Behind the RMG Crisis in 2025
1. Global Economic Slowdown & Reduced Demand
- Recession fears in the US & EU reduce clothing purchases.
- Fast fashion brands (H&M, Zara) cutting orders by 15-20%.
- Bangladesh’s RMG exports grew only 5% in 2024, compared to 12% in 2022.
2. Rising Production Costs
- Energy & gas price hikes increase manufacturing costs.
- Minimum wage raised to ৳12,500 ($110), raising labor costs.
- Dollar crisis makes raw material imports (cotton, dyes) costlier.
3. Increased Competition from Vietnam, India & Turkey
- Vietnam’s exports to the US grew 12% (Bangladesh only 3%).
- India’s “Make in India” policy attracts Western brands.
- Turkey’s duty-free EU access gives it an edge.
4. Compliance & Safety Pressures
- EU’s new ESG (Environmental, Social, Governance) rules require costly upgrades.
- Buyers demand carbon-neutral factories, raising operational costs.
- Accord & Alliance inspections lead to factory shutdowns.
5. Political & Policy Uncertainty
- Upcoming national elections (2024-25) delay reforms.
- Delays in new stimulus packages for RMG exporters.
- Bank loan defaults by struggling factories.
6. Shift to Nearshoring & Automation
- US & EU brands prefer “nearshoring” (Mexico, Turkey, Eastern Europe) for faster delivery.
- Robotics & AI in garment manufacturing reduce reliance on cheap labor.
Impacts of the RMG Crisis on Bangladesh’s Economy
1. Decline in Export Earnings
- RMG exports may drop below $40 billion in 2025, hurting GDP growth.
- Trade deficit widens as imports remain high.
2. Factory Closures & Job Losses
- 300+ factories shut down in 2024, leaving 50,000+ workers unemployed.
- Unpaid wages & protests increase social unrest.
3. Banking Sector Risks
- RMG factory loan defaults strain banks.
- LC (Letter of Credit) crisis worsens due to dollar shortages.
4. Reduced Foreign Investment
- Buyers shift orders to Vietnam & India, reducing FDI in Bangladesh.
- Brands hesitate to invest due to compliance risks.
5. Social & Humanitarian Crisis
- Malnutrition & poverty rise among laid-off workers.
- Child labor risks increase as families struggle financially.
5 Solutions to Save Bangladesh’s RMG Industry
1. Diversifying Export Markets
- Target new markets (Japan, Australia, Latin America, Africa).
- Reduce reliance on the US & EU (currently 80% of exports).
2. Moving Up the Value Chain
- Produce high-end fashion (activewear, luxury garments) instead of basic items.
- Invest in design & branding to reduce dependency on Western buyers.
3. Government Support & Policy Reforms
- Tax breaks & cash incentives for struggling factories.
- Faster customs clearance & reduced port delays.
- Duty-free import of machinery to boost efficiency.
4. Embracing Sustainability & Digitalization
- Green factories & renewable energy to meet EU ESG standards.
- Automation & AI to cut costs and improve productivity.
5. Strengthening Worker Welfare & Skills
- Upskilling programs for workers to handle advanced machinery.
- Better wages & working conditions to prevent labor unrest.
Future Outlook: Can Bangladesh’s RMG Sector Recover?
Optimistic Scenario (2025-2026)
✅ Global demand recovers post-recession
✅ Bangladesh shifts to high-value garments
✅ New trade deals with non-traditional markets
→ Exports could rebound to $50 billion by 2026
Pessimistic Scenario (If Reforms Fail)
❌ Orders keep moving to Vietnam, India, Turkey
❌ More factory closures & job losses
❌ Social unrest & economic instability
→ RMG exports may stagnate at $38-40 billion
Conclusion
Bangladesh’s RMG industry is at a crossroads in 2025. While global economic challenges are unavoidable, diversification, sustainability, and policy reforms can help the sector survive.
Key steps needed:
✔ Reduce dependency on the US & EU markets
✔ Invest in high-value, eco-friendly production
✔ Government support for factories & workers
✔ Adopt automation & digital transformation
Without urgent action, Bangladesh risks losing its position as the world’s 2nd-largest garment exporter.
FAQs on Bangladesh’s RMG Crisis (2025)
Q1: Why is Bangladesh’s RMG industry in crisis?
A: Due to falling global demand, rising costs, competition from Vietnam/India, and compliance pressures.
Q2: How much does RMG contribute to Bangladesh’s economy?
A: 84% of total exports ($42 billion) and 12% of GDP.
Q3: Which countries are taking Bangladesh’s RMG orders?
A: Vietnam, India, Turkey, and Cambodia due to lower costs and better trade deals.
Q4: What is the future of Bangladesh’s RMG sector?
A: Recovery is possible with market diversification, sustainability, and automation.
Q5: How many workers depend on the RMG industry?
A: 4.4 million directly, with 20 million indirectly dependent.