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We began the new year with hopes of an economic revival. While the economy has stabilized with rebounding exports and remittances, several internal challenges—such as law and order issues and sluggish private sector credit growth—continue to hinder progress.
The RMG sector, which faced worker unrest following the regime change, is gradually stabilizing. Notably, exports rebounded significantly in the first seven months of FY 2024-25 (July 2024 to January 2025), rising by 12% to USD 23.55 billion compared to the previous fiscal year.
Meanwhile, Trump’s inauguration as the new US president has reignited trade tensions with China and other major economies. Bangladesh has already benefited, as US buyers began diversifying away from China in anticipation of Trump’s victory. The holiday season further boosted apparel demand. According to OTEXA, Bangladesh’s monthly exports to the US grew by 18.4% in September, 26.7% in October, and 41.6% in November compared to the previous year.
Beyond increasing export orders, Bangladesh must also seize the opportunity to attract outbound investments from China. Inbound FDI can create new economic opportunities, facilitating technology transfer and strengthening the country’s backward linkages in textile manufacturing. By enhancing value addition and product diversification, Bangladesh can bolster its long-term competitiveness in the global market.
At the same time, Western consumers are tightening their budgets, shifting toward affordable apparel over premium alternatives. McKinsey’s State of Fashion 2025 report highlights that brands are diversifying their sourcing strategies, favoring Bangladesh, Vietnam, and India over China. Procurement officers are making strategic decisions to mitigate geopolitical risks and comply with evolving environmental regulations. Additionally, while customers increasingly prefer sustainable products, they remain reluctant to pay a premium for them.
Bangladesh now stands at a critical juncture as shifting policies in key export markets reshape global production. The Fourth Industrial Revolution offers opportunities for automation and productivity gains, but it also raises concerns over employment displacement. Furthermore, Bangladesh’s upcoming LDC graduation will phase out existing trade benefits, impacting cost competitiveness.
The EU’s sustainability policies are already influencing sourcing decisions, with brands prioritizing suppliers that incorporate recycled materials and lower carbon footprints. Local manufacturers that fail to adapt risk losing export opportunities. To stay competitive, Bangladesh must strengthen sustainable financing policies to encourage investment in circular and resource-efficient production. Currently, only 5% of pre-consumer textile waste is recycled—a percentage that must increase significantly to align with EU green policy standards.
Recognizing these challenges, LightCastle’s Bunon 2030 initiative—under the Oporajita program and supported by the H&M Foundation—aims to address key barriers to the sustainable growth of Bangladesh’s apparel sector. Our research explores critical policy challenges in worker well-being, circularity and decarbonization, international trade policies, and automation & 4IR. The initiative culminated in a publication that outlines key policy recommendations from industry dialogues. Moving forward, we look forward to collaborating with industry leaders, innovators, policymakers, and academics to build a more inclusive and sustainable apparel sector.
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