Diversifying export: It's urgent
Major policy incentives incorporated in the budget for fiscal year (FY2026-27) to widen the country's export base are a welcome development. At a recent briefing, the Bangladesh Investment Development Authority (BIDA) informed business leaders that 10 more export-oriented sectors, including motorcycles, fish processing, diversified jute products, handicrafts and recycled textile products, would be allowed to import raw materials duty-free against bank guarantees without obtaining bond licences. The minimum 30 per cent value addition on goods produced with such imported inputs has also been withdrawn. Alongside these measures are a 14-day service guarantee for business approvals through a single window, automatic approval after expiry of the stipulated time, three-year bond licences and fast-track customs facilities. Evidently, the government has begun to address procedural barriers that have long discouraged new exporters.
But the urgency of export diversification has never been greater. According to provisional data of the Export Promotion Bureau (EPB), Bangladesh earned US$48 billion from merchandise exports in FY2025-26, 0.58 per cent below the previous year. Of that amount, the readymade garment (RMG) sector fetched US$38.70 billion, or 80.62 per cent of the total. So, despite decades of policies and speeches promising diversification, four out of every five export dollars still come from apparel. What happens when garment demand weakens, buyers force down prices, trade preferences disappear or a large market raises tariffs? The entire external sector then catches cold. This dependence is a structural risk to employment, foreign exchange earnings and macroeconomic stability.
In this connection, extending duty-free input facilities beyond traditional beneficiaries can lower entry costs for new exporters and release scarce working capital. Small and medium entrepreneurs, who cannot maintain a bonded warehouse or wait months for duty drawback, stand to gain in particular. Likewise, accepting reports from accredited private laboratories and simplifying tax, VAT and customs procedures should help. For exporters, time lost in obtaining a licence or clearing an input is as real a cost as tax. However, budget facilities do not automatically create competitive industries. They work only when customs decisions are predictable, energy supply is dependable, port delays are reduced and businesses can obtain affordable credit.
Removing the minimum value-addition requirement altogether also has a downside. The measure may help new exporters, but it could encourage import-and-re-export activities with little domestic processing. Worse still, duty-free inputs may be diverted to the local market unless the bank-guarantee system is backed by real-time digital tracking, risk-based audits and punishment for abuse. As Bangladesh moves towards graduation from the least developed country category, rules of origin in its major markets will become more, not less, important. So, the government should review how much local employment, technology transfer and net foreign exchange each beneficiary sector is creating. Export diversification cannot mean diversification of duty exemptions alone.
More importantly, equal access to exemptions is not equal opportunity. Apparel did not become a global export powerhouse merely because its entrepreneurs were energetic. It enjoyed bonded warehouses, back-to-back letters of credit, cash incentives, favourable taxation, export credit and sustained diplomatic attention over decades. Emerging sectors cannot catch up with only a customs concession and a pat on the back. Direct incentives should go to industries meeting measurable targets in export growth, local value addition, job creation, environmental compliance and entry into new markets. Such support may include low-cost credit, reimbursement of certification expenses, matching grants for design and technology upgrades and assistance in overseas branding. The incentives should be time-bound and subject to performance audits so that they do not turn into permanent rents.
Jute deserves special consideration in this regard. At a time when the world is searching for biodegradable alternatives to plastic, Bangladesh possesses the crop, knowledge, mills and history to build a globally recognised green industry. Yet the sector remains confined to raw fibre and traditional sacks, while higher-value products such as geotextiles, composite materials, home furnishings, specialised packaging and fashion accessories remain marginal. Small wonder that the golden fibre is praised in speeches but seldom treated as a modern industrial material. A dedicated jute innovation fund, modern testing laboratories, design support, stable supplies of quality fibre and vigorous international branding could connect rural growers with a more valuable global market.
Leather and leather goods also need focused support. The sector earned about US$1.23 billion in FY2025-26 and has high local value addition, but its potential remains constrained by environmental and compliance failures. Shortcomings of the central effluent treatment plant at Savar and the absence of widely accepted Leather Working Group certification have long prevented producers from obtaining better prices. No duty relief can compensate for failure to meet a buyer's environmental, labour and traceability standards. The government needs to finish the compliance work at Savar, help smaller factories introduce traceability, establish common testing and design facilities and offer patient finance for modern machinery. Leather should not remain another promising sector perpetually waiting to take off.
Against this backdrop, the role of Bangladesh's missions abroad has to be redefined. The country maintains 24 commercial wings in 21 countries, but their work should go beyond ceremonial fairs, business-card exchanges and routine general market reports. Each mission should receive product-specific and country-specific targets for jute, leather, pharmaceuticals, agro-processing, light engineering and digital services. Performance should be measured through verified buyer contacts, business matches, removal of market barriers and export orders facilitated. In fact, the pay, perks, desirable postings and promotions of officials assigned to commercial work should, to a reasonable extent, be linked with such performance. Taxpayers are entitled to ask what commercial return the country receives from these offices.
At the same time, the BIDA, the EPB, the commerce ministry, the foreign ministry and private-sector bodies will have to work from a common market intelligence platform. An exporter should be able to learn what products a particular market demands, which standards apply, who the credible buyers are and what support is available without visiting a maze of offices. The announced facilities for the 10 new sectors provide a useful beginning. But implementation should be transparent, sector-specific and regularly evaluated. That will ensure that public money follows demonstrable results rather than the loudest pressure groups. Unless promising sectors receive direct, performance-wise support and the country's foreign missions are assigned to find new markets, export diversification will remain more a slogan than a strategy.
Bangladesh Defense
