Entrepreneurs in the textile, accessories and packaging sectors have expressed concern over the proposed removal of the minimum local value-addition requirement for non-bonded manufacturers that use duty-free imported raw materials under bank guarantees.
They also warned that the move could weaken Bangladesh’s backwards-linkage industries and increase dependence on imports.
The government issued a statutory regulatory order in the earlier this month purposing for the proposed national budget for 2026-27 financial year, abolishing the previous minimum 30 per cent value-addition requirement for duty-free raw material imports under bank guarantees.
A September 2025 statutory regulatory order required exporters in sectors such as RMG, leather and leather goods, food processing, steel, plastics and light engineering to ensure a minimum 30 per cent local value addition in export production.
The requirement was removed by a new SRO issued earlier this month, which stipulated only that realised export earnings must exceed the foreign currency spent on importing raw materials used to produce the export goods.
Industry stakeholders warned that the change could encourage manufacturers to rely more heavily on imported raw materials rather than locally produced inputs, reducing demand for domestic suppliers of yarn, fabrics, accessories, packaging materials and other industrial inputs.
They also said that the 30 per cent threshold in the draft import policy was already lower than what many industries considered necessary and that the proposed budget measure effectively eliminates any meaningful local value-addition obligation.
The concern comes at a time when Bangladesh is preparing for graduation from the least developed country category.
According to the Bangladesh Smooth Transition Strategy, exporters would need at least 50 per cent local value addition to qualify for GSP Plus preferences in the European Union after LDC graduation.
Existing rules of origin requirements in several export destinations are also significantly higher. Canada requires 60 per cent value addition, while the United Kingdom and India require 50 per cent and 40 per cent respectively for certain products.
Moreover, apparel exports to the European Union and the United Kingdom must comply with the double-transformation requirement to qualify for preferential market access.
Failure to meet such conditions could result in exports being treated as transhipment goods and subjected to higher duties.
Industry representatives said that removing value-addition requirements for duty-free imported raw materials would undermine incentives to source inputs domestically and could weaken industrial ecosystems that have developed over decades.
They also noted that recent changes to import policy had already relaxed some provisions relating to local sourcing and value addition and warned that further liberalisation could erode the country’s industrial base.
The proposed budget seeks to extend the duty-free raw material import facility under bank guarantees to 10 additional sectors, in addition to the existing 8.
The sectors eligible for the facility include furniture, electronics, food processing, light engineering, steel products, plastics, leather goods, readymade garments, motorcycles, fish processing, handicrafts, diversified jute products, diapers and sanitary napkins, crockeries, tents, terry towels, recycled cotton bags with accessories and speedboats.
The government has argued that the measure was intended to support export diversification and promote export-oriented industries.
Entrepreneurs, however, feared that the initiative may lead to greater import dependence while undermining domestic manufacturing capabilities.
NZ Tex Group managing director and former Bangladesh Textile Mills Association vice-president Md Salehuddin Zaman Khan said that strong backward linkage industries had been built over the years through policy support and value-addition requirements.
‘If these conditions are removed, the progress achieved over decades could be jeopardised,’ he added.
He also said that exporters might be encouraged to undertake only minimal processing before re-exporting imported materials, reducing the actual domestic contribution to exports and weakening industrialisation efforts.
Industry stakeholders also said that value-addition requirements not only helped retain a larger share of export earnings within the country but also supported thousands of local enterprises that produced yarn, fabrics, packaging materials and accessories.
They said that rules of origin and local value-addition requirements would become even more important after LDC graduation as Bangladesh sought preferential trade arrangements with major export markets, including the European Union, the United Kingdom and Japan.
BTMA president Showkat Aziz Russell urged the government to retain the existing value-addition requirement, warning that its removal could pose risks to domestic industries and create opportunities for misuse of duty-free import facilities.
‘At a time when Bangladesh needs to strengthen its backward linkage capacity to address post-LDC challenges, relaxing value-addition requirements could prove damaging for local industries,’ he added.
Russell also cautioned that failure to amend the budget proposal could adversely affect domestic manufacturers, their financing banks and government revenue collection.
The BTMA might call a press conference coming Saturday to express its concerns regarding the proposed budget, including the removal of the minimum value-addition requirement.
