Bangladesh is poised to transition out of the least developed country category in 2026. The achievement holds significant importance for the nation. However, this endeavour is full of challenges. The “cheap labour” narrative that enabled us to become the world’s second-largest apparel exporter is no longer a sustainable strategy. The competitive advantages we have enjoyed for nearly forty years are about to vanish. To survive in a post-LDC world, Bangladesh must shift from a model based on low wages to one defined by high efficiency, technological sophistication, and social accountability. To stay competitive, Bangladesh must address labor conditions, invest in sustainability, and build resilience against political risks.
Challenges to Future Competitiveness
Post-2026 Tariff Cliff: Currently, Bangladesh enjoys preferential access to major markets. Post-2026, this safety net disappears. We will face tariffs of 9% to 12% in the EU, our largest market, unless we qualify for GSP+. After the graduation, we will have to meet the global standards of labour rights, environmental sustainability, and corporate governance. These compliance measures increase production costs.
Slow Lead Time: Bangladesh has the longest lead times in the region (90–120 days) compared to competitors like Vietnam (45-60 days) driven by high-level automation transitions and Turkey (20-30 days) utilizing AI and digital tools, which is a major disadvantage in fast-fashion. Our lead time is primarily consumed by the import of raw materials, a dependency we have yet to break.
Infrastructure & Logistics Upgrades: To reduce hidden costs that offset low wages, the government is executing massive infrastructure projects. Construction of the Matarbari Deep Sea Port and modernization of Chittagong Port to cut container dwell times. Projects like the Padma Bridge and Dhaka’s elevated expressways are improving the “lead time” competitiveness for factories located outside the capital.
The challenges of wage hikes: As wages rise (a 56% increase in 2023), the traditional advantage of being the lowest-cost producer is eroding, creating a need for higher productivity. Naturally, a wage increase presents a challenge for factory owners. On one side, there is pressure from global buyers and labour advocacy organisations to guarantee fair working conditions and just compensation. On the other hand, increasing production costs are putting pressure on their already narrow profit margins. A study by the Bangladesh Institute of Development Studies (BIDS) indicates that raising wages might result in a 15-20% increase in production costs. Global brands, which have traditionally sourced from Bangladesh because of their affordability, might rethink their supply chains. Countries nearby, such as Vietnam, Cambodia, and Ethiopia, with their appealing labour costs, might draw some of these orders away, possibly diminishing Bangladesh’s market presence.
Core Advantages Beyond Cheap Labor
To stay competitive, Bangladesh must cultivate new, sustainable advantages:
Technological Adoption and Automation: Shifting from manual to automated processes is essential to reduce lead times and improve quality.While spinning, dyeing, and printing are largely automated, sewing, finishing, and packaging operations are still semi-automated or fully manual. Recent studies suggest that up to 30% of the RMG workers are less needed due to changes in machinery and the adoption of automation.
High-Value Product Diversification: Bangladesh needs to transition towards creating high-value, design-driven items like sportswear, luxury apparel, and specialised textiles. These categories attract higher prices and can support increased labour expenses. 70 percent of RMG exports consist of only five products, which are primarily cotton-based, and around 83 percent of these exports are shipped to the European and North American markets. Bangladesh has not been able to fully utilize its potential in terms of expanding production to goods such as PPE, plush toys, hair accessories, automotive upholstery, travel, and campaign products.
Sustainable and ethical production: As consumers and regulatory bodies like the EU increasingly push for eco-friendly and ethically produced clothing, sustainability presents a fresh opportunity for gaining a competitive edge. Leading the world in LEED-certified factories (energy-efficient) provides a “green” advantage for Bangladesh. Bangladesh can further enhance its sustainable practices, such as water recycling, embracing renewable energy, and promoting circular fashion initiatives. Experts believe these initiatives resonate with mindful shoppers and enable brands to set higher price points.
Leveraging geopolitics: A lot of clients are taking their business away from China due to the trade war with the US and some internal issues. So, Bangladesh can become a viable option for these buyers. Bangladesh has a significant number of factories with huge capacity, which only a few countries have; this can certainly be an advantage, as buyers moving away from other countries would need big orders completed pronto.
Strengthening Foreign Direct Investment (FDI): Attracting FDI is crucial, as the country currently has a low FDI-to-GDP ratio compared to peers like Vietnam. There is concern that the country has pigeonhole itself into an all-eggs-in-one-basket situation. In a competitive world, the country must diversify its foreign direct investment (FDI) by expanding into new products, as relying on a single industry is not sustainable.
Increased employment in RMG and other labour-intensive sectors in Bangladesh demonstrates the positive relationship between FDI and job opportunities. The countries with the highest FDI stocks in Bangladesh include the United States, the United Kingdom, and Singapore, which have maintained stable positions over the years. However, South Korea, the Netherlands, and China have been increasing their investments in Bangladesh.
Strategic Pathways Forward:
- The industry must move from high-volume, low-value to moderate-volume, high-value, producing garments for premium brands.
- Reducing over-reliance on the EU and US by targeting markets in Asia, Africa, and Latin America.
- Setting up a “fast-track” task force to resolve infrastructure, customs, and regulatory bottlenecks.
- Need to provide training to make skilled labor.
I’m Saimon Johir. Merchandiser at Barakah Sourcing. Graduated from BUFT (BGMEA University of Fashion & Technology).
