Rising costs squeeze businesses

Industrial production in Bangladesh is under mounting pressure as global conflicts, load-shedding and an acute energy crisis drive up costs. Output has already declined by 15–20% in many factories, while production costs in the garment export sector have risen by around 20%. Additional transport costs have further compounded the strain.

Although international prices for Bangladeshi goods have not increased, production costs have surged, eroding competitiveness against rival countries. Exports have been declining for more than eight consecutive months. Over the past three years, around 400 factories have shut down, while many others are operating at only 70% of their capacity. More closures are feared if the situation persists.

According to data from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), export earnings have been on a downward trend since August 2025, with factories unable to operate at full capacity. Investment in the industrial sector has also declined over the past two years. In the first seven months of the current fiscal year, imports of capital machinery in the textile and garment sectors have fallen.

Industry insiders warn that many factories are now financially vulnerable. Lending rates have risen to between 12% and 15%, while the proposed ‘Bangladesh Labour (Amendment) Ordinance 2025’ is expected to significantly increase labour-related costs, further raising the cost of doing business.

Business leaders say the sector is facing a three-pronged challenge: severe energy shortages, high bank interest rates and weakening global demand. Alongside falling production, operational costs are rising sharply. Increased reliance on generators due to power shortages has, in some cases, doubled energy costs compared to grid electricity. Higher transport costs are also disrupting timely delivery of goods.

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President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Mohammad Hatem, said factories are being forced to shut down for at least two hours a day due to power and fuel shortages, with some experiencing outages lasting six to seven hours. For several years, industries have been unable to operate at full capacity, contributing to a steady monthly decline in exports. Many factories are now running at just 50–60% capacity. He added that export earnings in the sector could have exceeded $50 billion annually if full capacity had been maintained.

Meanwhile, President of the Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), Mohammad Shahriar, said production costs have risen by 35% over the past 20 days due to the ongoing energy crisis, while production capacity has fallen by around 30%.

He warned that if the crisis continues, many factories—both large and small—could be forced to shut down, and entrepreneurs may face the risk of becoming bank defaulters.