Over 400 RMG Factories Shut Down in Bangladesh in 3 Years: Commerce Minister

TBS Report, Dhaka — More than 400 garment factories have shut down in Bangladesh over the past three years due to a combination of global economic pressures and domestic challenges, Commerce Minister Khandakar Abdul Muktadir told parliament on 3 September 2026 — a stark disclosure that underscores the structural pressures bearing down on the country's dominant export sector.

Of the factories that closed between July 2023 and June 2026, 282 were members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and 120 belonged to the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), the minister said.

📊 Factory Closure Breakdown

• 👕 Total factories closed: 400+
• 👕 BGMEA member factories: 282
• 👕 BKMEA member factories: 120
• 📅 Period: July 2023 to June 2026 (3 years)
• 📊 Disclosure venue: Parliament, 3 September 2026

The minister disclosed the figures in response to a question from Chuadanga-2 MP Md Ruhul Amin during the session chaired by Speaker Hafiz Uddin Ahmed. He said the government is still working to make a complete list of the factories that have shut down, so the names of many others could not be presented in parliament — suggesting the actual closure figure may be higher.

🌏 Multiple Factors Behind Closures

According to the commerce minister, the closures were driven by a combination of global and domestic factors:

Global factors:

• 🌏 Covid-19 pandemic aftermath and supply chain disruption
• 🌏 Russia-Ukraine war affecting trade flows
• 🌏 Israel-Palestine conflict in the Middle East
• 🌏 US-Iran conflict disrupting shipping and energy
• 🌏 Global economic downturn reducing demand

Domestic factors:

• 🏛 Political instability through the transition period
• 🏛 Banking sector liquidity crisis stemming from money laundering
• 💰 Free trade agreements between India/Vietnam and European markets (competitor advantage)
• 💰 Declining interest among foreign buyers in small and medium-sized factories
• ⚡ Gas supply shortages affecting factory capacity utilisation
• 💰 Rising production costs: energy, lending rates, wages

👥 SME Factories Under Particular Pressure

The minister said small and medium-sized factories have come under particular pressure as foreign buyers are reluctant to place orders with them because monitoring such factories is more difficult. The buyer reluctance reflects broader compliance and supply chain transparency concerns — with international brands increasingly consolidating their supplier base around larger, well-audited factories that can demonstrate stronger social and environmental compliance.

Earlier in 2026, BGMEA also said that around 400 garment factories had closed over the past three years due to rising business costs, order shortages, high energy costs, loan interest rates, and infrastructure constraints. According to recent BGMEA data, many factories are unable to operate at full capacity because of gas supply shortages. At the same time, production costs have risen significantly over the past three years due to higher energy costs, lending rates, and wages.

💰 Government Support Measures

Despite the factory closures, the government is providing various cash incentives and trade facilities to support exports, the commerce minister told parliament:

• 💰 1.5% alternative cash incentive for export-oriented domestic textile manufacturers
• 💰 0.5% special incentive for exporters to the Eurozone
• 💰 3% additional incentive for SMEs in knit, woven, and sweater segments
• 💰 0.3% cash incentive for the garment sector
• 💰 2% special cash incentive for new products to new markets
• 📜 Bonded warehouse facilities, back-to-back LCs, duty drawbacks
• 📜 Export processing zone facilities, tax holidays, FDI incentives

🌏 LDC Graduation: $17.5 Billion at Risk

Bangladesh could lose preferential market access in several developed countries after graduating from the least developed country (LDC) category, potentially affecting around $17.5 billion in exports, Muktadir said. To address the challenge, the government is pursuing free and preferential trade agreements:

• 🇯🇵 EPA with Japan: concluded
• 🇰🇷 CEPA with South Korea: negotiations underway
• 🇪🇺 CEPA with EU: being pursued
• 🌏 RCEP membership: under consideration
• 🇦🇪 FTA with UAE: being pursued
• 🇸🇬 FTA with Singapore: being pursued
• 🇮🇩 FTA with Indonesia: being pursued
• 🇨🇳 FTA with China: being pursued

🌏 New Export Market Diversification

The commerce minister said the government is working to diversify Bangladesh's export markets and reduce dependence on traditional markets in the United States and Europe. The country is participating in trade fairs in:

• 🇧🇷 Brazil
• 🇲🇶 Middle East
• 🇯🇵 Japan
• 🇨🇦 Canada
• 🇦🇺 Australia
• 🌏 Africa
• 🌏 Central Asia
• 🌏 Latin America

In the 2026-27 fiscal year, Bangladesh plans to participate in 50 international trade fairs in promising markets around the world. The Export Promotion Bureau (EPB) also organised and participated in various sourcing fairs, including the Global Sourcing Expo, during FY2025-26 to help create new buyers and markets.

📊 Strategic Implications

The 400+ factory closure disclosure carries several strategic implications:

• ⚠️ Sector consolidation: smaller factories closing while larger ones capture market share
• ⚠️ Gas crisis impact: energy shortages directly affecting factory viability
• ⚠️ SME vulnerability: buyer consolidation disproportionately affects smaller factories
• ⚠️ $17.5b export risk: LDC graduation compounds structural challenges
• ✅ FTA pursuit acceleration: Japan EPA done, multiple FTAs being pursued
• ✅ Market diversification: 50 trade fairs planned for FY27
• ✅ Cash incentive framework: multiple tiers of support maintained
• ⚠️ Implementation gap: incentives exist but factory closures continue

The 400+ factory closure disclosure represents the most comprehensive official acknowledgement of the structural pressures on Bangladesh's RMG sector. The combination of global conflicts, domestic energy crisis, banking sector stress, and buyer consolidation has created a challenging operating environment that will require sustained policy intervention through the LDC graduation transition period beginning November 2026 — with the government's FTA pursuit and market diversification efforts representing the principal strategic response to the sector's competitive challenges.