Written by The Banking Post
The government is losing millions of dollars in revenue every year due to widespread misuse of bonded-warehouse facilities in the textile sector, industry insiders say, warning that weak monitoring is distorting competition and putting compliant local mills at risk.
Bonded facilities were introduced to support export-oriented industries by allowing duty-free imports of raw materials. But stakeholders allege that the system is now being abused through misdeclaration, illegal domestic sales, and unauthorised marketing of imported yarn and fabrics.
Industry sources say yarn and fabrics imported under bonded privileges are being openly sold in local markets, particularly in Narayanganj, Araihazar, Madhabdi, Baburhat, Narsingdi, Pabna, Sirajganj, and Belkuchi. In many cases, importers reportedly declare low-count yarn but bring in higher-value products. Some even import fabrics in the name of non-existent factories, which are then sold directly in the domestic market, undercutting compliant spinning and weaving mills.
According to National Board of Revenue data, Bangladesh imported yarn worth US$2.18 billion in FY25. With duties ranging from 33.63 per cent to 39.75 per cent, a large portion of potential revenue is believed to be lost due to bonded facility abuse.
The Bangladesh Textile Mills Association (BTMA), which represents 1,869 spinning, weaving, and dyeing-printing-finishing mills with an estimated investment of US$23 billion, says the misuse is crippling the backward-linkage industry. The textile and apparel sector contributes over 20 per cent to GDP and accounts for 80–86 per cent of export earnings, while retaining about 30 per cent of foreign currency inflows.
Local mills currently supply nearly all yarn for knitwear exports and around 60 per cent for woven fabrics, meeting most domestic clothing demand as well. Industry experts warn that weakening this base would increase fabric imports, putting further pressure on foreign exchange reserves.
BTMA President Showkat Aziz Russell said the sector is facing a severe crisis, worsened by rising gas and power tariffs, dollar shortages, higher interest rates, currency depreciation, and reduced export incentives. He said repeated appeals for government support over the past year have yielded no result, despite a recommendation from the commerce ministry to withdraw bonded facilities for yarn imports.
“Mills are closing almost daily. If the government does not act, we have decided to keep mills closed from February 1, as no owner can afford to operate at a loss,” he said, adding that many entrepreneurs are exiting the business due to mounting loan pressures.
Russell also criticised policy inconsistencies, noting that yarn wastage has risen to 32 per cent despite modern machinery, while cotton imports face duties but finished yarn enters duty-free. He said corporate tax, turnover tax, and VAT burdens remain high.
Badsha Mia, managing director of Badsha Mia Textile, warned that prolonged bonded misuse is destroying backward-linkage industries. “If local spinning mills shut down, India will dominate the market and raise prices, as seen during the Covid period,” he said, alleging dumping of low-priced Indian yarn through bonded channels.
Former BTMA director Engineer Razib Haider cautioned that the erosion of local value addition could jeopardise Bangladesh’s global market access. He said potential US countervailing duties and stricter European trade conditions could further strain the sector if local textile capacity weakens. He added that a proposal to exclude certain yarn counts from bonded benefits remains stalled due to red tape.
Meanwhile, BKMEA Executive President Fazlee Shamim Ehsan acknowledged that some misuse occurs but said claims of widespread abuse may be overstated. “Multiple agencies monitor the system. Large-scale irregularities bypassing all oversight are not easy,” he said, adding that strict punishment should be ensured for any proven wrongdoing.
Industry leaders, however, insist that unless enforcement is tightened and policy gaps closed, bonded facility abuse will continue to drain public revenue and undermine the country’s textile backbone.
