Bangladesh’s garment exporters and local textile mill owners have presented opposing arguments to Prime Minister Tarique Rahman over restrictions on yarn imports under bonded warehouse facilities. Following their discussions, the Prime Minister has directed a committee led by the Commerce-Minister to submit recommendations for resolving the dispute by November 20.
The directive came at a meeting with representatives of garment exporters and spinning mill owners at the Secretariat on November 9. According to sources present, a final decision will be taken after reviewing the committee’s report.
BGMEA President Mahmud Hasan Khan Babu told The Business Standard that the Prime Minister had asked the committee to prepare and submit a report by November 20 after hearing the views of both sides.
Yarn is a major raw material for Bangladesh’s garment industry, particularly knitwear exporters. A significant portion of the country’s yarn requirements is met through imports under duty-free bonded warehouse facilities.
Local spinning mill owners, however, argue that garment manufacturers increasingly prefer imported yarn because it is cheaper than locally produced alternatives. They also allege that some imported yarn, brought in duty-free for export-oriented production, is diverted to the domestic market instead of being used to manufacture garments for export, creating unfair competition for local mills.
In early September, the government introduced restrictions on yarn imports under the bonded warehouse system. Under the revised arrangement, importers are required to provide a bank guarantee equivalent to the value of the imported yarn.
The guarantee is released after the imported yarn has been used to manufacture garments for export, the required documentation has been submitted and export proceeds have been repatriated.
Since the introduction of the measure, garment exporters and spinning mill owners have taken opposing positions on its impact.
At Monday’s meeting, garment exporters alleged that local spinning mills had raised yarn prices by around 7–10% following the restrictions. They also highlighted how the additional costs and import-related requirements could affect exports by small and medium-sized factories.
Representatives of the spinning mills rejected the allegation and asked garment manufacturers to provide specific evidence of such price increases. They also explained the factors behind the higher prices of certain types of yarn in Bangladesh.
A senior official of the Bangladesh Textile Mills Association (BTMA), speaking on condition of anonymity, told The Business Standard that international cotton prices had increased by US$0.24 per kilogram over the past few months.
The increase in yarn prices was partly attributable to higher cotton costs, the official said, adding that mill owners had not raised prices for other reasons. The official also claimed that garment exporters had failed to provide evidence supporting their allegations.
The meeting decided to continue discussions while keeping the existing import arrangement in place for the time being, the official added.
BKMEA Executive President Fazle Shamim Ehsan cited a significant price difference between imported and locally produced yarn. He said the cost of importing yarn from China, including clearance at Chattogram Port, was around US$3.32 per kilogram, while imports from India cost approximately US$3.30 per kilogram. In comparison, the same yarn purchased from local spinning mills cost around US$3.85 per kilogram.
Questioning how exporters could remain competitive in the global market while paying such higher prices, Ehsan warned that the competitiveness of garment exporters and the long-term sustainability of local spinning mills were closely linked.
The committee’s recommendations by November 20 are expected to provide a basis for the government’s next decision on the contentious yarn import policy.
