To maintain the global competitiveness of Bangladesh’s ready-made garment (RMG) sector, transitioning toward eco-friendly green manufacturing by reducing carbon emissions is indispensable.
International buyers are no longer prioritizing product quality and price alone; they are increasingly evaluating manufacturing processes and their associated carbon footprints. Consequently, boosting renewable energy adoption and improving energy efficiency across garment units has become critical.
However, high taxes and tariffs, elevated bank interest rates, bureaucratic delays, and limited availability of requisite technologies stand as major obstacles to this transition.
While the government claims duty-free benefits on renewable energy equipment, entrepreneurs report facing hefty tax burdens in practice. Stakeholders alleged that over a hundred containers filled with solar panels currently remain stranded at port as a result.
These observations were shared on Sunday (16 August) during a dialogue titled "Decarbonizing the RMG Industry: Challenges and the Way Forward," organized by the Center for Policy Dialogue (CPD) at the Brac Centre Inn auditorium in Mohakhali, Dhaka.
Moderated by CPD research director Khondaker Golam Moazzem, the event brought together RMG entrepreneurs, technology experts, institutional financiers, researchers, and trade body representatives.
Presenting findings from a CPD study covering 350 apparel factories, CPD program associate Sami Mohammad highlighted that meeting 30% of a factory's total electricity demand through renewable energy could reduce average monthly energy expenditure by 15.7%.
Even a 10% solar share could lower monthly energy costs by 5.5%.
Mohammad noted that over-reliance on imported LNG and other fossil fuels escalates production costs while heightening supply vulnerability. Simultaneously, pressures from international brands for sustainable manufacturing are mounting rapidly, making now the opportune time to accelerate the transition to renewables.
He added that while many garment units have taken preliminary steps to curb emissions, structural transformation lags behind—particularly in small and medium enterprises (SMEs), which face severe shortages of modern, energy-efficient machinery.
Tax burdens questioned
BGMEA vice president Barrister Vidiya Amrit Khan emphasized that European Union initiatives like the 'Green Deal' and 'Digital Product Passport' present substantial compliance challenges for Bangladeshi apparel exporters.
She warned that failing to implement proactive emission-reduction measures risks diminishing Bangladesh's market share, particularly as regional competitors like Vietnam and Pakistan outstrip Bangladesh in renewable energy adoption.
Meanwhile, local importers face steep customs duties and VAT on solar and renewable equipment.
BSREA president DM Mostafa Al Mahmud stated that despite budget speeches promising duty-free facilities for solar panels, importers encounter multiple tax levies at ports. More than a hundred solar panel containers currently remain stuck, causing factory owners to incur heavy demurrage fines.
He stressed that achieving renewable energy targets remains difficult under such conditions and called for simplifying the licensing process for merchant power plants dedicated to industrial units.
Delays in net metering
Participants pointed out that administrative bottlenecks pose as significant a barrier as capital and technology deficits.
A key grievance raised was the absence of net metering facilities in economic zones. Entrepreneurs alleged that net metering approvals, which should take 15 to 20 days, often drag on for up to six months due to red tape.
Furthermore, solar power cannot immediately replace gas or coal in heat-intensive operations such as washing and dyeing. High capital costs for industrial electric boilers deter entrepreneurs from undertaking such high-risk investments.
BKMEA executive president Fazlee Shamim Ehsan noted that while green financing frameworks exist, accessing them is overly complex. Bank interest rates hovering around 14%-15% make borrowing unsustainable for SMEs.
He added that processing loans through institutions like Idcol involves protracted delays, preventing swift investments in green technology.
He proposed establishing centralized boiler and energy distribution systems in new industrial zones to lower capital expenditure and curb emissions.
Idcol senior assistant vice president Asif Shahriar assured that efforts are underway to structure dedicated credit lines for smaller factories.
However, loan disbursements face delays due to weak financial standing or lack of repayment guarantees—an area where trade bodies like BGMEA or BKMEA could assist by providing institutional guarantees.
Discussants emphasized that while global brands demand carbon reduction, they contribute inadequately to the necessary capital investments, leaving factory owners to bear the financial burden alone.
While large factory groups maintain some capacity to self-fund tech upgrades, SMEs remain constrained by technical knowledge gaps, lack of capital, and high borrowing costs, threatening their long-term market viability.
Proposal for high-level steering committee
CPD research director Khondaker Golam Moazzem proposed forming an inter-ministerial task force under the Prime Minister's Office, comprising representatives from the Ministry of Power, Energy and Mineral Resources, Ministry of Finance, National Board of Revenue (NBR), and business leaders.
He advocated for expedited decision-making to streamline tax, tariff, financing, and energy policies.
Moazzem added that Bangladesh's energy supply issues are unlikely to be fully resolved within the next decade, making it imperative for factories to secure localized renewable energy sources based on their operational capacity.