Bangladesh, the world’s second-largest exporter of ready-to-wear clothing, faces significant challenges as it grapples with trade restrictions imposed by neighboring India. It’s a pivotal moment for Bangladesh’s garment industry, which exported $38 billion in apparel last year. This expansion is happening as the industry continues to be heavily dependent on imports from India and fast, reliable transport routes for its exports.
Rising and ongoing trade tensions have escalated. Flooding the market with more Chinese goods. Tightened Indian visa regulations have steeply reduced the number of approvals granted to Bangladeshi exporters. Significantly, in recent months, daily visa issuances during peak periods have plummeted by over 80%. This sudden drop off is devastating the fast-fashion export industry that is so crucial to Bangladesh’s economy. The garment sector mainly relies on yarn imports from India, which are necessary to run production.
Bangladesh’s dependence on Indian ports, roads and waterways to move Bangladeshi goods is especially important for its landlocked northeastern region. The new route through India allows shipments to arrive at Western markets in under a week. By contrast, moving goods from Bangladesh to the U.S. directly by ocean can take up to eight weeks. Limited air freight capacity and airports ill-equipped for cargo operations complicate direct exports from Bangladesh.
Bangladesh is aggressively attempting to protect its domestic industries. Over the past few months, the country has imposed a land ban on cotton yarn imports from India to curb cheaper imports. Only time will tell, but if successful, this measure would have permanent effects on the garment industry. Yarn is more easily shippable by slower and more expensive sea and air routes. As Anis Ahmed, head of the supply chain firm MGH Group, stated, “It’s a blow to Bangladesh’s fast-fashion export industry.”
Bangladesh’s political landscape is not helping to untangle the trade issues either. The country is the world’s third-largest Muslim-majority nation, with Hindus comprising less than 10% of its 170 million people. The government has dismissed accusations that it targets minorities, dismissing the majority of cases as politically motivated fabrications or everyday criminal activity. Now, Nobel Peace Prize winner Muhammad Yunus is heading an interim administration in Bangladesh. His leadership would be particularly timely given the state of long, contentious underscoring negotiations with India.
Indeed, Shyam Saran, a former Indian foreign secretary, has observed that Indian sensitivities to the new political realities were acute. He said, “They should realise that there is no way that we can just hand Hasina to them. We know what will happen to her if she’s handed over. I think public opinion in India would not countenance that.” This is testimony to the complicated and often inextricably intertwined relationship between trade relations and political dynamics in the region.
Debapriya Bhattacharya, a senior economist at the Centre for Policy Dialogue in Dhaka, says this is the moment for Bangladesh to rethink the transit and transshipment facilities it has provided India. This fashionable lament has enjoyed a rising tide of popularity since the last Hasina administration. He remarked, “I think there is a strong view nowadays in Bangladesh that we should reassess the other transit and transhipment facilities given to India [for its north-eastern states] by the earlier [Hasina] government.”
As Bangladesh navigates these challenges, it remains to be seen how both countries will address their economic interdependence while managing their political realities. The apparel sector is at an unprecedented crossroads. It is now confronted with external trade barriers and internal political trends that may fortify or reform its hallowed status.