In the last 15 months, a concerning trend has emerged in Bangladesh’s highly crucial ready-made garment (RMG) sector, a backbone of the country’s economy. A total of 113 garment factories that were members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) have shut down, leaving 96,000 workers unemployed. While the garment sector as a whole has continued to grow, these factory closures are a serious setback to both the workers and the industry.
Despite enduring global challenges, political upheavals, and other adversities, the Bangladesh garment industry remains one of the world’s largest exporters of ready-made garments, particularly to the European Union and the United States. However, the closures reflect a shift within the sector that is impacting thousands of workers, especially those in smaller factories struggling to remain competitive in an increasingly automated and AI-driven manufacturing environment.
Factory Closures and Unemployment: According to the BGMEA, the closures represent a significant portion of the country’s garment manufacturing capacity. Notable among the closed factories are 24 of the Beximco Group, 4 of Keya Group, 4 of TNZ, and other well-known manufacturers like Virgo MH, Modish Attire, Ciroc Apparels, and Odish Craft. Many of these closures happened between February and August of the past year, with the closure of 14 factories in the Beximco Industrial Park alone on February 28.
The affected factories employed a total of 96,000 workers, out of which 31,679 workers were from Beximco’s facilities. The government, recognizing the impact of these closures on workers, allocated Tk 525.46 crore to help pay the dues of the displaced workers. However, many workers are still waiting to receive their full compensation, and the situation remains dire for them.
Of the 113 closed factories, the largest number, 69 factories, were closed since August last year. These closures have disproportionately affected the garment workers, many of whom were employed in smaller factories, which are particularly vulnerable to economic fluctuations, technological changes, and a lack of investment in modernization.
Sector Growth amidst Challenges: Despite these closures, the overall garment sector continues to demonstrate significant growth. According to the Export Promotion Bureau (EPB), Bangladesh’s ready-made garment exports have reached an impressive value of $325 million in the first 9 months of the current fiscal year, 2024-2025, marking a 10.84 percent increase compared to the same period in the previous fiscal year. This indicates that Bangladesh’s RMG sector is still resilient in many ways, even as individual factories face challenges.
BGMEA officials attribute this growth to a combination of factors, including strong demand in key international markets and the competitive advantage that Bangladesh holds due to its low-cost labor force and its growing reputation for producing high-quality garments. At the same time, the country has made substantial progress in meeting international labor and environmental standards, which has helped improve its standing in the global market.
However, despite the overall growth, factory closures have led to an alarming increase in unemployment within the garment sector. Many small factories, in particular, have struggled to keep up with global trends and technological advancements. The rise of automated machinery and the integration of artificial intelligence (AI) into manufacturing processes have made it increasingly difficult for small factories to remain competitive. Labor costs, combined with the growing shift toward automation, have created a difficult environment for traditional garment manufacturers to survive.
Small Factories and Lack of Competitiveness: Mohiuddin Rubel, a former BGMEA director, believes that smaller factories are particularly vulnerable due to their lack of competitiveness in a rapidly evolving industry. While large factories may have the resources to invest in advanced technologies like automation and AI, small and medium-sized enterprises (SMEs) often struggle with upgrading their infrastructure. Rubel pointed out that the survival of small factories is threatened by global trade challenges, rising production costs, and political instability, which has made it harder for them to compete with larger, more technologically advanced operations.
“Despite the growth of this sector, the country’s garment industry is facing various adversities, including the use of automated machinery, artificial intelligence (AI), and political changes,” Rubel said. “Small factories are unable to survive due to a lack of business competitiveness. As a result, many factories are closing, but new factories are also emerging. At the same time, investment and employment are happening. In addition, the old factories are also making investments to stay afloat.”
The shift toward automation and AI is not only a factor in factory closures but also a potential solution to the challenges faced by the garment sector. Automation can help increase efficiency, reduce labor costs, and make production processes more competitive in the global marketplace. However, the shift also has downsides, including the displacement of workers and the need for workers to adapt to new skills.
New Factories and Investment: On a more positive note, 128 new factories have joined the BGMEA over the past 15 months, bringing new hope to the sector. These factories represent a shift toward modernization, with many of them adopting new technologies and better business practices. 18 of these new factories are expected to employ more than 1,000 workers each, which will partially offset the loss of jobs caused by the closures.
These new entrants into the industry are seen as a sign of resilience, as they represent new investments and an opportunity for the garment sector to continue to expand and innovate. Many of the new factories have been established by entrepreneurs who see the potential of Bangladesh’s garment sector in the coming years and are looking to capitalize on that opportunity.
According to BGMEA officials, the entry of new factories has been bolstered by both local investments and foreign capital. This new wave of investment is crucial for the sector’s long-term sustainability, as it helps create jobs and diversify the market. In the same breath, however, BGMEA acknowledges that the number of job losses due to factory closures remains a critical concern.
Policy Recommendations and Government Intervention: The Bangladesh government has made significant efforts to support the garment industry, including efforts to modernize infrastructure, improve labor conditions, and ensure fair wages. However, many industry stakeholders believe that the government could do more to address the challenges faced by small and medium-sized garment factories.
There is growing consensus within the industry that policy reforms are necessary to ensure that small factories can adapt to the demands of the global market. This includes providing financial incentives for upgrading technology, increasing access to training programs for workers, and fostering partnerships between factories and technology providers.
Additionally, the sector needs stronger support for research and development (R&D) to innovate and create value-added products. As the global garment industry moves towards more sustainable and high-tech manufacturing, Bangladesh’s garment factories must keep pace with these changes to maintain their competitive edge.
A Resilient Sector with Challenges Ahead: The Bangladesh garment sector remains one of the country’s most significant economic engines, contributing substantially to both GDP and export earnings. The closure of 113 factories, however, highlights the vulnerabilities that remain in the sector, especially for small-scale operations that struggle to compete with larger, more modern factories.
While the growth in exports and the emergence of new factories show that the sector has considerable potential, addressing the challenges of automation, political instability, and global market shifts will be essential for ensuring the long-term health of the industry. Moreover, ensuring that displaced workers are adequately compensated and retrained for future opportunities will be crucial in maintaining the sector’s social stability and protecting the livelihoods of millions of Bangladeshis who depend on the garment industry.
While the garment sector has shown resilience and adaptation, the government, industry stakeholders, and business leaders must continue working together to create an environment that supports both innovation and fair employment in the face of global competition and technological advancements.
