Ask Assef Shaikh about Bangladesh’s sourcing landscape and he’ll tell you the information fashion companies use to make decisions is woefully out of date.
“Most of what is written about the country comes from the outside and falls into one of two categories: cheap labor or Rana Plaza,” said the CEO of Harnest, a Dhaka-headquartered vertically integrated manufacturer of threads, elastics, yarns, trims, labels and packaging that supplies apparel brands in more than 50 countries. “Neither describes what is being built here now.”
That’s why he commissioned a report offering, as he put it, an “independent, evidence-based picture” of Bangladesh’s wider procurement landscape, drawing on insights from other suppliers, including Harnest’s competitors. Shaikh didn’t want anything that only talked about Harnest. That would just be a brochure, he said.
Published on Wednesday, the report begins with a simple premise: What if brands stopped asking whether Bangladesh was cheap enough and instead focused on suppliers that could help them improve compliance readiness, shorten lead times, tighten quality control or scale circular innovation?
To Brooke Roberts-Islam, founder of consultancy Techstyler and the report’s author, that question feels almost subversive in an industry where the traditional “race to the bottom” often overshadows broader considerations. Yet treating price per unit as the sole measure of success is becoming a high-stakes gamble for Bangladesh and the international brands that drive more than 80 percent of its export earnings, she said.
“Most brands are sourcing on FOB terms through Tier 1 factories, so they’re not necessarily accessing local materials or innovation in Tier 2,” she said, using an acronym for Free on Board, the point in the supply chain when a buyer or seller becomes liable for the goods being transported. “That means they’re leaving opportunities on the table. Tier 1 also procures from a nominated list, and it doesn’t always have an interest in finding the best possible alignment on price or sustainability credentials.”
As Bangladesh confronts plummeting order volumes, market share losses to competitors such as India and Vietnam and its forthcoming graduation from least developed country status, it faces challenges that go well beyond staying cheap.
Just last week, Faruque Hassan, former president of the Bangladesh Garment Manufacturers and Exporters Association, warned that the country has slipped behind Vietnam to become the world’s third-largest garment exporter after China amid growing financial, policy and operational headwinds.
“We must work together to regain the position,” Hassan said at an event organized by the Bangladesh Packaging Accessories Manufacturers and Exporters Association ahead of its board election.
One answer, Roberts-Islam said, is to recast Bangladesh not as a cheap cut-and-sew hub but as a mature, connected ecosystem built for speed, precision and value. She pointed to companies like Umi Group, which is using AI-assisted sewing systems to reduce defects; Impress-Newtex, an integrated apparel and textile manufacturer with a “full stack” of knitting, dyeing and finishing capabilities; and Maruhisa, a Japanese-owned factory that runs a “zero-defects” model for small-batch, premium production and is expanding a new facility aimed at European premium buyers.
“The evidence within the report all demonstrates that it’s the larger players with an element of vertical integration between Tiers 1 and 2 that are able to fulfill way more than just an FOB price and a finished product,” Roberts-Islam said.
There is also Harnest, which lets brands nominate component volumes while offering price savings, including a 10 percent rebate for brands and 5 percent for Tier 1 suppliers, on next-generation textile-to-textile recycled and biodegradable trims that lock in those volumes at below-market cost.
“A cut-and-sew factory buying its inputs on the open market cannot offer that, however good its price,” Shaikh said. “When you buy on FOB terms, everything upstream of cut-and-sew is invisible to you. Trims can account for more than 40 percent of a garment’s bill of materials by weight, and most brands do not know what they pay for them, who makes them or what they are made from.”
Shaikh’s point is not that Tier 2 and 3 should replace Tier 1. Rather, leaving them out of the conversation removes margin, traceability and material choice at the same time.
“A strong vertical Tier 1 partner is what makes direct nomination work,” he said. “They have the planning discipline and the volume to absorb a nominated component program without disrupting production. Doing one without the other leaves value on the table.”
A sector under strain
Signs already suggest brands are increasingly seeking more integrated production that reduces handoffs, improves oversight and gives them greater control over lead times. Bangladesh’s readymade garment sector has consolidated significantly over the past 15 years, shrinking from roughly 6,000 small and medium-sized export-oriented factories to 3,320 garment factories in 2024, according to Mapped in Bangladesh, a research initiative by BRAC University’s Centre for Entrepreneurship Development.
But that contraction also reflects pressures driving factory closures and layoffs at an unprecedented rate. A recent study by the human-rights organization JusticeMakers Bangladesh in France found that between August 2024 and this past June, 457 factories shuttered operations, leaving roughly 240,000 workers unemployed. The bulk of those closures—205—were due to insufficient production orders, 190 to financial difficulties, 11 to labor unrest and 51 to factors such as political instability, banking complications, gas and electricity shortages, raw material scarcity and factory relocation.
What those categories fail to capture, however, is what’s driving them in the first place.
“The biggest challenges are the relentless downward pressure on unit prices; suppliers struggling to meet brand requirements on renewable energy while remaining profitable and competitive; and global uncertainty, with constant changes in U.S. tariff regimes that are having ripple effects across sourcing regions,” said Mostafiz Uddin, managing director of Denim Expert, a jean manufacturer in Chittagong that produces for major Western brands.
Uddin said discussions about brand-supplier collaboration have dragged on for years, but the “power to make it happen” lies with brands. True partnerships exist in isolated cases, he said, but as long as brands retain the decision-making power, any suggestion of an equal relationship is naive.
“If you lower the prices, increase the deadlines and make it harder, what is the other side supposed to do?” asked Alena Tansey, program manager at Better Work Bangladesh, a joint program of the International Labour Organization and the International Finance Corporation. “Brands should see this as an investment in a system of trusted partners, not just use compliance to lower costs for themselves.”
She said Bangladesh has been through three governments in three and a half years and, while the country continues to “punch above its weight,” the turmoil has left it little room to deliver the structural changes stronger systems require, fueling recurring bouts of labor unrest. Sudden closures and delays in wages and severance pay have also prompted street protests and clashes with authorities, with the minimum wage still a persistent flashpoint.
“I think a certain amount of patience is needed, along with meeting Bangladesh where it is, appreciating what it has already accomplished and figuring out how to do this together,” Tansey said. “Both sides need each other.”
Rafiqul Islam Rana, an assistant professor of retailing at the University of South Carolina, said genuine partnership between buyers and suppliers should also include clearer order forecasts, longer-term volume commitments, realistic lead times, faster payments and a fair way to adjust prices when wages, energy or material costs rise sharply.
“Buyer pressure on prices remains a major problem because factories are being asked to absorb higher wages, fuel costs and compliance expenses without always receiving higher sourcing prices,” he said. “Buyer pressure on prices and lead times can move directly onto the factory floor through wage manipulation, excessive overtime, weak worker voice and staged compliance.”
Tariff uncertainty is also making buyers more cautious, Rana said, even as Bangladesh’s expected LDC graduation raises concerns about future trade benefits. Meanwhile, competition from India is intensifying. While exports from India to the United States face the same 10 percent Section 301 tariff, albeit without a specific “textile mechanism” carveout for American inputs, New Delhi’s free trade agreements with the European Union and the United Kingdom have boosted its position in those markets.
“However, I would not describe the situation as an industry-wide collapse,” Rana said. “Stronger and more diversified suppliers are in a better position, while factories with weak finances, low productivity or heavy dependence on basic products are under much greater pressure.”
Opportunities also lie in areas where Bangladesh is still underdeveloped, including man-made fibers, functional fabrics, performance apparel, outerwear, technical products, product development and smaller specialized orders, he added. The Bangladesh-Japan free trade agreement is another promising development, alongside initiatives involving Japanese firms like Marubeni that emphasize reliability, innovation and longer-term buying.
Right now, Bangladesh imports more than 98 percent of the raw cotton it uses. If even 10 percent of that could be replaced by better use of domestic cotton waste, the country could begin supplying its own spinning sector with recycled fiber. An example is Recover, the global textile recycling company based in Madrid, which operates its largest mechanical textile-to-textile recycling facility for cotton-rich waste in Bangladesh.
“The key will be whether these partnerships produce firm orders, shared investment and measurable improvements, rather than remaining pilot projects,” Rana said.
Shifting the narrative
Still, lasting gains will require capital, especially for smaller firms that struggle to finance upgrades, said Intekhab Bin Yousuf, an investment consultant who recently joined social asset manager SIMA Funds’ Decarbonization of Textiles, Apparel and Footwear Fund, a $400 million vehicle backed by the International Finance Corporation that will earmark $50 million for Bangladesh.
Securing loans from the central bank, he said, means navigating a long bureaucratic process that requires 30 percent equity upfront, intensive audits, possible delays in allocation and high interest rates. By contrast, SIMA’s fund offers a faster route with no collateral, no mortgages, no bank guarantees, an approval process that typically takes two to three months and a flexible interest rate of just over 7 percent. The fund, which launches next month and aims to bridge short-term financing gaps, has already drawn significant interest from European brands and other development banks, Bin Yousuf said.
Bangladesh has set a target to reach 30 percent renewable energy by 2040, which would reduce fuel shocks exacerbated by global geopolitical conflicts, such as the ongoing Strait of Hormuz closure, and help ease its persistent energy crisis.
“That’s where we can come into play because we are not only financing the apparel companies for the rooftop solar plants, but also we are financing the equipment suppliers that are providing the solar panels,” Bin Yousuf said.
The same is true of shifting into more connected production, which requires hefty amounts of capital.
“The SMEs cannot afford that capital expenditure,” he said. “Many banks are also facing problems. As a result, apparel companies with credit lines at those banks are struggling too, because the banks can no longer keep financing them.”
Not every infrastructure upgrade has to be expensive, however. Roberts-Islam’s report features the Bangladesh Industrial Development & Engineering Company, better known as BIDEC, which is targeting efficiency through practical, low-capex retrofits, including an industrial fan initiative aimed at upcycling conventional, high-energy factory ceiling fans into high-efficiency brushless DC motor systems.
By upgrading the motor design while keeping the fan body and blades intact, BIDEC’s process could save the sector up to 217,440 megawatt-hours, avoid 271,452 tons of carbon dioxide equivalent and cut electricity costs by more than $17 million a year. The refurbished fans also generate less heat than the originals, helping keep factory floors cooler as heat stress becomes an increasingly serious health and occupational safety issue.
“Here the electricity costs are going up every day, and all the old technologies are becoming obsolete,” said Kazi Mohammad Ibrahim, who founded BIDEC in 2023. “In order to make money here in this current economy, you have to be much more efficient.”
Bangladesh has evolved as a buying destination and now offers advantages beyond cost, including quality, compliance and technical capability, said Faisal Samad, a director of the BGMEA. The trade body is working closely with the government and buyers to encourage a broader way of thinking about the country’s role in global trade. Sometimes brands are not aware of the actual conditions on the ground, he said, and if those are put on the table, there are advantages beyond just margins.
“I think that’s the image that needs to shift,” he said. “Bangladesh has matured from its products and technical capabilities to understanding how to conduct a business.”
Samad used Marks & Spencer as an example of how Bangladesh has moved beyond basic apparel. The British retailer, he said, now sources more than 1 billion pounds ($1.3 billion) worth of clothing from Bangladesh each year, making it its top country for apparel, and has said it wants to buy even more high-end garments from the market, expanding from basic items into more value-added products such as formalwear and men’s suits.
At the end of the year, the BGMEA will start conducting roadshows, where it visits different countries and “talks about the good stories.”
“I think it’s time for all of us to sit together at the table and really look at Bangladesh as a country with the most potential to grow from where we are to where we want to be,” Samad said. “And we need that support from everyone concerned.”
Roberts-Islam expects to hear of more factories closing. She described it as a “human crisis,” one born of years of fiscal mismanagement from the Sheikh Hasina government and a lack of related reform.
“Imagine being in a position of a Tier 2 Bangladeshi yarn producer, for example, and knowing that your Indian neighbors can export yarn to your country cheaper than you can produce it yourself because of subsidies in India,” she said. “This is a real challenge that Bangladeshi manufacturers face. There’s a lot of need for reform before SMEs have the kind of support they need to flourish.”
Harnest is adapting in its own way by taking cost out of the process rather than out of the specification. It replaced fossil-fuel-based steam generation with a rice husk biomass boiler in May. Steam, Shaikh said, is a critical requirement for its dyeing and finishing operations, so that was the “single most useful change available to us.” Solar, currently at 120 kilowatts, provides about 10 percent of the company’s electricity. Harnest is scaling that up to 400 kilowatts by the end of the year, which should cover up to 35 percent on a good day, depending on production load. On water, the company runs a zero-liquid-discharge system, saving around 8.6 million litres of groundwater a month, and has adopted ultra-low-liquor-ratio horizontal-tube dyeing.
“The pattern is the same in each case,” Shaikh said. “Less water heated means less steam burned and less load on the effluent plant, which is cheaper to run. The environmental result and the commercial result can align.”
This is how Bangladesh can move from what the BGMEA described in its 2026 RMG playbook as “reactive survival to proactive competitiveness,” Shaikh said. “Reactive survival is competing on price for the same basic product and hoping the order comes back next season,” he said. “Proactive competitiveness is being able to answer a buyer on defects per hundred units, chain of custody data or Scope 3 details with a number rather than a promise.”
And yet, for Shaikh, most sourcing strategies here are built for a country that no longer exists. Bangladesh, he said, has adopted all ten fundamental ILO conventions—the first country in Asia to do so. The Labour Amendment Act passed this year, and audit intensity, for all its strengths and weaknesses, is the highest in the sector.
“The best factories are running AI-assisted quality control, solar, biomass and closed-loop water. The buying conversation, in most cases, is still a price negotiation with a single Tier 1 factory,” he said. “We should stop defending the cost position and start building the one that replaces it.”
