Energy crisis erodes Bangladesh’s garment edge as exports shrink for second year

Bangladesh’s garment industry is losing its low-cost advantage as gas shortages, power disruptions and soaring production costs squeeze manufacturers, jeopardise export orders and threaten the livelihoods of millions of workers.

The crisis has drawn international attention, with the TIME magazine highlighting the mounting pressure on garment factories in its October 20 coverage, particularly their growing reliance on costly diesel generators to keep production lines running.

The warning comes as Bangladesh’s apparel exports have declined for the second consecutive fiscal year, raising fresh concerns about the competitiveness of the country’s largest export-earning industry at a time of intensifying global competition.

Garment exports fell to US$38.70 billion in FY26 from US$39.35 billion in FY25, a drop of US$650 million, or 1.64 per cent.

The slide threatens an industry that generates more than 80 per cent of the country’s export earnings and directly employs around four million people. A prolonged downturn could therefore have far-reaching consequences for factory owners, workers and millions of family members dependent on the sector.

Energy shortages are emerging as a critical pressure point. Manufacturers struggling with inadequate gas supplies and unreliable electricity are increasingly forced to turn to diesel generators, pushing up production costs and eroding already tight profit margins.

Yet passing these additional costs on to international buyers remains difficult. Global brands and retailers are highly price-sensitive and can shift orders to competing manufacturing hubs if Bangladesh becomes more expensive or fails to deliver shipments on schedule.

This leaves local manufacturers caught between rising operating expenses and buyers unwilling to absorb higher prices, threatening both profitability and the country's ability to retain export orders.

The competitive challenge is intensifying as Vietnam, India and other apparel-producing countries vie for a greater share of the global market. 

Buyers increasingly demand competitive prices, consistent quality and dependable delivery schedules �" requirements that become harder to meet when factories cannot secure uninterrupted energy supplies.

Smaller manufacturers face the greatest risk. With limited financial resources, they have less capacity to absorb escalating fuel bills, withstand prolonged production disruptions or invest in alternative energy systems. For some, sustained cost increases could threaten business viability and employment.

Energy insecurity is compounding a broader set of challenges facing the industry, including higher wages, rising financing costs and uncertainty over global demand. Together, these pressures are undermining the cost competitiveness that helped Bangladesh emerge as one of the world's leading apparel exporters.

Some factories are investing in rooftop solar panels and other alternative energy solutions to reduce their dependence on conventional supplies. 

Such investments, however, require substantial upfront capital and cannot fully meet the energy needs of every factory or replace uninterrupted grid power and gas for all industrial processes.

The worsening situation puts renewed pressure on the government to ensure reliable gas and electricity supplies, improve energy infrastructure and help manufacturers contain production costs. 

“Without meaningful improvements, Bangladesh risks losing orders to competitors that can offer buyers more predictable costs and delivery schedules”, TIME magazine observed.

For an industry so central to the country's export earnings, employment and economic stability, restoring reliable energy supplies is no longer merely an operational concern for factories.

“It is becoming a critical test of Bangladesh's ability to defend its position in the global apparel market”, it said.