Bangladesh Bank FEPD Circular No. 46/2025: RMG Export Cash-Incentive Extended to Sub-Contracted Production

Mechanism

FE Circular No. 46/2025 amends the scope of Bangladesh's long-standing RMG/textile export cash-incentive scheme, first established by FE Circular No. 01 of 7 January 2020, which pays a 0.30% cash subsidy on the net FOB (free-on-board) value of ready-made garment and textile-goods exports to manufacturer-exporters producing in their own factories.

The 12 November 2025 circular, issued "on government decision" (per the circular's own text), extends the same 0.30% incentive, on the same net-FOB basis and under the same conditions, to garments and textile goods that are manufactured and exported via sub-contracting arrangements — provided:

1. The principal firm/company placing the sub-contract operates its own running factory (previously only output from a company's own factory qualified at all). 2. The sub-contracting arrangement follows the "Sub-Contracting Guideline for the Ready-Made Garment Industry — 2019" and the "Rules for Direct Export-Oriented Garment Establishments (Temporary Import under Warehouse System, Warehouse Management and Procedures), 2024." 3. Pure trading firms/companies not engaged in production are not eligible for this extended facility — the incentive follows production, not the export documentation.

The circular takes effect for goods shipped from the date of issuance; all other instructions in the original FE Circular No. 01/2020 and subsequent related circulars on RMG/textile cash assistance remain unchanged.

Downstream implications

• Widens, not raises, the subsidy base. This is not a rate increase — the

0.30% cash-incentive rate is unchanged — but a scope expansion that captures the sub-contracting layer of Bangladesh's RMG production network, which is large: much of Bangladesh's ~$47bn/year (FY2024) garment-export base runs through informal or formal sub-contracting between larger exporters (with buyer relationships and compliance certification) and smaller factories that do the actual cut-make-trim (CMT) work. Extending the incentive removes a disincentive for principal exporters to sub-contract, and channels the export subsidy further down into Bangladesh's tiered factory base.

• Companion to the FY2024-27 Export Policy cash-incentive restructuring

(2024-02-25-bangladesh-export-policy-2024-2027), which flagged the cash-incentive regime as a lever for RMG competitiveness ahead of Bangladesh's November 2026 LDC graduation and loss of EU Everything-But-Arms duty-free access. Read together with 2025-04-20-bangladesh-bank-fepd-circular-14-2025 (import-LC discrepancy liberalisation, also FEPD, also RMG-directed), this is the third Bangladesh Bank instrument in the register easing operational and financial friction for RMG exporters in 2025 as the interim government works to defend export competitiveness through the LDC-transition window.

• WTO/subsidy-discipline exposure unchanged in kind, larger in reach: as an

export-contingent cash subsidy, the scheme sits in the same WTO SCM Agreement category as Bangladesh's broader RMG cash-incentive architecture (subject to phase-out obligations tied to LDC graduation); widening its base to sub-contractors increases the number of beneficiary firms without changing the underlying compliance question.

Open questions

• Fiscal cost estimate: no budget figure disclosed in the circular for the

incremental cost of extending eligibility to the sub-contracting layer of RMG production — watch Bangladesh Bank/NBR budget documents for FY2025-26/26-27.

• Whether this sub-contracting extension survives Bangladesh's LDC-graduation

subsidy phase-out commitments (effective November 2026), given WTO SCM Article 27 export-subsidy prohibitions apply in full once LDC status ends.