Duty bond facility for partially export-oriented industries may ease the impact of high US tariffs

While Bangladesh has made remarkable strides in global trade through the readymade garments (RMG) sector, our over-dependence on a single export item makes the economy vulnerable. In the quest for diversification, one sector that holds immense yet largely untapped potential is the furniture export industry. Despite having the capacity, craftsmanship, adequate human resources, and a growing global demand, furniture exports remain an overlooked opportunity in our country.

The Growing Furniture Market in Bangladesh
According to the Export Promotion Bureau, the current size of Bangladesh's furniture industry—combining both branded and non-branded segments—is BDT 25,000 crore. Unorganised or non-branded showrooms still dominate the majority of the market. However, several brands have already established a strong presence in the country's furniture sector. Moreover, furniture made in Bangladesh has now reached beyond national borders to many other countries. In the fiscal year 2011–2012, the country's furniture exports stood at USD 27.14 million, which increased several times to reach USD 110 million in the fiscal year 2021–2022.

Global Demand and Export Performance
Globally, the furniture market is expected to reach USD 780 billion by 2030, driven by rapid urbanisation, changing lifestyles, and demand for sustainable products. Bangladesh, despite its low share, has all the ingredients to claim a portion of this pie. Currently, our furniture export hovers around USD 100 million annually, which is a fraction compared to our capabilities. Countries like Vietnam, China, and Poland have made strategic investments in this sector and are now among the top global furniture exporters.

Barriers to Export Growth
Despite its promising potential, Bangladesh's furniture export sector faces a range of structural and policy-related challenges that continue to hamper its growth:

1. No Bonded Warehouse Facility
   Unlike the RMG sector, furniture exporters are deprived of bonded warehouse facilities. This means they must pay duties and taxes upfront on imported raw materials, which significantly increases production costs and reduces their ability to offer competitive prices in the global market.

2. Shortage of Raw Materials
   Although some materials are available locally, they are often insufficient in quantity and quality for export-standard furniture. As a result, manufacturers frequently rely on imports for timber, veneer, and fittings, adding cost and time burdens that slow down production and affect delivery commitments.

3. High Import Duty
   The import duty on essential raw materials and machinery parts remains high for furniture manufacturers. At various stages of import, duties range from 10% to as high as 127%. This discourages the adoption of advanced technologies and materials that are essential to producing globally competitive, high-end furniture.

4. Lack of Export-Friendly Policy Implementation
   While government policies have identified furniture as a priority export sector, these policies are often not implemented effectively. Delays, lack of coordination among agencies, and absence of accountability have resulted in missed opportunities. Without urgent and proactive execution, the gap between potential and performance will only widen.

5. No Strong Backward Linkage Industry
   A proper backward linkage industry for the furniture sector has yet to be developed. As a result, most of the raw materials required for furniture manufacturing are imported from China. This heavy dependency on imported components not only increases costs but also makes production timelines less predictable, both of which weaken our global competitiveness.

6. Less Competitive Price Point
   Due to high input costs, import dependency, and the absence of bonded facilities or sufficient subsidies, Bangladeshi furniture often struggles to offer competitive price points in international markets. In contrast, Vietnam charges a very low import duty, giving its exporters a significant edge. Despite having skilled labour, design expertise, and production capacity, our furniture industry still cannot fully leverage these strengths under the current cost structure.

Time for Serious Diversification
To increase national export earnings, it is essential to take appropriate measures to create opportunities for exporting a diverse range of locally produced goods, instead of relying solely on readymade garments and a few selected export items. Although there are various export policies, import policy orders, the National Industrial Policy, and the National Tariff Policy in place, their full and effective implementation is lacking.

The National Tariff Policy 2023 includes a policy decision to offer bond facilities against 100% bank guarantees for importing raw materials intended solely for export-oriented production. This is considered a better alternative to the existing Special Duty Bond system. Notably, this initiative has gained consensus among the Ministry of Commerce, the Export Promotion Bureau, Bangladesh Investment Development Authority, Bangladesh Trade and Tariff Commission, economic research institutions, the FBCCI, and various product-based industry associations. These organisations have previously submitted opinions, reports, and recommendations to the National Board of Revenue (NBR), urging implementation of the government's adopted policies.

Relying only on the garment sector exposes Bangladesh's economy to significant risks amid global changes. For instance, starting from August 2025, the United States is set to impose a 35% tariff on various imported products in its market—this could severely impact our garment exports.

This serves as a clear warning. Without placing importance on export diversification now, the country may face an economic crisis in the near future. The furniture sector, which has strong domestic potential, international demand, and the capacity to generate massive employment, could be our next major success story. With the right strategies, support, and effective policies, this sector can emerge as one of Bangladesh's leading export industries.

Therefore, it is urgent to implement the provision of duty bond facilities against 100% bank guarantees for partially export-oriented industries under the scope of the Export Policy, Import Policy Order, and the National Tariff Policy.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.