What Bangladesh’s priority sectors can learn from RMG

Bangladesh is very good at declaring sectors important. Agriculture, CMSMEs, women entrepreneurs, agro-processing and export diversification have all had their turn as priorities, backed by targets, funds, subsidies and special schemes.

Given the amount of public money involved, we have an obligation to ask harder questions. What changes for the farmer or entrepreneur once the declaration is made? What have we achieved? And what has it cost us?

In FY2026–27, the government has allocated Tk17,000 crore for agricultural subsidies and incentives. The export-incentive allocation, covering 43 export sectors, not just RMG, is Tk8,825 crore. The headline credit numbers are larger still. 

Bangladesh Bank has continued its Tk25,000 crore CMSME pre-finance scheme, while this year's agricultural and rural credit disbursement target has been raised from Tk39,000 crore to Tk60,000 crore.

A subsidy, a refinance facility and a credit target are different instruments.

Yet, together, they make it difficult to argue that agriculture and smaller businesses simply suffer from a lack of policy attention or headline financial support. 

The more useful distinction is between subsidising a cost, making finance available and changing the conditions under which firms operate.

RMG illustrates the last of these particularly well.

The sector could not have taken off because the government simply decided it should.

The Multi-Fibre Arrangement opened a market opportunity, while Korean investment and knowledge transfer, Bangladeshi entrepreneurs and international buyers helped turn that opportunity into an industry. As the industry grew, the government, banks and customs gradually adapted around what exporters actually needed.

An exporter with an order could bring in inputs through bonded warehousing without first carrying the full customs burden. Back-to-back letters of credit helped finance those inputs against the order. Over time, an institutional chain developed around getting an order, producing it and shipping it.

None of this arrived as a single industrial-policy blueprint. 

Much of it evolved as the sector grew and recurring problems were solved. Support gradually became part of doing business rather than something a firm had to apply for afresh every time it wanted to grow.

RMG also had a market feedback mechanism. A buyer placed an order and judged the factory on price, quality and delivery. The next order depended on the result. What emerged was an institutional capability and intent to weed out recurring commercial bottlenecks.

Agriculture operates in a very different institutional environment. The World Bank's 2026 review of agricultural public support finds that, across FY2019–20 to FY2022–23, payments to producers accounted for an average 45.1% of agriculture-specific public expenditure.

Public stockholding and storage accounted for 17.1%, knowledge dissemination 8.5%, agricultural infrastructure 5.6% and agricultural research 4.2%. Fertiliser subsidies alone accounted for about 68% of payments to producers. In other words, more than Tk10 went into direct support to producers for every Tk1 going into agricultural research.

There are good reasons for keeping fertiliser affordable, particularly when international energy and fertiliser prices spike. Food security matters, and abrupt input-price shocks can quickly reach both farmers and consumers.

But the design of the subsidy has consequences. 

World Bank estimates find that the largest 20% of landholders capture half of total fertiliser-subsidy benefits, while the bottom 40% receive only about 15%. The reason is straightforward: support is distributed on a volume basis and larger farms use more fertiliser.

Agriculture and CMSMEs cannot literally copy garments. For a vegetable farmer, useful support may mean grading, cold storage, aggregation, transport, market information and buyers. For a small manufacturer, it may mean simpler tax compliance, digital accounts, invoice finance, reliable power and predictable licensing. Both require rules that are clear and predictable.

Keeping fertiliser affordable helps with this season's crop. Research, extension, soil information, irrigation, storage, cold chains and logistics can change what farmers are able to produce, how much value they retain and where they can sell it. That is what starts to change what farmers can actually do.

CMSME policy encounters the same underlying problem from another direction. 

Bangladesh Bank can create refinance schemes, guarantees and lending targets. But financing made available somewhere in the system does not mean a particular small firm can reach it.

The Economic Census 2024 shows how wide that gap remains. 

Among economic units reporting business difficulties, 85.89% cited insufficient capital and 34.42% cited difficulty accessing loans. A refinance scheme can make money cheaper for a firm that gets the loan. It cannot, by itself, make a promising but poorly documented business bankable.

There is another reason RMG was able to get problems fixed: it had a voice. 

BGMEA, BKMEA and large exporters became organised counterparts to the government. They could sit regularly across the table from ministries, banks and customs and raise concrete operating problems. 

Millions of farmers and small businesses do not have comparable organised access or bargaining power with the state.

The World Bank finds that garment firms face regulatory-service wait times about half as long as firms in other manufacturing and services. Across the regulatory services it examined, Bangladeshi firms waited 35 days on average, the longest among the peer countries in its comparison, while implementation varied substantially even among firms operating under the same rules. 

The obvious fixes are common-sensical: simpler rules, less discretion and more consistent implementation.

The FY27 budget offers an important test of that principle. 

It explicitly acknowledges that bonded warehousing played a 'transformative role' in RMG and proposes widening bond access across export-oriented sectors. 

It would also extend three-year general-bond validity to leather goods, footwear, towels, linen and home textiles, while allowing fully export-oriented firms without bond licences to procure raw materials duty-free against back-to-back letters of credit.

Agriculture and CMSMEs cannot literally copy garments. For a vegetable farmer, useful support may mean grading, cold storage, aggregation, transport, market information and buyers. For a small manufacturer, it may mean simpler tax compliance, digital accounts, invoice finance, reliable power and predictable licensing. Both require rules that are clear and predictable.

All this neatly boils down to three first-principles questions: Does public support make productive activity easier? Does access depend on individual discretion? And can we show what changed?

Priority status should mean more than money being available somewhere in the system. It should mean fewer avoidable obstacles, easier access to government and fewer decisions left to individual discretion.

And we should be able to say what the public money actually bought.

Saba El Kabir is a sustainability practitioner and the founder of Cultivera Limited. He can be reached at saba@cultivera.net.

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.