Lessons from the East: Decoding the Rise of Bangladesh’s Apparel Sector

The global apparel industry has undergone dramatic transformations over the past two decades, shaped by shifting consumer preferences, evolving trade policies, and increasing demands for cost efficiency, compliance, and speed. Among developing countries, Bangladesh and Pakistan have long been seen as regional competitors due to their large labor forces, strong textile traditions, and export potential. Yet the trajectories of their apparel sectors have diverged significantly.

Today, Bangladesh ranks as the world’s second-largest apparel exporter, with annual exports exceeding $49 billion, supplying some of the world’s top fashion retailers such as H&M, Zara, Walmart, and Uniqlo. By contrast, Pakistan’s apparel exports remain below $9 billion, despite being one of the world’s top cotton producers and having a well-established textile base. This disparity raises fundamental questions: Why has Bangladesh succeeded in scaling and modernizing its apparel industry while Pakistan continues to struggle with low value addition, limited global integration, and stagnant export volumes?

This report seeks to answer some of these questions through a structured comparative analysis of the two countries’ apparel sectors. It investigates the policy frameworks, industrial strategies, export performance, pricing structures, and institutional arrangements that have shaped outcomes in both countries. It further assesses the impact of market access mechanisms (such as GSP and EBA), the role of labor market dynamics, the strength of backward linkages, and the efficiency of supply chains.

Crucially, the report aims not just to highlight differences, but to extract actionable lessons from Bangladesh’s success that can inform strategic reforms in Pakistan’s apparel sector. The goal is to offer a pathway for Pakistan to move beyond raw material exports and into high-value, diversified, and globally competitive garment manufacturing—an imperative for sustainable economic growth, employment generation, and foreign exchange stability.

Key Findings:

Pakistan’s export structure remains dominated by upstream textile products such as yarn and fabric. In 2024, of the $17.5 billion in total textile exports, only $8.71 billion came from the apparel sector —a relatively low share compared to Bangladesh, where apparel makes up 86.2% of total exports. Pakistan also continues to export raw materials to its competitors, including Bangladesh, who then add value and re-export at significantly higher margins. This export of intermediate goods limits Pakistan’s pricing power and brand visibility in the global markets.

Bangladesh’s rise in the apparel sector has been significantly aided by preferential market access, firstly due to its status as an LDC and then under the EU’s Everything But Arms (EBA) initiative. In contrast, Pakistan, despite gaining GSP+ status in 2014, has been unable to leverage this preference fully due to weak compliance, inconsistent policy implementation, and poor buyer engagement. Bangladesh’s use of bonded warehouses, back-to-back LCs, and simplified tax regimes has enhanced its trade facilitation and responsiveness to international demand.

Bangladesh enjoys considerable production efficiency, driven by labor-intensive manufacturing, high female labor participation, and industrial clustering. Proactive trade policies, institutional continuity, and strong public-private partnerships which have created an enabling environment for apparel growth. Meanwhile, Pakistan’s apparel sector is burdened by high energy costs, outdated machinery, a fragmented industrial base, and limited policy coordination at federal and provincial levels.

Major Structural Constraints in Pakistan:

1. Institutional and Policy Gaps
   Pakistan lacks a dedicated National Apparel Policy, treating instead, apparel as a sub-component of the broader textile sector. This conflation fails to recognize the distinct labor dynamics, global value chain integration, and compliance needs of garment production. Existing policies are fragmented, reactive, and often contradictory—combining import substitution rhetoric with inconsistent export incentives.

2. Labor and Skill Deficits
   Pakistan has a large labor force but suffers from low labor productivity, outdated skills, and minimal female participation in the apparel sector. In contrast, Bangladesh invested early in vocational training and created strong linkages between training institutions and industry needs. Skill shortages remain a binding constraint in Pakistan, especially in advanced apparel processes like pattern-making, quality control, and merchandising.

3. Energy and Taxation Issues
   Pakistan’s industrial electricity and gas tariffs are among the highest in the region. Apparel manufacturing, though not energy-intensive, is penalized due to cross-subsidies and fluctuating energy policies. Additionally, the shift from a 1% final tax to a 2.25% turnover tax, along with delayed refund cycles, has disrupted exporters’ liquidity and growth planning. Bangladesh, in contrast, maintains a stable and low-cost energy regime for exporters and offers real-time tax and duty refunds through simplified digital systems.

4. Weak Buyer Engagement and Global Positioning
   Bangladesh’s strong integration with global retailers like H&M, Zara, and Walmart has enabled it to align with international standards and rapidly adapt to market shifts. Pakistani firms, by contrast, remain mostly vendor-driven, supplying intermediaries rather than final brands. This limits their ability to influence product pricing, quality standards, and long-term sourcing relationships.

Strategic Recommendations for Pakistan:

Drawing from Bangladesh’s experience and the analysis of current challenges, the report outlines the following strategic interventions for Pakistan:

1. Develop a National Apparel Policy that treats apparel as an independent industry, with export-focused incentives and institutional oversight.
2. Shift focus from raw materials to finished garments, through fiscal and regulatory measures that discourage the export of yarn and fabric and support domestic garment production.
3. Revamp labor training systems, align technical education with market needs, and boost female labor force participation through gender-sensitive workplace reforms.
4. Reinstate regionally competitive energy tariffs and rationalize the taxation regime to restore cost competitiveness.
5. Facilitate global buyer engagement by re-establishing sourcing offices, improving travel ease and safety, and promoting “Brand Pakistan” through trade missions and expos.
6. Invest in product diversification, especially in high-margin segments such as MMF-based apparel, activewear, outerwear, and lingerie.
7. Improve infrastructure and logistics, particularly in key export clusters, through special economic zones, customs digitization, and reliable freight systems.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk