Govt plans to slash export subsidy on RMG

Nazmul Ahsan

The government is planning a 25 per cent slash in export incentives on readymade garments at a time the sector faces setback in retaining its global market share and struggles to cope with non-stop blockades and hartals.
The planned reduction would be made effective on all three categories of apparel exports, as the finance ministry believes the sector alone gobbles up the lion’s share of incentive allocation of the government every year.
The new rates of cash incentive for textiles and apparel sector will be effective from July, a senior finance ministry official said.
Current five per cent export subsidy for all types of export-oriented RMG industries will be reduced to four per cent, another five per cent incentive, only meant for medium and small RMG units, will be slashed to four per cent, and the three per cent incentive now available only for export earnings generated from countries other than the US, Canada and EU, will be trimmed to two per cent.
Besides, a 0.25 per cent extra export incentive available for the current fiscal year for all categories of apparel exports, would not be extended beyond June this year, sources said.
‘The apparel sector is the most blessed area that receives maximum fiscal and non-fiscal privileges from the government. The facilities will be trimmed down to support other non-traditional items that are making their presence in the global export markets,’ a top finance official told New Age.
Bangladesh Garment Manufacturers and Exporters Association reacted sharply over the move of the government, saying any cut in existing facility ‘would be suicidal for this vital sector.’
‘We have been in the constant miseries, given the decreasing global market share of apparel export and increasing political chaos and blockades,’ Atiqul Islam, president of BGMEA, told New Age on Thursday.
Expressing his wonders, Atiqul said how come the government thinks of such a suicidal step to stifle the already struggling export earning sector.
Finance officials said the steps once implemented would save Tk 200 crore per annum, which could be invested in new sectors with potentials.
The amount of export subsidy given to RMG sector in 2013-14 fiscal year was Tk 950 crore as the largest export earning sector raked in above US$ 25 billion last fiscal year.
Industry sources said garment exports to the US, Bangladesh’s single largest export destination, declined 3.17 per cent year-on-year to US$ 4.64 billion during January-November last year.
Bangladesh was the sixth largest sourcing country for the US during the period though Bangladesh’s position was third even a few months ago, according to the US Department of Commerce.
In the US market, China remained on the top of the list with apparel exports worth US$ 38.85 billion, followed by India, Vietnam, Pakistan and Mexico.
Atiqul said the growth in apparel export was waning in recent period, due largely to negative propaganda after the Rana Plaza building collapse, and lack of adequate infrastructure including port facilities and poor profitability.
The situation would be much disturbing and devastating if the ongoing blockades and hartals continue for further period, he cautioned.
‘The planned step will impact the economy, as scopes of unemployment and factory closures will be the consequences,’ Atiqul said.
‘We want our present facilities be broadened and increased to withstand the local and international headwinds.’

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