Business leaders have responded differently to the Government’s decision to reduce export incentives in almost all industries for the current fiscal year.
The administration supports the action, claiming that the export subsidies will be completely removed after the country passes the least developed country (LDC) classification in 2026.
The measure is also intended to reduce pressure on state spending following IMF guidelines, as well as to encourage exporters to increase their capacity to compete globally.
Mohammad Hatem, the executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), was reportedly upset.
According to him, the move will have an impact on the country’s clothing industry, which is a major source of export revenue.
“The garment sector is now in ICU. If proper treatment is not given, it will soon be put on life support,” said Hatem in opposing the step. He believes that eliminating export incentives right now is strangling the sector.
However, Mahbubul Alam, president of the FBCCI, has a slightly different viewpoint. Speaking to local media, he said the Government had reduced export subsidies to encourage exporters to compete with global competition. However, to increase capacity, the domestic industry requires both regulatory and incentive support from the state.
This judgment will have an impact on certain sectors, he said, but the Government may address it in other ways. He did, however, note that many local industries are dealing with increasing mortgage rates and power bills, which are driving up production costs.
From 1st July 2024, the maximum rate of export incentive has been set at 10 per cent and the minimum at 0.3 per cent, said the Bangladesh Bank in a notice on 30th June.
The cash assistance on the export earnings of apparel makers in all markets has been halved to 0.30 per cent from 0.50 per cent. The cash subsidy for venturing into new markets has been reduced to 2.0 per cent from 3.0 per cent.
The lower export incentive will apply to a variety of sectors, including jute and jute items, leather and leather products, frozen fish, and agricultural products. Until June 30, it was 15 per cent.
Before February of this year, they received 20 per cent incentives. However, the Government has offered a 6.0 per cent tariff on crust leather exports.
Currently, 43 sectors are eligible for funding, with the Government investing approximately Taka 90.25 billion yearly over the last three years.