Mahmud Hasan Khan Babu, panel leader of the victorious Forum in the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) elections, expressed concerns over the proposed national budget, stating that it is not conducive to industry growth and investment.
In a media statement, he highlighted that the budget’s allocation for the energy sector has been reduced, which could pose challenges for existing factories to sustain operations. Additionally, the decrease in tax exemption benefits for industries is expected to limit opportunities for new investments. Despite these concerns, Mahmud Hasan Khan Babu acknowledged a positive move, namely, the reduction of VAT on LNG imports, which he praised as a necessary step amid ongoing gas and electricity shortages.
He warned that the withdrawal of tax exemptions could create capital shortages, hindering the launch of new projects. As an alternative, he suggested expanding Bangladesh Bank’s “low-cost finance” initiatives to help investors access affordable funding.
The BGMEA leader also pointed out a proposed increase in VAT on yarn production in textile mills, which would directly impact spinning mills. However, apparel exporters with bonded warehouse licenses, those opening back-to-back LCs, are expected to be unaffected. He emphasized that around 700 BGMEA member factories lack bonded licenses and are required to purchase yarn locally with cash, meaning the proposed Taka 2 per kilogram VAT increase would directly burden these producers. He called for a reconsideration of this proposal to prevent adverse financial impacts.
Furthermore, he expressed concern over indications that the budget may phase out export incentives. Mahmud Hasan Khan Babu urged that these incentives remain in place until Bangladesh graduates from Least Developed Country (LDC) status, noting that WTO guidelines permit continued incentives for three years post-graduation and that such incentives are legally protected during this transition period.
The BGMEA leader concluded by emphasizing the importance of maintaining supportive policies to ensure continued industry growth and investment in Bangladesh.
