In the wake of the Bangladesh Government’s recent initiation of export subsidy reductions across various sectors, strategically aiming to alleviate fiscal pressures and anticipating the country’s transition to a developing nation status, the president of the leading garment manufacturers’ body, BGMEA, has voiced concerns about the implications of this decision.
Faruque Hassan, in a column published in a local daily, highlighted the initial reduction in cash incentive rates across four categories. However, the subsequent circular further narrowed down to exclude products under five HS (harmonised system) codes from receiving cash incentives, significantly impacting the crucial segment of readymade garment exports.
The revised circular indicates that only a few goods will now qualify for cash incentives, he underlined even as he expressed specific concern about the exclusion of India, Australia, and Japan from the category of new markets,
Hassan emphasised the challenges in developing these markets and the considerable risk posed to the industry by such decisions.
The central bank justified the incentive rate reduction, citing adherence to World Trade Organization guidelines, which state that incentives cannot be maintained after 2026 when Bangladesh is scheduled to graduate from the Least Developed Country (LDC) status.
Despite repeated appeals from the garment industry to postpone the incentive reduction, citing the need for competitiveness in foreign currency, the Government proceeded with the decision, held the BGMEA president even as he emphasised the critical need to maintain incentives, given the existing challenges, including low international orders, a domestic dollar crisis, and concerns about foreign exchange reserves affecting the opening of letters of credit and raw material imports.
