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Budget, industry and incentives…

by Deepak Mohindra

05-July-2019  |  4 mins read

Budget

For fiscal 2019-20 budget, Bangladesh has proposed 5% export incentive for the readymade garments industry, which is the highest ever.

It was heartening to note the importance that the Sheikh Hasinaled Government is assigning to the sector, which is the backbone of the country’s economy. Terming the proposed budget as inclusive, business-friendly and pro-people, BGMEA has urged the Government to reconsider increasing cash incentives from 1% to 3% against exports to traditional market for the next fiscal year

If the garment industry has been enjoying 4% cash incentives for exports to non-traditional markets, this time around, the Government has proposed 1% cash incentive against export of apparel goods to traditional destinations as well, for which it has even earmarked Taka 2,825 crore.

Given the market dynamics, the garment makers’ demand is comprehensible, more so if one considers the economic burden the industry has to bear on account of the wage hike. Add to it the wafer-thin profit margins and ever-increasing raw material cost and overheads. In the last five years, the industry claims, production cost has gone up by 29.54% and wages by 184%, while the prices of goods fell by 5% in US and by 4% in Europe.

In the fiscal year 2017, the sector received Taka 804 crore as cash incentives against exports to non-traditional markets and, if the Government has to hike the 1% cash incentive for traditional markets to 3% now, it would cost an additional Taka 5,650 crore to the country’s exchequer. Economists are not in favour of this. Instead they support controlling the exchange rate to devaluate Taka against US Dollar, incentivising the industry in areas such as technological development, improvement of the skill set of workers, product diversification, valueaddition, etc., which could help the industry to attain a position of strength to better bargain with global clients, while also increasing its competitiveness.

Even as the exchange of thoughts between the industry, the Government and the experts are on-going on this issue, Bangladesh has notched up yet another achievement in the export front. It has beaten China in cotton trousers exports to USA during Jan.-Apr.’19 period. Bangladesh exported cotton trousers worth US $ 886.52 million to USA pushing China to second spot with US $ 869.51 million-worth exports.

At a time when global brands are reassessing their sourcing strategies in view of the waging trade war between USA and China, Bangladesh’s export performance to USA is very significant. What’s more, the industry is making this progress without compromising on sustainability, an issue for which, it has faced flak in the past.

Bangladesh, today, is the country with the highest number of Platinumrated LEED factories in the world. Twenty-four to be exact, of which, six are amongst the top 10 globally!

The momentum that the industry has built in the recent past needs to continue now… With ex-BGMEA chief Tipu Munshi as the present Commerce Minister; an able, experienced and determined Dr. Rubana Huq heading the industry as BGMEA President; and an equallysupportive Government, I am sure the industry is all set to touch new
heights in the coming days.

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