1pc cash incentive for RMG exports to traditional markets

FT ONLINE

Apparel exports to the markets of the European Union (EU), the USA, and Canada will get one percent cash incentive, which will be effective on shipments from July 1.

The Bangladesh Bank issued a circular in this regard on Thursday, clarifying the eligibility for receiving the facility.

However, in this case, the rate of value addition must be at least 30 percent.

The factories of local entrepreneurs located in specialised zones (EPZs and EZs) will get the facility.

But, the apparel exporters who are already enjoying cash incentives under four categories will not be eligible for this new one, according to the circular.

The current cash incentives are: four percent for exports to new destinations outside the EU, the USA and Canada, four percent for export items produced from local fabrics, four percent for SME exporters – whose export volume is below $5 million – and two percent for exporting to Eurozone markets.

The central bank circular also mentioned that the cash incentive would be provided following the World Trade Organization's (WTO) regulations regarding handling charges, upgrading and processing costs, domestic and international transportation and freight charges of exporting items.

Md Shehabudduza Chowdhury, director of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the one percent cash incentive was very poor to make the local ready-made garment industry compete with other apparel exporting countries like Vietnam, Cambodia, India, and Pakistan.

"However, the factories in the EPZs did not get the cash incentives earlier," he said.

Mohammad Hatem, the first vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), also echoed the same view.

He said one percent was not sufficient for the apparel industry. "It should be at least three percent," he opined.  

However, Mostafiz Uddin, managing director of Bangladesh Denim Expert Ltd, a denim garment and washing plant at Chattagram Export Processing Zone, welcomed the government initiative of giving the incentive. 

He said, "The one percent cash incentive against the apparel export is indeed a commendable step taken by the government."

The country's apparel industry was going through a tough time, which was evident in the closure of a number of factories in recent times, he added.

"The incentive will indeed be instrumental in boosting up our competitiveness," said Mostafiz, also the founder of Bangladesh Denim Expo.

He suggested concentrating on value addition and innovation to sustain in the global competition.

The government proposed to provide the incentive at the budget for the fiscal year 2019-20. 

The government also announced to give cash incentives to 37 products and sectors in the budget. Earlier, the cash incentives were provided to 35 products and sectors.

The two new categories are the one percent cash incentive to the apparel sector and 10 percent cash incentive for exporting consumer electronics and electrical home and kitchen appliances.