Apparel manufacturers likely to get big policy support from govt

BDApparelNews Desk
29 May 2019  

Inside a readymade garments factory in Bangladesh.

Inside a readymade garments factory in Bangladesh.

Bangladesh’s apparel manufacturers are likely to get huge policy support from the government, and its reflection is most likely to be seen in the proposed budget for fiscal 2019-20.

According to insiders in the finance ministry, the biggest support is likely to be in the form of cash incentive. The government might give a flat cash incentive for all the manufacturers and exporters, regardless of export destination or criteria – which is now the case.

Currently, the 4 per cent cash incentive on exports is applicable for manufacturers or exporters exporting to non-traditional destinations who fulfil a number of criteria. In the proposition, all apparel manufacturers and exporters will be eligible to avail the cash incentive.

From what little could be known, even if the cash incentive is not proposed at 5 per cent, what is now the priority demand of the apparel manufacturers at the moment, the prevailing 4 per cent incentive would be slapped flat without discrimination or selection. But, a 5 per cent cash incentive is very likely, which is set to cost over an additional BDT 11,000 crore.

Sources say, the move is being taken in consideration of an apparel-priority policy, in line with the business first policy adopted by the new government, and since apparel exports contribute to around 83 per cent of Bangladesh’s total export basket.

READ MORE: Analysis – BD govt focusing on luring FDI, business

Also, unverified sources said, there might be changes to corporate tax rates and we might not be seeing a hike in source tax like every year. Currently, apparel manufacturers are counting a higher corporate tax rate at 12 per cent, and 10 per cent in case of green manufacturing.

In overall, Bangladesh government is considering to increase its subsidy to fuel the business sectors. According to sources, the coming budget might see BDT 45,000 crore in subsidy – what will be higher by over 22 per cent in compared to the running fiscal.

WHAT THE MANUFACTURERS WANT

Bangladesh Garment Manufacturers and Exporters’ Association (BGMEA), Bangladesh Textile Mills Association (BTMA), and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) have already laid down a long list of demands before the government.

The focal point of their demand was the 5 per cent cash incentive – for BGMEA and BKMEA-enlisted manufacturers exporting to both traditional and non-traditional markets. But, their long list of demands does not end there and is listed below.

READ MORE: Manufacturers want 5% cash incentive

-     5 per cent cash incentive for all markets, traditional or non-traditional.
-    Exchange rate according to market mechanism. Additional BDT 5 per dollar for exchange rate for the apparel and other exporters.
-    Doubling the default loan rescheduling deadline. BGMEA has requested a special budget for rescheduling of loans for apparel manufacturers.
-    VAT exemption for apparel manufacturers, including for the use of utility services like power, gas, water and others.
-    Keeping the source tax at 0.25 per cent. Lowering the corporate tax rate to 10 per cent for apparel manufacturers like what it was before.
-    Duty-free import of safety equipment like fire rated paint, solar energy operated lamps, close-circuit camera system, and archway gate.
-    Exemption from 0.2 per cent from stamp duty.
-    Fixing LC commission at BDT 0.2 and LC acceptance commission BDT 0.2.
-    Special interest rates for bank loans for apparel manufacturers.
-    Creating a special ‘Emergency Fund’ for troubled medium and small manufacturers who are on the verge of closure.
-    Fund for technological advancement in the apparel sector.
-    Audit document submission deadline extended to 6 months from the prevailing 3.