Partial incentive on export of five products

Workers handle a container at the Chittagong port on 7 February 2022.Prothom Alo file photo

The government is going to revise its decision on new markets, five products of the readymade garment (RMG) sector and the date of effectiveness within two weeks. It has decided to phase out cash incentives or subsidies to the export of goods.

Earlier on 30 January, the Bangladesh Bank announced the incentive cuts in the export sector through a notification. Bangladesh has long been providing cash incentives on 43 items.

According to the central bank, the Finance Division of the finance ministry informed the central bank governor Abdur Rauf Talukder in a letter about the revised decision on cash incentives and asked the latter to issue a new circular on the matter.

Per the revised decision, India. Japan and Australia will be considered as new markets. Five products of HS (harmonized system) codes will receive partial cash incentives. Besides, the previous notification on the withdrawal of case incentives will come into effect from 1 February instead of 1 January.

Bangladesh Bank spokesperson and executive director Mezbaul Haque told Prothom Alo over mobile phone on Sunday, “No revisory notification has been issued till now.”

Following the issuance of notification on incentive cuts, leaders of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Textile Mills Association (BTMA) met finance minister Abul Hassan Mahmood Ali at the Secretariat on 4 January.

Meanwhile, the BKMEA appealed to prime minister Sheikh Hasina on Sunday to suspend the notification.

The Finance Division sent the letter to Bangladesh Bank. Two days later, Bangladesh Bank issued a notification stating that cash incentives against custom bonds and duty drawback will be 3 per cent instead of 4 per cent in the export-oriented apparel sector, apparel exporters of the Eurozone will receive 1 per cent special incentive instead of 3 per cent. However, small and medium factories in the apparel sector will continue to receive an additional 4 per cent.

Cash incentive on market expansion was slashed to 3 per cent from 4 per cent, leaving India, Japan and Australia of the list. Special cash incentive on export of readymade garments was reduced to 0.50 per cent from 1 per cent.

The notification also stated apparel of five HS codes will no longer receive cash incentives on export, and these five products are knitwear-made T-shirts, shirts and trousers, and woven-fabric jackets and blazers.

Replying to a query on the government's decision to revise incentive cuts, BKMEA executive president Mohammed Hatem told this correspondent, “If this is true, then our demands will be fulfilled partially. However, 1 July should be fixed as the date when the notification comes into effect.”

The apparel sector is followed by leather and leather goods, which saw a cut in cash incentives from 15 per cent to 12 per cent. Incentives have been withdrawn from the export of crust leather but were slashed to 7 per cent from 10 per cent in the export of fished leather products.

Cash assistance on agriculture products and agro-processed products was reduced to 15 per cent from 20 per cent, jute products to 15 per cent from 20 per cent, jute-processed products to 7 per cent from 12 per cent and cash incentives on jute fibre was slashed to 5 per cent from 7 per cent.

Likewise, cash incentive on light engineering products was slashed to 12 per cent from 15 per cent, raw materials of medicine 10 per cent from 20 per cent, and halal meat from 15 per cent to 20 per cent. Cash incentive was also reduced in exports of motorcycles, furniture, battery potatoes, tea, ships, plastic products, frozen shrimp, PET bottle flakes, caps, crops and vegetable seeds, aloe wood, and perfumes.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), told Prothom Alo the decision on revision including the reduction of cash incentives came following the discussions with the stakeholders, and that indicates exporters agree in principle on the government decisions, and that is a positive sign.

According to the Finance Divisions, a total of Tk 86.90 billion was given in cash incentives in the 2022-23 fiscal, with the export-oriented apparel sector alone receiving Tk 56.96 billion.

This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna