We’ll be in trouble if export incentives are lifted overnight

The government has recently slashed incentives by up to 10 percent from different export products in preparation for graduation from the group of least developed countries (LDC). Also, five ready-made garment products have been excluded from the incentive privilege, which has left exporters aggrieved. However, economists describe it as a positive move. In this regard, Mohammad Ali, president of the Bangladesh Textile Mills Association (BTMA), spoke to Shovongkor Karmakar of Prothom Alo.

Prothom Alo:

Will the decision to reduce incentives on exports have any impact on the textile sector?

There has been significant advancement in value addition to knitwear exports due to yarn and fabric supplied by local textile mills. The longstanding cash incentive helped the backward linkage industry solidify its base. Suddenly, the government took the decision to lessen the cash incentive and issued a gazette notification disclosing the decision of gradual reduction in the privilege.

However, we saw the alternative cash assistance go down from 4 per cent to 3 per cent, instead of duty bonds and duty drawbacks in the textile sector. The additional special incentive for traders exporting textile goods to the Eurozone was reduced from 2 per cent to 1 per cent. Besides, five HS codes were mentioned to be ineligible for export incentives.

It seems a type of deception to talk about the gradual reduction of incentives and suddenly cancel incentives for five particular products. Why was it done? The local textile sector, which is closely associated with these five HS code products, will be destroyed if the decision is implemented. Also, the export of these products will be dependent on imports.

Prothom Alo:

Readymade garments and the textile sector have long benefited from export incentives. How long do you think this support should continue?

Once, there was a 25 per cent incentive, and it has come down to the current level over time. It will not be a problem for us if the incentives are slashed gradually; we, in fact, want it. We will be in trouble if the incentives are removed overnight; exports will also subside.

In the prevailing woes, we do not get the required supply of gas, despite paying a higher price. The interest rates on bank loans are also high. We buy each dollar at Tk 125 during import but receive Tk 110 while selling the export income. Overall, we are going through a tough time.

Against such a backdrop, the sudden cancellation of incentives will not bring good results. Besides, there is pressure on our foreign exchange reserves due to the dollar crisis. Hence, we have to increase our exports. Many developed countries also provide incentives to the export sector, such as India, which is investing to scale up its competitiveness in the export sector; even a rich country like the USA is providing incentives to cotton farming.

Prothom Alo:

The government opted to reduce incentives as part of its preparation in combating the challenges posed by the graduation from the LDC group. What do you want in this context?

It costs us 1 per cent to receive incentives, while we are charged a 10 per cent tax again. If the minimal incentives are removed overnight, the local textile sector will not survive. Even the export-oriented garment factories that have no import capacity will shut.

Therefore, we demand that incentives be reduced step by step until the LDC graduation. On the other hand, it is imperative to take steps to reduce business costs. Our bank loan interest rates are high. There are many hidden costs in various places, including Chattogram port, and they eventually pull up our business costs. Our competitiveness would have strengthened had these issues been addressed.