Withdrawal of cash incentives on various garment export products could have been more logical as it has come when the industry faces several challenges, including gas shortages and a slowdown in exports.
This was said unanimously by various Bangladeshi textile and garment associations shocked by the government’s decision to withdraw cash incentives from January 1 this year.
The Central Bank of Bangladesh Bangladesh Bank issued a circular on January 30 and lowered cash incentives against exports of products under various categories for the ongoing fiscal 2023-24.
Bangladesh Bank said in its circular that the government had decided to reduce the cash incentives against exports gradually, as after graduation of the country from least developed country (LDC) status in 2026, the export subsidy would be prohibited under provisions of the World Trade Organisation.
A letter from Mohammad Ali Khokon, President of the Bangladesh Textile Mills Association (BTMA), said products excluded from cash incentives accounted for 55.22 percent of garment exports.
The letter to the Finance Minister added that most of these garment products were made with yarns produced by domestic spinning mills.
“The withdrawal of incentives would encourage huge imports of yarns under bonded warehouse facility to produce products under the five categories, and the lead time for exports will increase,” Khokon stated.
The BTMA President further said that excessive yarn import would ruin domestic mills’ competitive edge, and Bangladesh would turn into a yarn and fabric importing country.
“I request the Finance Minister to keep cash incentive against exports of respective products intact,” the BTMA President noted.
Garment exporters said that the Bangladesh Bank’s decision without discussion would be disastrous for the textile and apparel sector as export orders for clothing were already down by 20 percent due to the worldwide economic slowdown.
After meeting with garment industry stakeholders, the Finance Minister agreed that five apparel categories should not be excluded from export cash incentives.