Inadequate measures for exporters | The Daily Star

The stimulus packages and measures announced by the government are inadequate to revive exports from the fallouts of the ongoing coronavirus pandemic, according to industry leaders.

“The government needs to go beyond such measures if it wants to boost exports and protect jobs of thousands of workers,” they said.

Prompt implementation of the Tk 5,000 crore, Tk 20,000 crore and Tk 30,000 crore stimulus packages announced by the government would go a long way in safeguarding export-oriented sectors, they said.

Cooperation from the banking sector is needed to speed up implementation of the stimulus packages, they added.

Considering how the Covid-19 outbreak has negatively impacted Bangladesh’s garment industry, the country’s main export sector, Finance Minister AHM Mustafa Kamal proposed the continuation of the 1 per cent additional cash incentive scheme for the upcoming fiscal year.

The government has been providing a 1 per cent additional cash subsidy on apparel exports since the beginning of the outgoing fiscal year.

This means garment exporters have enjoyed a 5 per cent cash incentive on all non-traditional export markets as well.

Other than the EU, the US and Canada, Bangladesh considers all markets as non-traditional.

The finance minister also proposed increasing tax deductions at source from 0.25 per cent to 0.50 per cent.

The current 0.25 per cent source tax levied on exporters was initially set to be 1 per cent but was later reduced through a statutory regulatory order (SRO).

The reduced 12 per cent and 10 per cent corporate tax rates for non-green and green garment factories respectively should remain the same for the next two years, Kamal said.

The Export Development Fund was topped up from $3.50 billion to $5 billion in the new budget while VAT on the sale of synthetic and polyester yarn was set at Tk 6 per kilogramme.

Meanwhile, VAT on yarn meant for domestic markets was reduced by Tk 1 per kg.

At present, local yarn buyers have to pay Tk 4 per kg as VAT but according to the new proposal, they will have to pay Tk 3 per kg in the upcoming fiscal year.

Kamal also proposed that VAT should be waived altogether on the production of personal protective equipment (PPE) such as face masks.

PPE has become a major export item for Bangladesh in the past few months due to the ongoing coronavirus pandemic.

As always, no taxes will be levied on cotton imports for the upcoming year as it is a vital raw material for the garment sector. The finance minister went on to propose a tax rebate on the import of RFID tags, which are used in garment factories, industrial rakes and cutting tables.

In total, the government allocated Tk 6,825 crore as export incentives for 37 different sectors in the outgoing fiscal year while it was Tk 4,000 crore in fiscal 2018-19.

“We expected that the 5 per cent tax on cash incentives would be waived,” said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in her reaction to the budget.

She welcomed the budget but urged the government to continue charging 0.25 per cent VAT at source for the next five years instead of the proposed 0.50 per cent. Huq also lauded the government’s intention to continue the additional 1 per cent cash incentive for the garment sector.

The BGMEA president also sought the government’s cooperation for launching e-commerce platforms like Amazon or Alibaba.

The government should allocate more funds for micro, cottage and small enterprises as these sectors generate employment, said Ahsan H Mansur, executive director of the Policy Research Institute.

“If we can implement the stimulus packages, we can protect the jobs of workers. New job creation might not be possible if new funds are not injected,” Mansur added.

The government should come up with another Tk 5,000 crore stimulus package to help export-oriented businesses pay their workers’ wages in July, August and September, said Saiful Islam, president of the Leathergoods and Footwear Manufacturer & Exporter’s Association of Bangladesh.

Mohammad Ali Khokon, president of Bangladesh Textile Mills Association, demanded a 10 per cent increase in cash incentives for using local yarn instead of the proposed 4 per cent for at least the next six months.

Bangladesh’s domestic market for garment products suffered losses of about Tk 20,000 crore due to the Covid-19 outbreak while export-oriented manufacturers lost around $1.4 billion following work order cancellations by international brands and retailers.

Mohammad Hatem, vice president of Bangladesh Knitwear Manufacturers and Exporters Association, urged the government to immediately implement the stimulus packages to help bring work orders back into the country.

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