• Friday, April 18, 2014

RMG stimulus in the offing

Cash incentive may go up, while export tax may fall, among other benefits, to protect exporters from political shocks

Rejaul Karim Byron

The government along with the central bank plans to come up with a stimulus package for the garment sector that has been affected by the ongoing political unrest.
The government may bring down export tax for the sector to 0.50-0.60 percent from 0.80 percent now, though garment makers want it at 0.25 percent.
The government may also increase the amount of cash incentive for garment exporters to 6 percent of their export proceeds, from 5 percent now.
And banks may raise cash credit on garment makers' export earnings to 40 percent, which is 25 percent at present.
The incentives will remain effective for one and a half years though the garment makers want the benefits for at least three years, a finance ministry official said.
However, four state-owned commercial banks said 30 percent of their outstanding loans in the garment sector fall in the default loan category as on October 30.
The state banks have already informed the government and the central bank that their default loans may rise by 4-6 percent by the yearend due to continuous blockades and shutdowns.
Private commercial banks also told the central bank yesterday that their default loans may go up by 1-1.5 percent within December.
In this backdrop, the government already held several meetings with stakeholders to find out ways, and the central bank yesterday sat in separate meetings with the private banks and four state banks.

Three platforms of garment and knitwear makers and textile mill owners placed a three-point demand to the finance minister on December 11 to help them offset the extra cost following the recent hike in garment wages.
They also demanded measures to make up for the losses caused by political unrest.
Finance Minister AMA Muhith later sat with the officials of the central bank, the finance ministry and the National Board of Revenue.
In another demand, the garment makers said all existing loan classification rules should be relaxed, and term-loans and forced loans in the textile, garment and backward linkage industries should be given a grace period of two years.
However, Bangladesh Bank said they will not relax rules on a wholesale basis but will provide compensation to the genuinely affected factories individually.
The BB yesterday discussed the matter with the state-owned and private banks.
The central bank also issued a directive to all commercial banks and gave them a guideline about rescheduling the loans of all industrial units affected by the political unrest.
A central bank official said, apart from the benefits meant for the garment sector, some loan facilities may be announced after receiving an instruction from the government. 
Managing Director of Pubali Bank Helal Ahmed Chowdhury said many compliant businesses with a good track record are going through tough times due to the ongoing blockades and shutdowns. 
The government as well as the central bank should support the businesses that were really affected, he said.
A central bank official said the banks have expressed concern about the ongoing political unrest. He said the turmoil would cause an increase in banks' default loans, which will have an effect on various indicators of the banks.

 

Published: 12:00 am Tuesday, December 24, 2013

Last modified: 9:54 pm Tuesday, December 24, 2013

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