Cash incentive inadequate | The Daily Star
12:00 AM, June 09, 2019 / LAST MODIFIED: 12:32 AM, June 09, 2019

Run-up to Budget 2019-20

Cash incentive inadequate

Exporters say govt’s proposed hike in incentive won’t boost shipments

The government’s proposal to increase cash incentive by one percentage point for exporters is insufficient to jumpstart shipments from many sectors, said leaders of different trade bodies.

“It is absolutely inadequate considering the current situation of the garment sector,” said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), yesterday.

At present, garment shipments to new markets -- which are destinations other than the US, the EU and Canada -- and the use of local yarn yield 4 percent cash incentives.

The sector, the country’s main export earner, demanded 5 percent cash incentive on export receipts for all for at least the next five years due to the rising costs amid implementation of a new salary structure in the industry.

“The garment sector, especially the small and medium factories, needs a boost from the government as we are passing through a bad time,” Huq said.

Echoing with the views of Huq, Monsoor Ahmed, secretary to Bangladesh Textile Mills Association (BTMA), said the cash incentive on export should be at least 7 percent for the benefit of the primary textile sector.

The primary textile sector entrepreneurs enjoy 4 percent cash incentive if the garment exporters source the yarn and fabrics from them.

“One percent incentive is too little and seven percent is rational for the sector,” Ahmed told The Daily Star.

The local spinners and weavers have also been passing through bad time due to Western brands’ insistence on sourcing fabrics from a country of their choice.

Similarly, Kazi Belayet Hossain, president of Bangladesh Frozen Foods Exporters Association, said 1 percent cash incentive is too scanty for the revival of the frozen food sector.

Currently, the government gives 10 percent cash subsidy on export of frozen food.

“Our demand is 20 percent cash incentive on export of frozen foods as we are facing competition from India and Vietnam as those countries can export high-yielding vannamei variety of shrimps,” Hossain said.

The farmers started cultivation of vannamei variety of shrimps at Cox’s Bazar and Chittagong on a pilot basis from last year.

“We will start getting benefit from the vannamei shrimp cultivation in the next five years if the pilot projects succeed,” Hossain also said.

Regardless of the amount, the BGMEA president said the government should ease the process of releasing the cash incentive money so that exporters can utilise the funds timely.

The government’s subsidy expenditure is likely to soar 22.28 percent year-on-year to about Tk 45,000 crore next fiscal year.

Currently, 26 sectors are provided with cash incentives ranging from 2 percent to 20 percent of their export proceeds to encourage higher shipments.

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