Apparel exporters need more support to stay the course | The Daily Star
12:00 AM, June 15, 2020 / LAST MODIFIED: 01:04 AM, June 15, 2020

Apparel exporters need more support to stay the course

Apparel exporters and textile millers demanded the government accommodate more measures in the proposed budget to recuperate exports and buck up job creation such that the sector can weather the looming economic storm unleashed by the pandemic.

Steps needed to revive exports are absent in the budget, and on top of that, source tax has been jacked up to 0.50 per cent from 0.25 per cent for the sector that fetches more than 84 per cent of the total export earnings, they said.

Garment manufacturers said they get some sort of incentive from the government every year but the support should have been extensive this year given the economic meltdown that is sweeping across the globe.

The garment and textile millers want the government to double cash incentive on export receipts from all destinations to 2 per cent at least for the time being, which, they said, would help them meet their match in the global market.

"The budget is as usual unless some concrete steps are taken to revitalise garment exports," said Mahmud Hasan Khan Babu, managing director of Rising Group, an apparel exporter.

Considering the time and the overall business situation, the garment sector deserves a reduction in source tax to 0.25 per cent and an increase in cash incentive to 2 per cent, he said.

"We see a grim picture in work orders at least for the next three months as most Western retailers did not reopen their outlets to the full. So we need support to stay the course," said Fazlul Hoque, managing director of Plummy Fashions, another leading exporter.

Hoque said many of the garment manufacturers cannot borrow from the government-announced stimulus funds because of stringent conditions.

If the conditions are relaxed at least for the micro, cottage, small and medium enterprises, many factories would survive the pandemic-induced recession, he added.

"The finance minister should have planned something big for the garment sector," said Shahidul Haque Mukul, managing director of Adams Apparels.

For instance, he said, the government could have announced more cash incentive on exports to the EU and the US, the two big markets that take about 80 per cent of Bangladesh's total garment shipment.

"This was not the right time to increase source tax," said MA Jabbar, managing director of DBL Group, another top apparel exporter of the country.

The government should provide special healthcare support to garment workers, he said, adding that augmented allocation for healthcare, education and industries could be a game-changer for the economy.

"During this critical time, the government should support the backward linkage industries of the garment sector so that they can supply quality products at competitive prices," he said.

Had the government been able to devalue the local currency against the dollar by 10 per cent, no other measures were needed for the sector, said Ahsan H Mansur, executive director of the Policy Research Institute.

Mansur, however, said the government cannot devalue the local currency arbitrarily as the country will then have to foot a huge import bill.

"But the garment sector needs more incentive to remain competitive in the international market and save the jobs of workers."

The apparel industry is not going to see fresh or foreign investment anytime soon, said AK Azad, managing director of Ha-Meem Group, adding that special measures should be adopted for small and medium enterprises.

"The repayment conditions for their loans taken from the stimulus packages can be eased."

Azad sees gloomy days ahead since new work orders in the sector nosedived by at least 45 per cent.

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, demanded 10 per cent cash incentive, instead of 4 per cent, at least for the next six months.

"If Bangladesh doesn't fare well in the EU and the US, Indian and Pakistani exporters will grab those markets. It's about time garment exporters embarked on all-encompassing value addition by improving the primary textile sector," Khokon added.

The government's stimulus package of Tk 5,000 crore for paying garment workers' wages was not enough as many factories could not avail themselves of the fund, said Arshad Jamal Dipu, vice-president of the Bangladesh Garment Manufacturers and Exporters Association.

The government should have brought down the corporate tax for garment factories, he said, adding that the overwhelming target to borrow from the banking sector might shrink the cash flow into the private sector.

 

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