Cash incentive doubles for apparel

The government has increased cash incentives for garment exports by an additional 5 percent to assist local spinners and weavers affected by the volatile global cotton market.
The government has increased cash subsidies from 5 percent to 10 percent as local spinners and weavers lost their competitiveness in recent months, according to a Bangladesh Bank circular issued last week.
The central bank said, only the associated members of the Bangladesh Textile Mills Association (BTMA) will benefit from the government move, either for exports or local supply, in the current fiscal year.
The government will extend the incentive on the export of garments made from local yarn or fabrics.
The competitiveness of the spinners and weavers was affected after sales of both yarn and fabrics declined with the price drop of cotton and for relaxation of the Rules of Origin (RoO) by the European Union in January this year.
Now, they sell the widely consumed 30-count yarn at $3.5 a kilogram, which was nearly $7 a few months ago. Spinners are counting losses for this.
The demand for local fabrics also declined significantly with the relaxation of the RoO, as local garment makers preferred importing fabrics to enjoy the 12.5 percent duty benefit from Eurozone under the Generalised System of Preferences.
The government will subsidise the importers who imported high-priced cotton between August 2010 and March 2011.
Razeeb Haider, managing director of Outpace Spinning Mills Ltd in Gazipur, however, said the government's incentive is not adequate to offset the losses.
"Moreover, the circular needs to be clarified. Still, I welcome the decision as the government has responded positively to the demands of local spinners and weavers," he said.
Haider said the period from February last year to January this year should be taken into consideration instead of the August to March period, as the prices of cotton fluctuated frequently at the time on the international markets.
“Such temporary solutions are not enough to help overcome such huge losses. We need a permanent solution,” he said.
Ahmed Ali, vice president of BTMA, said they would sit with the government soon after the millers return to production following the Eid break.
He said the government should also relax some rules of the circular to help them get benefits. They had urged the government to hike incentives to 15 percent.
Cotton prices hit a record high of $2.52 a pound in April, but nosedived to $1-$1.3, or even below one dollar now, according to importers.

[email protected]