Govt to retain free quota system in garments export to US, Canada

The government has decided to retain the free quota system in garments export to the USA and Canada for this year only in view of demands from the BGMEA, commerce ministry sources said.

In the free quota system, five per cent the total export quota is kept reserved.

The government had earlier decided to cancel it from this year following recommendation by an official investigation report in May last year. The quota system was one of the major causes of corruption in garments export, it had said.

But following several meetings and with BGMEA leaders and strong lobbying by political high-ups, the commerce ministry revised its decision and ordered the Export Promotion Bureau (EPB) to retain the system for this year only, sources in the ministry said. The BGMEA also used the good offices of the immediate past commerce minister for this, the sources said.

The EPB is now preparing for giving an advertisement inviting applications for allotments under free quota, EPB sources said.

Pressure from a strong group of fake exporters who are involved in quota business but play a key role in the BGMEA election was the main reason behind the decision, the sources said.

Talking to this correspondent, some BGMEA officials who deal with free quota also spoke against the system saying, it creates a lot of problems for genuine exporters.

The free quota system benefits neither the industry nor the buyers because it increases the cost of products. A lot of fake garments factories exist in the name of sick industries which get allotments from the reserve quota and sell those to genuine exporters, thereby increasing the cost of products, they said.

"BGMEA leaders want this system because a large number of its members are involved in quota business," one BGMEA official said.

"The government should take initiative to control misuse of free quota," he said.

As the free quota is distributed to all applicants equally, it does not fulfil the objective. To encourage exporters, particular categories can be allotted to those exporters who did not perform on those categories in the previous year, he commented.

But BGMEA Chief Executive Officer Uzair Afzal when contacted denied the allegation made in the investigation report. "It (the allegation) is not well founded," he said.

"We want free quota system to continue for the benefit of our members. It should continue because it is in the government policy," Afzal argued.

The proposal for retaining the free quota system was first rejected by the then commerce secretary who had viewed that it would not help boost garments export.

According to the investigation report, more than 98 per cent of allotments under the free quota during 1998 and 1999 were sold by allottees to others.

"What is the use of keeping free quota if it is not used by exporters who get allotments?" the secretary was quoted as saying at a meeting with BGMEA leaders.

The leaders then met the then commerce minister and requested him to retain the system at least for the period they are in the BGMEA leadership. The minister later agreed and the decision was taken without the presence of any high official of the ministry, the sources claimed.

The investigation conducted under the guidance of the Director General of EPB Textile Cell revealed various irregularities and unfair practices in distribution of free quota. An unauthorised quota market has also developed because of the free quota system, the report said.

The US and Canada provide quota facilities to Bangladesh and buy around fifty per cent of its total garment exports.

Last year, a professor of George Town University in USA during a visit to the country warned about the negative impact of quota business in the country's garments export.

Addressing a seminar he had said that quota business affected consumers in the USA because they had to pay higher prices. "It also affects the bilateral relationship between US and Bangladesh," he had said.