‘Tax exemption on artificial fibre production to draw more investments’

We welcome the expanse of the budget during this challenging time. We also welcome the corporate tax being unchanged for readymade garments (RMG). We want to offer special gratitude to the government for a proposal of tax exemption for production of articulation fibre.

Though our backward linkage industry has grown quite significantly in the last few decades pulled by the demand of the export-oriented RMG industry, the primary textile industry remains overwhelmingly concentrated in cotton rather than in other materials like man-made fibres (MMF), polyester, vegetable fibres and animal fibres.

The share of the global trade of cotton-based apparel is around 35 percent which shrank at 0.5 percent Compound Annual Growth Rate (CAGR) between 2007 and 2017. On the other hand, the share of MMF-based apparel is around 45 percent of the trade which grew at 5 percent CAGR in the same period. In 2017, the global trade of MMF-based apparel was $150 billion to which Bangladesh shared 5 percent when Vietnam did 10 percent.

In contrast, 74.14 percent of Bangladesh's apparel export is cotton-based which was 68.67 percent 10 years ago. Bangladesh's fibre import reflects a similar picture. The latest data reveal that cotton constituted 93.57 percent of 20.52 lakh tonnes of fibre import of Bangladesh in 2018.

The profile of textile mills also tells a similar story. Out of 430 spinning mills in Bangladesh, only 27 are based on synthetic and acrylic fibre, and the rest are cotton spinning ones. Due to changes in lifestyle, consumers are looking for products that are easy to take care of. The demand for MMF-based products is also rising.

Moreover, with the effect of graduation to a middle income country, we will have to comply with the "double transformation" process as per European Union GSP (GSP Plus or Standard GSP) Rules of Origin. So, it requires Bangladesh to bring more investments in primary textiles, especially in woven and non-cotton sectors.

Besides, consumers now are more informed and concerned about the environment, and MMF is durable and more environment-friendly than cotton. Therefore, given the prospect of non-cotton apparel in the global market and the trade advantages, the tax exemption on the artificial fibre production will directly incentivise investments in Bangladesh and thus would help us diversify our export basket and go for higher value added items.

In these times of a global unprecedented challenge, the sector will have to steady itself and engage more in online sales, brand ourselves better, and retool our industries for at least immediate needs of personal protective equipment and athleisure.

The government has proposed to raise the tax at source for the sector to 0.50 percent from the previous 0.25 percent. We humbly request the government to keep it as it is.

However, the government's clear understanding about the sector's requirements in times of extreme uncertainties is greatly appreciated.

We must also all remember that RMG is just not about export; we are a part of the internal inclusive economy as the employment that we provide creates consumption needs. We must also remember that our government reacted the fastest when it came down to the salary support in the form of a loan. The other two stimulus packages will hopefully be quickly disbursed by the commercial banks.

In terms of Artificial Intelligence (AI) and robotic engineering support that the government is providing is also very timely. The time for the Fourth Industrial Revolution is here, and since we are required at our end to invest in three-dimensional sampling and prototyping, this move will enrich the industry.

The virtual marketplace concept will require a robust AI platform which we can take advantage of and create a brand of our own to the West by reducing our dependence and creating a B2C (Business-to-Consumer) platform.

In times of a crisis, it is extremely heartening to watch the agriculture doing well, especially because that directly impacts our workers' intake.

The post-Covid reconstruction will remain a challenge for us for sure. But to be able to turn a challenge into a victory remains the goal of the industry.

Dr Rubana Huq is the current President of Bangladesh Garment Manufacturers and Exporters Association