Apparel makers to seek new stimulus

Highlights

• RMG owners now seek a two-year extension to the repayment of working capital loans
• BKMEA president says they can now repay only interests, not the principal amounts

Readymade garment exporters will seek a new stimulus package and two more years to repay their already-taken stimulus loans during a meeting with Prime Minister Sheikh Hasina.  

Mohammad Hatem, first vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Standard that they have already sought permission from the Prime Minister's Office for the meeting.

"We will present our demands to the prime minister in writing," he added.

The apparel owners under the government's stimulus package got loans amounting to Tk10,500 crore to pay workers' wages and allowances. The loan amount was conditional on repayment in 18 instalments, including a six-month grace period. Later in February 2021, the government further extended the grace period for six more months.

The RMG factories now demand extending the repayment period by 18 more months.

Besides, the government also allocated the Tk30,000-crore fund in working capital loan for large industries, including, the RMG sector, with a one-year repayment period.

The RMG owners now seek a two-year extension to the repayment of working capital loans, considering the garment industry's ongoing lean times.  

Speaking at a BKMEA meeting in a city hotel on Tuesday night, Selim Osman, BKMEA president, said the pandemic resulted in the cancellation of orders, increase in yarn prices, 200-300% rise in sea freight rates, pressure from banks on loan repayments and various tax issues. That is why the apparel sector is experiencing negative growth.

Besides, the ongoing situation in the readymade garment sector might not improve till next September but there is an obligation to pay salaries, allowances and next Eid bonuses. The industry will not be able to survive without continued support in such situations, he added.

The BKMEA president said, "In this situation, we can now only repay interests, not principal amounts. So, we demand two more years for repayments. If banks put more pressure on us to repay the loan money, every factory owner will become a defaulter. If we fall in trouble, it will have a negative impact on every sector, including banks."

Speaking as the chief guest at the meeting, Shafiul Islam Mohiuddin, head of the taskforce for RMG, said, "The Sheikh Hasina's government is business-friendly. Only if we convey our problems to her, a solution will definitely come. She has brought down lending to a single digit. Customs riddled with serious corruption is creating problems for us. We will talk again to solve this problem."

Meanwhile, a press release issued by the BKMEA on Wednesday said although banks have agreed to extend the repayment deadline for long-term loans in the garment sector to 14-15 years, the Bangladesh Bank fixed it at eight years. If the central bank does not extend the deadline, many apparel makers might turn defaults in the next few months.

Mohammad Hatem said alongside these issues, the harassment that the readymade garment sector faces will also be brought to the prime minister's notice.

The exporters, who are manufacturing apparel items using raw materials sourced from the local market, are being deprived of cash incentives, he pointed out.

An Utilisation Declaration (UD) that the BKMEA issues is termed invalid by the customs intelligence,' said Mohammad Hatem adding that they will seek a remedy from the prime minister in this regard.

He complained that many garment owners are being forced to use the bonded warehouse facility even though they do not want to. As a result, domestic linkage industries are being affected.

Meanwhile, the Export Development Fund has increased by $1.5 billion to $5 billion. At the end of January, $4.58 billion in debt was released from the fund.

During the eight months of the current fiscal year, RMG export earnings declined by 3.73% over the same period of the previous fiscal year. The export earnings of woven garments decreased by about %11.5. However, net apparel exports increased by 4%.