Ready-made garment industry wants policy measures to overcome hard situation

Bangladesh's ready-made garment industry has of late been going through some challenging times. As a way of dealing with the situation, ready-made garment exporters have come forth with the demand that some policy measures be initiated for the industry to emerge on to an easier plane.  

Individuals connected with the industry have drawn attention to the dilemma the ready-made garment sector faces, with production costs and workers' minimum wages going up and, paradoxically, orders in a state of decline.

Compounding the situation is the fact that the industry has been losing its capacity in comparison with the garments sector in countries regarded as areas of competition for Bangladesh. These countries have devalued their currencies and provided more in terms of cash incentives and other policy support to their ready-made garment sectors.

Speaking to The Business Standard, Rubana Huq, president of Bangladesh Garment Manufacturers & Exporters Association (BGMEA), said: "The overall condition of the industry is not good. We have been going through closures almost every week. Costs have gone up, orders are dwindling, the minimum wage has gone up. Countries in competition with us have devalued their currencies, and announced incentives, including a recent 4 percent incentive announced by India."

It is to be recalled that on September 12, the BGMEA president sent a letter to the principal secretary to the Prime Minister asking for directives from the National Board of Revenue (NBR) regarding measures towards ensuring a growth in the export of ready-made garments.

The letter also pointed out that the prime minister had issued some directives on September 4 at a meeting with representatives of the ready-made garment sector regarding steps aimed at helping the apparel sector to overcome the problems it faces at present.

The letter from the BGMEA chief was forwarded by Principal Secretary Md Nojibur Rahman to the chairman of the National Board of Revenue (NBR) on September 22.

"The National Board of Revenue (NBR) can only replace one percent tax at source with 0.25 percent tax, with the rest remaining as it is," said Md Nojibur Rahman in his letter.

For his part, NBR chairman Md Mosharraf Hossain Bhuiyan told The Business Standard that he had received a letter from the Prime Minister's Office (PMO) which would be considered, particularly in relation to a lowering of the rate of tax at source for apparel export.

In her letter on September 12, Rubana Huq had mentioned that the Prime Minister had assured the BGMEA of reducing the rate of tax at source to 25 percent from the current 1 percent.

The BGMEA letter has sought the intervention of the principal secretary in ensuring the implementation of the prime minister's directive vis-à-vis a lower tax rate and calculating it from the first day of the current fiscal year.

Special cash incentive for all 

The BGMEA letter mentioned that the current fiscal year budget allocated one percent special cash incentive for apparel export in light of increased costs of production, dwindling prices in the international market and strength of currency compared with those of countries competing with Bangladesh in the ready-made garment area.

Subsequently, the Ministry of Finance imposed a condition on exporters who have been enjoying regular cash incentives, making it clear they will not be eligible for special cash incentives

The BGMEA president noted that the prime minister had expressed her opinion in favour of providing one percent special cash incentive against the FOB (Freight on Board) price of all apparel export items.

Tax on cash incentive

The apparel exporters have demanded a withdrawal of the deduction of 10 percent advance tax on cash incentives imposed through the budgetary measures of the current fiscal year. Earlier the figure was 3 percent.

The BGMEA president stated that cash incentives are not profits for apparel exporters and therefore, in her opinion, a deduction of advance income tax is not relevant in this context.