New ‘Textile Act’ to bring all sub sectors under one umbrella

    
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Government of Bangladesh recently has published final draft of Textile Act 2015. A thorough look on the draft reveals that the act is to bring all sub sectors of textiles under one umbrella which is The Directorate of Textiles (DoT) under the Ministry of Textiles. DoT is going to be the sponsoring authority of all textile and allied businesses in Bangladesh. As per the draft, the new act if passed by the cabinet and the parliament will be implemented by maintaining collaborations with existing Industry Laws, Export and Import Laws. But the act doesn’t have concrete outline how implementation will be done and how synergies will be maintained.

Impact of new textile act on doing business
Figure 1: Impact of new textile act on doing business

Directorate of Textiles to be the only sponsoring authority

In different needs of textile and RMG industry currently many ministries and departments are involved like Ministry of Commerce, Ministry of Industry, Ministry of Labor and Employment, Ministry of Environment, Ministry of Finance, Ministry of Land etc. This scenario already has made things very difficult for companies to comply with many regulations. There is not much synergy in the existing law and policy structure. At these circumstances, new textile act is bringing up another authority Directorate of Textiles (DoT) under the Ministry of Textiles as overall responsible and regulatory body for textile, RMG and allied industries.

Adding jeopardy or easing the process

Many industry counter parts have feared that this would make things further difficult instead easing. If the new act cannot come up with a concrete outline of giving one stop regulatory services for textile and allied industry, regulatory things could become more difficult for businesses. Already it has come in many forums, that making business in Bangladesh is very difficult. It requires numerous registrations, certificates, licenses and so entrepreneurs need to be involved with many authorities. Every step of such regulatory maintenance is severely costly and time consuming.

Industry insiders have opined that if the new act really can make Directorate of Textiles (DoT) under the Ministry of Textiles as the only authority to provide all regulatory support and factories don’t require to go any other authorities than it would helpful. But if the law only add another new authority, that would be disastrous for the sector. In that case the new law will hinder the growth of the sector instead of accelerating it.

 

New Licensing system if don’t eliminate others, will hinder the growth of the sector

In a recently published article in The Daily Sun, a researcher of Dhaka Chamber of Commerce and Industries has mentioned that the act requires all textile manufacturing and business units to register with the new sponsoring agency to operate their businesses. Textile unit having registration with other agencies will not work unless gets registered with textile Ministry. He added that All private sector local and foreign investment are conventionally required to register with Board of Investment prior to legitimately launch business operation along with other relevant clearance and registration with Ministry of Factories and Establishment, Ministry of Environment and Registrar of Joint stock companies, Land ministry as well other relevant registrations. All manufacturing business often expresses concern on the delayed and slow regulatory requirement and demand to cut the conventional process.

According to the proposed draft of the law, none would establish and run textiles and garments factories without registration under the textile industries establishment act. If anyone violates the law there is a provision for one year imprisonment or Tk 1 lakh penalty in the draft law. After enactment of the law, all the new establishments (textile and garments) would have to take registration under the act and all the existing factories would have to come under the registration of the textile directorate within six months as per the new law, the draft said.

The report also mentioned that the proposed provisions of compulsory registration with textile ministry will not help to ease the regulatory process rather will be a burden on doing business. The report concluded that the act also proposed that textile unit will not be allowed to get any membership to any trade/ chamber association and banking, insurance and other utility facility access for local and cross border trade unless registered with the sponsoring agency. And, this proposed process will create complexities in the business operation system.

The feedback of the trade bodies

Another report recently published in rmgbd.net has mentioned that the BKMEA expressed its reservation over the registration clause of the draft law and said the clause should be applicable for the new establishments and the license for the existing factories should be renewed based on the previous license of the Board of Investment. The BKMEA demanded scrapping the provision of recommendation to the customs authorities regarding release of imported capital machineries and indemnity bond. The trade body said that it would not be pragmatic to renew the license of factories every three years as the industry is not a trading company. The period for renewal of license for the factories should be 10 years instead of three years, the BKMEA said.

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