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1% cash incentive is good but not enough for RMG sector

In the proposed budget for the fiscal year 2019-20, the government has proposed 1% cash incentives against exports to traditional export markets and kept an allocation of Tk28 bn.

1% incentive apparel, BD budget 2018

On top of that, the government has also pledged to keep other incentives unchanged. While the corporate tax rate will remain the same in the next fiscal year.

All these steps are aimed at retaining the apparel sector position in the global market and increasing market share.

“We have acquired the second position in the world in exporting of ready-made garments. In the current context of international trade, it is considered as a growing and promising sector said Finance Minister AHM Mostafa Kamal in his budget speech in the parliament on May 13.

Keeping this in mind, our government has kept on providing all types of facilities to this sector including the existing incentives, said Kamal.

I propose to provide an export incentive of 1 percent in the next fiscal year to the rest of the sectors of ready-made garments. Allocation of additional Tk28 bn will be made in the budget for FY2019-20 for this purpose, he added.

Currently, apparel exporters enjoy a 4% cash incentives against exports to non-traditional export destinations.

In giving a boost to the apparel exports earning, the government should increase cash incentive to at least 3% for traditional exports market.

Mohammad Hatem senior Vice President of Exporters Association of Bangladesh

Welcoming the government proposed budget, the apparel sector said the incentives for the traditional market will help to boost the export market.

“In the budget proposal, we demanded a 5% cash incentives against exports to all markets but the government has given 1% or Tk28 bn,” BGMEA president Rubana Huq told the Textile Today.

Though the amount is much lesser what we demanded it would play an important role to increase exports, said Huq.

Rubana Huq also urged the government to continue support as the sector is going through a critical time and losing a competitive edge in the global export destination.

But the offered incentives is not enough for the sector as it is going through a critical time due to the rise in production cost, said sector people urging to revise.

Lion share of apparel exports earning come from the traditional export market and 1% cash incentive wouldn’t cast a big impact on exports, said Mohammad Hatem senior Vice President of Exporters Association of Bangladesh.

Export to non-traditional markets contributes only 15.85% to total apparel export, while the rest export earnings come from the traditional market.

In giving a boost to the apparel exports earning, the government should increase cash incentive to at least 3% for traditional exports market, said Hatem.

However, the trade analyst opined that keeping corporate tax and source tax same will be good for the sector.

The government also kept the corporate tax for the apparel sector unchanged at 12%. The corporate tax rate will be 10% if there is a green building certification. Besides, for textile sector tax rate is 15%.

Since the government proposed not to increase corporate tax and source tax, it would give space for the sector and attract new investment, former caretaker government advisor AB Mirza Azizul Islam said.

He also suggested incentives on products diversification and to encourage value-added products manufacturing.

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