Garment accessories and packaging manufacturers are contributing in two ways to the national exports by exporting goods directly and supplying accessories products to the export oriented apparel manufacturers.
However, their longstanding demands of cash incentives against direct export of accessories and packaging products did not meet in the proposed budget for Fiscal Year 2022-23 despite being a priority sector mentioned in the export policy.
“In the proposed budget for FY23, the government has brought over 43 export products and services under incentives coverage. It is aimed at encouraging exports,” Mohammad Moazzem Hossain Moti,
President of Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) told the Textile Today.
As per the export policy, garments accessories and packaging sector is termed fully export-oriented industry and small and medium in size, which was supposed to get the incentives as a priority sector but yet to get this type of support, said Moazzem.
For more investment and employment generation as well as export diversification, the garments accessories and packaging sector needs cash incentives, the sector people said.
“As an industry, we are playing an important role in reducing lead time by supplying goods to the TMG exporters and similarly exporting products to different countries but not enjoying cash incentives, which is discouraging to investors,” Md. Shahriar, Director of BGAPMEA, told the Textile Today.
If the government wants to diversify exports and earn more from the garment accessories products exports, it should offer cash incentives for the sector. If it is done, there will be more investment and new employment would be created, said SHahriar, Managing Director of Adzi Trims Ltd.
He is one of the largest exporters of garment accessories products also manufacturing in a sustainable and green manner.
On top of that, the proposed rise in source tax also will be a burden for the sector, when it is recovering from the Covid-19 pandemic shocks. This is because of the soaring prices of raw materials in the global markets.
“Manufacturers have to import goods from different countries and in many cases buy raw materials from the local market through back-to-back letter of credit (LC). Due to the Covid-19 pandemic, the prices of raw materials rose sharply and 1 per cent source tax will further increase cost of production,” Abdul Kader Khan, Managing Director of Khan Accessories & Packaging Co. Ltd told the Textile Today.
In the given context, a 1 per cent source tax is against the spirit of business expansion, which needs to remain unchanged at 0.50 per cent for next five years, said Kader, also former president of Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA).
However, the sector will get a relief from the proposed 12 per cent corporate tax for all export oriented sectors. It will reduce cost of business as it was 30 per cent in FY22, which cut to 27.5 per cent.
In reaction to the proposed budget, the sector people welcomed the government for its budgetary measures such reduction of corporate tax for non-RMG export-oriented sector to 12 per cent, cutting 2.5 per cent corporate tax for all and extension of 15 per cent corporate tax for textile sector.
Currently there are 1,900 accessories and packaging factories and they are able to supply about 95 per cent products to meet the domestic demands of the export oriented RMG sector.
The sector earned valuable foreign exchange to the tune of $7.50 billion during FY19 but due to the Covid-19 pandemic, the export dropped to $7 billion in FY21. Of the total export earning, about $1 billion came from direct exports.
Currently, the sector exports goods to Turkey, Netherlands, South Africa, Pakistan, India, Middle East, Ethiopia, Indonesia, Italy, Sri Lanka, Turkmenistan, Germany and Austria etc.