Cuts in tax, loan cost, utility bills planned for jute, leather, pharma, agri post-LDC
Committee suggests Bangladesh adopt strategic models from China, Indonesia
Bangladesh should shift its export strategy from subsidies to innovation, productivity and high-tech industrial development after graduating from Least Developed Country (LDC) status next year, an inter-ministerial committee has recommended.
The finance ministry-formed committee, in proposals seen by The Business Standard, urged the government to adopt elements of China's "Made in China 2025" and Indonesia's "Making Indonesia 4.0" to remain competitive in a post-graduation environment where cash incentives for exporters will no longer be permitted.
Launched in 2015, Made in China 2025 aims to modernise manufacturing, reduce dependence on foreign technology and build global leadership in high-tech industries—supported by low-interest loans, favourable taxes, subsidised land, discounted steel and cheap utilities.
Indonesia's 2018 Making Indonesia 4.0 roadmap focuses on automation, artificial intelligence and digital manufacturing, underpinned by streamlined regulations, industrial zones and improved logistics.
The committee said Bangladesh could follow similar paths by offering targeted support for value addition, technology imports and transfer, Fourth Industrial Revolution (4IR) adoption, and new product innovation. It also recommended tax incentives for research and development.
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Other proposals include lower corporate tax rates, serviced land for high-tech industries and a broader set of business-friendly tools to develop advanced manufacturing. Export sectors such as leather, jute, agri-products and pharmaceuticals could be strengthened through productivity-driven policies rather than direct subsidies.
Officials said the committee drew on the WTO's Agreement on Subsidies and Countervailing Measures, as well as the experiences of India, Vietnam, Indonesia, Malaysia and China, to craft WTO-compliant alternatives to cash incentives.
A 17-member high-level panel, chaired by the cabinet secretary and including the Bangladesh Bank governor, senior secretaries and the NBR chairman, was formed on 20 November to implement the recommendations.
Bangladesh's LDC graduation plan
Bangladesh is set to graduate from LDC status on 24 November 2026, having met all three UN criteria, according to last month's UNCTAD report.
With export subsidies prohibited after graduation, the government has already begun tapering them. Incentives for the 43 eligible sectors will be halved in January and fully withdrawn next July, following reductions in February and July last year.
This year's Tk9,025 crore allocation for export incentives remains unchanged from last year, while actual spending in FY24 was Tk8,198 crore.
Bangladesh has started implementing a Smooth Transition Strategy (STS), though businesses and economists had urged the government to seek a three-year extension due to energy shortages, infrastructure weaknesses, a fragile banking sector and external uncertainties. The government chose not to request a delay.
Mostafizur Rahman, distinguished fellow at the CPD, told TBS that given political uncertainty after July and impending elections, an additional three years to implement the STS "would have been reasonable".
Mostafa Abid Khan, former member of the Bangladesh Trade and Tariff Commission, noted that the EU, Turkey, Canada, the UK and Japan will continue GSP benefits for three years after graduation. "These markets account for 93% of exports, so graduation is unlikely to disrupt exports before 2029," he added.
Leather sector: Low-interest loans, lower duties
To increase competitiveness in leather and leather goods, the committee recommended low-interest loans at the Bangladesh Bank rate plus 2.5 percentage points, and cuts to the current 35% customs duty on key chemicals. The exporters' retention quota should also be increased from the existing $25,000.
It proposed rebates on gas and electricity bills, creation of a common facility centre, and joint investment in a 10,000 sq ft chrome recovery plant with government backing.
During Eid-ul-Azha, the panel suggested allowing duty-free chemicals through home consumption bonds.
Bonded warehouse facilities with Value-In/Value-Out mechanisms—like in Vietnam and China—should be introduced to allow duty-free raw material imports. It also proposed common bonded warehouses to help SMEs and exporters access raw materials easily.
Jute sector: Scrapping 1% source tax, boosting seeds
The committee recommended abolishing the 1% source tax on direct jute purchases from farmers, arguing it raises production costs and export prices. It said revenue losses would be minimal but exporters would benefit significantly.
Although India imposes anti-dumping duties on Bangladeshi jute goods, it imports large volumes of raw jute. The panel suggested imposing a 15–20% export duty on raw jute to discourage such exports.
It proposed low-cost distribution of high-quality jute seeds, partial government financing for machinery for diversified jute products, low-interest loans for capital machinery imports and creation of a Jute Sector Development Fund. Bonded warehouse facilities for dyes and chemicals were also recommended.
Cold storage and agriculture: Cheaper electricity, logistics upgrades
To ensure farmers receive fair prices, the committee called for multi-temperature cold storage facilities run by the government or supported through low-interest financing for private investment. Electricity for cold storages should be provided at reduced rates.
It emphasised improved handling of export-quality agricultural products through reefer vans, port-based refrigerated warehouses, electronic data loggers and time-temperature indicators.
The panel proposed support similar to India's Procurement and Marketing Support scheme, including travel support for participation in global food fairs and assistance for selling through e-commerce platforms.
It also called for internationally accredited testing labs, incentives for farmers to obtain third-party certification, and development of an effective national e-traceability system.
Pharmaceuticals: Higher pre-financing limit, API park completion
For the capital-intensive pharmaceutical industry, the committee proposed raising the Export Facilitation Pre-Financing Scheme limit from Tk5 crore to Tk10 crore.
It urged the speedy completion of the long-delayed API Park in Munshiganj and the provision of gas and utilities. It also recommended expanding the credit guarantee scheme from Tk2,000 crore to Tk5,000 crore and including API exporters.
To access regulated markets, the committee stressed the need for domestic contract research centres capable of conducting bioequivalence and clinical trials, which currently require expensive overseas facilities.
Although the Bangladesh National Drug Testing Laboratory is WHO-accredited, it cannot test API samples. The committee recommended budgetary support for upgraded laboratory equipment.
Finally, it warned that Bangladesh will lose the flexibility to produce patented drugs after LDC graduation, urging accelerated investment in pharmaceutical research and development.
