Service halt for new units outside industrial zones to hurt investment: BGMEA

The decision to allow no new industries outside designated economic zones and industrial enclaves, such as BSCIC, will badly hurt industrialisation, new investments, and exports in the country, readymade garment manufacturers have warned.

They expressed deep concern over the authorities' stance on not providing essential services like electricity and gas supply, nor granting bank loans, to new factories established outside the designated zones and enclaves.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA), an influential lobby of apparel exporters, has called for the continuation of these essential facilities to support investment.

Additionally, the association has requested cash incentives and alternative support for apparel exports until 2029 in order to maintain their competitiveness in the international market.

At a press briefing in the capital on Saturday (1 June), BGMEA President SM Mannan Kochi also emphasised the need for improvements in ease of doing business, including addressing customs issues and reducing harassment.

In April, the Bangladesh Bank instructed banks to ensure clearance certificates from utility service providers before approving loans to new factories.

This directive followed a decision on 21 March by the cabinet committee on economic affairs, which stated that new industrial establishments outside government-designated economic zones or industrial areas will not be granted electricity and gas connections.

"If utility and loan facilities outside industrial zones are paused, it will hamper both investment and exports," said the BGMEA president. "A large number of factories have already made substantial investments. If they do not receive electricity and gas connections, they will face significant financial losses."

In addition, he said, "We have already requested the government to suspend this decision. It should be implemented only after the industrial areas are fully ready and the plots are handed over."

The government is working to establish 100 economic zones. However, the new BGMEA president said only 10 EZs are currently being launched. The apparel leaders have also made this request to the prime minister and the central bank governor.

He added, "We have sought directions from the prime minister in this regard."

Additionally, they called for a reduction of taxes on export incentives and import tax rebates on certain firefighting equipment. Furthermore, they sought the establishment of a special fund for food rationing facilities for garment workers.

"There is an enormous opportunity in the coming days. If all kinds of government support remain intact, our RMG sector will be able to play a pioneering role in building Smart Bangladesh as envisioned by the prime minister and a poverty-free Sonar Bangla as dreamt by the Father of the Nation, Bangabandhu Sheikh Mujibur Rahman," he said.

At the same time, he expressed caution, saying, "We hope that the government will continue to support the industry. It is important to remember that if support is stopped for any reason, competitiveness will be lost, and investment will be hindered."

He added, "We hope that these recommendations will be reflected in the ensuing budget."

The BGMEA president also said the number of direct export-oriented RMG factories in the country has now declined to 2,200 from the previous 5,000.

"Had the direct export-oriented RMG factories remained in operation, the export volume could have been much higher and thus could have created newer employment," he added.

"In the last five years, our cost of production has soared by 50% due to wage hikes, utility prices, and other issues, while export product price has declined by up to 16% in the last eight months." 

Former BGMEA president and Dhaka North City Corporation Mayor Md Atiqul Islam, former BGMEA president Abdus Salam Murshedy MP, and former BGMEA president and ruling Awami League Industries and Commerce Secretary Siddiqur Rahman also spoke on the occasion, among others.

The BGMEA president also raised concerns about customs officials' harassment and delays in the clearance of imported goods.

He said, "We have already urged the government to bring those individuals under the purview of the law, for they obstruct export operations, harass exporters, and harm the country's economy."

"The new board is prioritising several issues, including simplification of business, continuing cash incentives till 2029, providing alternative support, taking initiatives related to banks and financial sector services, introducing exit policy and export credit guarantee facilities, and bringing SMEs under special policy support and financing schemes," Kochi added.