Cash incentive cut: Apparel exporters to seek PM's intervention
Approximately 70% of knitwear export products will be impacted by the [cash incentive reduction] decision, said BGMEA leader Mannan
Apparel exporters have decided to meet with Prime Minister Sheikh Hasina to address the concerns regarding the reduction in cash incentives, according to Bangladesh Garment Manufacturers and Exporters Association (BGMEA) acting president SM Mannan.
This decision could adversely impact business competitiveness, he said while talking to The Business Standard yesterday.
"We want to first meet with the finance secretary and Bangladesh Bank governor next Sunday to seek a solution. Later, we will meet with the finance minister. We will also meet the prime minister to seek her intervention regarding the cash incentive cut," said SM Mannan.
Keep updated, follow The Business Standard's Google news channel
"We have no idea why the authorities made such a decision without consulting the stakeholders," he questioned.
"Without any prior notice, this sudden decision of cash incentive withdrawals from 56% of apparel items will be a dangerous move for the industry. Consequently, many factories may face challenges in surviving," said Mannan.
He mentioned that approximately 70% of knitwear export products will be impacted by this decision, significantly affecting Bangladesh's apparel export strength.
In a statement yesterday, SM Mannan said that the Bangladesh Bank circular on Tuesday cut cash incentives for items like T-shirts, sweaters, knitted shirts, trousers, men's undergarments, and jackets by 25% to 50%. While small and medium-sized businesses (SMEs) are not under the purview of the incentive cuts, many SME factories which heavily rely on these items will bear the brunt.
Mannan is concerned about the circular's lack of direction on providing alternative incentives after LDC graduation, a practice followed by most middle-income countries.
Additionally, the circular removed three growing markets, making up 8% of apparel exports and showing a significant 43.56% growth in the last fiscal year.
The industry has been grappling with order shortages for the past eight months, while entrepreneurs find themselves burdened with utility payments that have more than doubled, he highlighted the situation.
Mentioning that gas prices surged by 179% last year, and the new wage structure has been in effect since December 2023, SM Mannan said that only three to four buyers are contributing to offset the additional costs resulting from the wage hike.
On the other hand, bank interest rates and freight costs are also on the rise.
"Given the overall situation, the apparel industry is battling for survival amidst various international and local challenges. If the government does not reconsider the decision to cut cash incentives, jobs for around 4 million RMG workers will be at risk," he added.
The country's export earnings are poised to be significantly affected, especially when grappling with a dollar crisis.
