BGMEA seeks cash incentive on 20% value addition condition

BGMEA demands:

• A cut in local value addition condition to 20% from the existing 30%
• 4% cash incentive on exports of RMG goods made with imported raw materials
• 10% cash incentive on non-cotton exports
•  Continuation of back-to-back LC facility for non-bond exporters

Apparel exporters have now demanded that the government relax the condition of at least 30% value addition for woven items to stay eligible for a 4% cash incentive as well as all subsidies.  

In a letter to Commerce Minister Tipu Munshi this month, Faruque Hasan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), proposed cutting the value addition rate to 20%.

At a time when the whole world is preparing for adding more value locally while manufacturing products on the eve of the fourth industrial revolution, Bangladesh's apparel entrepreneurs have demanded that the government relax value addition conditions to stay eligible for all subsidies, including cash incentives against exports.

The BGMEA has also sought a 4% cash incentive on export-oriented apparel items that are made from imported raw materials.

The government now provides such a reward on exports of readymade garments manufactured with locally sourced yarns or fabrics.

The BGMEA president in the letter said the relaxation is very essential for the apparel exporters who are trying to survive with their business by absorbing pandemic shocks.

This facility will also draw in more investment and create job opportunities, he added.

Md Shahidullah Azim, vice-president of BGMEA, told The Business Standard that the cash incentive was previously available subject to adding 20% value, which has recently increased to 30%.

"Many of us will not be able to meet this condition as for woven garments, we need to import 70%-80% of fabrics and accessories," he said.

When asked why they still cannot add 30% local value to woven clothing in the four-decade-old garment sector, he said what they do locally are cutting, making and washing. The situation is similar for all woven garment exporters.

On 8 October, the BGMEA president sent two separate letters to the commerce minister.

In one of the two letters, he sought nine benefits, including a rise in cash incentives.

The BGMEA has also requested the commerce ministry not to cancel the back-to-back LC facility for non-bond exporters. The unavailability of such a benefit will lead to closures of 387 factories and subsequent job losses for 2.58 lakh workers.

Against this backdrop, the apparel exporters association demanded an amendment to the Import Policy Order.

They sought necessary measures from the commerce ministry to ensure that the Bangladesh Bank instructs banks not to press for bond licences for opening back-to-back LC by non-bond exporters until the existing law is amended.

Mentioning that export earnings from unconventional markets have increased to $5.68 billion from $849 million over the last decade owing to market diversification and new market creation, Faruque Hasan in the letter demanded a 10% cash incentive on exports of man-made fibre based items.

As per the existing Import Policy Order 2015-2018, there is a provision of allowing duty-free imports of raw materials and accessories for four months in a row based on the performance of the previous year.

The draft Import Policy Order 2021-2024 will give the facility for six months. But as the new policy has not been issued yet, importers are now unable to enjoy the extended benefit.

So, the BGMEA has requested the commerce minister to take necessary steps to issue the new Import Policy Order expeditiously.

The association also demanded that the commerce minister take necessary steps to duty-free imports of all types of fibres by local spinning mills subject to certification through the Bangladesh Textile Mills Association (BTMA).