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Special cash incentive to exporters

The government has reportedly turned down requests from the trade bodies for ‘special cash incentives’ to help key export sectors stay competitive, in the wake of the eroding value of the euro. Despite the stand, the government seems to be closely watching if export is becoming, as argued by the business community, sluggish. While the slumping euro is indeed a factor, there may be other factors as well to be attributed to the declining competitiveness of Bangladeshi exports, particularly in the European Union (EU) markets. The issue of downward adjustment of taka’s exchange rate vis-à-vis the US dollar is also another issue that, business leaders feel, the central bank may consider seriously. From the government’s stand on the issue, as of now, it is clear that it would not give in until of course the situation demands such a special treatment. Counting on what the trade bodies have argued in favour of cash incentives may not be found well-founded as the latest export figures – that of August – show a surge in exports by around 4.0 per cent. This, however, may not be a representative picture of the country’s exports since good performance by some major sectors may overshadow poor performance of others, lending a deceptive, albeit positive reflection on the overall exports. It is thus important for the government to examine the matter thoroughly keeping in view not only the key sectors of exports but also those otherwise prospective. As for the claim by the trade bodies of the diminishing value of the euro, there can be no disagreement. According to a calculation by the finance division of the government, the euro has weakened by nearly 20 per cent over the past year, and even shed 1.0 per cent of its value in June over the Greek debt crisis. This is sure to seriously affect Bangladesh’s major export products like garments, leather goods and frozen food (shrimps) which, for the most part, are reliant on the EU markets. It is this reality that has prompted the trade bodies to ask for special cash incentives. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) wanted 3.0 per cent special cash incentives until the euro stabilises. The two other key trade bodies, the Metropolitan Chamber of Commerce and Industry (MCCI) and Leather goods & Footwear Manufacturer & Exporter’s Association of Bangladesh (LFMEAB) have demanded 5.0 per cent incentives on the free on board (FOB) prices until the European currency settles down. Representatives of the trade bodies are of the view that incurring losses for the sake of staying in business will be difficult for the majority of the export enterprises. Given the realities, observers hold that the government, instead of reviewing the export trend, should look into the sector- and market-specific difficulties caused by, among others, the declining value of the euro. And in so doing, if the difficulties are found export-deterrent and potentially threatening, the proposal of the trade bodies should be considered seriously in favour of assuaging the difficulties, if not redressing those entirely.