It may sound strange that half of the cash incentives provided to the export-oriented sectors of the economy is virtually eaten up by the readymade garment (RMG) industry. However, one must not also ignore here the reality about the overwhelming presence of the RMG sector in the country’s economy. This sector far outshines all others in terms of productivity, employment, backward linkages and exports. With its whooping 75 per cent share in the country’s total exports, the RMG sector counts rather too heavily when it comes to government facilitations by way of incentives. Nevertheless, it remains to be seen whether feeding a single voracious sector is a well-guarded proposition or not. Cash incentive to export sectors has recently made news headlines, viewing it as highly disproportionate with too much focus on RMG that denies the required nourishment to some upcoming export sectors. More importantly, this is seen as an indirect deterrent to export diversification. Focusing on a single predominant sector thus tends to demean the prospect of others which, if provided with a slice of the pie, could shoot with their strengths and potential. A recent Bangladesh Institute of Development Studies (BIDS) study has quantified the cash benefits currently going to the RMG sector. It shows that the government had provided on an average Tk 25 billion to the knit and woven sub-sectors in the past three financial years in various forms. The flow of cash incentives to the knitwear exporters is extremely lucrative; they get more than 3.0 cent for earning one-dollar equivalent of exports as they use around 80 per cent local fabrics as the most vital input for their apparel products, the study says. As for the woven garment exporters, they get 1.3 cent against each dollar earned from export. Providing incentive package, including that of cash, has been integral to the government’s successive export policies, although the parameters followed for awarding a sector or rejecting another has been a matter of debate for a long time. There is thus definite logic in seeking a reasonably fair treatment for sectors which are getting less than they deserve, and the other ones that are not at all considered for the benefits. Although the government reviews the overall export scenario before preparing its export incentive package every year, it is often alleged to be an exercise not based on meticulous homework. Here comes the need to assess the capacity of an export sector in terms of its potential to meet market demands rather than judge it from its current earnings. This is to say, incentives should be more towards promoting productivity that, in turn, can materialise in higher earnings. If this figures as one of the key elements in the government policy in identifying products eligible for cash benefits, some of the neglected sub-sectors such as the bicycle industry, poultry, light engineering, agro-processing and few more can attain the desired eligibility. In this context, the issue of whether or not to slash the benefits of the RMG should be viewed very carefully, not just going by the fact that it is the largest beneficiary.
Source: https://www.thefinancialexpress-bd.com/2015/05/21/93437
