The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has demanded fund allocation in the next budget for creating a global platform, like Amazon, eBay and Alibaba, so Bangladesh can export clothes of local brands to the international market. Such an online platform will help garment manufacturers to deliver products directly to foreign buyers through individual shopping portals. The BGMEA also wants to sell garments of local brands at the retail level outside the country through the online platform and has sought up to 15% cash incentive against the exported items. The demands put forward by the highest body of garment owners also include waiver of interest against loans, fund allocation for health and education of garment workers, incentives to help the sector deal with Covid impacts and 10% cash incentives for the next 10 years for exporting garments and in recycling textile waste to produce fashion items. In a budget proposal for the fiscal 2021-22 sent to Finance Minister AHM Mustafa Kamal last week, BGMEA President Rubana Huq said the global market was inclining towards online sales and the ongoing trend indicated a rise in online purchases in future. “While we are trying to recover from the shock, the second wave disrupted the retail market and demand causing a slowdown in exports and a continued downward pressure on price. This also means underutilisation of capacity leading to increased marginal cost.” The detection of the new strain of the coronavirus and declining retail sales in both the USA and the EU caused the garment sector to lose 2.87% unit value in 2020. The decline was recorded at 4.26% between September 2020 and February 2021. Against this backdrop, the RMG industry needs continued government support along with a number of additional policy assistance for its survival, recovery, growth and sustenance, Rubana said.
Proposal for Tk 100 crore allocation for virtual marketplace
The BGMEA said it had already taken an initiative to open business-to-business and business-to-consumer portals and to implement a project to establish its own platform on the virtual marketplace. The project requires an allocation of Tk 100 crore in the next budget, it said. The BGMEA wants an opportunity to send 10% of the export earnings abroad so that Bangladeshi garment manufacturers can operate outside the country for brand development and marketing. Moreover, it wants the payment period to be extended to 2 years from 210 days after the shipping of the exportable items to inspire buyers amid Covid-19 to place orders. The BGMEA also demanded that the government allow garment makers to sell products at 50% discount. The top association of apparel makers made separate proposals for retail sales in the international market. It said the year 2018 saw retail sales worth Tk 533 billion of clothing items globally, which was estimated to grow to Tk 872 billion by 2023. Bangladeshi small and medium garment factories can sustain their business by retailing products at the global market. In case of online sales, Rubana said the government should provide 5% cash incentive for exporting products, 10% cash incentive for exporting products of local design and brands and 15% for products made with local fabrics, such as jamdani, muslin and tant.
Circular economy
Rubana said circular fashion was increasingly getting popular worldwide, which involved recycling used products into re-usable items or turning those into raw materials, instead of throwing those away as waste. According to BGMEA, about 4.5 lakh tonne waste is being generated from the garment sector every year, 5% of which is recycled and 60% exported. The rest goes to the landfill. In the fiscal 2018-19, Bangladesh exported textile waste amounting to Tk 84 million, which was recycled in the importing countries. The BGMEA said Bangladesh itself could turn the waste into resources by establishing a planned recycling industry. It demands that the government pay 10% cash incentive to promote production and export of circular fashion over the next 10 years, 10% subsidy on import of capital machinery and equipment, and exemption of import tax. The association suggested providing 80% of the total investments in loans at 5-6% interest rate in the next 10 years to set up a circular fashion industry. The RMG sector can play a role to help diversify the country’s export industry, for which, the BGMEA proposed a 10% cash incentive against direct and indirect exports of items manufactured by different sectors. The government can also facilitate setting up new industries through 10% subsidy on imports of capital machinery, it said.
2% tax deduction for digital payment
The association also wants 2% deduction of corporate tax for payment of salaries of garment workers through mobile financial service providers, like bKash and Rocket. Garment makers have already returned to the traditional cash payment system after the disbursement of salaries from the government stimulus package. Digital payments at the individual level entail additional cost, considering which the government should give special financial benefits to those who have continued them, the BGMEA said.
Tk500 crore assessment fund
The BGMEA proposed creating a Tk500 crore assessment fund to support backward linkage industries and the small and medium factories that produce raw materials supplied to the RMG sector. Loans to set up such factories should not require more than 5% interest rate. The units that are environment friendly and sustainable should not be obligated to pay more than 5% corporate tax, the BGMEA said. It demanded technological, logistical, financial and policy support so that the factories can get connected to the virtual marketplace. The operation of RMG sustainability council costs Tk50 crore a year, the association said, asking for Tk20 crore government donation for the purpose in the next budget.
100% subsidy on research
The RMG sector needs to boost its value addition capacity, in proportion with the country’s overall socio-economic development. Otherwise, commercial products will lose cost competitiveness as wage and other costs grow. Therefore, research and design development should be emphasised, through which the sector can add value to its exports and produce high-end garment items. BGMEA wants 100% cash support from the government in this regard.
Workers’ education, health
The BGMEA demands special allocation of Tk200 crore in the budget for distribution of vitamin tablets among garment workers, their housing, transport and education. For their psychological counseling, at least Tk1 crore should be set aside, it said. There should be scholarship schemes of Tk10 crore for talented garment workers so they can attain higher education, the association said. In addition to that, a fund of Tk3 crore has been proposed for education of children of garment employees.
Interest waiver for affected businessmen
The coronavirus pandemic caused many international buyers and brands to go bankrupt. Many brands have cancelled orders and failed to pay back, which has led to many local factories losing the capacity to pay back loans. The BGMEA suggested transferring their loans to interest-free block accounts and keeping separate funds for the purpose. To help all factories to resume operation and export, it asked the government to extend the period for loan repayment and provide fresh loans for the time at 5% interest rate. The association of apparel makers also recommended extending 18-month time to 30 months for repayment of loans taken to pay workers’ salaries with 2% service charge.
