The government has revised a circular cutting export subsidy rates, after negotiations with industry leaders, two weeks after the circular was issued.
The Ministry of Finance has issued a new notification with amendments on three issues – new markets, five products of the readymade garment sector and effective date.
According to the new circular, issued on Sunday, the government has reinstated Australia, India, and Japan as new markets which involve a cash incentive of 3%.
In the previous circular on January 30, the three were placed under the traditional market.
Moreover, the revised circular also changed the effective date to February 1, which was January 1- June 30 in the previous circular, issued on January 30.
The new circular also allowed cash incentives of a few apparel items which were previously placed in the list of items barred from enjoying cash incentives.
The apparels items include men’s or boys’ knitted or crochet shirt, men’s or boys’ knitted or crochet briefs and similar articles, knitted or crochet t-shirts, singlets and other vests, jerseys, pullovers, cardigans and similar articles, and men’s or boys’ suits, ensembles, jackets, blazers, trousers, etc.
According to data from the BGMEA, the items under five harmonized system (HS) codes of 6105, 6107, 6109, 6110, and 6203 contributed $25.95 billion in exports, or 46.71% of the total export figure for the last FY23 and 55.22% of the total RMG exports.
Earlier on January 30’s circular, the government revealed an extensive plan aimed at reducing export subsidies for all goods, marking a significant step towards aligning itself with the impending graduation from Least Developed Country (LDC) status in 2026.
According to the latest official data from the government, a substantial 65% of these cash incentives, amounting to nearly Tk5,000 crore, primarily benefit the garments and textiles industry.
The withdrawal of the cash incentive sparked a lot of discussion among experts, manufacturers, and stakeholders. It led to a debate among exporters, who are worried about how it may affect their bottom line.
The manufacturers also said that the withdrawal of cash incentives for value-added products contradicted the government’s focus on value addition.
They raised concerns about reduced incentives for high-value products like suits and blazers, and new markets could hinder product and market diversification and impact the global competitiveness of the sector.
The manufacturers also met with the finance minister and the prime minister to discuss restoring the cash incentives while BKMEA sent a letter to the prime minister on Sunday to suspend the notification of Bangladesh Bank in this regard.
Regarding the revision of the circular, Faruque Hassan, president of the Bangladesh Garment Manufacturers and the Exporters Association (BGMEA), told Dhaka Tribune that the revisions in the latest circular have brought some relief to the exporters.
He said that the timing of withdrawal is inappropriate, given the country’s challenges with depleted reserves and diminished remittances and that it will be better if the ongoing incentives continue till June.
He added that it is better that the government revised their major demands like reinstatement of Australia, Japan, and India into the new markets and allow the cash incentives of five apparel items, this will help the exporters.
Earlier, on February 4, leaders of the BGMEA, Bangladesh Textile Mills Association (BTMA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) met Finance Minister Abul Hassan Mahmood Ali seeking the restoration of the cash incentives citing that the cut in the incentive for exports would hurt their competitiveness in the global market.
The finance minister assured them that the government may review its decision to cut export incentives considering the move’s impact on the RMG industry.
According to the Bangladesh Bank, the government has been providing cash incentives for 43 export items to encourage their growth.
