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

US Ambassador in Dhaka Marcia Stephens Bloom Bernicat on Tuesday said Bangladesh must improve workers rights to retain the Generalised System of Preferences (GSP) facility. The US Ambassador disclosed the stance of her government on reinstatement of GSP while speaking at the Annual General Meeting (AGM) of the International Business Forum of Bangladesh (BFB) at a city hotel. The Ambassador, however, said the US recognises the progress made in Bangladesh by joint endeavours of owners, brands, government and trade union leaders at the RMG industry since the Rana Plaza collapses in 2013. “My message is clear…..There are more needed to be done, especially to improve workers’ rights,” Bernicat said. In her course of speech, the Ambassador, however, didn’t specify which components of workers’ rights needs to be improved as workers rights include many issues including fair wage, holiday, 8-hour work, common leave facility, maternity leave, healthcare and ending violence and various forms of humiliation at factories. Meanwhile, several ministers have been saying that foreign buyers and international community were lauding the initiatives taken and the implementation of the reform agenda to improve workers’ safety and rights in the RMG sector. Recently, State Minister for Labour and Employment Mujibul Haque Chunnu said Bangladesh had fulfilled all the conditions set by the US to revive the GSP status. Commerce Minister Tofael Ahmed told local media recently that “What is the use of Trade and Investment Cooperation Framework Agreement (TICFA), if there is no GSP.” Bangladesh had signed a TICFA with the US few years back to strengthen bilateral cooperation in the field of investment, trade and commerce. Bernicat also said the US is maintaining a long-term relationship with Bangladesh and it will continue to support Bangladesh as a development partner. “Trade and business engagement will increase in the coming days,” she said. The Ambassador said US is working in Bangladesh to improve education and living standard. Lauding the rapid expansion of the pharmaceutical sector in Bangladesh, she said, “I am delighted of what I have seen at local pharmaceutical units; their finished products, production procedures and use of raw materials.” She said blue economy is a new concept of economic development and the US is keen to work with Bangladesh in this regard sincerely. In his course of speech, FBCCI president Kazi Akram Uddin Ahmed said Foreign Direct Investment from the US remains low though US is the largest single buyer of Bangladeshi apparel products. “It is unfortunate. We expect it will increase,” he said. IBFB president Hafizur Rahman Khan chaired the event while founding IBFB president Mahmudul Islam Chowdhury and vice president (finance) of the forum, Humayun Rashid spoke on the occasion, among others.

Source: https://www.daily-sun.com/print/back-page/2015/05/20/504149#sthash.BmO9pofs.dpuf

The Bangladesh government has to emphasise more on the labour rights issues to restore the generalised system of preference in the US market, the US ambassador in Dhaka Marcia Stephens Bloom Bernicat said on Tuesday. ‘Bangladesh has made significant improvement in the workers safety and we acknowledge that. But there is scope for more to do in the workers rights issues. For the GSP, Bangladesh should emphasis on the labour rights issues,’ she said while addressing as chief guest at the opening session of annual meeting of International Business Forum of Bangladesh. She said improving the economic relations between the two countries is one of the focus of the US government. ‘The talks on Trade and Investment Cooperation Forum Agreement (TICFA) will take place later in the year,’ she said. Bernicat also said that the local business community also needed to focus on expatriate Bangladeshis to get them involved in the investment process of the country. ‘There are Bangladeshis in USA who want to invest in their own country and looking for a link. This is one area where the local business people should engage more,’ she said. Federation of Bangladesh Chambers of Commerce and Industries president Kazi Akram Uddin Ahmed said Bangladesh economy is in a fast lane and now the local businessmen are keen to invest in other countries. ‘Now we are looking for agricultural investment in African countries like Gambia and Senegal as those countries value our expertise in this field. So that is a sign of progress,’ he said. IBFB president Hafizur Rahman Khan said the country has huge potentials but the political uncertainty is affecting the economy. ‘I would like to request the political parties, irrespective of their views, to ensure the political stability so that we business people can do our work properly,’ he said. He also urged the government to develop the infrastructure by building highways to better connectivity across the country.

Source: https://newagebd.net/121316/bdesh-should-improve-labour-rights-for-gsp-revival-bernicat/#sthash.wulLJobb.dpuf

Export earnings from the Turkey market dropped by 19.50 per cent to $581.25 million in the first 10 months of the current fiscal year due to a devaluation of the euro as well as the Turkish currency lira, dashing the exporters’ hope of getting another billion-dollar-market. Bangladesh’s export earnings from Turkey in the July-April period of the financial year 2013-14 were $722.12 million, according to the Export Promotion Bureau data. Following the imposition of safeguard duties by Turkey on readymade garment imports from Bangladesh, country’s (Bangladesh’s) export earnings had witnessed a drastic fall in the FY 2011-12. Export earnings in FY12 had decreased by 64.26 per cent to $258.90 million against $724.45 million in the FY11, data showed. Overcoming the hassle of safeguard duties, Bangladesh’s exports rebounded in the Turkey market in the FY 2012-13. In the FY 2012-13, the export earnings from Turkey grew by 146.35 per cent to $637.81 million from $258.90 million in the FY12. The earnings in the FY 2013-14 increased to $856.19 million and the exporters expected that Turkey would be a billion-dollar-market in the FY 2014-15. According to the EPB data, the export of RMG, the major product, to Turkey in the first 10 months of the financial year 2014-15 decreased by 25.95 per cent to $388.04 million against $524.02 million in the same period of FY 2013-14. Anwar-Ul-Alam Chowdhury Parvez, managing director of Evince Garments Ltd, said the domestic consumption in Turkey decreased a bit due to a fall in the value of euro. In last one year, the Turkish currency lira depreciated by 2 per cent against the euro and about 20 per cent against the dollar that increased cost in import for the country, he said. Parvez, also a former president of Bangladesh Garment Manufacturers and Exporters Association, exports shirts to Turkey. ‘Amid the depreciation of local currency, Turkey usually will prefer local production to import,’ he said. ‘Despite having potentials in the Turkey market, our export witnessed a negative growth in the market due to depreciation of euro as well as lira,’ said Faruque Hassan, managing director of Giant Group. He said that due to devaluation of local currency production cost in Turkey became cheaper than import and so the country started to utilise their capacity in production. Depreciation of euro is one of the reasons for the negative export growth in Turkey as the payments between Bangladesh and Turkey are settled in euro, said Faruque, also a former vice-president of the BGMEA.

Source: https://newagebd.net/121323/turkish-market-for-bdesh-garment-on-the-wane/#sthash.xPWyJoNp.dpuf

Two western retailer groups – Accord and Alliance – have warned 37 local apparel makers of severing business ties with them for their failure to timely address safety concerns in line with Corrective Action Plans (CAPs), industry insiders said. After initial inspection, both the groups conducting follow-up assessment in their respective listed factories have identified those units where the remedial work is not satisfactory and issued non-compliance letters, they added. The Bangladesh Accord on Fire and Building Safety, led mostly by European buyers, warned some 28 out of 224 factories where it carried out follow-up inspections (fire, electrical and structural) till February 2015. But the Alliance for Bangladesh Worker Safety, another group led mostly by North American buyers, issued non-compliance letters to some nine units after it found the remedial work there unsatisfactory, people involved with the process said. “If no action is taken following this letter and the Accord doesn’t see adequate progress, the signatory companies in the factory will need to invoke the provisions of the Accord related to non-compliance with required remediation,” according to a recent report posted on the Accord’s website. “Such provisions include termination of business relations and public disclosure of non-compliance on the Accord website,” it warned. Till November last year, the Accord issued non-compliance letters to 13 units while 15 more factories were put on the list during the period between December 2014 and February 2015, Accord Executive Director Rob Wayss told the FE. In reply to a query, he said all the 28 factories responded immediately after issuing the warning while the previous 13 factories already identified immediate requirements. Terming the remediation a continuous process, Mr Wayss said, “But they need to continue the work.” Accord Chief Safety Inspector Brad Loewen explained that the letters were issued as they failed to comply with the CAPs requirements including issues of keeping the exits locked or using the collapsible gates within the deadline. The ministry of labour in January 2013 issued a circular, asking all the garment factory owners to replace collapsible gates by sliding gates or others of this kind that can easily be opened from outside. The Accord shared the issue with respective buyers, labour representatives along with the factory management, Mr Loewen added. However, the Alliance talked with its listed factories where its engineers were not satisfied with the remediation after their follow-up inspections and gave them two weeks, people involved with the process said. The group issued non-compliance letters to nine units finding that in some cases, only two per cent of the remedial work had been done, they said, adding that they were given two more weeks. It would go for termination of business if they fail to comply with the requirements. When asked, Alliance Managing Director M Rabin declined to make any comment in this regard and asked the FE correspondent to talk to the apparel apex body – BGMEA. While contacted, Vice President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Md Shahidullah Azim said the association was not officially informed anything about it. Responding to a query, he admitted that if the remediation is two per cent and not up to the desired level, it reflects the ill-motive of the factory management. “But if they are on the process or have identified the requirements up to 10-15 per cent, it reveals good gesture.” Buyers would not place orders to the factories which were not carrying out the remedial work, he noted. “But the deadline should be counted immediately after the fund is available as many factories could not meet all the requirements due to fund crisis,” he said and suggested that the groups inform the apex body of their observations so that BGMEA can consult with that particular factories.

Source: https://www.thefinancialexpress-bd.com/2015/05/20/93340

Concord launched a new denim brand styled “Freestyler” aiming at conveying new expression in country’s fashion market. The brand was launched for playing significant role in meeting the growing demand of fashion loving kids, teenagers and aged people. Concord has brought the new brand eyeing to save huge foreign currencies by meeting the demand for denim locally reducing the country’s dependence on imported item. At present, a lion share of the market is captured by foreign brand, company officials informed. Concord started its journey immediately after the Independence to rebuild the war affected country. Since then, the company has been making remarkable contributions to infrastructure development, construction, recreation and also in many other fields, officials said. To earmark of the 40th anniversary, Concord has launched some new venture. In 1983, Concord started its journey in readymade garments industry by launching a company namely Jeacon Garments Limited. Later, keeping the necessity in the mind and with a view to maintain incessant growth, Concord established another garments unit named Concord Fashion Export Limited. To widen its production line, the company has taken the new initiative to produce 50,000 pieces of readymade garments per month aiming at raising total production to above 3 lakh pieces per month.

Source: https://www.daily-sun.com/print/business/2015/05/19/503970#sthash.dFFcVTbo.dpuf

Japan has expressed interest to establish an economic zone at Matarbari in Moheshkhali seeing the future prospects of Japanese investment there. Besides, China has also sought 50-year land lease agreements and uninterrupted utility supplies to the economic zones they seek to establish in Bangladesh. Sources at the Bangladesh Economic Zones Authority (BEZA) said a Japanese delegation comprising JICA officials and Japanese investors expressed their interest to establish an economic zone in Matarbari during a meeting with the BEZA authority on Sunday. The government has already taken initiatives to establish a 1,200 MW coal-fired power plant at Matarbari in Moheshkhali and signed agreements with Japan, Germany and Australia to implement the mega project. BEZA sources said they are yet to get the approval for establishing Japanese economic zone in Matarbari and primary work for getting the approval was under process. Earlier, Japanese delegation had visited three sites in Narsingdi, Narayanganj and Sreepur in Gazipur as potential sites for establishing economic zones for the Japanese investors. “The number of Japanese economic zones to be established here will be confirmed by the end June,” said Malay Chowdhury, Deputy Secretary and General Manager of BEZA. The Chinese government is primarily planning to establish two economic zones at Anwara in Chittagong. They have already sought uninterrupted utility supply to the proposed economic zones. During a meeting with BEZA officials on Sunday, a Chinese delegation comprising officials of Chinese Embassy and Chinese businessmen said they will submit a paper naming all the facilities they want for establishing the economic zones here. While talking to daily sun, Malay Chowdhury said they will provide all the facilities to the foreign investors as per the BEZA act. He also said they will provide modern out-site infrastructure facilities to the investors so that they can operate their business smoothly. Mentionable, the government is planning to set up a total of 100 special economic zones in different parts of the country by the year 2030 with a view to fetch more foreign investment and generate thousands of new jobs. The economic zones will be set up on around 75,000 acres of land under the supervision of Bangladesh Economic Zones Authority (BEZA). BEZA has already got approval for establishing 22 economic zones across the country. The economic zones include the one at Sreepur in Gazipur, Sabrang Tourism SEZ in Cox’s Bazar, Anwara SEZ-2 in Chittagong, Dhaka IT SEZ at Keraniganj, one each in Jamalpur, Narayanganj, Bhola, Ashuganj, Panchagarh, Narsingdi, Manikganj, Kushtia, Barisal, and Nilphamari, a private economic zone in Narsingdi, Abdul Monem Private Economic Zone in Munshiganj, a private special economic zone in Munshiganj, Mirsarai special economic zone, Anwara Economic Zone, Srihatta Economic Zone and two economic zones in Moulvibazar and Mongla. Of the economic zones, four were given to private sector and one to Bangladesh Tourism Board.

Source: https://www.daily-sun.com/print/back-page/2015/05/19/503989#sthash.RubaXIp9.dpuf

Tax resource mobilisation in Bangladesh has been unsatisfactory and much lower than that of other countries at a similar stage of economic and social development. With the limited sources of tax revenue (mainly value added tax or VAT domestic and income tax) and gradual reduction in import-based revenue, it has become more essential for the government to increase its tax base and areas of revenue generation. Despite being the most dynamic and profitable sector of Bangladesh, it is a fact that the readymade garments (RMG) sector remains the most under-taxed one. The export basket of Bangladesh is dominated by RMG, accounting for almost 80 per cent of its total export earnings. By taking advantage of an insulated external market under the provision of Multi-Fibre Agreement (MFA), complemented by the right support policies at home, it attained a high profile, in terms of foreign exchange earnings, exports, industrialisation and contribution to gross domestic product (GDP) within a short span of time. During the last five years, exports of RMG have grown by an average of 15 per cent. This growth has been partly achieved owing to preferential treatment from the European Union’s (EU’s) Generalised System of Preferences or GSP and Rules of Origin (ROO) facilities and the Duty-Free Quota-Free (DFQF) access granted by Canada, Japan, Australia etc. The sector currently contributes to about 16 per cent of Bangladesh’s GDP. Estimates suggest that there are more than four thousand garment factories in the country employing more than four million workers. Given its status as a critical export sector for Bangladesh, it enjoys various fiscal incentives—cash incentives, duty drawback and bonded warehouse facility—from the government. Tax at source on export of knitwear, woven garment and other selected sectors is considered as final settlement and the sectors need not pay any other taxes. For nearly two decades, the RMG sector was exempt from all taxes until a tax of 0.25 per cent on export receipts was levied in FY 2005. The tax at source was raised subsequently to 0.4 per cent in 2011, 0.6 per cent in 2012 and 0.8 per cent in 2013. Until 2014, the tax at source for apparel item exporters was 0.80 per cent on their export proceeds. However, in April, 2014, National Board of Revenue (NBR) reduced the tax at source to 0.30 per cent that would continue until June 30, 2015 in a bid to increase competitiveness of the sector in the international market in a situation of rising costs faced by it and the political turmoil that ensued in the country. The NBR assessed that reduction of tax at source on export of RMG products would cost at least Tk 20 billion (2000 crore) in revenue. Alternative scenarios involving different rates of profit and their respective turnover tax rates are given in Table.2. If we assume an average profit of 10 per cent on RMG exports’ turnover and the top income tax rate of 30 per cent of taxes, the turnover tax will stand at 3.0 per cent. Even if we were to consider the 30 per cent income tax is charged on a mere 3.0 per cent profit rate, it will result in a turnover tax rate of 0.9 per cent which is still quite meagre in amount. A report published in 2007 stated that share of profits of the RMG industry enjoyed by the garments factory owners were well above 25 per cent. The current tax rate of 0.3 per cent is far too less given the profit margins of RMG producers and has resulted in significant revenue losses for the NBR. In two main competitors of Bangladesh in the RMG sector — neighbouring countries India and Pakistan — corporate taxes have to be paid by the enterprises in the sector. The RMG producers in Bangladesh are not subject to any corporate taxes. The corporate tax rate currently stands at 30 per cent in India and 35 per cent in Pakistan which is uniform for all businesses. Thus despite exhibiting its massive potential for generating revenue for the government, the taxes levied on to the RMG sector are minimal in the light of their expected profit margins. This also appears discriminatory when compared to other sectors and with taxation in competing countries. Herein lies the rationale and scope for higher taxation of income of RMG producers and exporters. (The writer is Saeba Ruslan, Senior Research Associate, PRI. FE-PRI Economic Analysis Unit).
Source: https://www.thefinancialexpress-bd.com/2015/05/19/93168

Bangladesh Accord on Fire and Building Safety, a platform led by the European brands and retailers, has warned of cutting business relations with 28 factories for their failure to make satisfactory progress with the remediation work. In a recent report, the Accord said that they have sent a total of 224 follow-up inspection reports (fire, electrical and structural) to the factory, related company signatories and union signatories. Out of 224 factories, Accord issued non-compliance letters for 28 where remedial works for ensuring safety were not satisfactory. According to the Accord aggregate report, the engineers of the platform generated a detailed report and updated the Corrective Action Plans under the follow-up inspection and the detailed report was sent to the factory, related company signatories and union signatories. ‘In cases where the Accord engineers are not satisfied with the remediation work of the factory, the Lead Engineer issues a non-compliance letter to the factory, the company signatories and labour signatories,’ the Accord said. If the factories do not take any action following the letters and the Accord does not see adequate progress, the signatory companies and the factory will be required to invoke the provisions of the Accord related to non-compliance with required remediation. ‘Such provisions include termination of business relations and public disclosure of the noncompliance on the Accord website,’ the retailers group said. Accord officials declined to disclose the names of the factories and said the platform is working with the companies closely and if the factories finally failed to make any progress then the names will be disclosed as disqualified. Shahidullah Azim, vice-president of Bangladesh Garment Manufacturers and exporters Association, told New Age that the Accord did not send any list of the factories that have failed to make headway in remediation work to the Association. ‘Perhaps, the progress in some medium factories are slow due to fund crisis and Accord should start countdown factories for announcing them noncompliant after providing necessary funds,’ he said. Earlier in March, the Accord announced a local apparel making company Mega Chois Knitwear Ltd disqualified for producing cloths for the Accord signatory due to noncompliance. The retailers group had said in their disclosure that Accord engineers identified serious fire safety lapses in Mega Chois Knitwear Ltd located at Ashulia and asked the authorities to evacuate the building temporarily for necessary remedial works, but the factory owner refused to comply. Meanwhile, BGMEA President Atiqul Islam has recently sent a letter to the commerce ministry alleging that the Accord is creating problems for some factories with threats to declare them non-compliant and thereby destroy their export business. Atiqul in his letter alleged that improving worker safety in the garment factories where the Accord signatory companies source apparel products is the job of the Accord but the platform has got engaged in some activities which are beyond the purview of worker safety. The BGMEA president urged commerce minister Tofail Ahmed to look into the situation seriously and take appropriate measures to keep the Accord activities within the bounds of the law of the land.

Source: https://newagebd.net/121008/accord-warns-28-rmg-factories-of-cutting-business-ties/#sthash.wb8xF88z.dpuf

US ambassador will place a report (on workers’ safety and rights) to the US congressmen. She will seek to reduce tariff on import of Bangladeshi RMG products State Minister for Labour and Employment Mujibul Haque said the US ambassador to Bangladesh would inform the US congressmen about the improvements in workers’ safety and rights status in Bangladesh garment industry and ask for cutting tariff on the RMG import. “US ambassador will place a report (on workers’ safety and rights) to the US congressmen. She will seek to reduce tariff on import of Bangladeshi RMG products,” he told journalists at his office yesterday after the US envoy Marcia Bernicat paid a courtesy call to him. Mujibul said the US diplomat sought to know about the present situations of trade unionism, labour rights and factory inspections in the garment industry. “She has been updated about the status and current priorities.” “I also inform her about what initiatives have been taken to improve working environment in the clothing industry and ensure workers’ safety and rights after the tragic Rana Plaza incident,” the state minister added. Currently the US importers of Bangladeshi RMG products have to pay about 16% duty, which is much higher compared to other competitor countries. Mujibul said the GSP issue was also discussed in the meeting and the envoy observed that most of the conditions imposed by the US government to restore the trade facility have been met by Bangladesh except the workers’ rights. “We have told the envoy that all the conditions outlined by the US government have been addressed,” the state minister said. After the meeting, Marcia Bernicat also talked to the journalists. In reply to a question about migrants crisis, the US ambassador said: “We are working with the Bangladesh government and other countries related with the ongoing migrant issue. The US was also working on providing humanitarian assistance.” Labour and Employment Secretary Mikail Shipar was also present as the envoy called on the state minister.

Source: https://www.dhakatribune.com/business/2015/may/18/mujibul-us-envoy-recommend-tariff-cuts-rmg-import#sthash.FhDnJOIu.dpuf