What We Want In Fiscal Budget
Garment sector needs support to overcome crisis
Business Observer will publish the interview of Engr. Monir Uddin Ahmed immediate past president of Bangladesh Association of Construction Industry, on the upcoming fiscal budget tomorrow.
Published : Thursday, 30 May, 2019 at 12:00 AM Count : 397
Garment industry is the lone export sector bringing over 80 percent of the country's export earnings and since other export sectors are trailing far behind, leaders of the garment sector believe its success must remain uninterrupted to avoid setback in domestic employment market and external trade.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Rubana Haq while speaking to The Daily Observer on "What We Want In Fiscal Budget," said the forthcoming budget should maintain existing incentives to garment industry and add more such facilities to keep the sector competitive.
Rubana Haq - who is also the managing director of Mohammadi Group -- is the first woman president of apparel makers' chamber and having several decades experience in the trade said the industry is going through many challenges like rising wages and lower prices expounding many problems.
By exporting more big industries are now outweighing the loss from lower price but smaller ones are facing big setback. Such situation can't go unabated. So the industry must improve the bargaining capacity with buyers in one hand and seek to achieve higher efficiency in production chain on the other to overcome the mismatch.
She said the forthcoming budget should provide 5 percent cash incentives, besides subsidies for all types of conventional and non-conventional apparel products.
Rubana said the garment sector had witnessed 30 percent rise in cost over the past 5 years and unless special facilities offered the industry will not be able to sustain the business on competitive track. Many factory owners have been forced to shut down their factories.
Over the past five years more than 1200 factories have shut their doors; this is 17 closures per month. In the recent past 20 to 22 factories have shut business per month and 20 factories were closed alone in last 17 days.
She has called for urgent budgetary measures to protect the industry. Most small factories are particularly ailing from lower export earnings from lower placement of orders. It drastically fell prior to elections.
She has therefore demanded formation of an urgent fund for Tk 300 crore for garment industry from which factories in dire need may seek bail out funding. Her other demands include reduction of tax at source at 0.25 percent, reduction of corporate tax at 10 percent from 12 now, devaluation of taka against dollar at Tk 5 bonus rate for garment exporters and keeping the energy cost from further increase.
She has also demanded an exit policy for owners of ailing garment factories who want to quit the business for incurring losses.
Rubana said, workers' wages have increased, fuel prices increased; cost of compliance related works has also increased. Most factories can't recover such cost from lower export earnings as prices of apparels in international market have decreased.
Constant pressure on factory owners for costly compliance of safety standard has increased cost of running factories. If the growing pressure on factories; continues, particularly on smaller ones, the industry will be in big danger.
Rubana Huq said, the cost of production of ready-made garments in Bangladesh is only growing though the country enjoyed lower cost of production compared to other countries in the past. Rising cost and lower export price is threatening the industry, she said.
Since 2013, production cost in Bangladesh grew by 0.74 percent on an average annually. If the price of gas increase, electricity price increase by 60 percent as proposed and price of other raw materials rises, it will increase production cost by about 9 percent annually to hit hard the industry.
She said, "Bangladesh is in second place after China in ready-made garments export to global market. It has achieved competitive edge over China from US-China trade war. We have good prospect to capture bigger share of market if we can fix problems in this sector," she said.
The global apparel market is USD $446 billion and Bangladesh claims 6.5 percent of the total market at this moment. About 18 percent of foreign investment in Bangladesh now involves ready-made garments sector, whose financial value is $460 million.
So, to save the sector and make greater access to global market, there is no alternative to cash incentives and other budgetary supports that we are calling for in the upcoming budget, she said.