Rethink reducing cash incentives for RMG exports

The recent decision by Bangladesh Bank to phase out cash incentives or subsidies to the export of goods, effective from January 1, has sparked concerns in our garment sector. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has urged the government to reconsider this move.

The central premise of the decision lies in Bangladeshs anticipated transition from the Least Developed Country (LDC) status to that of a developing country by 2026, as announced by the Bangladesh Bank. According to World Trade Organization (WTO) regulations, countries in transition from LDCs are restricted from providing export incentives or cash assistance. While this transition is a significant milestone, the abrupt withdrawal of cash assistance could pose challenges for the export sector.

The BGMEA emphasizes the potential impact on the competitiveness of the garment industry in the global market. With international orders already at a low and a prevailing dollar crisis in the country, reducing incentives could exacerbate the challenges faced by exporters. The plea highlights the crucial need to attract more foreign currency to bolster the nations foreign exchange reserves.
The BGMEA press release underlines the current economic strains resulting from the global pandemic, coupled with geopolitical conflicts such as the Russia-Ukraine war and the Hamas-Israel conflict, which have collectively dampened demand for various products, including ready-made garments. In this challenging environment, the reduction in the size of the Export Development Fund (EDF) last year further added to the difficulties faced by the industries.

Business costs are on the rise, compounded by persistent challenges such as the gas crisis. However, the stability of the dollar price has been a silver lining amid these adversities. The sudden decision to cut cash assistance in this context is viewed as a potential threat to the export sector, leading to a decline in its capacity to compete globally.

The exporters plea for reconsideration is justified in the need for a comprehensive and strategic approach to support the garment industry during these testing times. As the sector grapples with various challenges, including a reduction in the EDF and increasing business costs, a sudden withdrawal of cash assistance could further strain its ability to navigate the intricacies of the global market.

In light of the critical situation faced by the garment industry, the BGMEA appeals to the government to reconsider its decision. A careful and phased approach, taking into account the unique challenges currently confronting the sector, would be instrumental in ensuring the sustained growth and competitiveness of Bangladeshs vital garment industry on the global stage.