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Bangladesh - February 3, 2024

New fear in exports

Mahfuz Emran : The government has suddenly reduced the rate of export incentives and subsidies. Incentives are reduced by an average of 0.50 percent to 5 percent from the previous rate. Currently 43 sectors are given incentives at various rates to increase exports. This rate has been reduced in almost all sectors.
A circular has been issued by Bangladesh Bank and sent to the chief executives of commercial banks. The government has taken this decision as a preparation to exit the list of least developed countries in 2026.
The entire export sector, including the exporters of the ready-made garment industry, will be greatly affected by such a decision. At the same time, the dollar crisis may become more intense, the stakeholders think. They said that the export sector is currently facing multifaceted challenges due to global and domestic crisis. Due to increase in the price of gas and electricity in the country’s market, the production cost of export products has increased. Traders said that if the subsidy is reduced, the exporters will be in a more negative situation.
Mohammad Hatem, executive president of BKMEA, an association of knitwear industry owners, said that export support has been reduced. That means that all major export products including t-shirts will not benefit.
Instead of suddenly taking such a decision, traders would have taken orders in that light if told five to six months in advance.
This will discourage the exporters andexports will decrease. According to the instructions of Bangladesh Bank, the government is providing export incentives or cash assistance against exports in 43 sectors in the current fiscal year 2023-24 with the aim of encouraging the country’s export trade. As per World Trade Organization (WTO) regulations, the matter is considered as export-dependent subsidy and no export incentives and cash assistance can be provided in transition from LDCs as per the agreement. The transition of Bangladesh from the list of least developed countries is going to happen in 2026. After such a transition, the export sector may face challenges if export incentives and cash assistance are withdrawn altogether. Considering these, the government has decided to gradually reduce the rate of cash assistance in various sectors from January 1 this year.
According to the directive, 43 products will get incentives or cash assistance against exports during the period from January 1 to June this year. These 43 products received assistance in the previous year as well. Cash assistance ranging from 0.50 percent to 15 percent has been announced against these products. Whereas in the previous year, exporters used to get maximum support of 20 percent.
Among the products, export of agricultural produce and processed agricultural produce, diversified jute, potato and halal meat will get maximum 15 percent support. Besides, 3 percent instead of duty bond and duty draw-back in export-oriented domestic textile sector, 4 percent in small and medium industries in export-oriented ready-made garment sector (knits, knits and sweaters), 3 percent in new products, new markets (textile sector) but exporters of textile sector in Euro zone. Additional special assistance of 1 percent to the existing 3 percent, special cash assistance of 15 percent to readymade garments, 7 percent to jute final products, 5 percent to jute and 12 percent to export of leather goods will be given.

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