Apparel exporters push for full restoration of cash incentives

Apparel exporters have urged the government to reinstate cash incentives at pre-2024 rates and scrap the procedural requirements that they say are inflating costs and undermining the ease of doing business.

At a meeting with the finance ministry on Sunday, industry leaders pressed for restoring the local yarn incentive to 3.0 per cent and the general export incentive to 1.0 per cent, maintaining these until 2029 under provisions allowed by the World Trade Organization (WTO).

Under WTO rules, countries are permitted to provide such subsidies for a three-year grace period after graduating from least developed country (LDC) status.

The stakeholders raised these demands during a meeting at the Bangladesh Secretariat, chaired by Rahima Begum, Additional Secretary and Director General of the finance ministry's Monitoring Cell.

Meeting sources said exporters argued that restoring the local yarn incentive from the current 1.5 per cent to 3.0 per cent would benefit domestic millers and boost local value addition, a requirement under the rules of the newly imposed US reciprocal tariff.

They also called for reinstating the 1.0 per cent incentive for all exporters, which has been reduced to 0.3 per cent.

Exporters further alleged that the paperwork required to access incentives is so cumbersome that compliance costs nearly negate the benefits.

"We want to know the challenges faced by the industries, understand the whole situation and ensure a smooth transition from LDC status," a meeting source quoted Ms Rahima as saying. "We want to find solutions to boost our exports and economic growth."

After the meeting, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) President Mohammad Hatem told the Financial Express that under WTO rules, cash incentives can be offered for three more years after graduation to preserve competitiveness.

"Cash incentives should be disbursed at the proceeds realisation stage; otherwise, exporters often face delays of up to 18 months due to bureaucratic procedures, which undermines the ease of doing business," he said.

Mr Hatem also criticised a Bangladesh Bank circular requiring certification from an audit firm, arguing that it increases costs. He suggested removing the term "composite" from the incentive application form, saying it creates confusion during audits and unfairly excludes manufacturers without composite facilities.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Director Sumaiya Islam Rozalin noted that the industry is grappling with both external and domestic pressures.

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Senior Additional Secretary General Shah Md Abdul Khaleque stressed the need for alternative incentive measures ahead of LDC graduation, since cash incentives will eventually be phased out.

He proposed subsidies on utility bills, worker salaries, and factory rent, or tax waivers, alongside government-to-government deals to secure zero-tariff market access.

BGMEA Vice-President Md Shihab Uddoza Chowdhury echoed the call for restoring the 3.0 per cent and 1.0 per cent rates, stressing the importance of matching support levels offered by competitor nations.

The government has already decided to phase out cash incentives in four stages to soften the impact of Bangladesh's planned LDC graduation in November 2026. WTO rules prohibit developing countries from offering such subsidies after graduation.

In January 2024, the government began restructuring export subsidies, cutting rates for 43 categories of products from between 1.0 and 15 per cent to between 0.3 and 10 per cent.

This second-phase reduction triggered strong opposition from businesses, which are now calling for a full rollback to pre-January 2024 rates.

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