Plastic goods exporters demand reconsideration of cash incentive cut

The Bangladesh Plastic Goods Manufacturers and Exporters Association (BPGMEA) has demanded reconsideration of the government’s decision to lower cash incentive rates for exports.

The change in the rate of cash incentives is not helpful and timely for the industry, said BPGMEA President Shamim Ahmed in a press statement.

“Rather, it will bring unintended risks and disasters to other industries, including the plastic sector," he said.

He also demanded that the decision be amended on an urgent basis before it has a major negative impact on exports, advocating for the maintenance of 10 per cent cash support for the export of plastic products until 2026.

The amount of cash incentives for the plastic sector was reduced from 10 per cent to 8 per cent through the Bangladesh Bank's FE circular number-02 dated January 30 this year.  

The BPGMEA statement said that the plastic sector is an emerging and promising sector. It is diversifying export products according to the needs of foreign buyers and earning foreign exchange by exporting 150 varieties of plastic products to about 126 countries using modern technology.

Direct exports in FY 2022-2023 amount to USD 209.86 million, according to the Export Promotion Bureau. As a backward linkage industry serving he country's largest export sector, garments and other industries, it earns about US$ 950 million.

That is, the export volume (direct + deemed) is above 1.2 billion US dollars. Some 1.5 million men and women are employed here, of which 30 per cent are women. It has been growing at a rate of 20 per cent for the past two decades. The position of the plastic sector in exports is 12th.

The current government has also included the plastic sector as a priority sector in the Import and Export Policy-2024.

The BB circular did not mention the introduction of alternative incentives in the duty-compliant system post-LDC transition, the statement said.

However, many middle-income countries have been providing alternative incentives rather than direct incentives for their industries.

The issue of providing alternative incentives has come up in various government and private studies of the country.

“We do not think that the sudden reduction of the existing system without an alternative system is a helpful step for the industry and the economy," the BPGMEA president said.

“On the other hand, while the incentive package is being cut, competing countries are increasing support for their industries, such as the Export Development Fund in India, Vietnam Trade Policy and Promotion Project, and even in rich countries like the USA, cotton cultivation is subsidised to encourage export trade. Bangladesh will face the challenge of double transformation after 2029," he added.

At such a time, the statement said, as long as the LDCs were enjoying benefits as per the provisions, it would have been more reasonable to extend other facilities, including cash incentives, through which the industry could be sustained.

According to the statement, the price of the export product is determined by calculating the subsidy at the time of placing the export purchase order. Export incentives will face financial losses for the period from January 1 to June 30, 2024, without prior announcement. As a result, there will be a major problem in the export of plastic products due to the sudden withdrawal of subsidies midway.