Potential export-earning sector struggling to encash incentives

Exporters of diversified jute products are facing difficulties in encashment of the export incentives amid procedural complexities, despite publishing the official list of such products more than three years back.

The producers alleged that this is affecting their fund flows and making it tougher to sustain competition with big exporters like India and China in the global market which is witnessing growing demand for such eco-friendly products.

Nearly 800 entrepreneurs in the country are involved in producing diversified jute products that contribute around 10 per cent of the total export earnings from jute goods, sector insiders estimated.

Bangladesh earned US$ 311.04 million in the first six months of the current fiscal year (FY 2023-24) from exports of jute goods (jute yarn and twine, sacks and bags). The earnings were $607.78 million in FY 2022-23.

The Ministry of Textiles and Jute issued a gazette notification with a list of 282 diversified jute products in October 2020 and accordingly sent it to the Ministry of Finance to take necessary measures in this regard.

However, the list is yet to be forwarded to the Bangladesh Bank (BB), the authority to administer the cash incentive, resulting in complexities like audit-related documentation over releasing the government subsidy, exporters have said.

At least 80 per cent of the jute goods exporters were facing such setbacks, they added.

"Most of the exporters are deprived of due incentives for audit objections, while some others can manage it facing different types of hassles," said one of the sector insiders.

The central bank issued a circular in 2016, offering a 20 per cent cash incentive to boost earnings from exports of diversified jute goods.

Bangladesh Jute Mills Association (BJMA) sent a formal request to the finance ministry on Monday last, seeking its cooperation to solve the problem in this regard.

BJMA Chairman Abul Hossain in a letter pointed out that as the finance ministry did not send the gazette to the BB to take necessary measures, the complexities remained unresolved.

He also stated that the gazette has facilitated identifying the diversified products.

"If necessary, the government can issue another gazette when the list will add new products in the future. Now it is crucial to send the existing one to the central bank as it can help the exporters get their due incentives," he added.

As per the Jute Act 2017, diversified jute goods, except hessian, sacking, Carpet Backing Cloth(CBC), and yarn of six counts or more, would get a 20 per cent cash incentive if produced by using at least 50 per cent jute.

When contacted, Abdul Barik Khan, secretary general of the BJMA, said from the beginning of introducing the cash incentive, they were facing complexities during the audit regarding the percentage of jute used in the diversified products.

The jute ministry published the list of such items to solve the product identification problem, he said. "Despite having the gazette, we're suffering from the same problem as before."

Mr Khan, however, said that the product identification problem was supposed to be solved after the gazette but it rather deepened as the audit firms are not following it due to the absence of a necessary circular supposed to be issued by the central bank.

"Earlier, the audit firms often raised questions about the product materials. However, since issuing the gazette, they started asking more frequently if 50 per cent jute was used in the products."

The BJMA secretary-general said Bangladesh has a huge potential to export such products due to its environment-friendly nature. But it is difficult for domestic producers to sustain competition with big players like India and China without the incentives, he added. 

In response to a BJMA's appeal, the central bank sent a letter to the finance ministry on October 22 last year, requesting it to execute the gazette carrying the list of 282 diversified jute products.

"As the list of products is not mentioned in the Bangladesh Bank circular regarding cash incentive, the audit firms are reluctant to issue certification against the exports of these products," the letter mentioned.

On the other hand, in response to BB's letter, the monitoring cell of the finance division issued a reply on December 13, 2023, stating that cash incentives will continue as before.

"The existing system of providing cash incentives will continue by following the definition of diversified jute products mentioned in the Jute Act, 2017 without formulating a list of the goods for providing the incentive on the export of these products."  

Bangladesh jute products are in demand in different countries. To boost exports of such products, it is necessary to immediately resolve the complications, said Rashedul Karim Munna, one of the leading producers and exporters.

"Issuing a central bank circular with the list of diversified products would solve the problem," added Mr Munna, managing director of Creation Private Ltd.

Contacted, an official of the monitoring cell at the finance division only said that since it was an earlier matter, instructions might have been given in this regard.

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