The United Kingdom (UK) is worried over the growing incentive packages for domestic apparel manufacturers as such facilities have caused widening disadvantages to foreign-owned clothing units inside the export processing zones (EPZs).
For ensuring equal treatment for both EPZ factories and local producing units, the UK has requested the government to provide such incentives for EPZ factories too.
British High Commissioner in Dhaka Robert Chatterton Dickson sent a letter to Commerce Minister Tipu Munshi recently, requesting him to take measures for ensuring level playing field for all investors.
Currently, local apparel exporters enjoy a 4 per cent cash incentive against exports to non-traditional export destinations, i.e. countries outside the EU, the USA and Canada.
"But the factories operating inside the EPZs are not eligible to enjoy such incentive and British companies working there expressed fear to me that the proposed 1.0 per cent export rebate in the current budget might also exclude them," he said in the letter.
The British envoy also highly appreciated Bangladesh's achievements, remarkable economic and development stories.
He, however, said the UK firms operating in the RMG sector are contributing to job creation, skills training and tax revenues-the determinants necessary to help Bangladesh reach its undoubted development potential.
"To attract foreign direct investment, it will be important that Bangladesh can demonstrate a fair approach to foreign companies. Part of the job of the British High Commission is to assist UK companies thinking of investing in Bangladesh and to help companies through advocating a level playing field for all investors," the letter reads.
Mr Dickson said, "A number of UK companies operating in Bangladesh have recently approached me and said the government is planning to introduce a rebate of 1.0 per cent on all RMG exports."
However, only "Type C" companies (100 per cent Bangladesh owned and resident in Bangladesh) within the export processing zones (EPZs) are entitled to get this incentive, according to the letter.
Under the planned incentive scheme, "Type A" (100 per cent foreign-owned including Bangladesh nationals ordinarily resident abroad) and "Type B" (joint venture between foreign and Bangladesh entrepreneurs resident in Bangladesh) companies within the EPZs will not be eligible for 4 per cent rebate, said the letter.
For those operating in an EPZ, this could put them at a 5.0 per cent disadvantage with Type C companies in terms of export rebates.
In the fiscal year 2018-19, Bangladesh's export earnings from the UK posted a 4.51 per cent growth to US$ 4.16 billion against an 11.76 per cent growth to US$ 3.99 billion in the fiscal year 2017-18, according to the Export Promotion Bureau (EPB) data.
The apparel sector has contributed US$ 3.85 billion which is 92.56 per cent of total exports of US$ 4.16 billion.
The budget for the current fiscal year proposed 1.0 per cent cash incentive to the rest of the RMG sector except those who are currently getting cash incentive at 4.0 per cent.
Currently, four sectors of ready-made garment are receiving export incentives at 4.0 per cent. The finance minister, in his budget speech, proposed providing an export incentive of 1.0 per cent in the current fiscal year to the rest of the sectors of ready-made garment.
The national budget for FY 2019-20 proposed a significant rise in the allocation for the country's readymade garment sector, taking its contribution and potential into account.
It also set aside an additional allocation of Tk 28.25 billion for the sector which is receiving Tk 15 billion in the current fiscal year.