Bangladesh government says 'No' to pleas for special cash incentives to exporters.

The government has turned down the pleas of different trade bodies for providing 'special cash incentives' to help key export sectors stay competitive on the global market amid erosion in the value of euro.

Sources said the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), the Bangladesh Garment Manufacturers and Exporters Association and the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) had sought special cash help for the time being amid decline in country's exports.

The finance division of the ministry of finance organized a meeting on the matter on September 08 with senior secretary at the division Mahbub Ahmed in the chair.
People familiar with the latest developments told the FE Monday that the government would not consider their pleas for now and observe the situation further to take a decision on the issue.

Rather, a number of senior officials at the finance division opined that the central bank should depreciate the local currency against the US dollar, which will make the Bangladesh-made products cheaper on the global market and thus help boost exports.

Some argued the export receipts would grow shortly, thus influencing the policymakers not to heed the pleas of the leading trade-promotion organizations.

"We've seen the August export surge around 4.0 per cent, so we should observe the developments few months more," said an official who is in the know of the matter.

The BGMEA wanted 3.0 per cent special cash incentives until the euro stabilizes.

According to a calculation by the finance division the European Union currency has weakened by nearly 20 per cent over the past year, and even shed 1.0 per cent of its value in June over the Greek debt crisis.

On the other hand, the MCCI and the LFMEAB want 5.0 per cent incentives on the fob (free on board) prices until the euro stabilizes.

They also sought higher ceiling of the existing cash incentives for the leather sector which lost around 60 per cent market shares in Europe mainly due to the euro devaluation against the dollar.

The Ministry of Commerce (MoC) sees Bangladesh's exports to Eurozone in the positive zone and hopes the trend will sustain.

The MoC said a number of Eurozone members are importing Bangladesh-made clothing, leather and other goods. They are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Ireland, Italy, Luxemburg, Malta, the Netherlands, Portugal, Slovakia and Spain.

However, an analysis by the finance division showed Bangladesh's exports to the Eurozone on upturn until 2013-14 but growth was minimal in the last financial year.

Salam Murshedy, president of the Exporters Association of Bangladesh, told the FE that Bangladesh's main export market was Europe and the government should consider their appeals.

"Once the export-oriented factories start closing, it will impact on employment as only garment sector alone recruited 4.0 million work forces," he said. However, Bangladesh has been continuing to provide cash incentives for many sectors and some of them were reviewed in the last financial year.

Currently, clothing sector is getting 4.0 per cent cash perks against the 5.0 per cent earlier.

Leather sector is getting 12.5 per cent, down from previous 15 per cent.

The government handed out Tk 14.49 billion to the clothing sector and Tk 4.59 billion to the leather sector as cash incentives in the last fiscal to help them remain competitive on the global market.
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