Govt to give cash incentive on FOB

The Bangladesh government has agreed in principle to pay cash incentives on the basis of freight on board prices against exports of apparel goods made using locally produced yarn.

Though this incentive already exists, the proposed move will introduce a more streamlined and direct payment process for apparel makers, and no longer require a series of inspections and audits, observed apparel makers.

The decision came on Wednesday in a meeting attended by stakeholders and industry representatives, including officials from the finance and commerce ministries and Bangladesh Trade and Tariff Commission.

As per the decision of the meeting, the commerce ministry will now send their recommendations to the finance ministry.

Later, following a review, the Bangladesh Bank will issue a master circular to implement the cash incentive, sources present at the meeting told The Business Post.

Commerce ministry’s Additional Secretary Hafizur Rahman, who presided over the event, said, “Stakeholders provided us with some recommendations at the meeting. Those will be forwarded to the finance ministry for further action.”

Responding to a query, Bangladesh Knitwear Manufacturers and Exporters Association’s (BKMEA) Executive President Mohammad Hatem further acknowledged that the government has accepted their demands, and agreed to pay cash incentives on the basis of FOB.

The export-oriented textile manufacturers currently enjoy a 4 per cent cash incentive against their exports using local yarn. However, suffering harassment due to a complex audit system which causes delays in disbursing the cash, industry leaders have been demanding a solution.

On September 26, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan, BKMEA President AKM Selim Osman, Bangladesh Textile Mills Association President Mohammad Ali Khokon and Exporters Association of Bangladesh President Abdus Salam Murshedy presented their demand in writing to the finance ministry and the textiles and jute ministry.

They also sent a copy of the letter to the Prime Minister’s Office, Ministry of Commerce and Bangladesh Bank.

In the letter, industry leaders sought immediate action from the government to resolve issues related to the payment of alternative cash assistance, and make the payment directly on the basis of FOB.

It also mentions that Bangladesh currently has no definitive policy or system for setting textile export prices, and industry leaders are facing harassment due to the ambiguity of circular 25, issued by the central bank on 18 September 2017.

On the issue, BGMEA’s Vice President Mohammad Nasir told The Business Post, “To ensure hassle-free cash incentives, there are no alternatives to the FOB price. We expect that the finance ministry will consider our demand as per commerce ministry’s recommendation.”