The National Board of Revenue (NBR) has eased subcontracting rules to accelerate export trade and improve the business environment in Bangladesh.
Under the new regulations, non-readymade garment (non-RMG) firms, particularly with bonded warehouse licences, can now engage in subcontracting with other factories. This policy change aims to ensure timely deliveries and boost export orders.
Previously, subcontracting was allowed for all export-oriented sectors. However, the previous government restricted this privilege solely to the RMG sector, depriving other industries of the benefit, according to NBR officials.
This restriction led to challenges for non-RMG sectors, particularly leather exporters, who struggled to secure more orders without the ability to subcontract. Some factories, heavily reliant on subcontracting, even faced the threat of closure, the officials added.
In response, the Leathergoods And Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) recently sent a letter, prompting the NBR to grant the non-RMG sector the same subcontracting privileges as the RMG sector.
A subcontractor is a person or business that takes over part or all of the obligations of another's contract. Subcontracting is commonly used when a factory receives more orders than it can handle, transferring some of the work to another factory.
However, before subcontracting, the main contractor must seek the buyer’s permission, as foreign buyers require the same compliance standards in the subcontracted factory.
Over 80 per cent of the country’s export earnings come from the RMG sector, with the remainder generated by non-RMG sectors, including leather, footwear, plastics, and others.
Representatives from the non-RMG sectors welcomed the NBR’s initiative, saying it would help them secure more orders.
Tipu Sultan, managing director of Bengal Shoe Industries Limited, a renowned leather goods exporter, said, “This decision will help us secure more orders and minimise losses. Sometimes we need to shift some work to another factory to reduce the workload and meet deadlines.”
“Additionally, there are times when we want to take on subcontracting work during a shortage of orders,” he added. “Since I maintain compliance and have all the necessary setups with workers, why should we be restricted from getting subcontracts?”
He further remarked, “We were surprised to learn that the non-RMG sector was not allowed to engage in or receive subcontracting from other factories.”
Amrita Makin Islam, deputy managing director at PICARD Bangladesh Limited and director of LFMEAB, said, “Allowing subcontracting for the non-RMG sector is a positive move that will help us boost exports.”
Previously, in some cases, subcontracting factory owners were required to provide a bank guarantee, which meant depositing an equivalent amount of money in the bank to continue work orders in the event of legal disputes. Now, factory owners will be able to provide an undertaking instead of a bank guarantee.
