June 22, 2024

Bangladesh Garment Exporters In Crisis On Reduction Of Subsidies

Bangladesh apparel exporters are facing a crisis over the government’s decision to withdraw cash subsidies for five clothing products, which make up for 55 percent of the sector’s exports.

Along with the garment industry, the Bangladesh government had reduced incentives for other export sectors ahead of the country’s scheduled withdrawal from least developed country (LDC) status in 2026.

The Bangladesh government offers cash subsidies which range between 1-20 percent of the export value for exports of 43 types of products to make them more competitive in global markets.

It is estimated that apparel exporters will lose around US $440 million because of the withdrawal of incentives from just the five apparel products.

Additionally, cash incentives of other clothing products have been dropped from 1 percent to 0.5 percent. The new government promulgation came into effect from January 1, 2024.

Cash incentives, along with low cost of production and duty free access to several countries because of the LDC status have helped Bangladesh apparel exports, to soar in the last two decades.

While announcing reduction of subsidies, a Bangladesh Bank official had said that once it is termed a developed country, Bangladesh would not be allowed to provide incentives and hence the gradual reduction.

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