Despite zero import duty, the country’s RMG manufacturers are unwilling to import prefabricated building materials for relocating factories and make them compliant as entrepreneurs think the structure still remains expensive.
In the current budget, the government on certain condition allowed the export-oriented RMG sector to import duty-free raw materials needed for the manufacture of the required prefabricated buildings.
This duty-free import was aimed to help create favorable and safer production environment in line with international standards.
The duty-free import of the materials was expected to help encourage the RMG factories housed in shared buildings and want to be relocated for making them compliant.
The safety issues came under spotlight following the collapse of Rana Plaza. Relocation of factories outside Dhaka had emerged amid pressure from the global buyers.
But, the actual scenario is totally different from the expectation as only two factories got approval from the BGMEA to import materials even eight months after the tax waiver decision.
According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA), only two factories Simplex Apparel and Washing Limited and Mars Apparel have taken nod from the trade body to import prefabricated building materials in the last eight month of the current fiscal year.
In the current budget, the government allowed RMG factory owners duty free import of prefabricated building materials to give a cushion to relocate factories but the owners did not show much eagerness to import due to 5% advanced income Tax and 15% VAT, said a high official of BGMEA on condition of anonymity.
He also noted that duty-free import of prefabricated building materials would help the RMG owners to relocate their factories easily, fulfilling the compliance issues.
“It costs Tk550 to Tk600 per square feet to ensure fire safety in the outside portion of the building by using fire coated color,” Syed Faizul Ahsan Shameem, chairman of Dotcom Sweater, told the Dhaka Tribune.
The cost of prefabricated buildings goes up due to higher import-duty on fire-coated color, which ultimately badly caused slow response to the government incentives, said Shameem.
Fire coated color is another thing, which is needed in using prefabricated building materials to make it fire proof.
The BGMEA is negotiating with the government for withdrawing the import duty on fire quoting color and if the government agreed, the import of the materials will be increased sharply, he said.
BGMEA Vice President Shahidullah Azim said: “We’ve urged the National Board of Revenue (NBR) to withdraw the tax on color. But, we are yet to get any message from the NBR.”
Azim also said, “As it is not viable for the importers due to the imposed AIT, VAT and import tax on color, they are not showing any interest to import the materials.”
On the other hand, investors are still following wait and see policy to observe the political situation before investing any further.
“I’ve intended to build a prefabricated building to relocate factory but the current situation is not in favor of business,” said a factory owner, seeking anonymity.
According to BGMEA, over 35% factories need relocation to comply with safety standards. To relocate those factories, the factory owners demanded duty-free import of prefabricated building materials for quicker relocation of their factories.
