As fashion lovers and consumers' taste changes fast, product diversification and technology upgradation is crucial for the global apparel industry. So in the upcoming national budget for fiscal year 2021, special incentives are needed to upgrade technology, as well as new items such as recycled, non-cotton based clothing goods and circular products, BGMEA president Rubana Huq told Dhaka Tribune's Ibrahim Hossain Ovi in an interview.
The readymade garment (RMG) sector was hit the hardest in the Covid-19 pandemic. To fight back, what kind of measures are needed in the upcoming budget?
Coronavirus has brought an unprecedented disaster to our RMG industry and economy, and currently we are focusing on protecting the industry from an apocalypse. It is not easy for us now to actually estimate and demand something which will be adequate for the industry to survive and sustain.
Our first priority is to negotiate with the buyers to reinstate the canceled goods as much as possible and get the payments back. The goods which will remain unsold or raw materials unpaid for, we will have to find out a way to get rid of the liabilities, otherwise factories will not be able to survive.
To better use the stock of finished goods, we proposed for the government's support to establish a virtual marketplace like Amazon and Ebay through which we can sell the goods, and will get an online platform, which will be a significant preparation for us to cope up with post-Covid 19 global market.
What should be the tax structure for export-oriented industries?
The RMG industry currently needs to pay corporate tax at the rate of 12%, while green factories pay 10%. But both have to pay 0.25% tax at source. We demand to keep all these tax rates unchanged for the next five years, and consider the source tax as the final settlement.
Though a complete waiver of the taxes for next few years would have been more helpful for the industry, the continuation of the existing tax rates would also be helpful. We also demand to completely waive the RMG industry from paying VAT imposed on local purchases, and from the requirement to submit VAT returns.
What other budgetary support do you seek apart from traditional ones?
Product diversification is very crucial for the industry to survive as the demands of recycled, non-cotton based clothing goods and circular products items are on the rise. To this end, technology and infrastructure upgradation is imperative.
In addition, joint ventures help to share technical knowhow and diversify products goods. So the government should provide special incentives on these items and on JVs in new product categories.
On top of that, government has to incentivize and provide duty free capital machinery importation while opting for sector diversification particularly in areas such as recycled yarn, personal protective equipments (PPEs), polyester staple fiber (PSF), Solar PV Module Assembly, light engineering like manufacturing spare parts for industrial washing machine, sewing machine, vacuum pump, gas compressor, centrifuges, boilers, etc.
RMG sector enjoys 4% cash incentives in new markets and 1% in other markets. What are your demands to fight Covid-19 pandemic?
Cash incentives were given to the industry quite long ago and the impact of the Covid-19 disaster was not in the picture at that time.
We have made a few proposals to support us maintain competitiveness, particularly Tk5 per US dollar while document purchasing on the local value retention on RMG exports (25% of the export value).
Apart from that, we also demand relaxing the regulations on foreign loans and making loan procedures easier, subsidized rates of utilities, special tax breaks for factories relocating in special economic zones (SEZs), and special incentive on exports to markets having high tariff barriers like the USA.
How can the government help the sector create jobs and retain the existing employment through budgetary measures?
It would need concerted and coordinated efforts with the private stakeholders on board, identify the priorities and be efficient in action.
We need to find alternative markets and alternative products, we need more investments in the economy, we need the mega projects to keep going and be completed on time, and most of all it needs to ensure an environment where businesses can operate with less hassles and with greater efficiency.
What should be the budgetary measures to ensure health safety at the workplace?
I think special budget allocation for tests and subsidized treatment facilities for the working class would be a tremendous support. A 100% waiver of factory expenses incurred on health compliance, treatment and medical preparedness purposes for the workers from tax liability is also logical to expect. A special direction or support to use the dormitories and similar infrastructure of the government in different parts of the country for workers' residence would be helpful.
Besides, we have also proposed an allocation of Tk200 crore for RMG workers’ housing, especially the cost of accommodation in economic zones, nutrition, transport, provide ration cards to workers, and unemployment benefit for skilled operators.