Increased FOC limits threatens deemed export industry

The textile accessories industry is likely to face a severely turbulent situation due to the new amendment to the Import Policy Order, which increases the FOC (duty-free importation of fabrics and accessories) limit. Usually, exporters holding bond licences can avail 50 per cent FOC of their total exports from the previous year for the duty-free import of raw materials.

If the newly amended policy takes effect, local accessories manufacturers will face significant challenges, and the industry will become increasingly vulnerable. Although RMG owners predict a rise in exports and expect substantial foreign earnings, actual value addition will decline. Exporters will primarily receive proceeds for cutting and making, which in reality will not exceed 10 per cent.

Already, backward linkage industries such as spinning, textiles, and garment accessories are experiencing enormous difficulties due to scarcity of utilities, rising utility costs, and increased interest rates on bank borrowings. Amid these challenges, the industries could be further crippled if import, rather than local procurement, undermines key accessory sectors such as sewing threads, zippers, buttons, hangers, elastics, gum tape and photo cards.

The deemed export industry contributes approximately 70 per cent relative to the direct export industry in Bangladesh, with accessories accounting for more than 15 per cent of that contribution. Moreover, over 700,000 people depend on the deemed export industry for their livelihoods. Previously, there have been adverse incidents of money laundering through fraudulent misuse of FOC, and some of these imported goods have been unlawfully sold in the local market.

This scenario will undoubtedly be detrimental to the deemed export industry in Bangladesh. Therefore, to protect domestic industries, it is imperative to reconsider the immediate implementation of the amendment to the Import Policy Order.

Kawsik Azad Pronoy

A banker

kawsikdbbl@gmail.com