A package of fiscal facilities in the upcoming budget is recommended as imperative to enable emerging recycled cotton-fibre industries in Bangladesh to tap huge potential in apparel export, sources said.
Bangladesh Trade and Tariff Commission (BTTC) has made the recommendation to the government, they said, as buyers and brands from western consumer nations are making use of recycled-cotton fibre in clothing products mandatory while tonnes of garment wastes go to the waste in the country.
It has found existing taxes as barriers to procuring the raw materials of recycled fibre by the exporting mills, having environment-friendly new technology. Supply of the recycled fibre to the local spinning mills is also hindering growth of the new industry.
Currently, value-added tax (VAT) is imposed at a rate of 7.5 per cent and 15 per cent on local procurement and supply of the product to the spinning mills.
In a review, the BTTC has found production cost of locally produced recycled fibre higher than that of recycled cotton as there are no VAT or duty taxes on it.
And the commission proposed that the National Board of Revenue (NBR) introduce tariff for the local (VAT-registered) textile recycled-fibre- producing companies and include a new HS code styled 'Recycle Cotton Fibre' to expedite export-import trade of the products.
The commission conducted an industry review following a proposal of RBD Fibers Limited, which has so far invested a sum equivalent to foreign currencies worth US$25 million in this sector in Bangladesh.
The company has set up machinery manufactured by world leader in fibre treatment and recycling Laroche Andritz, and investment equivalent to another US$50 million is in pipeline at its recycling plant, sources said.
Currently, 23 companies have invested in textile-waste recycling or clips recycle process in the country. They have an aggregate production capacity of about 220,000 tonnes.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said tax-breaks could help the exporters use recycled cotton as an import substitute, and save foreign currencies and environment.
Waste cotton is used for filling up land, which has severe impact on the environment as those are non-biodegradable, he added.
"We are exploring new technology in Finland, Sweden to recycle cotton fibre as Bangladesh has a huge scope to tap the potential as 75 per cent of its production is cotton garments," he said.
He feels negotiation with the investors would be easier if the government offers fiscal benefits in the budget for this sector.
"We want to make jhuts (waste cotton or clips) into an asset. Policy support for opening up the avenue can help the sector become a value-added one," he says about a new breakthrough in the country's main export sector.
The BGMEA chief notes that conservative or negative approach of government may hurt growth of the manufacturing industry and employment generation in this sector.
Zahid Hossain Khan, controller (finance and operations) of RBD Fibers Ltd, said the deemed exporters need fiscal incentives to develop the recycling industry and generate more jobs.
The country would be able to meet mandatory requirements of European Union (EU) buyers to produce apparel products with recycled fibre and offer competitive prices, he added.
Two separate HS codes would be needed for clips (jhut) and mutilated garments in the fiscal laws, and cash incentives would encourage small industries to invest in this sector.
He informed that a number of local exporting companies are on way to making huge investment in recycled fibres in Bangladesh.
To save environment from textile wastes, world-renowned brands Parley x, Adidas, Girlfriend Collective, Shop Girlfriend Collective, All Birds, Ever Lane, Buffy, Rothy's, Vivo barefoot, Ethique, Nike, Seed Phytonutrients, United by Blue, Guppy Friend, Aday, H&M, and Nestle have been increasing use of recycled fibre produced from scraps of their products, says the BTTC report in support of the latent trade.
Companies having Global Re-cycled Standard (GRS) certificates have been imposing mandatory provision of making use of recycled scraps in making products.
Such developments have created huge potential for the local recycled fabrics-producing factories, the BTTC report reads.
"The government should ensure availability of the raw materials for the industries to help them tap the potential," says the commission report.
Bangladesh's textile industries churn out nearly 570,000 tonnes of textile wastes annually. If the spinoffs could be recycled into fibre, some US$1.0 billion could be saved on account of virgin cotton import, it noted. International buyers and renowned brands have also been imposing mandatory condition on use of recycled fibres-like recycle polyester and manmade fibre--instead of 'virgin cotton'.
The EU is going to make use of 30-percent recycle fibre mandatory on its imported apparel products from 2025 as a prerequisite to enjoying concessionary tax benefit.
The tariff commission has proposed imposing a ban on export of jhut (cotton waste) to ensure availability of raw materials for the recycled-fibre industry.
According to a global study textile industry is the second-most environment polluter and responsible for 20 per cent of wastewater production, 10 per cent of the carbon emissions in the world. Some 2,700- litre water is required to produce the cotton needed to make a T-shirt.
According to Environment Protection Association (EPA), the textile industries produced 1.0 million tonnes of wastes in 2013. The world incurs loss worth US$500 billion every year owing to textile waste.
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