Bail-out measures for exporters
Mahmud ur Rahman Choudhury | Tuesday, 10 March 2009
FINANCE Minister AMA Muhit last Sunday said that the government would consider bail-out measures for the country's export sectors to help tide over the period of global recession. The major export sectors include garments, leather goods, frozen foods, jute and jute goods and all of them have been demanding bailouts in the form of cash incentives on the claim that exports and prices of commodities have declined in international markets. The claim, by exporters, of declining exports and export earning flies in the face of a preliminary report by Export Promotion Bureau (EPB) which states that the overall export earnings grew by 18.11 per cent during the first eight months of the current fiscal over the same period of last fiscal - so much for declining exports and export earnings.
As for declining prices of commodities - it cuts both ways: while exporters will get less for their products, they will also be able to buy cheaper raw materials which ought to rationally reduce their overall production costs and thus the prices of export commodities. Taxes, VAT, and duties are imposed in percentages and not on benchmarks of cash currencies and so here too exporters are not losing out. Where exporters are losing out on is wages, which have been forced upwards by recent workers' agitations against being poorly paid and this is cutting into net profits of owners of export industries and enterprises. Thus the demand for "cash incentives" which is just another nice term for milking the state for personal profit.
One doesn't hear of industry owners talking about rationalising their production processes, or of making their management more efficient, thus reducing production costs. Neither does one hear of exporters looking for new market and products or of increasing exports of existing products by cutting prices through efficiency, competence and improved technology.
True, there are impediments of poor infrastructures, poor transportation systems, lack of power, corruption in government regulatory agencies etc., but the world's most advanced economies also suffer from impediments which we do not have to face such as exorbitant wages, lack of raw materials, energy etc. So, impediments have to be overcome through innovation and through demands to the government for improvements in infrastructures and through reduction of corruption and not by pressurising the government to dole out "cash incentives".
The government cannot give out cash to exporters because it needs to give out its limited amount of money to agriculture, to infrastructure developments, to setting up more power plants, to education, to poverty reduction and to health care, all of which are much, much more important than making the very few rich, even richer.
Government cash hand-outs will make manufacturers even less competitive than they are right now because having got hold of the cash, they will not have the motivation to innovate and be more efficient in order to survive; they will simply use the cash to improve their personal "life-styles". If manufacturers, exporters, factories, industries and enterprises are inefficient and non-competitive, they need to go down making way for other, better ones; shoring them up is tantamount to throwing scarce resources down the drain.
The author is the editor of The Bangladesh Today. He may be
contacted at:
editor@thebangladeshtoday.com
As for declining prices of commodities - it cuts both ways: while exporters will get less for their products, they will also be able to buy cheaper raw materials which ought to rationally reduce their overall production costs and thus the prices of export commodities. Taxes, VAT, and duties are imposed in percentages and not on benchmarks of cash currencies and so here too exporters are not losing out. Where exporters are losing out on is wages, which have been forced upwards by recent workers' agitations against being poorly paid and this is cutting into net profits of owners of export industries and enterprises. Thus the demand for "cash incentives" which is just another nice term for milking the state for personal profit.
One doesn't hear of industry owners talking about rationalising their production processes, or of making their management more efficient, thus reducing production costs. Neither does one hear of exporters looking for new market and products or of increasing exports of existing products by cutting prices through efficiency, competence and improved technology.
True, there are impediments of poor infrastructures, poor transportation systems, lack of power, corruption in government regulatory agencies etc., but the world's most advanced economies also suffer from impediments which we do not have to face such as exorbitant wages, lack of raw materials, energy etc. So, impediments have to be overcome through innovation and through demands to the government for improvements in infrastructures and through reduction of corruption and not by pressurising the government to dole out "cash incentives".
The government cannot give out cash to exporters because it needs to give out its limited amount of money to agriculture, to infrastructure developments, to setting up more power plants, to education, to poverty reduction and to health care, all of which are much, much more important than making the very few rich, even richer.
Government cash hand-outs will make manufacturers even less competitive than they are right now because having got hold of the cash, they will not have the motivation to innovate and be more efficient in order to survive; they will simply use the cash to improve their personal "life-styles". If manufacturers, exporters, factories, industries and enterprises are inefficient and non-competitive, they need to go down making way for other, better ones; shoring them up is tantamount to throwing scarce resources down the drain.
The author is the editor of The Bangladesh Today. He may be
contacted at:
editor@thebangladeshtoday.com