Garment exporters unlikely to get any immediate cash incentives
Friday, 10 April 2009
Mushir Ahmed
Finance advisor Dr. Moshiur Rahman hinted Thursday no immediate cash incentives for the country's garment exporters to fight off a price war amid the worst global economic downturn in six decades.
Dr Moshiur told the FE that garment exporters have not furnished any data that show that their cost of production has gone above the order price from the buyers, which would have made a ground for state subsidies.
"But so far we don't have any information that makes the case for cash incentives for garment exporters. We will definitely help them if they incur loss as a result of higher production cost than the order price," he said.
Garment manufacturers who account for 76 per cent of the country's annual shipment have demanded cash subsidy worth 10 per cent of their export value, saying they need state sops to counter a price war launched by rivals, China, India and Pakistan.
Dr. Moshiur said the government would sit with the garment exporters again and discuss the order outlook, before deciding on ways to bail out the manufacturers.
He won't comment whether or not any state support is going to be announced soon, but steadfastly he maintained that any subsidies in the garment sector would only help out the hard-pressed western consumers.
"We know that garment export is slowing down. But it is due to the plummeting demand in the West. And every exporting country is suffering because of this global recession-related slump."
"In this depressing demand scenario, any additional cash incentives to the garment exporters would only help subsidise the western consumers. Subsidy would give the western buyers some pretext to cut order prices," he said.
"Do the exporters have any data that shows orders have slumped because of their production cost? I think the exporters should increase efficiency and productivity to cope with the global economic downturn," he said.
He also rejected some exporters' demand for currency depreciation, saying the government cannot intervene in the money market and any significant devaluation of taka would pile up miseries local consumers and agriculture.
His comments came as some exporters accused the government of "foot-dragging" on subsidies, saying a lack of state support has created an uneven competition for them in the global garment trade.
They said a price war by global rivals has sharply slowed down Bangladesh's garment exports growth to four per cent in the last four months from a massive 40 per cent in the first quarter to September.
Two main exporters groups have even warned the government that any further delay in state support could wreck the industry, wiping out hundreds of thousands of jobs and closing down most of small and medium factories.
President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Fazlul Hoque said they needed the subsidies "for their survival and to keep jobs" and to compete with a resurgent China, India and Pakistan.
"These three nations are heavily subsidizing their garment exports, creating an uneven market situation for us. We used to be the cheapest manufacturers, but not any more. Our rivals are now offering better price," he said.
Hoque who represents 1300 manufacturers said orders have declined by 20 per cent in recent months, signaling a significant drop in exports in the next quarter.
"If we don't get the support, we may end up at a point of no return. It happened to Sri Lanka a few years back. And they are still struggling," he said.
Finance advisor Dr. Moshiur Rahman hinted Thursday no immediate cash incentives for the country's garment exporters to fight off a price war amid the worst global economic downturn in six decades.
Dr Moshiur told the FE that garment exporters have not furnished any data that show that their cost of production has gone above the order price from the buyers, which would have made a ground for state subsidies.
"But so far we don't have any information that makes the case for cash incentives for garment exporters. We will definitely help them if they incur loss as a result of higher production cost than the order price," he said.
Garment manufacturers who account for 76 per cent of the country's annual shipment have demanded cash subsidy worth 10 per cent of their export value, saying they need state sops to counter a price war launched by rivals, China, India and Pakistan.
Dr. Moshiur said the government would sit with the garment exporters again and discuss the order outlook, before deciding on ways to bail out the manufacturers.
He won't comment whether or not any state support is going to be announced soon, but steadfastly he maintained that any subsidies in the garment sector would only help out the hard-pressed western consumers.
"We know that garment export is slowing down. But it is due to the plummeting demand in the West. And every exporting country is suffering because of this global recession-related slump."
"In this depressing demand scenario, any additional cash incentives to the garment exporters would only help subsidise the western consumers. Subsidy would give the western buyers some pretext to cut order prices," he said.
"Do the exporters have any data that shows orders have slumped because of their production cost? I think the exporters should increase efficiency and productivity to cope with the global economic downturn," he said.
He also rejected some exporters' demand for currency depreciation, saying the government cannot intervene in the money market and any significant devaluation of taka would pile up miseries local consumers and agriculture.
His comments came as some exporters accused the government of "foot-dragging" on subsidies, saying a lack of state support has created an uneven competition for them in the global garment trade.
They said a price war by global rivals has sharply slowed down Bangladesh's garment exports growth to four per cent in the last four months from a massive 40 per cent in the first quarter to September.
Two main exporters groups have even warned the government that any further delay in state support could wreck the industry, wiping out hundreds of thousands of jobs and closing down most of small and medium factories.
President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Fazlul Hoque said they needed the subsidies "for their survival and to keep jobs" and to compete with a resurgent China, India and Pakistan.
"These three nations are heavily subsidizing their garment exports, creating an uneven market situation for us. We used to be the cheapest manufacturers, but not any more. Our rivals are now offering better price," he said.
Hoque who represents 1300 manufacturers said orders have declined by 20 per cent in recent months, signaling a significant drop in exports in the next quarter.
"If we don't get the support, we may end up at a point of no return. It happened to Sri Lanka a few years back. And they are still struggling," he said.