Move to rationalise export subsidy for efficient use

The government is considering to rationalise export subsidy through re-allocation for its efficient use as it has found that most of the funds is being wasted each year instead of boosting exports.
It wants to review its existing financial support being given to the exporters in view of rising cash incentives.
Cash incentive or export subsidy rose by more than 35 per cent to Tk 35 billion in 2014-15 fiscal over that of the last financial year, a figure that has crossed 3.0 per cent of the total National Board of Revenue (NBR) earnings.
Currently, 14 export-earning sectors including apparel and frozen foods get the financial benefit ranging 5.0 to 20 per cent on their export earnings. Earlier, 19 sectors were eligible for export incentives.
The Finance Division of the ministry of finance held a meeting with all ministries concerned on October 09 last to discuss the issue with additional secretary Moinul Islam in the chair.
Officials were against improper export subsidies saying this actually does not help boost export earnings, one official, who attended the meeting, told the FE Tuesday on condition of anonymity.
They alleged that many exporters have been withdrawing such type of financial benefits by showing 'fake export documents,' he said quoting  the meeting sources.
A senior Finance Division official said there has been growth in the apparel sector each year and this is not because of cash incentives.
"In my mind, this rise in the garment exports is simply due to our comparative advantage in terms of labour force over competitors," he said.
He said the government is providing its tax-earned money to the exporters to make them stay globally competitive.
"What actually we see does not justify continuation of the cash benefit," he said.
Golam Mostafa, a frozen food exporter told the FE that cash incentives are being eaten up by the big exporters.
Mr. Mostafa, who was chief of the Bangladesh Frozen Food Exporters Association, a group of a few hundred frozen fish exporters, said this should also be reviewed in a bid to encourage small exporters.
However, sources at the Finance Division said they want to include some potential export products in the eligibility list for cash incentives.
They identified electric cables and white fish (excluding shrimp) for inclusion in the new list.
However, the meeting decided to conduct a study to examine the benefits of the cash incentives.
The meeting asked the concerned circles to provide their opinion to the Finance Division for making an efficient allocation of the tax money.
The government is now providing subsidies and cash incentives to 14 export items, including readymade garments (RMG), vegetables, ships and light engineering products.
The export subsidies and cash incentives include 5.0 per cent for local RMG sector, 15-20 per cent for handicraft, 20 per cent for vegetables exports and agro-processing sector, 20 per cent for Halal meat, 5.0 per cent for ships and 7.5 per cent for frozen shrimps.

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