No more deferred-payment for sick apparel units
Thursday, 12 January 2012
Syful Islam
The government has decided not to extend deferred-payment facility to any more sick apparel factories after giving the advantage to 279 units, officials said Wednesday.
The ministry of finance (MoF) Sunday last informed the ministry of commerce (MoC) of the decision saying "since the facility is not open-ended, no more apparel units will be considered for the same".
Stakeholders have strongly denounced the government decision saying that many apparel factories had already become sick and the latest decision would deprive them of the facility.
On August 17, 2010 the MoF issued a circular introducing a policy to bail out 270 financially feeble apparel units, facing a long demand of the garment factory owners.
It was considered an exit policy for the sick apparel units as the government allowed them to make deferred payment of their loans.
The facility allowed the sick factories with less than Tk 50 million in credits to repay the amount within five years and the units with outstanding loans above Tk 50 million to do it in 10 years.
The borrowers were also offered one-year moratorium period and liabilities were fixed by adding interest to the principal amount.
The circular also said interests, which were not shown as income for bank, would be waived but the principal amount and legal costs would not be waived.
The borrowers would have to pay the instalments on a quarterly basis and if they defaulted on four instalments in a row, the delinquent companies would face forfeiture of the facility.
Under the facility offered to the sick units the banks would charge 8.0 per cent interest of which the borrowers would pay 5.0 per cent and the government would pay the rest 3.0 per cent as interest subsidy.
Owners of the sick apparel units would get their default loans rescheduled without paying any amount.
The latest MoF letter said the ministry has recently offered the facility to nine more sick units alike the 270 units on commerce ministry's recommendation. The facility will not be available any more, it noted.
Talking to the FE Wednesday, Vice President of Bangladesh Garment Manufactures and Exporters Association (BGMEA) Siddiqur Rahman said the decision of the government to stop the facility to the sick apparel units will be disastrous for the sector.
"Many apparel units have become sick facing various complications. If they do not get any such support from the government, they will face closure soon," he said.
He said the sector is passing tough days as the global economy is facing the pinch of recession. The apparel export saw a slow growth during the July-December period of the current fiscal as the European Union's economy was in trouble.
He said BGMEA will request the government to reconsider the decision for the sake of survival of the highest foreign currency earning sector.
The government has decided not to extend deferred-payment facility to any more sick apparel factories after giving the advantage to 279 units, officials said Wednesday.
The ministry of finance (MoF) Sunday last informed the ministry of commerce (MoC) of the decision saying "since the facility is not open-ended, no more apparel units will be considered for the same".
Stakeholders have strongly denounced the government decision saying that many apparel factories had already become sick and the latest decision would deprive them of the facility.
On August 17, 2010 the MoF issued a circular introducing a policy to bail out 270 financially feeble apparel units, facing a long demand of the garment factory owners.
It was considered an exit policy for the sick apparel units as the government allowed them to make deferred payment of their loans.
The facility allowed the sick factories with less than Tk 50 million in credits to repay the amount within five years and the units with outstanding loans above Tk 50 million to do it in 10 years.
The borrowers were also offered one-year moratorium period and liabilities were fixed by adding interest to the principal amount.
The circular also said interests, which were not shown as income for bank, would be waived but the principal amount and legal costs would not be waived.
The borrowers would have to pay the instalments on a quarterly basis and if they defaulted on four instalments in a row, the delinquent companies would face forfeiture of the facility.
Under the facility offered to the sick units the banks would charge 8.0 per cent interest of which the borrowers would pay 5.0 per cent and the government would pay the rest 3.0 per cent as interest subsidy.
Owners of the sick apparel units would get their default loans rescheduled without paying any amount.
The latest MoF letter said the ministry has recently offered the facility to nine more sick units alike the 270 units on commerce ministry's recommendation. The facility will not be available any more, it noted.
Talking to the FE Wednesday, Vice President of Bangladesh Garment Manufactures and Exporters Association (BGMEA) Siddiqur Rahman said the decision of the government to stop the facility to the sick apparel units will be disastrous for the sector.
"Many apparel units have become sick facing various complications. If they do not get any such support from the government, they will face closure soon," he said.
He said the sector is passing tough days as the global economy is facing the pinch of recession. The apparel export saw a slow growth during the July-December period of the current fiscal as the European Union's economy was in trouble.
He said BGMEA will request the government to reconsider the decision for the sake of survival of the highest foreign currency earning sector.