The latest fiscal and policy stimuli for export
Friday, 4 December 2009
Syed Jamaluddin
The government announced on October 25 last a series of fiscal and policy stimulus packages worth over Tk 10 billion (1,000 crore) for export sectors to offset the adverse impact of global recession on the domestic economy. The facilities the exporters are currently enjoying will continue as usual. This is the second stimulus package of the government.
Under the new package, the government will pay the licence renewal fees of captive power plants used in industrial units from November 1, 2009 to June 2010 to compensate for the power crisis. The government will need Tk 70 million (7.0 crore) more to pay the renewal fees. This money will come from the earlier stimulus package of Tk 50 billion (5,000 crore).
In this package, the government has extended the bank loan re-scheduling facility without any down payment up to June 30,2010 from October 2009 at a 10 per cent rate of interest, instead of the current 13 per cent for the readymade garments (RMG) and textile sectors. If any borrower defaults a loan during the proposed time-frame, extension of the re-scheduling facility will be considered under the bank-client relationship.
Under the package, exporters will receive 5.0 per cent cash incentives for new export destinations for three years while all export destinations, except the US, EU and Canada, will be considered as new. The exporters will get 5.0 per cent cash incentives in the first year, 4.0 per cent in the second year and 2.0 per cent in the third and final year.
According to the package document, members of Bangladesh Textile Mills Association (BTMA) will receive the above facility only for direct export of yarn. This sub-sector will also receive the bank loan rescheduling facility.
The government has also decided to give a special benefit to small and medium enterprises(SMEs). Companies that exported upto $3.5 million in 2008/09 will be brought under the SME category. Such SMEs will receive 5.0 per cent cash incentives in fiscal year (FY), 2009-2010 if they can export more than the actual export of the last fiscal. The government will also give 10 per cent electricity bill to SMEs that do not have their own captive generators up to June 30, 2010. This facility is subject to some conditions including non-availability of bank loan rescheduling facility, not being an enterprise of the owner of a large industry.
From now, an individual exporter can receive $10 million from the Export Development Fund through three banks; an exporter gets $1.5 million at present. The bank lending rate in this case will be London inter-bank offer rate(LIBOR) plus 2.5 per cent and the Bangladesh Bank will take necessary action in this regard.
The finance minister has suggested the formation of a joint contributory fund for the export sector for improving market and the quality of products. The government is ready to provide Tk 3.0 billion (300 crore) to this fund and the private sector exporters have been asked to contribute at a rate of 0.1 per cent on their free on board (FoB) value of exports up to June, 2010 and at 0.2 per cent from July, 2010.
The government will bear 50 per cent cost of the operation of the National Institute of Textile Training, Research Design from FY 2010-11 although it bore 100 per cent cost for FY 2008-09 and 60 per cent for FY 2009-10. The government will also give cash incentives to shipbuilders and crust leather exporters as these sectors have potential. It has also declared bank loan moratorium facility for these sectors for a certain period.
The new stimulus package will certainly go a long way to help the export industries facing difficulties in the hours of need. The government initiative to stimulate the export sector should be utilised for earning more foreign exchange and creating employment. It is good that the government has provided this stimulus, despite resource constraint.
Exporters expressed unhappiness over the latest stimulus package. It will be meaningless if the incentive goes only to the factories that achieve additional export growth. It is said that there is no justification for extending the package to the growing exporters and not to those who lose out due to global recession. Re-scheduling of loan was appreciated by all but they wanted this for a longer period. The stimulus package would not help the small and medium enterprises as several conditions have been attached to the assistance. The President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said that the government must solve the gas supply problem in the textile and garment industries, otherwise no package would be fruitful for the textile sector. The President of Bangladesh Garments Manufacturers and Exporters Association (BKMEA) lamented that the package raised the ceiling of Export Development Fund but lending rate of the fund was also raised. According to him, the proposed package is too inadequate and inconvenient. Bangladesh Textile Mills Association (BTMA), however, appreciated the incentive for export of yarn.
The latest stimulus package will be helpful in many ways. But one gap remains in its package. Nothing has been done for those factories who are losing money because of the recession. The finance minister has refused to review the case but something should be done to help the factories faced with losses. We are not also aware of the utilisation of the earlier stimulus package. Government may come out with a report on the utilisation of the first stimulus package.
(The writer is an economist and columnist. He can be reached at e-mail: syedjamaluddin22@yahoo.com)
The government announced on October 25 last a series of fiscal and policy stimulus packages worth over Tk 10 billion (1,000 crore) for export sectors to offset the adverse impact of global recession on the domestic economy. The facilities the exporters are currently enjoying will continue as usual. This is the second stimulus package of the government.
Under the new package, the government will pay the licence renewal fees of captive power plants used in industrial units from November 1, 2009 to June 2010 to compensate for the power crisis. The government will need Tk 70 million (7.0 crore) more to pay the renewal fees. This money will come from the earlier stimulus package of Tk 50 billion (5,000 crore).
In this package, the government has extended the bank loan re-scheduling facility without any down payment up to June 30,2010 from October 2009 at a 10 per cent rate of interest, instead of the current 13 per cent for the readymade garments (RMG) and textile sectors. If any borrower defaults a loan during the proposed time-frame, extension of the re-scheduling facility will be considered under the bank-client relationship.
Under the package, exporters will receive 5.0 per cent cash incentives for new export destinations for three years while all export destinations, except the US, EU and Canada, will be considered as new. The exporters will get 5.0 per cent cash incentives in the first year, 4.0 per cent in the second year and 2.0 per cent in the third and final year.
According to the package document, members of Bangladesh Textile Mills Association (BTMA) will receive the above facility only for direct export of yarn. This sub-sector will also receive the bank loan rescheduling facility.
The government has also decided to give a special benefit to small and medium enterprises(SMEs). Companies that exported upto $3.5 million in 2008/09 will be brought under the SME category. Such SMEs will receive 5.0 per cent cash incentives in fiscal year (FY), 2009-2010 if they can export more than the actual export of the last fiscal. The government will also give 10 per cent electricity bill to SMEs that do not have their own captive generators up to June 30, 2010. This facility is subject to some conditions including non-availability of bank loan rescheduling facility, not being an enterprise of the owner of a large industry.
From now, an individual exporter can receive $10 million from the Export Development Fund through three banks; an exporter gets $1.5 million at present. The bank lending rate in this case will be London inter-bank offer rate(LIBOR) plus 2.5 per cent and the Bangladesh Bank will take necessary action in this regard.
The finance minister has suggested the formation of a joint contributory fund for the export sector for improving market and the quality of products. The government is ready to provide Tk 3.0 billion (300 crore) to this fund and the private sector exporters have been asked to contribute at a rate of 0.1 per cent on their free on board (FoB) value of exports up to June, 2010 and at 0.2 per cent from July, 2010.
The government will bear 50 per cent cost of the operation of the National Institute of Textile Training, Research Design from FY 2010-11 although it bore 100 per cent cost for FY 2008-09 and 60 per cent for FY 2009-10. The government will also give cash incentives to shipbuilders and crust leather exporters as these sectors have potential. It has also declared bank loan moratorium facility for these sectors for a certain period.
The new stimulus package will certainly go a long way to help the export industries facing difficulties in the hours of need. The government initiative to stimulate the export sector should be utilised for earning more foreign exchange and creating employment. It is good that the government has provided this stimulus, despite resource constraint.
Exporters expressed unhappiness over the latest stimulus package. It will be meaningless if the incentive goes only to the factories that achieve additional export growth. It is said that there is no justification for extending the package to the growing exporters and not to those who lose out due to global recession. Re-scheduling of loan was appreciated by all but they wanted this for a longer period. The stimulus package would not help the small and medium enterprises as several conditions have been attached to the assistance. The President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said that the government must solve the gas supply problem in the textile and garment industries, otherwise no package would be fruitful for the textile sector. The President of Bangladesh Garments Manufacturers and Exporters Association (BKMEA) lamented that the package raised the ceiling of Export Development Fund but lending rate of the fund was also raised. According to him, the proposed package is too inadequate and inconvenient. Bangladesh Textile Mills Association (BTMA), however, appreciated the incentive for export of yarn.
The latest stimulus package will be helpful in many ways. But one gap remains in its package. Nothing has been done for those factories who are losing money because of the recession. The finance minister has refused to review the case but something should be done to help the factories faced with losses. We are not also aware of the utilisation of the earlier stimulus package. Government may come out with a report on the utilisation of the first stimulus package.
(The writer is an economist and columnist. He can be reached at e-mail: syedjamaluddin22@yahoo.com)