Photo: Messenger
Businessmen in the export sector are disappointed and unhappy with the proposed budget for the financial year 2024-25. They believe that export-oriented industries may struggle due to the imposition of duties on imported industrial capital equipment, retention of tax at source, and an increase in fuel prices.
Exporters said that the export sector will face pressures from various measures outlined in the proposed budget for the new financial year. The finance minister's multiple proposals, particularly concerning the garment sector, a major export product, will create new vulnerabilities in the industry's competitive capability. The budget proposal calls for levying a 1 percent duty on imported raw materials for manufacturing products by exporting firms with bonded warehouse facilities. Until now, raw materials could be imported duty-free.
Furthermore, there was an average duty of 1 to 1.5 percent on the import of industrial capital equipment, which is proposed to increase to 10 percent in the budget. Additionally, the duty on imported materials for constructing pre-fabricated buildings has been doubled. Due to some more such proposals in the budget, the cost of production for export goods will escalate substantially.
When asked about this, Mohammad Hatem, Executive President of BKMEA, an organisation of manufacturers and exporters of knit garments, told The Daily Messenger, “The steps mentioned in the proposed budget tantamount to handing over the export sector to competitors. Imposing duty on the import of industrial raw materials and capital machinery, coupled with an increase in furnace oil prices, are signs of crisis in the export sector.”
“Policy support is being reduced in Bangladesh, where competitors are taking massive policy actions. The industry will be in dire straits. Factories will be forced to close, and workers will become unemployed. There is a fear of creating social instability. Considering all these factors, all the dangerous proposals for the export sector should be withdrawn,” he added.
Incidentally, exports have been declining consistently for the past few months. Exports fell by more than 16 percent in May. Even with only one month left in the current fiscal year, there is a gap of more than Tk 1,000 crores between the export target and actual exports. The export target was not achieved in the last financial year as well.
Meanwhile, in the proposed budget, the finance minister has proposed to fix the duty on the import of industrial raw materials at 1 percent instead of zero percent to end the culture of tax evasion at all levels. The list contains the names of some major raw materials. Also, the finance minister did not discuss tax at source in the proposed budget. That is, the tax at source prescribed by law will remain at 1 percent.
In this regard, BGMEA president SM Mannan Kochi told The Daily Messenger, “Our export-oriented industry has not been in good condition for several months due to various reasons. The export volume is continuously decreasing. In this situation, we expected that the budget would provide some policy support for export-oriented industries. But the reality is that we are deprived of it.”
He also said that instead of providing necessary facilities, duties have been imposed on the import of capital equipment. The import duty on various types of construction materials used in constructing steel buildings has been increased from 5 percent to 10 percent, the import duty on capital equipment in establishments located in economic zones has been increased from zero percent to 1 percent, and VAT on energy-efficient lamps has been proposed to increase from 5 percent to 15 percent.
“Besides, the new bond license fee has been increased from Tk 50,000 to Tk 1 lakh, and the license renewal fee has been fixed at Tk 10,000 instead of Tk 5,000 annually. If these decisions are not reconsidered, the industry will face collapse,” he added.
After the Rana Plaza collapse, the construction of pre-fabricated buildings in garment factories is on the rise. The budget proposal proposed to raise the import duty from 5 percent to 10 percent on various types of materials used in constructing prefabricated buildings. Furnace oil, the main fuel used in industries, is also proposed to be priced at $480 per tonne. Furnace oil is currently used in industries at a lower cost.
FBCCI President Mahbubul Alam said that a one percent duty has been imposed on importing capital equipment by investors in Export Processing Zones (EPZs). Earlier, there was zero percent duty on importing capital equipment. This newly imposed duty should be withdrawn. The duty-free facility should be maintained for at least 5 more years. Then foreigners will be interested in investment, and domestic entrepreneurs will also come forward.
When asked about the overall issue, AB Mirza Azizul Islam, the former caretaker government's finance advisor, told The Daily Messenger, “The businessmen are not satisfied with the proposed budget. It is important to keep in mind that there has been a dollar crisis in the country for a long time. Reserves are also in a negative trend. In this situation, it is not right to do anything that hinders exports.”
Messenger/Disha
