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MARKET WATCH 13 SEPT, 2021

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Parliamentary panel asks commerce ministry to engage with FinMin on increasing allocations for RoDTEP  

Remissions of Duties and Taxes on Exported Products (RoDTEP) is a much-awaited scheme which seeks to replace the Merchandise Exports from India Scheme (MEIS). A parliamentary panel has suggested that the commerce ministry should engage with its finance counterpart for additional allocation under the recently notified tax rebate scheme for exporters 'RoDTEP' as the budget allocation of Rs 12,500 crore for the programme would be inadequate to meet its objectives. Last month, the government announced rates of tax refunds under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for 8,555 products, such as marine goods, yarn, dairy items. The government has set aside Rs 12,454 crore for the current fiscal. The report of the department related parliamentary standing committee on commerce has also suggested the Department of Commerce to expedite implementation of the scheme to enable exporters to avail benefits under the scheme. The committee recommends the Department of Commerce to engage with the Ministry of Finance to provide additional allocation for the scheme," the Rajya Sabha Secretariat said in a statement. The committee has recommended the commerce ministry to iron out issues that hindered the signing of free trade agreements (FTAs) with India's leading trade partners. It called for entering into trade agreements that are beneficial for India while balancing the interest of the domestic market with that of exporters. It noted that domestic exporters are at a disadvantage in the US and European markets while competing with other exporting countries due to absence of FTAs with these two regions. There are issues that need to be addressed in negotiating free trade agreements with the USA and EU in view of the concerns expressed by some domestic sectors, it said. It has asked for taking appropriate measures, relook at export strategies and policies to achieve positive growth rate of exports and higher share in global markets. To provide affordable credit to the export sector, the committee has recommended extension of interest subsidy scheme for at least five years or till the time our interest rates are at par with rates of the competing countries. "The committee recommends the department to revamp its efforts on promoting EOUs (export oriented units) and provide necessary support/incentives, including tax incentives, to enable the sustained increase of exports from these units," it said. Further to cut logistics costs, the committee stated that the different charges levied at terminals and container depots be reduced to a level comparable to other modes of transport. "...a distance based concession in the rail freight should be provided to the exporters located away from the sea port to ensure that they are able to deliver their export at a competitive rate," it said. On container issue, it expressed concerns on the exorbitant rates charged by the intermediary, i.e., the shipping lines on movement of empty containers from port to Inland Container Depots (ICDs). "The committee recommends that the requirement of an intermediary in this case may be abolished and appropriate strategy may be worked out to enable importers/exporters to deal directly with Railways, i.e., CONCOR for movement of empty containers from ports to ICDs," it said. Further, the committee suggested the rail ministry to ensure that a competitive freight rate is maintained and other charges levied by it are also fixed in such a way that it does not cause undue burden on exporters. On the matter of risky exporters, the panel stated that such a system should not come at the cost of punishing "genuine" exporters due to error in identification. "The committee, therefore, recommends the Department of Revenue to streamline its system to avoid error in identification, send prompt communication to exporters who are identified as risky, and provide opportunity to exporters for resolution before taking further steps," it said.

Source: Economic Times

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CBIC instructs field units to free up shipping containers amid global shortage, industry demands

 “Dispose expeditiously the unclaimed/uncleared/seized/confiscated goods including that are holding up containers… whenever it becomes necessary to detain the imported cargo, pending completion of enquiry/investigation, such cargo should be removed to a customs warehouse and the container can be released for further use,” the Board said in instructions issued to field units late Friday night. The Central Board ofIndirect Taxes and Customs (CBIC) has asked field units to expeditiously dispose of unclaimed or confiscated goods and move import cargo pending inquiry to warehouses, in order to free up shipping containers. The Board has also asked field units to give monthly updates on containers that have been held up by intelligence agencies or stuck in court cases, and have been subsequently free up.

Source: Economic Times

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Sign FTAs with US, EU for helping domestic exporters: Parliament panel to govt

The Parliamentary Standing Committee on Commerce submitted the report to RS Chairman Venkaiah Naidu, wherein it expressed concern that India's exports contracted from 2019-20, registering a negative growth rate of (-) 15.73 percent in 2020. The government should iron out the issues hindering the signing of Free Trade Agreements (FTAs) with the US and the EU nations as domestic exporters are at a disadvantage due to the absence of these agreements, a parliamentary panel has recommended in a report submitted on Saturday. The Parliamentary Standing Committee on Commerce chaired by YSR Congress leader Vijaysai Reddy submitted the report to Chairman of Rajya Sabha Venkaiah Naidu, wherein it has expressed concern that India's exports contracted from 2019-20, registering a negative growth rate of (-) 15.73 percent in 2020. In view of the crucial role played by exports in the overall economic growth of a country, the Committee in the report opined that "India needs to step up its effort in export promotion, expand its export baskets and penetrate new export markets to recover from its current slump and increase its share in global exports". The panel also underlined that the Indian exporters are at a "disadvantage" in the US and the European markets while competing with other exporting nations due to the absence of FTAs with the US and the EU countries. "The Committee recommends the Department of Commerce to iron out the issues that hindered the signing of FTAs with our leading trade partners and enter into trade agreements that are beneficial for our country while balancing the interest of the domestic market with that of our exporters," the report stated. The panel also expressed concern that the share of rail freight vis-a-vis road is only 35 percent whereas the trend is reversed in developed countries. The Committee, therefore, recommends the Ministry of Railways to undertake a detailed study on the reason for low share of rail and take a concerted effort to increase the share of rail in freight traffic, the report said. At the same time, the panel said, it is "disheartening to note that the Ministry of Railways is unable to provide competitive freight rate for movement of export consignment". The Committee feels that this will adversely affect the competitiveness of India's exports in global markets as freight cost plays a crucial role in determining the final price of the product, as per the report. The panel undertook an in-depth examination of export-oriented measures and held seven meetings with all stakeholders spanning over for nearly twenty hours, it said. The panel led by Reddy, who is a noted chartered accountant, in the report recommended the government to take appropriate measures, relook its export strategies and policies to achieve a positive growth rate of exports and higher share in global exports markets.

Source: Economic Times

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New Incentives: Mega textile parks near ports to boost exports

Such mega parks will be able to better draw overseas buyers by offering a broad range of products and cater for large orders, given the greater synergy among its resident entities. The selection criteria could include the proximity of the land to ports, raw material availability and modes of transportation. The Centre will grant incentives to investors to set up the proposed mega textile parks with plug-and-play facilities over large areas of at least 1,000 acres each, while states will pitch in with land, textiles secretary UP Singh told FE. The move is aimed at “building scale” across the textiles and garment value chain that has remained fragmented for decades, resulting in the country ceding export market share to much smaller economies, such as Bangladesh and Vietnam. Singh said it will also complement the recently-approved Rs 10,638-crore production-linked incentive (PLI) scheme for man-made fibre and technical textiles segments. The parks will preferably be close to ports and house all sorts of textile and garment firms, including integrated facilities, to create a robust eco-system, according to Singh. The centre will likely release the incentives to investors in two installments — upon the completion of about 60% and 100% of work. The investors will not just build infrastructure but even manage maintenance and other related facilities. They will be given to operate the park for a period of 25-30 years and they can collect fees from the companies that set up units there. Even small firms or fashion designers will be able to set up shop quickly, thanks to the plug-and-play facilities, Singh said. Such mega parks will be able to better draw overseas buyers by offering a broad range of products and cater for large orders, given the greater synergy among its resident entities. “Seven mega parks will be set up in the first phase. However, if a greater number of states, who are willing to offer land, approach us for the setting up of the parks, we will undertake a ‘challenge method’ to select the top seven of them, using certain criteria,” Singh said. The parks were announced as part of the FY22 Budget proposals. The selection criteria could include the proximity of the land to ports, raw material availability and modes of transportation, among others. The mega parks are the latest in a series of attempts made by the government to promote formalisation and build scale in the labour-intensive sector that has been hamstrung by millions of small units, supported by lackadaisical official policies for decades. Consequently, an overwhelmingly large percentage of firms, with very limited financial and operational heft to handle bulk orders, are scattered across the country, stunting its ability to raise exports exponentially and grab the space being vacated by China in this segment. When India finally removed some of these shackles (by removing SSI reservation between 2001 and 2005, allowing fixed-term employment in garments in 2016, scrapping an antidumping duty on a key input for polyster staple fibre in the Budget for FY21, etc), lowcost economies such as Bangladesh and Vietnam — in addition to dominant China — had consolidated their positions in the world market and beaten India. While Bangladesh’s garment exports have been bolstered by duty-free access to the US and the EU due to its status as a least developed country, Vietnam has made good use of its trade pacts with large markets, freer trade policies and massive Chinese investments. Of late, even much smaller countries like Cambodia and Myanmar, too, have recorded fast growth in garment exports. The textile secretary expected that with a raft of initiatives undertaken by the government in recent years — including the announcement of the PLI scheme, introduction of export tax remission schemes like RoDTEP and RoSCTL and easier labour norms — and the mega parks now, India’s textile and garment industry is well-poised to record impressive growth and recapture lost heights. Textile and garment exports shrank 8.6% on year to $33.7 billion in FY20 and saw a more dramatic, Covid-induced contraction of 10% last fiscal, worse than a 7% drop in overall merchandise exports. However, in the first four months of this fiscal, such exports have grown at a phenomenal pace of 106%, driven by an economic resurgence in advanced markets and aided partly by a conducive base.

Source: Financial Express

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Will follow challenge method to select states under MITRA, says textile ministry official

 Apart from 1,000-acre land for one such park, the ministry will look at some important things like nearby availability of raw material, all kinds of infrastructure including port, road and rail connectivity, water and power availability, and incentives of states among others. The Textiles Ministry will follow a "challenge method" to select states for the proposed Mega Investment Textiles Parks (MITRA) scheme, under which seven parks will be set up in the country, a top government official has said. The scheme, which was announced in the Union Budget 2021-22, is at advanced stages of approval, Textiles Secretary U P Singh said. "We are expecting that in the next 15 days, we will get (cabinet) approval on the MITRA scheme," he told PTI. He said that there are more takers for the scheme as some states want two or three such parks and because of that "we will follow a challenge method to select states". Apart from 1,000 acre land for one such park, the ministry will look at some important things like nearby availability of raw material, all kinds of infrastructure including port, road and rail connectivity, water and power availability, and incentives of states among others. States will have to apply for the scheme and "we will float expression of interest (EoI) kind of thing. We will seek documents as per a format and then we will do evaluation," Singh said. He added that a portal will also be developed for that. Textiles Minister Piyush Goyal had recently stated: "We need competition among states to capture business opportunities and we will see that competition in the MITRA scheme. We have to finalize 6-7 textile parks. States will have to commit for land, labour laws, infrastructure and power at attractive rates." The government has proposed the MITRA scheme to enable the textile industry to become globally competitive, attract large investments, boost employment generation and exports. Talking about the production linked (PLI) incentive scheme for the textiles sector, the secretary said by September-end, detailed guidelines will be issued for the scheme. The Union Cabinet on September 8 approved the PLI scheme for MMF (man-made fibre) and worth Rs 10,683 crore, which will be provided to industry over a five-year period. "It is a fund limited scheme. We are expecting that more people will come forward for this and for that, we are putting certain criteria. There will be certain criteria for selection of companies, which would get the benefits of this scheme," Singh said. He said the companies that would invest in aspirational districts and tier 3/4 towns would get preference. Preference will also be given to the companies that will go to small cities, create more employment, and have better financial and technical capabilities, he added. "If we will get more applications in two months above Rs 10,683 crore, then we will select them based on this criteria," Singh said.

Source: Economic Times

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This is how RoDTEP scheme can impact exports

 After missing several deadlines, the Ministry of Commerce notified the guidelines and rates under the scheme on 17 August this year. Remissions of Duties and Taxes on Exported Products (RoDTEP) is a muchawaited scheme which seeks to replace the Merchandise Exports from India Scheme (MEIS). MEIS was devised to incentivise exporters in offsetting infrastructural inefficiencies and the associated costs. It was considered a subsidy and pronounced as a violation of the World Trade Organisation (WTO) rules, by its Dispute Settlement Body in 2019.The Subsidies and Countervailing Measures (SCM) Agreement of the WTO prohibits a government especially countries above a certain specific threshold of development, from providing financial benefits to exporters in the form of incentives. This prompted the Central Government of India to rollout alternate schemes that are compatible with the WTO mandate. With RoDTEP exporters will be compensated for the non-creditable duty/tax costs (such as Electricity Tax, Stamp duty, Mandi Fee, Tax on fuel, etc.) that are embedded in the export goods. The government implemented the RoDTEP scheme with effect from January 2021. After missing several deadlines, the Ministry of Commerce notified the guidelines and rates under the scheme on 17 August this year. The new remission rates announced under the scheme envisage that the exporters will be compensated the embedded taxes, which were not recoverable (or refunded) and inbuilt in the price of the export commodity, leading to intense competition in the international market. It is apparent from the commodity-wise rates announced under RoDTEP that the government's focus has been on products that are relatively poor in export volume and have good potential to penetrate the international market.  The key differences between the MEIS Scheme and the newly launched RoDTEP Scheme are: 1. Under MEIS, an adhoc incentive was available as a percentage of the export price, which could be used for the payment ofimport duties. However, under the RoDTEP Scheme, exporters are entitled to a certain percentage of the export price as a scrip, which is limited approximately to the embedded taxes. 2. While the MEIS Scheme is an incentive in the form of physical, transferrable scrips used for payment of various components of Customs duties, the RoDTEP Scheme is an electronic, transferable credit, which can be used for payment of only the Basic Customs Duty. 3. The MEIS Scheme has been under the cloud from the standpoint of WTO norms compliance, whereas RoDTEP Scheme has been framed in accordance with WTO guidelines. 4. The MEIS incentive was often higher, as against RoDTEP, the basis of which is the actual taxes/duties embedded in the commodity. Under the RoDTEP Scheme, exporters are entitled to benefit from 0.5% to 4.3% of the FOB value of the exported products falling under the specified HS Codes. Further, the RoDTEP benefit is also capped at a certain sum per unit of the exported product, like the Duty Draw-back scheme which also follows 'valuecap'.

Response to RoDTEP

The initial response of the exporters suggests that the RoDTEP scheme has not been able to enthuse them as the rate has been lower than expectations. Many sectors are disappointed at the remission rates while others are upset with the exclusion of their sectors/products from the scope of the scheme. The government has announced that it would reconsider the excluded sectors/products in the future. Exporters from the pharma, steel and chemical industries, export-oriented units (including bio-technology parks and electronic hardware technology park), Special Economic Zones (SEZ), free trade warehousing zone and custom bonded warehouses operating under the Manufacturing and Other Operations in Warehousing Regulations are kept outside the scope of the new scheme. Many exporters have expressed their concerns and have suggested that the rates declared require immediate review. Few exporters cited their inability to submit details/data, as required by the Government, due to the current situation prevailing in the country on account of the pandemic. The government has projected RoDTEP as a replacement of MEIS,even though both cannot be equated, inherently since MEIS has been an incentive while RoDTEP is remission of tax/duty 'costs' which has found its way in export pricing. While the government's compliance with the WTO mandate is understandable, the exporter community has been comparing the benefits under MEIS with RoDTEP, and therefore drawing a gloomy picture. Exporters might likely revisit pricing strategies very soon to realign the prices in accordance with the new scheme. While industry representatives feel that the government must devise suitable schemes to incentivise exports, the government is discussing measures to introduce appropriate structures that serve the twin objective of rewarding the exporters, while surviving the test of WTO mandates. As RoDTEP is in its nascent stage, industry experts are exploring possibilities of initiating discussions with concerned authorities. One has to only wait and watch to see how this scheme evolves in the coming days.

Source:  Economic Times

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Sitharaman urges full vaccination for economy, industry to work normally

 Calls for more private sector participation in extending reach of govt schemes to rural India Finance Minister Nirmala Sitharaman on Sunday said only vaccination can bring the economy back on track and allow industry to work normally. The minister also urged more private sector participation in extending the reach of government schemes to rural India. Inaugurating the centenary celebrations of Tamilnad Mercantile Bank (TMB), the FM said, “Of the 1.3 billion people, we have already given at least one dose of vaccine to around 730 million. We have to wear masks even now. Once two doses are done, we believe that it will not be needed. For the economy, industry to work normally, vaccines are needed.” "Today, people are able to conduct business, traders are able to procure products to run businesses, (thereby) boosting the economy... So, vaccination is the only medicine (to combat the virus, to boost the economy)." The country’s Covid-19 vaccination coverage surpassed the cumulative figure of 738.19 million (73,82,07,378) on Sunday, adding 72,86,883 doses in the last 24 hours. Sitharaman said that due to the aggressive financial inclusion programme — implemented through the Jan Dhan Yojana — the government was successful in helping the poor in rural India by transferring Rs 1,500 to their accounts during the first three months of the pandemic. “This would not have been possible had we not launched PMJDY,” she said. The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on August 28, 2014. During the pandemic, Rs 500 per month was credited to the accounts of women account holders under PMJDY for three months (April to June 2020) under PM Garib Kalyan Yojana. A total of around Rs 30,945 crore was credited to such accounts during that time. The minister added that schemes like Mudra Yojana and Svanidhi, too, helped people in the rural areas. She urged the private sector banks to take up government schemes more aggressively. Sitharaman said micro, small and medium enterprises (MSMEs) were able to tide over the crisis and are able to run their business now because of the Emergency Credit Line Guarantee Scheme (ECGS) launched by the government. Under ECGS, loans to the tune of Rs 2.73 trillion have been sanctioned of the enhanced Rs 4.5-trillion limit so far. Of this, banks have so far disbursed around Rs 2.14 trillion. A lot of energy of the banking sector has gone towards recovery of non-performing assets (NPAs), she said, adding that ‘prompt corrective measures’ helped the sector to come back to the current level. “Today, the sector is stable after continuous prompt steps that the government has taken. Many banks in the public sector have come back to normalcy now,” she said. According to the latest data, NPAs declined from Rs 7.39 trillion in March 2019 to Rs 6.16 trillion in March 2021, down 17 per cent over two years. The minister also asked TMB to take up the digitisation drive further to improve financial inclusion, saying it is appreciable that around 74 per cent of its lending is towards the priority sector. “There are a lot of prospects for banking... I think it is important to completely bring in digitisation. Digitisation cannot be avoided for your own good and for the sake of customers,” she said. TMB has already filed a draft red herring prospectus with the market regulator Securities and Exchange Board of India for an Initial Public Offering. In April this year, the bank’s Managing Director and Chief Executive Officer K V Rama Moorthy had said the lender was planning a Rs 1,000-crore IPO this fiscal year.

Source: Business Standard

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Knitting, technical textile, nero fabrics on display at Surat expo

Inaugurating the expo on Saturday, Union Minister of State for Textiles and Railways and Surat city BJP MP Darshana Jardosh appealed to the industry representatives to take advantage of central government’s Production Linked Incentive (PLI) schemes to develop “Make in India” and “Make in Surat” a brand. Thousands of products from knitting industry, technical textiles and nero fabrics are on display at Weaveknitt 2021, three-day fabric exhibition, organised by the South Gujarat Chamber of Commerce and Industries (SGCCI) at Surat International Exhibition and Convention Centre at Sarsana in Surat city. Inaugurating the expo on Saturday, Union Minister of State for Textiles and Railways and Surat city BJP MP Darshana Jardosh appealed to the industry representatives to take advantage of central government’s Production Linked Incentive (PLI) schemes to develop “Make in India” and “Make in Surat” a brand. “The SGGCI had made a good decision to start the exhibition on Ganesh Chaturti and this is the first edition of WeaveKnitt 2021. Many works are done under the leadership of Prime Minister Narendra Modi… I told the Counsel General of the Republic of Indonesia in Mumbai, Agus Prihatin Saptono, to do a joint venture with the industries in Surat. The requirements should be worked out and Indonesia will also be a part of it,” said Jardosh. Saptono, who was present at the event, said, “Indonesia is a manufacturing hub of polyester fabrics, while India is the biggest in the cotton fabrics. The ties between both countries in textile industry sectors will definitely boost our economies.” Adding that India is one of the fastest growing markets for technical textiles, SGCCI president Ashish Gujarati said, “The global average growth is 4 per cent, whereas India’s growth rate is at 14 per cent per year. The biggest issue is that the raw material used in the production of technical textiles such as high tenacity yarn of polyester, nylon and viscose, are not manufactured in India. Union Textile Ministry should look into this aspect of capacity building, and pursue the large manufacturers of yarn to concentrate on these segments.” He added, “The Government of India has recently introduced BIS standards for different types of MMF (Man Made Fibre) yarns to be sold in India. The quality monitoring of the raw material of textile industry should be kept with the Textile Commissioner’s office instead of handing it over to the BIS.” Gujarati also requested the Union minister to set up a world-class Quality Certification Centre in Surat. Textile Ministry secretary Upendra Singh said, “India is the the second large producer of cotton worldwide, as a result of which 6 lakh tonnes of cotton fabrics are manufactured in India and 6 lakh tonne of MMF (Man-Made Fibre). We have exports of 40 million US dollars, and we have been given a target to take it over to 100 million US dollars. The growth can be achieved by working seriously on the MMF and technical textiles. Surat is the hub of MMF and technical textiles and the industry people should take benefit of PLI scheme.” Gujarat MSME commissioner Ranjeeth Kumar, who also attended the event, said, “In two years, the budget for MSME was doubled from Rs 750 to Rs 1,500 crore in the state. Most of the MSMEs are in Surat. Last week we did an MOU with Amazon.” Textile commissioner Roop Rashi Mahapatra said that the digital platform the country can enter the international market. “At present, we are export textiles to the US, West Asia, Bangladesh, etc. We receive around 60 per cent of proposals under different schemes from Gujarat, out of which 85 per cent are from Surat,” Mahapatra added.

Source: Indian Express

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TN set to announce Export Strategy Policy

Aims to make State the largest exporter in the country The Tamil Nadu government will soon announce an ‘Export Strategy Policy’ with an aim to make the State the largest exporter in the country. Tamil Nadu with 8.97 per cent share in overall exports is the third largest exporting State behind Gujarat (17 per cent) and Maharashtra (22 per cent). Its exports were worth ₹1.93- lakh crore in 2020-21. The State’s major export products include automobiles and auto components, machinery, electronics, textiles and wearing apparel, leather products, and electronics. Tamil Nadu’s major export markets are the US, China, Germany, UAE and the UK. “We want to move to the first place by 2030 and the policy will help us in achieving that vision,” said a senior government official. This dovetails well into Chief Minister MK Stalin’s ambitious target of making Tamil Nadu a $1 trillion economy by 2030. Its GDP was $300 billion in 2020-21.

Diversified exports

While Maharashtra and Gujarat are heavily dependent on oil, Tamil Nadu’s exports are quite diversified. The State exports 6,226 commodities to 217 countries, according to Guidance, the nodal agency of Tamil Nadu government for investment promotion and single-window facilitation. Most of the incentives for exports are generally offered by the Central government. Tamil Nadu on its part offers various incentives, including funding for producing publicity material (up to 25 per cent of the costs), sector specific studies (up to ₹2 lakh) and contesting for anti-dumping cases (50 per cent, up to ₹1 lakh), says information in Guidance website. Tamil Nadu cannot give more incentives as the State needs to comply with the World Trade Organisation norms. Hence, a special ‘strategy’ needs to be worked out to boost exports, and the policy will outline it, the official said. The State ranked third in Export Preparedness Index 2020, published by NITI Aayog which assessed States on parameters such as policy, business ecosystem, export ecosystem and the quantum of exports. Tamil Nadu has undertaken sustained reforms to reduce and simplify 286 compliances, required by businesses. Further, the State has implemented 301 reforms based on Business Reforms Action Plan 2020 and 45 reforms (112 services) as part of the District Reforms Action Plan 2020, says the Major Industries Policy for 2021-2022. The State’s strength is the infrastructure that helps foreign companies to set up their manufacturing units. Tamil Nadu is the only State in the country to have three major ports – Chennai; Kamarajar port in Ennore and VOC port in Thoothukudi – acting as export gateways. The State also has four international airports – Chennai, Tiruchi, Coimbatore and Madurai.

Source: The Hindu Businessline

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India expected to grow 10% during current fiscal: NCAER Director General

The economy is expected to grow around 10% during the current financial year on the likelihood of fewer Covid-linked supply disruptions and buoyancy in the global economy, said NCAER's Poonam Gupta The Indian economy is expected to grow around 10 per cent during the current financial year on the likelihood of fewer COVID-19-linked supply disruptions and buoyancy in the global economy, said Poonam Gupta, director general of economic think-tank NCAER. The real challenge, however, would be to sustain a growth rate of 7-8 per cent in years to come, she said. "We could see annual growth in the ballpark range of about 10 per cent. The reasons for this perceived optimism are: fewer supply disruptions; increased pent-up demand in the traditional and contact-intensive services; and a buoyant global economy. "Even so, if two pandemic years are taken together, there would be a very small net growth. In other words, the economy at the end of 2021-22 would be only slightly larger than at the end of 2019-20," Gupta said. Gupta is the first woman director general of NCAER. Before joining the think-tank, she was the lead economist at the World Bank. She was also the Reserve Bank of India Chair Professor at NIPFP, and a Professor of Macroeconomics at ICRIER. On the challenges being faced by the Indian economy, she said the first one is to recover from the impact of COVID-19 and the second is to sustain post-COVID-19 growth rates of at least 7-8 per cent. India has done rather well during the COVID-19 pandemic, primarily because of the rapid pace of vaccination, Gupta said, adding, "Currently, ensuring rapid and widespread vaccination is the best pro-growth policy that any country can implement." India's economic growth surged to 20.1 per cent in the April-June quarter of this fiscal, helped by a low base in the year-ago period, amid a devastating second wave of the COVID-19. The gross domestic product (GDP) had contracted by 24.4 per cent in the corresponding April-June quarter of 2020-21. The RBI expects the GDP growth at 9.5 per cent in 2021-22 consisting of 21.4 per cent in the first quarter; 7.3 per cent in Q2; 6.3 per cent in Q3; and 6.1 per cent in Q4 of 2021-22. On a question related to private investment picking up in India, Gupta said that one of the biggest economic challenges that India has faced in the past decade has been an anaemic private investment. The data, she said, show that the rate of investment declined from a peak of 36 per cent of GDP in 2007 to 27 per cent in 2020. A large part of this decline is on account of the slowdown in private investment. She noted that the Economic Survey 2017-18 had shown that the investment cycles often tend to be long-drawn. Notwithstanding even this cross-country experience, India's downturn in the realm of private investment has been longer drawn than anticipated, as it has now stretched into a second decade. "What is more puzzling is the failure of private investment to show a revival despite ample liquidity in the economy. The reasons for this persistence have to be structural. "Since investments, particularly large investments, are usually made while keeping a medium-to-long-term view in mind, reviving it may necessitate the adoption of a more holistic approach, such as being able to tap into not just domestic but also global demand, creating a stable, pro-growth, and pro-entrepreneurship policy climate, and promoting competitive input markets," she said. Nurturing an environment of regulatory freedom wherein entrepreneurs can enter, grow, and exit simply on the basis of their own calculations of viability would certainly help, Gupta said. To another query, Gupta said her research on India's experience with inflation targeting shows that monetary policy has catered to growth concerns, as much if not more than to the inflation concerns. The pro-growth stance has continued even during the pandemic. The RBI, she said, has indeed been very supportive of growth, through both its key policy rate as well as the implementation of liquidity measures and regulatory forbearance. "These have yielded positive results, so much so that not only do the worst times seem to be behind us, but we have ensured macroeconomic stability while handling the fallout of the pandemic," she said and added that this is a very delicate and complex balance to attain for any emerging market," she added. Gupta has taught at the Delhi School of Economics, and the University of Maryland. She started her professional career as an economist at the International Monetary Fund, Washington DC. She holds a PhD in Applied Macroeconomics and International Economics from the University of Maryland and a Masters in Economics from the Delhi School of Economics.

Source: Business Standard

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Pathways to innovation in India: India’s policy approaches to manufacturing have failed to create the tipping points innovation needs

The digital world may provide the most promising routes to Indian entrepreneurial success in the 21st century, but we know that the range of new technologies and profitable innovations is much larger than just software. The digital world may provide the most promising routes to Indian entrepreneurial success in the 21st century. (Representative image) The sale of online payments firm BillDesk, which has received tremendous media attention because of the value of the acquisition, offers some insight into how India’s innovation system is working, and how it can be strengthened. The three co-founders met at a multinational financial services firm, but they had racked up work experience before that with Indian firms. Their educational backgrounds (IITs and IIMs) indicate that they had made it through the most selective mechanisms in the world before they started working, and had presumably received good educations there, in terms of what they learned. When the co-founders started out, online payments were in their infancy, and their success now is the result of two decades of sustained effort, as well as making an intelligent choice for where to focus their energies. Initial funding came from public sector financial entities (presumably their pedigrees and networks helped there), but later, expansion was fueled by infusions of global capital. The acquisition of BillDesk, by a large multinational, will provide capital for further growth, including more innovation and entry into other countries’ markets. While it is not captured in the headlines, I have no doubt that how the company got where it is depended on the ability to hire enough people with the right skills and training, in software engineering, marketing, finance and whatever else is needed to create a successful company. This pool of human capital is being strengthened, not only by education, but by work experience – just as for the founders themselves. The digital world may provide the most promising routes to Indian entrepreneurial success in the 21st century, but we know that the range of new technologies and profitable innovations is much larger than just software. India’s development of a COVID-19 vaccine is an example of emerging prowess in the life sciences, and in cases like this, manufacturing capabilities are vital. The country’s slow ramp-up of production of vaccines cost India’s people dearly. There are more mundane examples of innovation, that illustrate possible pathways to success. A former school classmate, and subsequent IIT graduate, after gaining experience in industry, started his own electric lighting firm. Many years later, he told me about LED lighting, which, despite a long history, was not yet a commercial product. But he said that it was going to be the future of lighting. A decade or so later, his company has its own high-quality R&D labs and manufacturing facilities, dozens of patents, and many customers for large scale LED lighting projects, all driven by the energy efficiency and flexibility of the new technology, as it has rapidly evolved. As far as I know, his is a classic family firm, but clearly with professional management and the ability to hire qualified people at all levels. It may be that there are additional challenges of dealing with state and local government officials that accompany any manufacturing effort in India. I cannot be sure what the obstacles were that had to be overcome. But, as in the case of BillDesk, seeing an opportunity for innovation that solves a big problem, and getting in a position to pursue that opportunity, were the first steps. In the case of LED lighting, regulatory requirements generated incentives to shift from conventional light bulbs. These helped overcome uncertainties and higher upfront costs. As production and adoption expanded, costs fell, knowledge levels increased, and a tipping point was reached. Perhaps India’s policy approaches to manufacturing and to innovation have failed to create these tipping points. It is true that a more liberal approach leads to more failures, and a landscape of empty, unsuccessful factories is not desirable. This can be where openness to the world can be especially beneficial. The pool of global knowledge also includes lessons about what not to do, as well as what works. It is also true that taking full advantage of these lessons requires a larger pool of people who have had an opportunity to be trained and educated, and gained the right work experience, to the point where they can learn and innovate effectively. India’s policymakers still have to figure out how to achieve this situation rapidly enough to benefit the nation’s growing number of young people, all eager for a better life.

Source: Financial Express

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Kingdom-EAEU team to push for FTA

Cambodia is reportedly keen to set up a new joint team with the Eurasian Economic Union (EAEU) to conduct a more detailed examination of the possibility of formally launching free trade agreement (FTA) talks with the bloc soon, and add impetus to underwhelming bilateral trade ties. The initiative had been raised at the 3rd Joint Working Group Meeting between the Cambodian government and the Eurasian Economic Commission (EEC) – the executive body of the EAEU – held via video link from September 7-8. The meeting was chaired by Ministry of Commerce secretary of state Tek Reth Kamrong, and the EAEU was represented by Sergey Glazyev, the EEC Board member (minister) in charge of integration and macroeconomics. Comprising Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, the EAEU is home to 184.6 million people and represents a combined gross domestic product (GDP) of $4.778 trillion, according to International Monetary Fund estimates for 2020. At last week’s meeting, the two sides pledged to deepen cooperation in a number of key areas, including trade and investment cooperation, the energy industry and infrastructure, science and technology, innovation, digital developments, information and communication technology, technical trade barriers and regulations, customs, sanitary and phytosanitary issues, intellectual property, consumer protection and competition. Kamrong emphasised that the meeting was indispensable to deepen Cambodia-EAEU trade and investment cooperation. She said participants at the meeting also shared experiences related to domains such as customs, agriculture, information technology, business support and micro-, small- and medium-sized enterprises, as well as the development of “technical regulations”. “Cambodia is now willing to set up a joint working group to examine the possibility of launching free trade agreement negotiations between Cambodia and the EEC in the near future,” Kamrong added. First held in the Kingdom in 2017 and then the following year in Russia, the joint working group meetings are organised under the framework of the MoU, signed by Prime Minister Hun Sen in 2016. R Cambodia Chamber of Commerce vice-president Lim Heng told The Post that the EAEU would one day join the ranks of the US, Europe, China and South Korea as a notable buyer of Cambodian goods. Composed of countries with large populations and thriving economies, the bloc has caught the interest of Cambodia and will one day represent an important target market for exports, he opined. He suggested the Kingdom make a major push to capture more market share, noting that “the establishment of an FTA will make Cambodian exports more marketable”. According to Heng, Cambodia mostly exports agricultural products and finished textile products to the EAEU, while imports include tractors, machinery and agricultural vehicle parts. Bilateral trade between Cambodia and the EAEU was worth $67.37 million last year, increasing by 18.22 per cent over $56.98 million in 2019, according to data from the commerce ministry. The Kingdom’s exports accounted for $52.19 million, marking a 0.73 per cent year-onyear rise from $51.81 million in 2019, and imports stood at $15.18 million, rocketing by 193.57 per cent from $5.17 million. These number indicate that Cambodia’s trade surplus with the EAEU narrowed by nearly 21 per cent, from nearly $46.65 to $37.0 million.

Source: Phnom Penh Post

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BGMEA president calls for fair prices from US buyers

He urged the US government to consider reducing duty on apparel products from Bangladesh BGMEA President Faruque Hassan called on US brands and retailers to be more rational in pricing in order to build a secured global market where workplace and jobs will be safer and more sustainable. He made the call while addressing a roundtable titled "Seven years after Rana Plaza: Who is doing what?" organised by the Bangladesh Embassy in Washington DC on September 10. “Our factories are increasingly investing money for safety and sustainability. Besides, production cost has gone up by more than 30% in last five years. On the contrary, the price of our apparel is declining every year. While it’s a fact that in a free market economy price cannot be dictated, but nobody can justify a lower price to produce socially fair goods,” he said. “It is the collaboration and partnership between brands and our suppliers that has helped us to achieve tremendous growth so far and future cooperation and partnership will help us to maintain this,” Faruque Hassan added. Senior US government officials including Christopher Wilson, Assistant US Trade Representative for South Asia; William Jackson, Assistant USTR for Textiles, and Jennifer Larson, Director for South and Central Asia of the US Department of State; Maureen Haggard, Director for Democracy, Human Rights and Labour of the US Department of State; former Bangladeshi diplomat Farooq Sobhan, BGMEA Vice President Miran Ali, Ambassador Teresita Schaffer from the McLarty Associates, representatives of US-Bangladesh Business Council, American Apparel and Footwear Association, Walmart, Target, as well as senior officials of the Bangladesh Embassy participated in the roundtable. BGMEA President Faruque Hassan briefed the US Government and relevant stakeholders about how the readymade garment industry of Bangladesh has undergone massive transformation over the last few years to become one of the safest industries in the world and have the highest number of green garment factories across the globe. He also apprised the participants of the steps and measures taken by the industry to ensure workers’ wellbeing. He urged the US government to consider reducing duty on apparel products from Bangladesh. The BGMEA President called on US businessmen and non-resident Bangladeshis living in the US to explore investment opportunities in textile industries in Bangladesh, particularly in the non-cotton segment. He also stressed the need for a unified code of conduct as multiple audits are not only waste of time and money, but also the audit fatigue makes compliance difficult for enterprises. In his address at the roundtable Bangladesh Ambassador to the United States M Shahidul Islam highlighted the measures and initiatives taken by the government of Bangladesh to support the RMG industry in ensuring workplace safety and the welfare of garment workers in Bangladesh.

Source: Dhaka Tribune

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BGMEA: Bangladesh overtakes Vietnam in RMG earnings from Jan-July'21

 Bangladesh exported apparel products worth $18.80 billion during the period, against Vietnam's exports worth $16.86 billion Bangladesh regained its position as the second largest apparel exporter by earning $1.94 billion more than Vietnam in the first seven months of this calendar year, said the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). According to the BGMEA officials, Bangladesh exported apparel products worth $18.80 billion during the period, against Vietnam's exports worth $16.86 billion. However, both Bangladesh and Vietnam perceived a negative growth of 7.66% and 7.30% respectively during this seven-month period, compared to 2019. Earlier, Vietnam overtook Bangladesh in the global apparel market and became the second-largest global ready-made garment (RMG) exporter, according to the World Trade Statistical Review 2021 released by World Trade Organization (WTO), on July 30 this year. According to the data, Bangladesh’s share in the global apparel market dropped to 6.3% in 2020 from 6.8% with a market value of $28 billion in the same year, while Vietnam's share in global RMG exports stood at 6.4% in 2020, up from 6.2% a year earlier with a market value of $29 billion. However, apparel exporters said that the data was based on 2020 when Vietnam's export growth remained unhurt during and Bangladesh's exports steeply nosedived due to the Covid-19 pandemic. But from this year, Bangladesh's garment industry started to turn around. So, it is not uncommon for Bangladesh to regain the second position again by overtaking Vietnam, they also said. Talking to Dhaka Tribune, Mohiuddin Rubel, director of the BGMEA, said that as per the official data of Bangladesh government and the official data of Vietnam, Bangladesh clearly stays ahead of Vietnam during January-July period of 2021. The official export of Vietnam during this period stood at $16.86 billion, while for Bangladesh it was $18.80 billion. So, Bangladesh earned $1.94 billion more than Vietnam by exporting apparel goods,” he added. However, according to the General Statistics Office (GSO) of Vietnam, they earned $18.46 billion from textile and garments export during January-July period of 2021. In this regard, Mohiuddin Rubel said that the Vietnamese government aggregates their textile export with garment while publishing data, so the data they publish is not exclusively apparel export. “But the WTO calculates the textile and apparel sector separately, and that is logical. We can confidently say that Bangladesh will remain the second largest garment exporting country by the end of 2021,” he added. Shahidullah Azim, vice-president of the BGMEA, told Dhaka Tribune that Bangladesh undoubtedly overtook Vietnam a few months ago. "We expect Bangladesh to export about $4 billion more than Vietnam by the end of this year, as the factories have enough purchase orders. At the beginning of 2021, exports to EU countries were slightly lower but the exports have started to increase in this destination at a significant rate,” he added. He also said that if Bangladesh can improve their position in the Ease of Doing Business and achieve the desired target in all the parameters associated with it, the country will earn $3-$4 billion more from apparel exporting than their setting target. Bangladesh is ranked 168th out of 190 in 2020. It is tough to unload the goods before 7 days from airports as there is no necessary equipment, and also a lack of skilled manpower, he added. He also said that there are various complications at the port, and complications related to bonds, and infrastructures. These types of complications at various points are hindering exports severely. To increase exports, these must be fixed immediately. “Moreover, utilities such as electricity and gas pose various unwanted problems. If all these problems are solved, if we can improve our Ease of Doing Business rank, our exports will increase even more than our target,” he also said. However, exporters opined that Bangladesh should diversify its export basket within the RMG sector to sustain the pace of growth. Bangladesh needs to improve in labour productivity, capital productivity and diversification. It also needs to increase skills, move from low end to high end, increase value addition, increase product basket, and reduce lead time.

Source: Dhaka Tribune

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Sri Lanka: Finance Minister instructs to immediately resolve problems affecting foreign employment seekers

Basil Rohana Rajapaksa, Minister of Finance has instructed the officials to identify the problems faced by those who are looking to go abroad for employment and to take immediate action to resolve them, a press release issued by the Ministry of Finance said. The Minister of Finance gave these instructions while participating in the Progress Review Meeting of the Foreign Exchange Flow Task Force held at Temple Trees recently. The Minister emphasized the need to remove any obstacles as soon as possible as there is a growing demand for Sri Lankans in the foreign employment market. Accordingly, the Minister drew attention to the problem of lack of aircraft seating facilities for those who are currently expected to go abroad. He instructed the officials to resolve this issue expeditiously by using foreign as well as local airlines as required. Mr. Rajapaksa pointing out that the expatriate Sri Lankan working class community plays a significant role in earning foreign exchange added that it is the responsibility of the relevant sectors to expedite the inquiries into the difficulties they face. The progress made in earning foreign exchange through the export of local products and provision of services up to August 2021 and the issues that have affected further growth were discussed at length. Accordingly, the objectives achieved in the export of commodities including textiles and apparel, tea, rubber and rubber products, coconut and coconut related products, engineering products, other export crops, gems and jewelry, and seafood were also examined. Accordingly, the average monthly income from commodity exports last year was US$ 840 million and in the first eight months of 2021 it has increased to US$ 986 million. Despite the Covid epidemic, rubber and rubber products and engineering products have now successfully achieved the expected targets while other sectors are close to the performance level. Export earnings grew to US $ 7,886 million in the January-August period of 2021, an increase of 22.4% over the corresponding period last year. There was a lengthy discussion on the problems faced by the respective sectors in the face of the Covid epidemic and the solutions required to manage them and reach the relevant performance level. The Minister of Finance Basil Rajapaksa stated that since the objective of the President and the Government is to lead the country towards a production-based economy, necessary steps will be taken to give it priority. Mr. Rajapaksa further stated that while strengthening the economy while maintaining the growth of the export sector, active development activities in the country will also continue. Ministers, Secretaries to Ministries and a number of government officials were present at the meeting.

Source: Colombo Page

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Textile, garments workers seek national platform

Trade unions stress on accord for better health and safety standards. A joint platform at the national level is necessary to safeguard workers' rights and movement, labour leaders said on Saturday. The health and safety conditions in factories are worse nine years after the Ali Enterprises Factory fire incident in which More than 255 workers were killed and 57 injured, they said at a meeting to discuss workplace hazards. There is no significant role by the government to implement labour laws due to which Pakistani factories continue to face health and safety issues, this was said by the leaders of trade unions at the moot titled Recalling Baldia Factory Fire: Exploring Opportunities for Safe workplaces in Pakistan, held at Pakistan Institute of Labour Education and Research (PILER) Centre, Karachi on September 10-11. They said the Pakistani factories have still not learned from the incident of Ali Enterprises and these factories do not have proper emergency alarm systems, workers are also not educated to use a fire extinguisher and no emergency exit door they plan to make. Experts from different trade unions and civil society also shared their views. PILER Executive Director Karamat Ali stated: "In this power imbalance society, where workers are exploited and labour laws are not implemented, the trade union movement has systematically been reduced from time to time after Pakistan independence and now only 1% workers are unionised." He further viewed the Ali Enterprise Factory incident got united workers at a global platform through the Clean Clothes Campaign (CCC) and got short and long-term compensation for workers from the Sindh High Court. So, we need a similar united platform at regional and national levels to strengthen our movement and to improve workers' health and safety. National Trade Union Federation Secretary-General Nasir Mansoor said the recent chemical factory fire at Mehran Town was similar to Ali Enterprises where the fire brigade could not enter the factory and space was so confined that workers could not escape from flaming premises. No Health and Safety inspection is conducted in factories. The CCC and European Center for Constitutional and Human Rights (ECCHR) guided us and supported us internationally for the cause of Ali Enterprise and because of their efforts, European brands have come under European law for workers compensation especially Ali Enterprise Factory German brand, KIK Textilien. CCC International Coordinator Ineke-Zeldemrust shared with participants about International Accord Agreement to improve health and safety work in the Bangladesh Textile and Garment industry and this agreement will be expanded in Pakistan. The agreement is between international brands and international trade unions and the Bangladesh trade unions to pressure the local vendors of brands seller to improve health and safety standards. The accord is going to be implemented in the Pakistan and evidence is that when Bangladesh factories improved the health and safety conditions, it has improved investment and exports of Bangladesh. In the end, Participants decided to hold a National convention in Islamabad for Workers Confederation in Islamabad during October 2021 to organise workers and ensure labour rights in overall Pakistan.

Source: Tribune

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Pakistani goods thrive at China-ASEAN Expo: Ambassador Haque

Pakistan has already opened the market of China and ASEAN. These years, Pakistan’s exports have recorded a new volume, exports to China are showing great momentum as well. Pakistan Ambassador to China, Moin ul Haque said on Sunday that Pakistani goods have a strong competitive force at the 18th China-ASEAN Expo especially the textile sector, which remains one of Pakistan’s flagship products. “Pakistan has already opened the market of China and ASEAN. These years, Pakistan’s exports have recorded a new volume, exports to China are showing great momentum as well, and we hope that by the end of this year, we will have a new breakthrough, he said in an interview with China Economic Net (CEN). Pakistan is one of the few countries which have a complete ecosystem of textiles, from weaving to dyeing, making garments and clothes. “Textile is our strongest sector, so you can see the products from home textile to ladies’ clothes are all showcased here,” Ambassador Haque said while referring to Pakistani stalls set up at the Expo. He said that the food sector in Pakistan is very important. Pakistan is one of the largest leading countries in the production of wheat, rice, sugarcane, cotton as essential raw materials, which have made it one of the most competitive countries in the region. Now, the government is focusing on industrialization to do value addition for these products. Ambassador Haque said that the competitive commodity of Pakistan is milk products and added, “We are the fourth largest country as equal to China in milk production. Now we are focusing on also bringing a revolution in the dairy sector by doing value addition such as making cheese, yoghurt and other products, then exporting to ASEAN, China, and even the whole region.”• He also mentioned sports products as his favourite Pakistani goods, and he is proud that Pakistan is the largest producer of footballs in the world, and most world-class tournaments have assigned Pakistani football as their official football. “Not only football, but we also make other sports goods like boxing gloves, motorcycle gloves, and so on,” he added. Ambassador Haque remarked that this is the second time that Pakistan has been invited to participate as a special partner country. “We were given this honour for two years continuously, which is unprecedented in the history of CAEXPO. In another sense, it is important because China and Pakistan are celebrating the 70th anniversary of our friendship this year. Pakistan’s participation is dedicated to this milestone.” He expressed his pleasure to see such a beautifully designed pavilion and Pakistani products at Expo, which are very important export products of Pakistan. As many as 14 Pakistani stores, which are set up by Pakistani traders, are displaying these different products. Ambassador Haque emphasized that CAEXPO is very important for Pakistan because it represents two large markets: “China, which is the second-largest economy in the world, and ASEAN, which has become a very important trading block in the region, represents about 2 billion people and $18 trillion economies. Now, these countries have set up RCEP regional cooperation partnership.”• To a question, he said that Pakistan has a close friendship with China and ASEAN. “Pakistan’s presence and cooperation with China and ASEAN provide our traders new opportunities to come here and use this platform to export to RCEP block. So, we think that this platform will help in building trilateral cooperation in trade and investments.” He said that Pakistan has already opened the market of China and ASEAN. Now Pakistan has FTA with China and launched its second phase last year. In recent years, both Pakistan and China have opened their markets, and nearly 1,000 products are exported duty-free. In addition, the Pakistani government is also helping to promote trade and create an enabling environment for our traders to converge here and share their projects, and the results are clear and evident, he added.

Source: Global Village Space

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NBR to probe 'misuse' of cash incentive on exports

 Stakeholders say exporters of readymade garments and home textiles would immediately face losses if cash incentives are cancelled. Exporters with bond benefits may also face the same damages Exporters of readymade garments and home textiles are at risk of losing the cash incentives on exports – which they enjoy for using locally sourced yarn and fabrics – as the Customs Valuation and Internal Audit Commissionerate, a wing under the National Board of Revenue (NBR), has suggested revoking the facility terming it "against the rules". The commissionerate in a report sent to the revenue board recently has argued that exporters who have availed the duty drawbacks facility or have purchased duty-free raw materials under back-to-back LC facility are not eligible for this incentive – known as alternative cash assistance – as per a central bank circular concerning the issue. Stakeholders say exporters of readymade garments and home textiles would immediately face losses if cash incentives are cancelled. Exporters with bond benefits may also face the same damages. According to the NBR report, 35 banks have disbursed Tk1,384 crore as alternative cash assistance in the last three years. Officials involved in preparing the report, however, told The Business Standard (TBS) that the actual amount would be much higher. At present, the rate of alternative cash assistance on exports of products made with locally-produced yarn or fabrics is 4%, which has been objected to by the audit commissionerate. Apart from this, 4% cash incentives are provided to small and medium industries, 4% are provided on exports to new markets outside Europe and America, 2% are provided as special assistance on exports to the Euro region. Another 1% cash incentive was introduced last year to deal with the Covid situation. However, in total, an apparel exporter will not get more than 12% incentive. In addition to readymade garments, 37 sectors are currently getting cash assistance ranging from 1% to 20%. NBR sources said a committee has been formed to find out in detail what other irregularities have taken place in availing cash incentives against exports of products made with raw materials imported duty-free through back-to-back LCs. The five-member committee, headed by Additional Commissioner Abdul Mannan Sarder of the Customs Valuation and Internal Audit Commissionerate, was asked to submit a detailed report within 15 working days. But, Mohammad Enamul Hoque, commissioner at the customs valuation commissionerate, told TBS it will not be possible for the probe body to submit the report within the deadline. "We have applied to the NBR to extend the time," he said. No exporter – irrespective of whether they have a bond licence or not – will be entitled to cash incentives if they purchase raw material under duty-free facility or avail duty drawbacks, he continued. Mentioning that banks also have had a role in helping exporters avail the alternative cash assistance, he said, "We are now collecting information from the banks on how they have been providing exporters with the facility for so many years." Exporters who receive this cash assistance say the NBR report is not logical. They consider it as an act outside NBR purview which has misinterpreted the Bangladesh Bank circular. Mohammad Hatem, senior vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Standard that they will soon meet the commerce minister to seek a solution to the NBR's letter to the central bank on the cancellation of back-to-back LCs for exporters without bond license and on the issue of cash incentives. Fazlee Shamim Ehsan, director of the BKMEA, said, "The government has provided cash assistance to exporters on the purchase of local raw materials. The Bangladesh Bank also has issued a circular in this regard. Exporters are receiving cash assistance on purchasing raw materials from local sources in compliance with those rules." He observed the customs valuation commissionerate has given such a report based on unreasonable interpretation. Speaking to TBS, Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), questioned the legal basis based on which the NBR is now talking about cancellation of the alternative cash assistance facility which is there for so many years. "Do they want to shut down local industries and make the country dependent on imports? If this facility is withdrawn, the local textile industry may collapse." Economists are of the opinion that such problems have resulted from the lack of policy coordination between one government agency and another. Dr M Masrur Reaz, private sector expert and chairman of Policy Exchange, told TBS the government has to give incentives to the sectors as the cost of doing business is high in the country. "Decisions are not taken in a consultative manner, impact analyses cannot be done properly. As a result, the government's objectives are not properly reflected," he said. In order to encourage the use of local raw materials and accessories instead of imports, the government introduced alternative cash assistance in 1997 for exports that use local raw materials for their products. According to the Bangladesh Bank circular, on which the NBR affiliate organisation's report is based, a cash incentive will be given against the export of textiles and garments products if these products are made from yarn produced by mills which are members of Bangladesh Textile Mills Association (BTMA). The circular also mentions that the products cannot enjoy any duty drawback or bond facility on the raw materials used at any stage in the production process. On condition of anonymity, a senior NBR official involved in the preparation of the report told TBS, "Exporters who enjoy back-to-back LC and bond license facilities are not eligible for alternative cash assistance. That means the entire export-oriented garments sector, home textiles and some other sectors are not entitled to get this assistance from the government." Exporters say these facilities along with alternative cash assistance have fueled the great boom of the garments industry despite the fact that Bangladesh is not a cotton producing country. In Bangladesh, about 3,000 export-oriented factories – which are members of the BGMEA and the BKMEA – enjoy these facilities. Apart from this, about 60 home textile exporters also get the same benefits. Of these, about 500 factories that use 100% local raw materials do not have bond licenses. Dr Ahsan H Mansur, economist and chairman of Brac Bank, told TBS, "As per the Bangladesh Bank circular, alternative cash incentives will not be available if any exporter enjoys duty drawback and duty-free facilities. In that case, this incentive can be withdrawn as per the circular. But, it is better not to drag on with what happened in the past." According to exporters, the government provided this facility to encourage the purchase of raw materials from local sources, so that a strong backward linkage industry can be developed. The industry has got the benefits of this facility in the last two and a half decades. BTMA claims that local textile mills are currently able to supply 80% of the country's knitwear garments and 40% of woven garments. According to people concerned, earlier in 2005, the NBR had taken the initiative to cancel the alternative cash assistance. At that time, the NBR had asked Bangladesh Bank to get back the money provided in the previous three years as cash assistance. Although there was a temporary solution in the meeting of the parties concerned, no permanent solution was achieved. A senior official of Bangladesh Bank's Foreign Exchange Department said on condition of anonymity, "The issue needs to be resolved permanently by discussion. All the parties concerned including the finance ministry and the commerce ministry. In this regard, Bangladesh Bank has very little to do."

Source: TBS News

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