Staff Reporter :
Businesses are expressing concerns over the government’s latest decision to cut cash incentives on 43 export goods, terming it as “gagging the export sector to death.” They fear this move will diminish their competitive capacity in the global market.
The export sector in Bangladesh is already facing multiple challenges both domestically and internationally.
The recent decision by Bangladesh Bank to reduce export subsidies for almost all sectors by 20 to 50 percent aims to alleviate pressure on state coffers and prepare exporters for competition without state support, as the country is set to graduate from least developed country (LDC) status in 2026.
The apparel and textiles sectors, major beneficiaries of cash assistance, will be significantly affected, with at least half of the ready-made garment industry’s exports losing incentives.
Other leading export sectors, including leather, jute products, processed agricultural products, furniture, and plastics, will also see a decrease in cash assistance.
Mohammad Hatem, Executive President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), criticized the timing of the cuts.
“The government slashed the aid at a time when production costs have increased significantly due to spikes in gas and electricity prices and higher bank interest rates.
As a result, the sector will become a sick industry, and the decision will gag the export sector to death,” he said.
Hatem argued that the government’s justification based on LDC graduation is illogical. “There are still two more years to avail LDC facilities, and there is a possibility of a duty-free export facility for another three years after the transition from LDC status. So, I don’t see any reason to cut the cash incentive right now,” he added.
Prof. Mostafizur Rahman, a Distinguished Fellow at the Centre for Policy Dialogue (CPD), supported the government’s decision.
“The government’s decision to cut cash assistance is quite right. Exporters will face some initial shock, but overall the export sector is in an advantageous situation due to the spike in the dollar exchange rate. I don’t think there will be significant economic fallout in the sector,” he said.
He suggested that the government take steps to improve the business climate and find ways to reduce business costs to help traders mitigate financial losses from the cuts.
Between February and June of the last fiscal year, the government provided cash assistance ranging from 1 to 15 percent on export earnings to enhance the competitive edge of exporters in international markets.
The highest rate was previously 20 percent.
As per the central bank circular, the maximum rate of export incentive has been set at 10 percent and the minimum at 0.3 percent for the fiscal year 2024-25. The cash assistance on export earnings for apparel makers in all markets has been halved from 0.50 percent to 0.30 percent. The cash subsidy for entering new markets has been reduced from 3 percent to 2 percent.
The reduced export incentives will apply to various other sectors, including jute and jute goods, leather and leather products, frozen fish, and agro products.
Agro product, potato, and processed meat exporters will receive a 10 percent incentive on export earnings, the highest among all sectors, down from the previous 15 percent. Before February, the rate was 20 percent. The government has offered a 6 percent incentive on crust leather exports.
Currently, 43 sectors are eligible for aid, with the government spending about Tk 9,025 crore annually in the past three years.
This change follows the World Trade Organisation’s (WTO) stance that cash incentives are export subsidies.
As Bangladesh transitions from LDC to developing nation status, it cannot continue providing cash assistance per the WTO agreement on subsidies and countervailing measures.
