Ibrahim Hossain Ovi

Apparel makers said the production cost of RMG products has already increased several times higher than before

Apparel makers have expected the proposed incentives in the new national budget would help improve export competitiveness of the country’s readymade garment products in the global market while contributing to improve the fire and safety standards of the factory buildings.

They said the production cost of RMG products has already increased several times higher than before due to the recent wage-hikes, appreciation of dollar and increased charges of the utility services.

Reduction of tax at source at 0.30% and lowering tax on cash incentives to 3% would definitely help the sector increase competitiveness in the global markets as it would reduce production cost, said Abdus Salam Murshedy, former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

In the budget, the government has proposed to reduce tax at source to 0.30% from existing 0.80%, tax incentives to 3%, instead of 5%, and also to cut duty on some RMG raw materials to 5% from existing 10%.

Garments workers safety came on the spot light after the incident of Rana Plaza, an eight-story commercial building having housed five factories, collapsed in Savar on April 24, leaving at least 1,135 workers killed and over 2,500 injured.

Following the incident the global buyers imposed conditions to introduce fire safety equipment including fire doors, hydrant and sprinklers. But these equipments have higher import duty, which appeared as burden to the factory owners. 

Due to lack of cash flow, a section of factory owners were unable to import fire equipments as the import duty is still very high, Vidiya Amrit Khan, Managing Director of Desh Garments, told the Dhaka Tribune.

“Duty-free import of fire equipments would reduce the burden and help the factory owners to make their factories more compliant.”

Hoping that the overall industry would get back its lost momentum, Vidiya also noted that the government offered the incentives at a critical time while the RMG sector was sturglling to survive due to the ongoing inspection and safety-related scanning following the Rana Plaza Collapse.

According to BGMEA, over 35% factories need relocation to comply with safety standards. To relocate those factories, the factory owners demanded duty-free import of prefabricated building materials for quick relocation of their factories.

A sectition of factory owners has already shut their factories, failing to comply with the safety standards.

It was not possibile for them to further improve the safety standard of the existing factory structure without relocation, Syed Sadek Ahmed, Managing Director of Space Sweater told the Dhaka Tribune. He also noted that duty-free import of prefabricated building materials would help the RMG owners to relocate their factories easilly, fulfilling the compliance issues. 

Published: DhakaTribune, 10 June 2014