Commerce minister Tofail Ahmed on Wednesday said that the government would raise the tax at source for the export sector in the upcoming budget for the next fiscal year.
He, however, did not specify how much the rate would be increased.
‘Countries like India give many benefits to their export sector. Although we say we give such benefits to our exporters, but we cannot actually give such benefits. For example, the tax at source [for export sector] which is now 0.7 per cent will be raised [in the budget],’ he said while speaking at a roundtable on ‘trade and exchange rate policies for export diversification’ organised by the Policy Research Institute of Bangladesh in the city.
He said that like the previous years, exporters would go to the prime minister with demand for reducing the source tax after its increase this year.
At the roundtable, experts called for providing equal policy supports to all export sectors to help diversify the country’s export basket.
They also suggested an effective exchange rate and policy reform to boost foreign direct investment for export diversification.
They said other exporting sectors are not getting the same benefit from the government as enjoyed by the readymade garment sector.
Bangladesh Investment Development Authority executive chairman Kazi M Aminul Islam was present as special guest.
PRI chairman Zaidi Sattar moderated the roundtable, while PRI executive director Ahsan H Mansur delivered welcome speech.
‘Non-RMG exports have not performed well on an average. During the fiscal years 1990-2016, they grew at less than 8.0 per cent a year as compared with
16 per cent growth for RMG,’ said PRI vice-chairman Sadiq Ahmed.
Heavy concentration on one product — RMG — and reliance on a few large markets are among the challenges for diversifying exports, he said suggesting local and foreign investment on exports to remove supply side constraint to export diversification.
An appreciation of the real exchange rate over a long period of time poses a serious incentive problem to exports and it needs correction, Sadiq said recommending lowering domestic inflation to address it.
Tofail said that the local exporters were not taking advantages of trade benefit in many countries like Australia, New Zealand, Japan and China as they were confined in few markets especially the US and the EU.
Stressing the need for an increase in exports to the countries that offer duty benefits, he said the government is providing cash inventive for many sectors and going to provide such benefit to the ICT sector.
Kazi M Aminul Islam recommended economic diversification in primary, manufacturing and services sectors, which would help employment generation both in RMG and non-RMG sectors.
Zahid Hussain, lead economist and country sector coordination of the World Bank, said local market-based industries failed to grow in line with the support provided and common people paid for it buying products at a high rate.
He suggested that protection should be time bound and such support could be provided through generally depreciated currency.
There are so much talks including declaring leather as the product of the year regarding export diversification but actually these did not work because of exchange rate, said Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry.
Moreover, due to infrastructure weakness, exporters have to use the Dhaka port instead of the Chittagong port, she said.
Abrar A Anwar, chief executive officer of Standard Chartered Bangladesh, said footwear, toys, games, electronic and electrics, ICT were the potential sectors after the RMG sector.
Though the ICT has problems like skilled manpower, he said foreign direct investment was needed for skill development.
Md Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association, demanded depreciation of local currency, further lowering of bank interest rate and raising cash incentive for exploration of new markets.
Leathergoods and Footwear Manufacturers and Exporters Association president Md Saiful Islam demanded equal support for all sectors and stressed innovation, research and development for product diversification.
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