Gas price hike to erode export competitiveness

Economists, exporters want review

Staff Correspondent | Published: 22:23, Feb 25,2017

 
 

Economists and exporters on Saturday expressed their worries that the latest price hike of gas would raise the cost of doing business and affect industrial growth and exports.
The local industry will also lose competitiveness at the global market due to the resulting production cost increase, they said.
The government on Thursday increased the prices of natural gas by 22.7 per cent on an average across the board in two phases with effect from next month.
In a press statement, the Dhaka Chamber of Commerce and Industry said that the latest gas price hike would increase cost of doing business and affect inflation in the country.
Gas supply to the industries and households is still not sufficient, the chamber said adding that this hike would result in a price spiral of commodities on the retail market.
‘It will also impede export competitiveness, manufacturing sector, increase transportation cost and overall cost of doing business,’ the DCCI said.
The decision will emerge as a challenge for garments and local industries as they have to survive facing hard competition in the world market, the chamber said.
Besides, gas-based power generation, captive power generation and fertiliser production will also be costlier due to the gas price hike, it observed.
The DCCI, the largest trade body in the country, urged the government to review the decision considering the present cost of doing business, inflation and the greater interest of mass people.
The Exporters Association of Bangladesh said that exporters were worried due to the gas price hike by 15 per cent in two phases for the industrial sector.
It said the price hike would raise the cost of production and affect export growth.
In a statement, the EAB also said that the price hike would directly hurt all industries including export-oriented ones.
EAB president Abdus Salam Murshedy said that readymade garment, textile, fish and other frozen foods, plastic, leather and other export sectors would face negative impact and loose competitiveness due to the price hike.
The export-oriented industries have been fighting to survive after making huge investment to ensure compliance after the Rana Plaza building collapse and the recent global developments including Brexit, devaluation of the euro and price reduction by international buyers have added to the woes.
The gas price hike will be a double blow to the sectors, the EAB said.
Local exporters will fall behind in competition with other countries in the global market and continue to lose capacity in export to the international markets due to the decision, it said.
The EAB requested the government to review its decision.
Bangladesh Textile Mills Association director Mohd Khorshed Alam said that the cost of production would increase by 3 per cent in the textile industry mainly in spinning and dying factories because of the gas price hike.
‘The industry may not able to recover the cost through increasing the prices of products,’ he said.
The RMG sector, the main user of textile products, may be hit if the cost of production increases in the textile industry, he said.
The cost of production had increased by 6 per cent in just one year ago due to a 100-per cent price hike of gas for the textile sector in August 2015, he added.
Former interim government adviser Mirza Azizul Islam said the cost of production and transportation would increase once the decision comes into effect.
The gas price hike will also increase the prices of commodities on the local market as the producers will raise the prices of products, which will hurt the poor section people, he said.
The standard of living of lower income and lower-middle income households will be under pressure as they have to pay additional money for gas use, he added.
Centre for Policy Dialogue additional research director Khondaker Golam Moazzem said that the gas price hike would affect the production cost of gas-dependent industries including the textile sector.
But, the impact would be little if the government would have adjusted the prices of all types of energy products in line with the international prices, he said. 

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