The latest national budget in Bangladesh marks a deliberate shift from a purely growth-focused strategy to one centered on holistic development. This strategic redirection aims to propel the Bangladesh economy towards becoming a trillion-dollar powerhouse by the year 2034. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has commended the finance minister for robust efforts to sustain the nation’s macroeconomic stability, enhance business facilitation, and establish predictable long-term policies for investors, particularly in the face of diverse global and domestic economic pressures.
New Budget Priorities for Economic Development
A distinctive feature of this national budget is its pronounced emphasis on crucial areas such as education, healthcare, and social protection. The budget sets an ambitious growth target of 6.5% for the forthcoming fiscal year. Complementing this, ten critical priorities have been clearly outlined. These include fostering investment-driven employment generation, cultivating a production-oriented economy, pursuing deregulation, ensuring financial sector stability, and securing energy reliability. The BGMEA regards these measures as highly significant and supportive for the nation’s industrial expansion, trade growth, and, crucially, for facilitating a smooth graduation from the least developed countries (LDC) category. This holistic approach underpins the broader economic development goals.
Apparel Sector Faces Headwinds
The announcement of the new national budget coincides with an urgent BGMEA meeting convened to address a “persistent decline” in garment exports. The Apparel sector, a cornerstone of the Bangladesh economy, has been contending with a global economic slowdown and escalating domestic operational costs. This combination of factors has led to a 3.41% decrease in apparel export earnings, a 1.55% drop in average unit prices, and a 7.93% reduction in the opening of back-to-back Letters of Credit (LCs) for raw material imports during the current fiscal year. Consequently, approximately 400 factories within the Apparel sector have ceased operations over the past three years, highlighting significant challenges.
BGMEA Calls for Critical Policy Support
While the reform-oriented announcements within the Bangladesh Budget Economic Shift are generally seen as beneficial for industries, the BGMEA stresses that the current difficulties faced by the Apparel sector necessitate specific policy support measures. These measures are deemed essential to safeguard the industry’s competitiveness, given its pivotal role as a primary source of employment and foreign exchange earnings for the nation.
The BGMEA has put forth several BGMEA recommendations it hopes will be incorporated into the budget to mitigate the ongoing crisis in the Apparel sector. These include a reduction in withholding tax, a decrease in income tax applied to cash incentives, ensuring a reasonable corporate tax rate, eliminating double taxation in the sub-contracting process, and reducing import duties on man-made fibre-based apparel inputs.
In a formal statement, the organization underscored its belief that “the apparel sector is not only the country’s leading foreign exchange-earning sector but also a major driver of employment generation for millions of people.” To maintain international market competitiveness post-LDC graduation, the BGMEA emphasizes the necessity of reducing business costs, guaranteeing an uninterrupted and affordable supply of gas and electricity, and further streamlining customs and port-related procedures. This aligns with their prior plea in April for government intervention to resolve an ongoing gas and electricity crisis impacting the Apparel sector, as the energy challenges have driven up raw material prices and transportation costs, thereby increasing overall production expenses. These BGMEA recommendations are crucial for sustained economic development.
