We need employment, investment, productivity, and real ability to survive global competition. An important basis of this entire economic structure is the country’s readymade garment industry. For many years, this industry has been the main driver of the country’s export earnings, the face of industrialization, and the source of livelihood for millions of people. As a result, the question naturally arises: what budget is needed for the garment industry?
People’s expectations for the new government are higher than at any other time. The government has to navigate a fragile economic reality on the path to stability and prosperity. Keeping that goal in mind, the government has formulated a new five-year strategic development framework that builds on the traditional five-year plan. The long-term economic plan aims to create 10 million new jobs by 2030 and become a $1 trillion economy by 2034. To implement it, the industrial sector has to move forward. It is difficult to imagine that plan without excluding the readymade garment industry within the industrial sector. But the reality is that the industry is currently facing multiple challenges. Global economic instability, the impact of the war situation, the energy crisis, high interest rates on bank loans, infrastructure constraints, and the challenges of LDC graduation – all of these are creating uncertainty. As a result, this year’s budget is not just an annual income and expenditure account; This will be the direction of the industry and investment environment for the next few years.
pressure on the national grid, enhance energy security in the industry, and lower production costs. Energy insecurity is one of the biggest crises facing the industrial sector. For nearly a decade and a half, the industries have been suffering from an uninterrupted gas and electricity crisis. In particular, the garment industry and its backward-linkage sectors (yarn, fabric, dyeing, and accessories) are lagging in the competition due to production disruptions. According to industry entrepreneurs, about 40 percent of production is currently affected by energy problems. This is a very worrisome reality for an export-oriented industry. Therefore, the energy sector must be given special attention in this year’s budget. Instead of relying solely on LNG imports, it is important to explore new gas fields and take long-term energy plans. For many years, the country lacked effective efforts to explore new gas. Now it’s time to get over the stagnation. At the same time, opportunities should be created to increase investment in renewable energy. In particular, the potential for solar power in industry is huge. But at present, the high duties and taxes on the import of solar PV system installation machinery are discouraging entrepreneurs. If the import duty on this equipment is reduced to 1 percent, many industries will be interested in producing their own electricity. This will reduce the pressure on the national grid, increase energy security in the industry, and reduce the cost of production in the long run.
In addition to fuel, another major problem is high-interest bank loans. At present, the interest rate on industrial loans has reached close to 14 percent in many cases. It is becoming almost impossible to run a long-term industry at such high interest rates. Not only the garment industry, but the entire business sector is under pressure. Entrepreneurs say that in this situation, many people lack the courage to make new investments. Moreover, working capital is very important for export-oriented industries. To compete in the international market, we have to ensure the timely procurement of raw materials, production, and supply of goods. But when the cost of credit increases, so does the cost of production, ultimately weakening Bangladesh’s competitiveness in international markets. Therefore, there is a need to take the initiative in the budget to bring down the interest rate on industrial loans to a tolerable level. At the same time, special low-interest funds can be set up for technology development, energy efficiency, and green investments.
Bangladesh is now on the verge of graduating from LDC status. The government may be trying to get a waiver for some more time. The reality is that this will happen at some point. Then there will be no tax benefits and cash incentives in the international market. Over the years, incentives and cash assistance for export to new markets have been gradually reduced. In such a situation, the question is, how will Bangladesh maintain competition in the global market? It’s important to look at the competing countries here. Neighboring India has been providing production-based incentives, infrastructural support, and tax benefits to sustain its export sector. Vietnam, on the other hand, has strengthened its position in the global market through long-term policy stability, a streamlined customs regime, and a foreign-investment-friendly environment. As a result, if Bangladesh reduces policy support, it will be difficult to survive in the competition. In this reality, tax policy has become very important. The entrepreneurs want the corporate tax rate to remain at 12 percent and the source tax limited to 0.5 percent to 0.6 percent. At the same time, there is a need to reduce the tax burden on the backward linkage industry. To strengthen the main garment industry, the local raw-material-producing industries must also be sustained. Otherwise, the import dependency will increase, and production costs will also rise.
Not only tax policy, it is also important to simplify the business environment. At present, industries have to spend extra time and money due to port congestion, customs complexity, delays in getting bond benefits, and HS code-related problems. In many cases, unnecessary obstacles have been created to sourcing raw materials locally. To solve these problems, the entire customs and bond system has to be brought into a digital and integrated framework. The weakness of the logistics sector is also a major obstacle to the industry. It is not possible to increase export capacity without reducing container congestion at the port, accelerating unloading, and improving road infrastructure. International buyers now don’t just want products at lower prices; They also want timely delivery and a reliable delivery system. As a result, infrastructure development is no longer a luxury but an economic necessity. At the same time, the issue of eco-friendly industrialization is also gaining importance. Global brands and consumers are now emphasizing sustainable production. Therefore, it is important to continue the duty exemption on the import of ETP, WTP, more plants, and fire safety equipment. Bangladesh’s garment industry will become more acceptable and competitive if investment in new technologies and green energy is encouraged.
The present government has taken initiatives to close down and reopen sick industries, which is positive. The government’s initiatives to provide financial and policy support to revive these institutions need to be implemented effectively. In particular, loans, tax exemptions, and restructuring facilities should be provided on easy terms to resume production. Another important issue is the need for an integrated national plan for the industry’s future. With the challenges of the next 5-10 years in mind, a practical roadmap must be prepared. For this, the government can form a high-level national task force that includes industry owners, representatives from the backward linkage sector, labor representatives, transport sector representatives, economists, and all other stakeholders.
The garment industry is not just a source of export earnings; It is one of the foundations of Bangladesh’s social and economic stability. The more investment in this industry increases, the more jobs will be created. If employment increases, people’s incomes will rise, the domestic market will strengthen, and the wheels of the economy will turn more dynamically. Therefore, this year’s budget should not be just a number, but a far-reaching economic message. Bangladesh wants to move forward on the path of industrialization. At the forefront of that journey will be the country’s readymade garment industry.
