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Implement Saarc cumulation protecting local textiles

EPB-textiles ministry study suggests

STAR BUSINESS REPORT
A study sponsored by the Ministry of Textiles and Export Promotion Bureau (EPB) recommended implementation of the Saarc cumulation by slapping "export tax" on Europe-bound garment products enjoying GSP facilities.
Saarc cumulation may be implemented but ready made garments made of imported fabrics and eligible for the generalised system of preference (GSP) facilities may be subjected to export tax equal to the benefit, it said.
Abul Kalam Azad, a professor of the Department of Economics, Chittagong University and AKM Atiqur Rahman, an associate professor of the Department of Economics, North South University conducted the study.
Earlier, a study of the Ministry of Commerce supported the Saarc cumulation saying it would not harm Bangladesh's textile industry. But other studies opposed the idea
terming it "ill-conceived" or "ill-advised", the researchers said.
The proposed Saarc cumulation will allow Bangladesh to export products by importing inputs from other South Asian countries.
The latest study said if the RMG exports and the domestic supply of fabrics continue to grow at the current rates, the latter will meet roughly 33 per cent of the total fabric requirement for the RMG exports in the year 2004.
The RMG exporters may be granted GSP certificate for exports worth Tk 200 against their use of local fabrics worth Tk 100 in producing export items, the study recommended in order to protect local textile industry.
Otherwise, the study said, RMG exports to the EU produced from imported fabrics may be subjected to the export tax.
"The implementation of the Saarc cumulation in this manner is expected to prevent the loss of domestic textile production while
allowing the RMG exporters to obtain GSP benefits on exports made from imported fabrics," the study said.
It mentioned that the GSP benefit is two per cent in case of less than 50 per cent local value addition while it is 12.8 per cent for more than 50 per cent value addition.
The experts said nearly 70 per cent of the fabric requirement of the knit products and 20 per cent of the woven are met from domestic sources thus making them eligible for GSP benefits offered by the EU.
They said the European Union takes about 70 per cent of knit-RMG exports and more than 45 per cent woven products, which indicates the importance of the EU as a destination of Bangladesh exports in general and RMG exports in particular.