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China tax rebate may hurt RMG exports

Refayet Ullah Mi rdha
Bangladesh will face tougher competition in global readymade garment exports because of China's latest move to raise tax rebate to 13 percent from 11 percent, industry leaders said.
But an economist said there was not so much to worry about.
Mustafizur Rahman, executive director of the Centre for Policy Dialogue, said the Chinese move on incentives for apparel exporters was meant 5 only to offset the yuan appreci- K ation against the dollar.
China, the world's largest apparel exporter, faced a tougher time in the wake of a strong currency that hurts exporters but benefits importers. The yuan traded at 6.8532 against the dollar, according to Wednesday's currency rate.
The Chinese government hiked tax rebate on exports on August 1 to help textile exporters cope with the fallout from a stronger yuan, falling demand and rising costs, the local industry leaders said.
Bangladesh Knitwear Manufacturers and Exporters Association president Fazlul Hoque said his organisation would hold a press conference on Saturday to ask the govern-
ment to increase cash incentives for RMG exporters.
"Bangladesh will suffer to some extent because of the Chinese tax rebate for exporters," said Hoque.
China, the top player in the global apparel business, poses a big challenge to Bangladesh. China controls about 40 percent of global RMG business and Bangladesh, on the other hand, has only a 2 percent market share.
Both Bangladesh and China compete in the same markets such as EU and US.
Other competing countries such as India, Pakistan and Vietnam have also increased incentives to ride out the rising costs of production, Hoque said.
In the last fiscal year, Bangladesh rolled out Tk 700 crore in cash incentives on exports of RMG products and the government has a plan for the current fiscal year to disburse Tk 1,270 crore in incentives, which include arrears, for RMG exports, said the BKMEA chief.
The trends shows cash
incentives for Bangladesh garment exports came down to 5 percent from 25 percent in the last six years.
" RMG exports may not be as smooth in future as in the previous years as the costs of production, wages and competition have been increasing, but the price index has been falling," Hoque said.
Despite an increase in the costs of around 15 percent last year, intense competition did not let producers pass higher costs on to buyers.
But the output of RMG is not increasing due to the shortage of skilled manpower and frequent outages of power and gas, he said.
CPD's Mustafizur Rahman discounted the fears of so much hurt to the local RMG sector.
"But Bangladesh should watch out, as safeguard measures on China from the US market will be gone from January 1 next year," the CPD executive director said.
According to export data from the Export Promotion Bureau, out of total exports worth $14,110 billion, only woven and knitwear, the two sub-sectors of RMG, fetched $10,699 billion in the immediate past fiscal year.
reefat@thedailystar.net