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Exporters back interest subsidy

Refayet Ui MH Mirdha
Garment exporters and chamber leaders demand subsidies on bank interest rates instead of cash incentives as a stimulus in the upcoming national budget.
Finance Minister AMA Muhith has recently hinted that he will design a stimulus package for the ready-made garments (RMG) sector in the budget for fiscal 2009-10, as the sector was bypassed in the interim stimulus package.
But the minister did not disclose the type of the package to be offered -- whether it would be cash incentives against exports or subsidies on bank interest rates.
In the interim measure, the government announced aTk 1,500 crore package for agriculture, Tk 500 crore for farm loan recapitalisation, Tk 600 crore for the power sector, Tk 374 crore for social security (food) and Tk 450 crore for the export sectors.
Later, the spinning sub-sector was brought under the government stimulus package.
Jute and jute goods, leather and leather goods and frozen foods were beneficiaries of the stimulus for the export sectors.
While announcing the interim stimulus package, Muhith said different steps such as policy support and bank-loan rescheduling will be included in the budget for the RMG sector.
RMG exporters have been lobbying with ministers and influential sections of the government to receive the stimulus package.
Both leaders of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Garment Manufacturers and Exporters Association (BGMEA) met with newly appointed Bangladesh Bank Governor Dr Atiur Rahman and proposed a subsidy on bank interest rate as a stimulus package in the next budget.
BGMEA President Abdus Salam Murshedy had urged the government to give subsidy on bank interest rates, at 5 percent.
Talking to The Daily Star, Murshedy said if the government feels that there may be mismanagement in disbursing the cash incentives, it can provide subsidy on bank interest rates, which is
currently being preferred by the RMG exporters.
BKMEA President Fazlul Hoque said the subsidy on bank interest rate would be beneficial to the exporters if it were given at 5 percent.
Hoque said the proposed system of subsidy on bank interest may not equally benefit all exporters as the loan volume of many small and medium RMG entrepreneurs is very small. "But the system will be effective, as there is little scope for mismanagement."
Under the existing system of cash incentive disbursement, there are a lot of errors as a section of unscrupulous exporters overinvoice or take measures to receive more cash incentives.
At present, the government is giving cash incentives at 5 percent to the garment exporters.
Metropolitan Chamber of Commerce and Industry President Abdul Hafiz Chaudhury also supports the subsidy on bank interest
rate to favour all concerned.
Dhaka Chamber of Commerce and Industry President Zafar Osman said he does not support cash incentives for the export-oriented sectors. "The system of giving subsidy on bank interest rate would be more effective. ’
“But, we need subsidy nor only for the RMG sector, but also for frozen food, leather and other potential sectors, " he said.
reefat@ihedailystar.net