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Foreign investors have demanded cash incentive for exports from their readymade garment factories located inside the export processing zones in Bangladesh, claiming that the existing provision of cash incentive is discriminatory against foreign investors.
Exclusion of the foreign-owned clothing units inside the EPZs under the Bangladesh Export Processing Zone Authority from cash incentive on export proceeds discourages business of and investment by foreign investors, they said.
Commerce ministry officials said that they had received applications from at least two embassies in this connection.
The BEPZA has also requested the finance ministry to provide cash incentive to factories located inside the EPZs that are engaged in production of jute goods as factories outside the EPZs are enjoying the benefit.
The officials said that the then Japanese ambassador to Bangladesh, Hiroyasu Izumi, on September 16 in a letter to BEPZA executive chairman Major General SM Salahuddin Islam requested to review the policy and facilitate new market exploration assistance (cash incentive) for 100 per cent foreign-owned company (type A) and joint venture company (type B) in EPZs.
Currently, only 100 per cent Bangladesh-owned companies (type C) of the garment sector in EPZs are entitled to get this incentive, he wrote.
‘We are concerned about the growing incentive packages for domestic apparel manufacturers as the packages show effort of widening a sense of disadvantage at foreign-owned clothing units inside the EPZs,’ he said.
It can be considered unequal for investors and consequently discourages business of and investment by existing and potential Japanese companies in Bangladesh, he said.
‘We believe that giving cash incentive to type A and type B companies will be able to encourage further Japanese investment in future in Bangladesh,’ he said.
He also sent the copies of the letter to Prime Minister’s Office’s principal coordinator (SDG affairs), Bangladesh Bank governor, commerce secretary and finance secretary.
In a letter to commerce minister Tipu Munshi, British high commissioner Robert Chatterton Dickson on August 6 also said that a number of UK companies operating in Bangladesh had raised the issue to the high commission.
The government in the current fiscal year 2019-2020 introduced 1 per cent cash incentive for all RMG exports in addition to the existing 4 per cent cash incentive against exports to non-traditional export destinations.
Only type C companies within the EPZs are getting the benefits.
‘This could put the type A and type B companies operating in an EPZ at a 5-per cent disadvantage with type C companies in terms of export rebates,’ he said.
‘I would, therefore, ask you to consider ensuring export incentives are extended equally to foreign-owned as well as local firms,’ he said.
He said that this would send a strong signal about the value placed by Bangladesh on the international investment, which is so important to the country’s economic future.
In a letter to the finance ministry, the BEPZA in September 15 said that currently exporters got cash incentive against export of jute goods at various rates such as 7 per cent for jute thread (yarn and twine), 12 per cent for finished jute goods (hessian, sacking and others) and 10 per cent for diversified jute goods.
But factories in all categories located in the EPZs are kept out of the incentive though as per Foreign Private Investment (Promotion and Protection Act-1980), the government is supposed to accord fair and equitable treatment to foreign private investment, it said.
It said that 70 per cent of EPZ factories were owned by foreign investors — either fully or joint venture — while 80 per cent investment came from abroad.
Foreign investors applied to the BEPZA, claiming that they were not getting fair and equitable treatment as they were not getting cash incentive on export.
The remaining 30 per cent local investors in the EPZs are also not getting cash incentive for jute goods.
EPZ jute factories are lagging behind in competition in export market, it said.
The commerce ministry on October 14 asked the Bangladesh Tariff Commission to review the existing fiscal and non-fiscal benefits and other facilities being enjoyed by the EPZ companies, volume of export by EPZ companies, amount of cash incentives given to type C companies and international rules and regulations in this connection.
The BTC will give specific recommendations on the issue, it said.
Officials said that though type A and type B companies were not getting cash incentive, they were enjoying various fiscal and non-fiscal benefits from the government.
The ministry will make its recommendations based on the BTC report, they said.
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