Bangladesh’s garment makers have asked the government to extend a 5 percent export subsidy for the industry, saying they are being squeezed between low international prices for clothing and rising production costs.
The country’s garment industry, the world’s second-biggest producer, currently receives a 5 percent cash incentive for exports but that is due to end on June 30.
Siddiqur Rahman, the president of the Bangladesh Garment Manufacturers and Exporters Association, told reporters on Wednesday that without the subsidy, more garment makers would go out of business. The association says that 1,200 garment factories have closed down in Bangladesh in the past five years.
Siddiqur said another 5 percent cash incentive on exports would cost the government $1.67 billion.
Commerce Minister Tipu Munshi told Reuters that he would talk to the finance minister about including the proposal in the budget for the fiscal year beginning July 1.
“After the enhancement of wages since December last year there is a pressure to the owners and if they get some cash incentive that would be a relief,” said Tipu.
Siddiqur said that the prices of readymade garments in 2018 were 7.4 percent lower in the U.S. market and 3.64 percent less in the European market than they had been in 2012.
At the same time, the manufacturers’ costs have been climbing, mainly driven by labour costs.
Last year, there was a big increase in the minimum wage for Bangladesh garment makers and that drove the costs of production higher.
Bangladesh earns about $30 billion annually by exporting readymade garments.