Bangladesh's prime textile exports would face more competition after China raised a tax rebate on a range of textiles and garments to 13 percent from 11 percent, a top business leader said on Sunday.
The China tax rebate came into effect on Friday, to help textile exporters in that country cope with a stronger yuan, weaker demand and rising costs, Anwarul Alam Chowdhury Parvez, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said. "It means now China will gain more competing power in international markets and it will be more difficult for us to compete with them," he added.
Bangladesh offers 5 percent cash incentives, down ffrom 25 percent six years ago "We have a similar problem as our currency taka is strengthening against the US dollar while costs are also rising gradually," he said.
Over the last two years the value of dollar has fallen about four percent to an average 68 taka, officials said. "Moreover, cost of production increased up to 15 percent after Bangladesh increased oil prices last month and also due to rising prices of other inputs," Parvez said.
Ready-made garments suffered in the half year to the end of June because of political instability, but had since rebound as the political situation improved.
"Earlier we were upbeat with the prospect of healthy growth in the major export destinations, as Chinese production became expensive," he said. India is another threat as the rupee had depreciated against the dollar, while Bangladesh's central bank was pumping US dollars into the market to prevent currency depreciation, Parvez said.
"With poor infrastructure, especially the frequent power crisis, very high interest rates on bank loans and high transport costs, it is not possible to sustain against China and India," Parvez added.
"We have to pay up to 20 percent interest rates for bank loans while Chinese exporters pay only 3 percent. We also require 42 days to export to the US market while our competitors require only 18." Bangladesh's exports hit a record $12.18 billion in the fiscal year that ended in June 2007, of which more than $9 billion came from garments.
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