Sherpa Hossainy's Blog

Credit policy hindering Light Engineering Sector

Posted in Bangladesh, Business, Dhaka, Economy, Export and Import by Sherpa Hossainy on May 28, 2011

Published in The Daily Independent on 27 May, 2011

Read the article on the Independent website

Digital print edition

Light engineering sector is reeling from lack of access to credit and sluggish government initiatives, a study revealed.

Despite contributing 2.2 percent of the GDP, which is more than the foreign aid that the country receives in a year, land and energy crisis and poor credit accessibility is hurting the labour-intensive sector’s growth potential, the study said.

International Business Forum of Bangladesh (IBFB) conducted the study titled “Identifying Regulatory Impediments of the Light Engineering Sector and Improving Transparency” as part of its research activities funded by USAID-PROGOTI.

“There should be simplified VAT payment, based on total turnover instead of categorised VAT and tax structure,” IBFB research officer Md Deloar Hossain said Thursday at a view exchange meeting.

IBFB Chairman Mahmudul Islam presided over the event, while Editor of the Financial Express Moazzem Hossain was present as the chief guest.

Deloar Hossain said the entrepreneurs are currently paying 15 per cent VAT (Value Added Tax) on finished LE products and 17 per cent duty on the repairing services.

IBFB chairman said, “The government can build multi-storied buildings in its khas lands to house those industries where all kinds of facilities should be available.”

Moazzem Hossain said that the government should incorporate effective initiatives to promote this industry as it generates annual revenue of Tk 9,500 crore (US$ 1.36 billion).

The sector employs nearly 800,000 people by making import-substitute products worth Tk 2,000 crore a year, he said, citing the study report.

“Despite facing a number of obstacles, the sector has managed to keep a seven per cent growth,” Moazzem Hossain said, adding that it also earned Tk 12-15 billion through exports.

He said Bangladesh depends heavily on the readymade garment sector to earn foreign currency, but such dependency should be reduced for the sake of balanced economic growth and export diversification.

Journalists participating in the view-exchange meeting also emphasised the need for dialogues with the private and public banks so that the traders can avail access to industrial credit at a tolerable interest rate.

The sector’s contribution to production, maintenance and repair of automobile spare parts is worth about $75 million. Statistics show that the country spent $2.3 billion in importing cars and another $75 million in automobile spare parts in the 2007-08 fiscal year.

According to Export Promotion Bureau (EPB), export earnings from this sector were $310 million during 2007-08 compared to $285 million in 2006-07.


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