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Bangladesh Gov’t to Provide Cash Assistance to Garment Industry; Business Still Booms

Battered by political discord, apparel manufacturers have sought out the government’s assistance to help them weather business losses incurred from factory shutdowns. And their efforts have apparently paid off–the government has announced that it will disburse 5 percent cash incentives against export revenue to garment producers.

A notice was circulated by the Bangladesh Bank (BB) alerting garment manufacturers that they would be eligible if they produce woven apparel, knitwear or terry cloth towels. Also, in order to qualify, the producers must be willing and able to receive the funds via an electronic system known as “telegraphic transfer.”

In early December last year, garment, knitwear and textile associations collectively lobbied the government for help in response to both the losses generated by civil strife and the recently increased minimum wages.

Bangladesh, in particular Gazipur, has been center stage for the  persistent political violence that has plagued Bangladesh, the result of a contentious dispute between factory workers and owners over raising the minimum wage. Even after the Bangladesh Ministry of Labor officially signed off on the new minimum wage recommendations from the ad hoc Wage Board, simmering tensions have failed to subside. More than 2,000 garment factory workers took to the streets in Gazipur, violently demanding that recently shuttered factories reopen and that wage increases take immediate effect.

The violence crescendoed in a fire that engulfed a garments factory on November 29, reportedly started by workers enraged over rumors that a fellow colleague was killed by police. The inferno consumed the Standards Group factory in Gazipur, approximately twenty-five miles from Dhaka, the nation’s capital. The fire quickly spread to four adjacent buildings, frustrating attempts by firefighters to contain it. The Standards Group Factory is among the ten largest in the country, employing more than 18,000 workers.

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The Bangladesh government has also pledged to cut the export tax in half and to increase cash incentives for garment exporters another percentage point, a move which is estimated to cost 30 billion taka ($390 million).

Despite its recalcitrant political troubles, Bangladesh continues to be a magnet for apparel suppliers. Its readymade garment exports climbed nearly 20 percent year-on-year during the first half of 2013. From July to December 2013, garment exports hit $11.93 billion, a significant improvement over the same period the previous year, which achieved $9.95. Exports of woven garments did particularly well, leaping 20.37 percent to $5.98 billion while knitwear exports increased by 19.55% to $5.95 billion. The Bangladesh government expects total garment exports this year to increase a little more than 12 percent to approximately $24 billion.