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PROBLEMS of three types — the smuggling of fabrics into Bangladesh, the misuse of bonded warehouse facilities and misdeclaration in import, which also includes misinvoicing, in which prices of goods on invoices are stated less than the price actually paid to pay less in taxes — have largely held back the development of the primary textile sector. The sector, thus, loses business worth an estimated $6 billion a year on the domestic market. The value of the yearly commercial import fabrics, as the Bangladesh Textile Mills Association president says, is less than half a million dollars while almost a half of the demand for fabrics on the local market, about $6 billion in value, is met with foreign items. With such a negligible quantity of commercial import having happened on paper, saris and cloths for three-pieces, which are ensembles of three-part dresses of harmonious pieces, especially for women, and shirts have for long flooded the domestic market.
The association at hand says that the size of the domestic fabric market is seven to eight billion metres worth $11–12 billion and the local produces can supply only three to four billion metres of the fabric worth an estimated $6 billion. The rest of the demand is met with fabric smuggled into Bangladesh and the fabric leaked from bonded warehouses. Export-oriented industries enjoy a duty-free import of raw materials on condition that they will produce finished goods with the materials and export the products. The facilities are meant to make goods export competitive on the international market. But allegations have for long been rife that many export-oriented industries that enjoy the duty-free import of raw materials often sell the warehouse products on the domestic market in breach of the conditions of the facilities. All this holds the local industries from tapping into the potential on the domestic market although the industries export premium quality fabrics to the international market.
Added to this are issues of misdeclaration and misinvoicing in fabric import for tax evasion. There have been allegations that some businesses import fabrics measured in kilograms to evade paying taxes as a kilogram of denim cloths and a kilogram of chiffon fabric are not the same in quantity when they are measured in metres, which is the norm. The practice of stating price of goods on invoices as being less than the price actually paid so as to pay less in taxes has also been noticed. There has been the imposition of a 37 per cent duty on the commercial import of fabrics, which stops importers from selling the items at prices lower than the local fabrics after the duty is paid. But in all the three cases at hand, importers could sell the products at prices lower than what could be feasible for local industries.
All this together warrants that the government should effectively attend to the troubling issues. The government is reported to have amended the Bonded Warehouses Licensing Rules 2008 to stop the misuses of bonded warehouse facilities. While the rules at hand may still not be effectively enforced, the two other issues remain largely unattended. The government must look into all of the issues simultaneously to give the local textile industry the fillip that it needs for a sound growth.
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