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The primary textile sector of Bangladesh is losing business worth about $6 billion annually on the local market due to smuggling of fabrics, misdeclaration in imports and misuse of bonded warehouse facilities.
According to business leaders in the sector, saris, three-pieces and shirting cloth from India, China and Pakistan have been flooding the local market for a long time though official data show very negligible quantities of commercial imports of the items.
‘By analysing import data we have found that the value of the annual commercial import of fabrics was less than $0.5 million whereas almost 50 per cent of the local demand, worth nearly $6 billion, is being met by foreign items,’ Mohammad Ali Khokon, president of Bangladesh Textile Mills Association, told New Age recently.
Commerce minister Tipu Munshi on Friday said that his ministry was aware of the allegations of misuse of bonded warehouse facilities and smuggling of fabrics, adding that the government had taken required steps to address the issues.
According to BTMA data, the size of the domestic fabric market is seven to eight billion metres worth $11 billion to $12 billion.
While local producers supply only three to four billion metres of the fabrics worth some $6 billion the rest of the demand is met by foreign fabrics that come through smuggling and leakage of bonded warehouse facilities, BTMA leaders said.
The local textile industry could not tap the potentials on the domestic market though it exports premium quality fabrics to the global market, they added.
The BTMA president said, ‘The market situation suggests that fabrics are smuggled into the country and bonded warehouse facilities are misused.’
He further said that the local textile makers were also losing their competitiveness as the smuggled and warehouse fabrics were selling at very low prices on the domestic market.
‘As the government has imposed a 37 per cent duty on commercial import of fabrics it is not possible for importers to sell the items at prices lower than those of local fabrics after the duty is paid,’ Khokon observed.
Before the coronavirus pandemic, huge quantities of women’s clothing, including saris and three-pieces, were entering the country illegally through border haats while the illegal business had remained suspended since the pandemic broke out.
But the smuggling of fabrics from across borders has started again after about 1.5 years as the governments of Bangladesh and neighbouring countries have eased the Covid restrictions, said Narsingdi Chamber of Commerce and Industry president Md Ali Hossain.
According to him, the country’s textile sector is able to meet the domestic demand for cloth but the smuggled fabrics and fabrics imported under duty-free facilities are hindering the growth of the sector.
While commercial import of fabrics, he further said, was almost zero during the pandemic still foreign cloth was available at the Islampur market in the old part of the city, meaning that fabrics imported under bonded warehouse facilities were being sold on the open market.
Textile mill owners said that the misuse of bond facilities and the import of fabrics through misdeclaration were also hitting the backward-linkage industries hard.
BTMA senior vice-president Fazlul Hoque said, ‘Along with the misuse of bond facilities, a section of businesses are importing fabrics through under-invoicing to evade taxes. Some of the businesses import fabrics measured in kilograms to evade taxes as a kilogram of denim cloth and a kilogram of chiffon fabric are not same in quantity when measured in, say, metres.’
‘We have failed to make any significant progress in woven fabric production due to the smuggling and the illegal import of the item from neighbouring countries and the misuse of bonded warehouse facilities,’ he observed.
He said that it was a longstanding demand from the textile mill owners that the leakage of bonded warehouse items and the smuggling of fabrics should be stopped to protect the local industry.
The BTMA president said that the backward-linkage industries of the country’s woven sector would not be able to make progress if the government failed to stop illegal import of fabrics.
The smuggling, misdeclaration in imports and misuse of bonded warehouse facilities are hindering the livelihoods of 10 lakh people, who are involved in the operation of power looms across the country, he said.
Amid growing allegations of misuse of duty-free import facilities, the National Board of Revenue on June 30, 2020 issued a statutory regulatory order amending the Bonded Warehouse Licencing Rules-2008.
The revenue board incorporated a number of conditions in issuing bonded warehouse licences to prevent misuse of the duty-free import facilities under bond licences.
Following the amendment, the applicants for bond licences have to submit a total of 23 documents, including on the minimum size, capital and lifespan of the factory, instead of the previous 14 documents, with their applications to the Customs Bond Commissionerate.
Commerce minister Tipu Munshi on Friday said to New Age, ‘The ministry is aware of the allegations of misuse of bonded warehouse facilities and the misdeclaration in import of fabrics. Such unfair practices should be stopped to protect the interest of the local textile industry.’
He added that the government had taken required steps to address the issues.
The minister went on that his ministry had sent letters to the departments concerned to take initiatives to prevent the leakage of bonded warehouse items and the smuggling of fabrics.
They will send further letters to the ministries and departments concerned, if necessary, to check the malpractices so that the local industry can grow, Tipu Munshi also said.
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