BANGLADESH last Thursday (2) unveiled plans to cut taxes for the crucial garment industry as it unveiled a whopping $43 billion (£29.5bn) budget and targeted growth of more than seven per cent for the second year running.
“GDP (Gross Domestic Product) growth is expected to edge up to 7.05 per cent this fiscal year,” finance minister AMA Muhith told lawmakers.
Although a quarter of its 160 million people still live below the poverty level, Bangladesh has registered annual growth of around six per cent in nearly every year since the turn of the millennium.
But the World Bank says it needs at least eight per cent growth to provide work for the two million people who en- ter the jobs market every year.
Muhith said the garment industry – which has continued to thrive despite re- cent deadly disasters and political strife – was crucial to keeping growth ticking along and generating employment.
“Acknowledging this, the Bangladesh government is providing substantial tax benefits to this sector,” he said. “I propose to reduce the tax rate of the RMG (ready made garment) sector from 35 per cent to 20 per cent.”
Bangladesh exported more than $26bn (£18bn) worth of garments in 2015, with increased orders from Western retailers such as Walmart and H&M fuelling a rise in shipments of around 10 per cent.
Muhith said the economy would expand by 7.2 per cent in 2016-17
off the back of increased spending in infrastructure and the energy sector and a hike in private investment. He also announced an ex- pansion of VAT and plans to pay pensions to private sector staff for the first time.