Contract production in agro exports: Incentive gap sparks outcry
Bangladesh’s processed food exporters are hitting a wall. The government dangles a 10% cash incentive and a 15% VAT exemption for agro-products—spices, biscuits, pickles, noodles—but there’s a catch: produce it in-house or lose out.
Contract manufacturing? No dice. This quirk, absent in the garment sector, has agro-exporters crying foul, warning it’s choking a potential 20-25% export boom.
A basket too big
Picture this: a foreign buyer orders a smorgasbord—chanachur, sauces, jhalmuri, chips—all from one supplier. Bangladesh’s agro-food scene, now exporting 50 product types to 144 countries, thrives on variety.
But no single factory churns out everything. “We lean on partners for some items,” says Mizanur Rahman, head of Needs Agro Food, which juggles 50 products.
“Take a 100-item order—we make half, source the rest. Without incentives or VAT breaks, costs jump 25%. India and Pakistan swoop in with cheaper bids.”
Abul Hashem, president of the Bangladesh Agro Processors Association (BAPA), nods grimly. “A buyer wants 10 items; you make six. Can’t deliver four? Order’s gone. They won’t shop around—it’s too much hassle.” He’s watched deals slip to rivals: “India and Pakistan incentivise contract work. We don’t. That’s our bottleneck.”
The price of rigidity
The rule’s fallout stings hardest for small and medium enterprises (SMEs), the backbone of this $2 billion export push.
BAPA pegs losses starkly: without cash aid or VAT relief, outsourced production inflates costs, kills competitiveness, and sends orders abroad. “Fix this, and exports could surge 20-25%,” Hashem insists. “Revenue would climb too.”
Take Kushtia’s rice snacks or Sylhet’s juices—shipped worldwide, yet shackled by a policy that demands vertical control. “We’re losing ground,” Rahman laments. “Buyers don’t care where it’s made—just the price.”
A plea to power
BAPA’s not sitting idle. Letters have landed at the Commerce and Finance Ministries, pleading for contract manufacturing to qualify for aid. General Secretary Md Iqtadul Hoque ups the ante: “We’ve requested a sit-down with Bangladesh Bank’s Governor. SMEs need this boost—our two-year goal is $2 billion in exports.”
Commerce Ministry’s Additional Secretary (Export) Abdur Rahim Khan offers a cautious ear. “We know the issue,” he told Jago News. “But with LDC graduation looming, Finance isn’t keen on new subsidies—they’re trimming old ones. Still, the Tariff Commission could weigh the exporters’ case. Then we’ll decide.”
A fork in the road
For Bangladesh’s agro-exporters, it’s a make-or-break moment. Fifty products, 144 markets, and a hungry global appetite dangle within reach—yet a rigid rule risks it all. Will the government bend, unlocking a quarter-billion-dollar surge? Or will SMEs watch their orders drift across borders, a feast lost to red tape?
