Monday, October 13, 2025

GARMENT INDUSTRIAL PARK: Economists against govt guarantee for foreign loan

The country’ leading economists have opposed a proposal of the apparel manufacturers seeking sovereign guarantee from the government against foreign loan for setting up a garment industrial park in Munshiganj. It will be risky for the government to give sovereign guarantee for the private sector project as the government will be responsible for the repayment of the loan if the garment factory owners become defaulters, they said.
The government has recently allocated 530 acres of land at Bausia under Gazaria upazila in Munshiganj to set up the garment industrial zone, where as many as 577 factories can be accommodated.
The two China companies have shown their interest to finance for developing the industrial zone as the garment owners sought foreign loan.
According to garment sector leaders, Hong Kong KRD International Investment Group Limited in December last year agreed to give loan worth Tk 1,400 crore at low interest rate to the garment factory owners with a condition of sovereign guarantee.
Since then the garment factory owners have engaged in hectic lobby with the influential government officials to get the sovereign guarantee against the foreign loan.
But according the economists, usually the government does not issue sovereign guarantee for any private project.
‘I do not support it. Why will the government issue sovereign guarantee against the garment factory owners’ loans?’ former finance adviser to the caretaker government AB Mirza Azizul Islam told New Age on Tuesday.
The government will have to make repayment in case the garment factory owners become defaulters of the loan, he said.
Former Bangladesh Bank governor Salehuddin Ahmed said the government should not issue sovereign guarantee against foreign loan for garment factory owners as it was risky.
The government could allow special loan for the factory owners from local banks to develop the industrial zone, he said.
‘The proposed garment industrial zone is completely a private sector project and so there is no reason on the part of the government of taking responsibility of the foreign loan,’ Policy Research Institute executive director Ahsan H Mansur said.
He said the government should be more vigilant about the sovereign guarantee against foreign loan so that no ‘unnecessary loss’ could suffer it.
Bangladesh Knitwear Manufacturers and Exporters Association vice-president Mohammed Hatem said they were trying to secure sovereign guarantee from the government.
He said as per the suggestion of Bangladesh Bank and Board of Investment, they had completed preliminary work to form a company comprising representatives from the Bangladesh Garment Manufacturers and Exporters Association and the BKMEA to receive the loan.
‘If the government does not issue sovereign guarantee, at least a government clearance for giving loan against manufacturers will require,’ Hatem said.
BKMEA vice-president Shahidullah Azim said the government could issue a ‘letter of comfort’ if it did not want to grant the sovereign guarantee so that the manufacturers could be able to receive the foreign loan.
The financing company has already agreed to ease its condition for financing as the government is unwilling to issue the sovereign guarantee against the foreign loan for private sector, he said.
‘Now we are trying for letter of comfort,’ Azim added.
Mirza Aziz said if the government issued letter of comfort it would tarnish the credibility of the government if the factory owners became defaulters.
Salehuddin said the government should not issue letter of comfort as there might be a possibility of legal complexity if the factory owners failed to repay the loan.

-With New Age input

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