Bangladesh Bank has issued a circular in this regard recently informing all commercial banks that they can thus reschedule such default loans of RMG factories on condition that the exporters make repayment when the lots are sold.

Previously, exporters had to make 15 percent down payment for rescheduling loans up to Tk 1 crore, 10 percent (but not less than Tk 15 lakh) for Tk 1 crore to Tk 5 crore and 5 percent (but not less than Tk 50 lakh) for more than Tk 5 crore.

Many view the move as a major incentive for the apparel sector, which will be exposed to international competition as the MFA ceases as from January 1.

"As we have only less than a month left to enter the open market regime, the recent government steps including exempting the garment units from Vat (value-added tax) and the reschedule facility of default loans in case of stock lots will help the exporters increase their competitive edge in the global market," Annisul Huq, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The Daily Star.

Small factories would be most vulnerable in the quota-free regime, he said, adding it would also be a risky situation for them if they are stuck with stock lots.

Huq said, "So, allowing them to reschedule their default loans without down payment will help them survive in the post-MFA era," adding, "BGMEA has been working for a long time on these issues to protect the interests of the small factories."

The BGMEA president felt the Vat waiver and loan rescheduling facilities would also help reduce other business costs.

The government from November 20 has exempted all 100 percent export-oriented industries from Vat on handling charges of freight at port and on clearing, forwarding, shipping and insurance.

The export-oriented industries will also enjoy Vat waiver on utility bills -- 80 percent for gas, 60 percent for water and 80 percent for electricity.