The government will continue to provide existing cash incentives and grants to exporters under different names to maintain their competitiveness in the global market when Bangladesh transitions to a developing country.
It will also introduce Merchant Trade and Countertrade to further increase export earnings. In addition, exporters themselves will have the power to issue declarations of non-compliance for priority exportable goods, according to the Export Policy Ordinance for 2021-24 issued by the Ministry of Commerce on Sunday.
In addition, the government will provide the necessary political support for the establishment of warehouses in the European Union, the United States, the Russian-led Eurasian Economic Union and Mercosur, an economic and political bloc of countries in the world. America, to create and develop brands of Bangladeshi products. in the international market.
By June 2024, the Ministry of Commerce in collaboration with other relevant ministries and the private sector will implement these initiatives.
In line with the Export Policy Ordinance, Bangladesh has set a target to increase its exports to $80 billion by 2024. Finance Minister AHM Mustafa Kamal told reporters yesterday that any the necessary assistance would be provided to achieve this objective.
When Bangladesh becomes a developing country in 2026, it will lose its trade preferences. In addition, it will no longer be permitted to offer cash incentives and various subsidies to exporters in accordance with policies approved by the World Trade Organization (WTO), pursuant to the Export Policy Ordinance.
Even in the EU market, duty-free benefits will be limited under the “Everything But Arms” program, resulting in a 10% increase in tariffs on average and a subsequent reduction in competitive advantage. export to international market, according to the policy.
Bangladesh will also have to abide strictly by rules of origin and deal with reduced special and differential treatment under various WTO treaties, notification obligations, etc.
Keeping all these issues at the forefront, the government will adopt a specific plan on how to integrate existing export incentives, subsidies and other aids into WTO-supported policies to improve Bangladesh’s export competitiveness, underlines the order.
According to the relevant sources, India, China and Vietnam have also continued to provide such support to their export sectors under various names.
For example, India has launched a “Make in India” program to encourage companies to develop, manufacture and assemble products in India and to encourage investment dedicated to manufacturing.
Vietnam has long introduced financial benefits in the form of industry and skill enhancement. China also provides financial support in the name of technological upgrading.
MA Razzaque, research director at the Policy Research Institute, told The Business Standard that Bangladesh needs to start conducting research now to find a mechanism to maintain facilities for exporters after the country exits the LDC group.
Echoing him, Mostafa Abid Khan, a member of the Bangladesh Trade and Tariff Commission, told TBS that after LDC graduation, export benefits can be offered in the form of a job security or an industry modernization fund.
“If Bangladesh enacts a law or formulates a policy to continue supporting in the name of upgrading the industry, it should not be only for the export sector as it would be a clear violation of Bangladesh’s policy. WTO In this case, we must give it to other sectors as well,” noted MA Razzaque.
According to the Ministry of Finance, in FY22, Taka 7,350 crore was allocated for cash incentives against exports of various goods and services. The allocation stood at Tk 6,828 crore in the previous financial year.
Shahidullah Azim, vice president of the Bangladesh Garment Manufacturers and Exporters Association, told TBS that signing free trade agreement with different countries is more important than pursuing subsidies and incentives.
“Vietnam has increased its export capacity through FTAs, we should also follow them,” he said.
In addition, it is also important to reduce the cost of doing business while increasing the ease.
Shahidullah also believes that a long-term and predictable tax policy for exporters will facilitate exports of synthetic fiber garments, thereby boosting overall exports.
This policy will remain in effect until June 2024, or until another new export policy is formulated. It calls for the introduction of merchanting and countertrade for the diversification of export trade.
Trading trade will allow the shipment of goods from one foreign country to another foreign country involving a Bangladeshi middleman.
On the other hand, countertrade is a reciprocal form of international trade, in which goods or services are exchanged for other goods or services rather than hard currency.
Currently, Bangladesh does not have a merchanting and countertrade policy. The export policy stipulates that necessary guidelines will be issued in this regard at the initiative of the Bangladesh Bank.
Merchant trading has been introduced in different countries around the world, said MA Razzaque, adding that this type of business is gaining popularity around the world. “Bangladesh must also develop a policy in this regard. If an exporter wishes to export a product from Singapore to the United States, specific guidelines are needed as to the amount of dollars that the Bangladesh Bank will allow him to buy the product from. Singapore and what will be the difference between the export price and the purchase price of the product.”
The export policy also plans to allow capable owner associations in key export-oriented sectors to issue Declarations of Use (DU) based on recommendations from the Ministry of Commerce to help reduce delays. enforcement in export trade and to simplify business practices.
DUs are issued by the Commissariat for Customs Guarantees of the National Revenue Office. Officials often take longer to issue DUs, according to exporters.
In the context of such allegations, the government authorized the BGMEA to issue DUs for ready-to-wear, the country’s main export product.
Exporters in various sectors, including plastics, have been seeking similar benefits for years.
Shamim Ahmed, Chairman of the Bangladesh Plastic Products Manufacturers and Exporters Association (BPGMEA), said that if their organization and those in other major sectors had the power to issue DUs like in the RMG sector, it would would help increase export volumes and diversify exports. products in these sectors.
“Although our organization signed a memorandum of understanding with the NBR on this issue a long time ago, it has not yet been implemented. We have been fighting for this for a long time.”
The Ministry of Commerce, in a bid to help export product diversification, will take coordinated initiatives to ensure that various sectors have the same facilities as the garment industry, the new export policy says.
It also calls for taking necessary measures to maintain the availability of raw materials for export-oriented industries and examining the feasibility of setting up sectoral central warehouses to keep the supply chain uninterrupted.
When a lockdown was put into effect in China in 2020 following the Covid-19 outbreak, various export-oriented sectors including RMG in Bangladesh fell into a commodity crisis. At that time, Commerce Minister Tipu Munshi announced that a central warehouse would be set up or an alternative source would be identified.
The policy also includes plans to establish product/sector focused institutes in the private sector like the Fashion and Technology University BGMEA for the advancement of product design, fashion and technology.
The government will provide financial assistance to exporters to develop technology, logistics and infrastructure to create online platforms and virtual markets.
The policy also states that in order to strengthen Bangladesh’s position in the global value chain, the government should expand the necessary policy support for the production and export of intermediate goods, as well as formulate strategies to attract investment and designate a special economic zone. to attract foreign investment in the synthetic fiber sector.
The policy calls for the establishment of test labs to ensure digital products and services meet international standards and arrangements for prompt and duty-free import and export of warranty and product samples.
It also promises long-term tax breaks for the development of the light engineering industry.