Home ›› 24 Aug 2022 ›› Front
Bangladesh exported goods worth $359.21 billion in the last ten fiscal years, but repatriated $314.37 billion till date. The remaining $44.84 billion is yet to be tracked down, and experts believe a significant portion of this sum may have been laundered.
This figure, found in an analysis of the Bangladesh Bank and Export Promotion Bureau (EPB) data, is very close to the country’s record high foreign exchange reserves of $48 billion, posted back in August 2021.
Bangladesh has been grappling with declining forex reserves, and seeking loans from the International Monetary Fund (IMF) and other sources to cover the shortage. Stakeholders say if even a portion of the export earnings gap is filled, the country’s economic woes will ease a bit.
The Business Post approached a number of exporters, and officials of the EPB and central bank, but none could provide a valid explanation of the massive gap in export earnings. Industry insiders say a gap of 5 per cent – 6 per cent is normal, but 12.48 per cent is extremely unusual.
On the issue, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Fazlee Shamim Ehsan said, “The central bank suspended my back-to-back letter of credit (LC) facility for two months because I failed to repatriate $30 from my export earnings.
“How much of the billions of dollars have been repatriated till date? The government should investigate this matter thoroughly.”
Policy Research Institute (PRI) Executive Director Ahsan H Mansur said, “The gap in export earnings raised a lot of questions. Something has definitely gone wrong. Even if the exporters provide an explanation regarding the gap, a cell must be formed to probe the matter.
“The Bangladesh Bank should unearth the reason why such an amount went missing, and track down the people responsible for such discrepancies.”
Export earnings vs received payments
The EPB publishes monthly and yearly export earnings information on the basis of data collected from the National Board of Revenue (NBR). The NBR collects relevant data through the customs department and information submitted by exporters, said EPB officials.
The Business Post collected a number of documents from exporters – which they had submitted to the customs.
Such documents have a 56-point checklist that includes the exporter’s name, customer’s name, export destination, HS Code, total volume of goods, packet quantity, gross weight, net weight, unit price, total values of goods, exchange rate, and bank’s name.
EPB data shows that the country exported goods worth $36.67 billion in FY18, but the central bank data shows export payments reached $32.54 billion that year. This indicates that the country did not receive $4.13 billion or 11.26 per cent of the export payments in FY18.
In FY19, Bangladesh received $33.37 billion, despite exporting goods worth $40.53 billion – which shows a deviation of $7.16 billion or 17.66 per cent. In FY20, it received $29.97 billion against $33.67 billion in export earnings, and the deviation is $3.7 billion or 10.99 per cent.
Bangladesh exported $38.76 billion in FY21, but received 33.97 billion, with the deviation hitting $4.79 billion or 12.36 per cent. It earned $52.08 billion from exports in FY22, and received $43.61 billion in payments, showing a deviation of $8.48 billion or 16.28 per cent.
An analysis of 17 years of data on export earnings and received payments show that Bangladesh received $419.89 billion in payments, against goods exports worth $475.01 billion. During this period, the deviation was $55.12 billion or 11.60 per cent.
The analysis also shows that the export earnings gap or deviation increased whenever Bangladesh held the general election or faced political instability.
The deviation rate was 11.04 per cent in FY06, 10.13 per cent in FY08, 11.39 per cent in FY11, 12.07 per cent in FY13, 13.08 per cent in FY17, and 17.67 per cent in FY19 – the highest figure recorded in 17 years.
What’s the export procedure?
In a nutshell, exporters use two established methods – Letter of Credit (LC) and Telegraphic Transfer (TT) – for exporting goods. Among the two, the LC system is used by the majority of exporters.
An exporter opens a LC after receiving an order, and to avail the bond facility, they have to collect Utilisation Declaration (UD).
If shipments are designated as FOB (freight on board), sellers record sales as complete as soon as the shipments leave the warehouse. It means the buyers own the products en route to their warehouses and must pay any delivery charges.
Buyers nominate a third party to take further steps. It means, after an exporter secures a third party assessment certificate, and Export Permission (EXP) is submitted to the NBR, they become eligible to claim export payments.
The TT method is almost the same, but a buyer has clear payment before the goods are exported.
Industry insiders say though the TT system is less used, it has a far smaller scope for deviation. In contrast, the LC system has a larger scope for deviation – but not more than 5 per cent to 6 per cent.
How long do payments take?
Most Bangladeshi exporters export their goods using the FOB system. Under this process, when a third party inspection is completed, and goods are received by the Clearing and Forwarding Agents (C&F) agent, all liabilities regarding the goods fall on the buyers.
This means the buyers are contractually bound to pay exporters regardless of circumstances. Industry insiders say that the reputed buyers clear payments within a month after submission of export documents to a corresponding bank, but the process usually takes 60-90 days.
However, there are many non-brand buyers who take up to 120 days to issue payments, and sometimes in rare cases the payments get delayed by up to six months. There have been a few cases where the buyer did not clear payments, and exporters took legal action over the matter.
EPB, BB could not explain gap
The Business Post approached a number of EPB officials for explanation on the $44.84 billion export earnings gap, but they declined to comment on the issue saying the bureau only works on export promotion.
Whether the exporters received payment or not is a central bank issue, they added.
When approached for comments, several central bank officials said they have no clue why the export earnings gap became so large in the last ten FY.
Requesting anonymity, a senior official of the central bank said, “Sometimes a buyer finds fault in received goods and ask for discounts, but there is no logical reason for the huge gap in export earnings to exist.”
Bangladesh Bank spokesperson Md Serajul Islam also could not provide a solid explanation, instead he said, “Sometimes goods are sent abroad from home which are not exports – such as gifts. But those are shown as exports none-the-less.
“This is one of the reasons behind this deviation.”
Stakeholders demand investigation
Explaining the usual 5 per cent to 6 per cent export earnings gap, industry insiders mentioned a few reasons. Sometimes buyers book a new vessel or cargo plane after an exporter misses their shipment deadline, and deduct the fare from payment.
Exporters also claimed that many foreign buying houses receive their buying commission from the total export payment. Sometimes buyers also go bankrupt and payments get stuck for years. Buyers also ask for discounts when their sales go slow.
“But in all such cases, it is mandatory for us to inform the Bangladesh Bank,” BKMEA’s Ehsan said.
Commenting on the issue, several bankers say when exporters export their goods, buyers are contractually bound to pay them. If an exporter fails to repatriate their earnings, the central bank can take legal action on the matter.
Bankers further say that when buyers ask for discounts from exporters, they are obliged to inform the Bangladesh Bank. But such a phenomenon can be seen in only five per cent of total export cases.
Requesting the government to investigate the gap in export earnings, experts say the deviation may have been triggered by money laundering. They pointed out that the issue has persisted for more than a decade, but no one is looking into the matter seriously.
“If there is no other logical explanation, then the money was definitely laundered,” said Professor Mustafizur Rahman, a Distinguished Fellow at the Centre for Policy Dialogue (CPD).
PRI’s Mansur said, “I do not know why the central bank did not investigate this serious issue and take necessary legal action.”
Transparency International Bangladesh (TIB) Executive Director Dr Iftekharuzzaman said, “The gap in export earnings corroborates the reports that have been coming out every year on huge amounts of export-based money laundering through misinvoicing.
“Regrettably, there is no credible evidence that the government has taken trade-based money laundering with any seriousness, perhaps because of the lack of necessary political will, provided that many of those involved are among the strongest power bases of the government having a strong leverage.”
