Home ›› 21 Mar 2023 ›› Front
To tackle the challenges and retain competitiveness in the global export market after LDC graduation, Bangladesh’s businesspeople have demanded duty-free import of raw materials for all export-oriented non-RMG sectors and reforms in regulation to improve ease of doing business.
In response, Prime Minister Sheikh Hasina has assured that their demand would be considered gradually but emphasised prioritising diversification of products within RMG and other sectors.
The prime minister on Monday also emphasised formulating a new long-term export policy considering the country’s graduation to developing country from LDC after 2026.
“We will get some opportunities after we graduate to a developing country from the LDC in 2026. We need to plan now how we will utilise those opportunities to make our economy stronger and develop the country,” she said while addressing the 11th meeting of the National Committee on Export at Ganabhaban in Dhaka.
The meeting, attended by 49 committee members including 11 ministers, 11 secretaries, the Bangladesh Bank governor, top officials of the Prime Minister’s Office, Bangladesh Investment Development Authority, Bangladesh Economic Zones Authority, Bangladesh Export Processing Zone Authority, FBCCI, MCCI, BGMEA, BKMEA and other related chambers and associations, also stressed the reform of the export sector in view of the LDC graduation.
The prime minister said the duty-free facility on the import of raw materials for all export-oriented non-RMG sectors will be provided. However, this facility will not come all at once but will be given in phases by retaining the revenue income.
She also directed authorities concerned to increase cooperation with small and women entrepreneurs and find new export markets.
The Russia-Ukraine war has created an opportunity for Bangladesh to find new markets with its products. “We have to catch that,” she said.
Talking to The Business Post after the meeting, Commerce Ministry Senior Secretary Tapan Kanti Ghosh said that there is a lot of potentials to increase apparel exports by diversifying products. “There is great scope beyond the apparel sector to diversify export products.
“For this, bonded warehouse facilities should be provided in other sectors like apparel. In this case, it is necessary to get rid of the duty on the import of raw materials for export-oriented industries. If that happens, the barriers to export competition will be removed,” he said.
After LDC graduation, the partner country will have to give tariff concessions if they want to enter into a Free Trade Agreement (FTA). FTA should be signed to retain future market access. After FTA, import duty will have to be made zero within seven to 10 years, Tapan said.
Moreover, after 2026, as a developing country, tariffs will have to be removed in line with World Trade Organisation rules. Afterwards, no direct subsidy or cash assistance can be given to exports but it will be possible to provide facilities at the production stage, he added.
What businesses want
According to sources, the country’s trade bodies made several demands at the meeting, including more simplification of ease of doing business.
Particularly, they said, instead of having businesses renew different certificates every year, certificates should be issued for longer periods and online services should be introduced in offices related to business sectors. Money from the Export Development Fund should be disbursed in dollars instead of taka.
BGMEA President Faruque Hassan told The Business Post that at the meeting, they proposed to keep the source tax in the RMG sector within 0.5 per cent and not to raise the loan interest rate to boost investment.
He also said that fuel prices need to remain stable to maintain export competitiveness since export orders have already decreased.
Faruque also said that they demanded cash incentives and tax waivers on manmade fibre to increase investment and export of this product.
MCCI President Md Saiful Islam also told The Business Post that they called for reducing lead time to maintain growth after LDC graduation. The complications in the processes for doing business also need to be removed and the processes need to become simplified. In this case, he said, regulatory services can be provided quickly through outsourcing.
At Monday’s meeting, Senior Secretary Tapan also gave a presentation on the current situation of exports, opportunities and challenges after LDC graduation and ways to achieve export targets.
He said that the country aims to earn $80 billion through exports in 2024, $150 billion in 2031 and $300 billion in 2041. In this case, export earnings of four sectors apart from apparel are more than $1 billion. The government plans to these sectors’ increase export earnings between $5 billion and $20 billion.
To achieve these targets, emphasis should be placed on manpower skill development to increase production, he added.
LDC graduation challenges
Bangladesh will lose several trade-related international support measures after LDC graduation, according to Tapan’s presentation made on behalf of the Commerce Ministry.
For example, LDC-related preferences in the EU and UK will exist until November 2029. The country will lose duty-free market access in other countries including India, China, Japan and Canada. The matter of the same access in the EU after 2026 is still unsettled.
Loss of preferential rules of origin and services waiver for LDCs will be discontinued while TRIPs waiver and TRIPs exemptions will be withdrawn.
Meanwhile, export subsidies of cash incentives cannot be provided after LDC graduation in 2026 and exemptions from international trade regulations will be discontinued due to the loss of policy space.
The intellectual property rights regime will have to be enforced. Compliance with Environmental, Social and Governance factors will arise while LDC-related technical assistance will phase out after LDC graduation.
Recommendations
The presentation also made some recommendations for the government and businesses to achieve export targets after LDC graduation.
The graduation will bring more opportunities for RMG as China’s market share is falling fast due to geopolitical factors and Bangladesh is set to gain from this. Vast potential also exists in exporting more manmade fibre-based products.
The export potential of several other sectors is also likely to grow. These include leather goods and footwear, jute goods, light engineering, agro-processing, ICT and ITES, plastic and pharmaceuticals.
It was also recommended that tariff policy should be rationalised to facilitate export diversification.
The other recommendations include a time-bound action plan to phase out import, supplementary and regulatory duties; preparatory measures in areas such as services, intellectual property protection and investment regime; environmental protection; and developing capacities for international standards in testing and certification.
