DCTS can be a game changer for Bangladesh: Experts

The introduction of the Developing Countries Trading Scheme (DCTS) by the UK can be a game changer for Bangladesh in breaking into the non-RMG export sectors, including light engineering products, experts say.

They said Bangladesh can expand its export of light engineering products in the prospective market of the UK as the country introduced preferential trading schemes like the GSP facility for developing countries this year.

Experts and industry leaders made the observations at a stakeholders consultative meeting, titled “Expanding Export to the UK Market: Light Engineering Products,” organised by Research and Policy Integration for Development (RAPID), in collaboration with UK Foreign, Commonwealth and Development Office (FCDO) at a hotel in Dhaka on Wednesday.

They also discussed the barriers and constraints faced by the exporters of light engineering products to the UK market, where Bangladesh’s share is still insignificant.

The DCTS is more flexible for least developed countries for exporting. There is no condition to fulfilling the international convention and the competitive labour cost can help Bangladesh to get a big slice of the pie of the light engineering market.

According to International Trade Centre’s trade map, in 2021, the UK imported light engineering products worth $327 billion. Of that, Bangladesh exported only $56 million, which is only 0.02 per cent of the total import by the UK.

Experts and industry insiders said some bottlenecks have led to the poor performance of this product’s export and the lack of value chain connection is one of the major issues.

The light engineering products’ quality and standards in line with the UK market’s requirements need to improve to boost exports. This sector also needs legal and other trade-related regulations for exporting in the UK and other non-tariff barriers need to be removed as well, they said.

Currently, the sector is facing some major problems, including customs and other logistics issues, lack of international standard testing facilities, lack of access to finance, problems with LC opening, lack of skilled labour force, quality and uninterrupted energy supply, maintaining labour law and working conditions, and environmental issues.

Industry representatives also identified the complexity of GSP verification from the UK end as one of the major hindrances.

While presenting his concept note, RAPID Chairman Mohammad Abdur Razzque said that DCTS for developing countries relaxes local value addition requirements from 30 per cent to 25 per cent, sets liberal product-specific rules, extends cumulation facilities, and removes the requirement to ratify certain international conventions. As a result, Bangladesh will benefit more flexibly in the UK market than the EU.

“Bangladesh has a competitive labour force, which can help the country boost the export of diversified products like light engineering. But Bangladeshi exporters are not linked with the international supply chain and it’s a key bottleneck,” he told The Business Standard after the event.

According to the Export Promotion Bureau, Bangladesh’s overall export of engineering products in FY2021-22 was $796 million, which is 1.5 per cent of merchandise export. But as part of product diversification beyond readymade garments, the government has identified some emerging products and light engineering is among them.

“In the case of raw material import, the customs department is assessing the increased value, instead of the actual value. As a result, we have to pay more taxes and duties and the production cost goes up. This decreased our competitiveness,” industry leaders said at the meeting.

For example, they said, customs on Tuesday assessed per tonne imported raw material against the increased rate of $2,160 while the actual price is $1,450.