Info Biz & Invest :: Export Policy of Bangladesh

Export Policy 2003-2006

The Export Policy 2003 - 2006 has been published both in Bengali and English Languages. If there is any inconsistency between the two versions the Bengali text will prevail.

1. Introduction

a) Increased production and massive expansion of commerce is one of the main means of local resource generation. Employment opportunities can be created in a populous country like ours with the promotion of export. This employment will pave the way for increased savings and investment, ensure capital flow, solve unemployment problems and eradicate poverty. In the field of commerce the main task of the government is to make Bangladesh economy strong and dynamic enabling it to face the challenges of rapidly changing world trade system. Currently the readymade garments (RMG) sector contributes two thirds of the Bangladesh's total export earnings. But the market of the readymade garments is limited. The North America and European Union are the main destinations of our export items. Though Japan has a good market of garments, we are yet to actively enter into that market. There is a possibility of major changes of the role of RMG sector in Bangladesh's export trading from 2005 or in the post MFA era. We need to undertake necessary measures so that the changes become favourable for Bangladesh.

b) There are scopes of thinking more about the necessity of developing backward linkage industries for a massive change in the RMG sector. But the reality suggests that there are scopes to adopt different means regarding backward linkage industries. In that case we will have to change our strategies in increasing the export of our products. Currently Bangladesh's export trading depends on two products (75 percent RMG and 6 percent frozen food). Such dependence is not expected for any country. So we need to produce new products with higher values, develop the designs and find new markets.

c) Continued efforts are underway to create markets for Bangladeshi products since the present government took over. Already duty free access has been availed for the markets in European Union, Canada, Australia and Norway. Though in limited scale, Bangladeshi products already found their access with lower duty in the markets of Thailand, India and Pakistan. Talks are underway with China, Russia, Malaysia and other neighbouring countries in this regard. A good result is being expected within a short period. But duty free access or special facilities are not everything; rather the use of such advantages is the main concern.

d) Only through changes in RMG industry the development of export trading would be an absurd idea, rather it would be difficult even to survive in the present situation. So Bangladesh should proceed in other areas of export trading. Quality of conventional 2-export items has to be developed - along with increasing their production. The list of export items have to be expanded exploring the non-conventional sectors like ICT, light engineering and auto-parts, agro-processing and pharmaceuticals along with finding their appropriate markets. The product quality too will have to be high and acceptable and any deviation in this regard will weaken our position in export trading. And if the export trading is not expanded, the desired national growth could not be achieved resulting in the economic backwardness, which would bar the overall national progress.

e) In order to promote export, scopes should be there to pay prices both under LC and contractual agreements. Besides the existing VAT and duty structures should be made time befitting and realistic. Moreover new products have to be added in the export basket.

f) Against the above backdrop the Export Policy 2003-2006 has been formulated.

2. Area

The objectives and targets, strategies, incentives/assistance that would be provided to expand export trading are presented serially below:

3. Objectives

Capacity building of export related institutions like EPB (through its reorganization to enhance institutional efficiency), customs department, land and sea ports, fisheries department, BSTI, Tea Board and trade bodies;
Product diversification;
Develop product quality and design and production of high value products;
Adopt new strategies for expanding export products, ensure good use of IT or computer technology, E-commerce and other technologies;
Develop necessary infrastructures and in required cases backward and forward linkage industries to ensure production of maximum volume of exportable items;
Create new exporters and provide all assistance to existing exporters and develop a business friendly attitude;
Develop expert manpower on trade ; and
Equip trade bodies, businessmen and concerned people with necessary knowledge on systems of world trading.

4. Target

4.1 The export targets for 2004-2005 & 2005-2006 have been fixed at US$ 8565.78 million and 9,599.20 million respectively.
4.2 Export growth is as follows :

Fiscal year	% of growth
2002-2003	+9.39%
2003-2004	+16.10%
Source: Bangladesh Export Statistics 2002-2003

4.3 Export as a percentage to Imports for the last 3 years is as follows:

(Value in million US$)
Fiscal year	Exports	Imports	Export as a percentage to Imports
2001-2002	5986	8540	70.09%
2002-2003	6548	9658	67.80%
2003-2004	7603	10903	69.73%
Source : Bangladesh Export Statistics 2002-2003

5. Strategies

Provide assistance through developing necessary numbers of product development councils for increased product of export items;
Provide market intelligence to producers and exporters on product demands and prices in markets abroad;
Offer increased institutional facilities through trading and export houses to encourage export;
Offer assistance in establishing seal of quality organization or similar organizations to ensure quality of export items in required cases;
Offer assistance in establishing “Bangladesh International Arbitration Centre” or similar organizations for prompt settlement and disposal of Trade disputes;
Offer assistance to producers for development of product designs and use of modern technology;
Offer assistance to enable exporters getting acquainted with the strategies and methods of countries which attained remarkable success in export trading and highlight the exporters; and
Organise single country export fair for Bangladeshi products abroad and offer assistance to exporters in participating trade fairs in different countries;

6. Incentives/Assistance

6.1 Government has declared the following package of incentives/facilities:
6.2 Fiscal facilities :
Income tax exemption for export earning: Under the income tax law other than the owners of factories not registered in Bangladeshi, all exporters will get 50% exemptions in their income taxes.
Exemption in insurance premium:
Bond facilities for export oriented industries:
Facilities for duty free import of capital machineries for export - oriented industries:
The export-oriented industries will get the advantage of importing 10 percent spare parts of their capital machineries without duty in every two years.
Providing alternative facilities to export-oriented local textiles and RMG other than duty-bond or duty-draw-back:
Tax holiday:
Duty-draw-back scheme.

7. Cash incentive

The rate of cash incentive as provided by the Government for export of different commodities is as follows :

Sl. NO.	Name of Commodities	FE Circular No. & date of Bangladesh Bank	% of Cash Incentive
01	Frozen Shrimp and other fish	FE No. 23, 12th December, 2002	10%
02	Product Made of HoOgla, Straw, Coir of Sugar Cane a) If local raw materials is used more than 80% b) If local raw materials is used more than 50%	FE No. 26 12th December, 2002	(a) 15% (b) 10%
03	Bicycle	FE No. 27, 12th December, 2002	15%
04	Crushed Bone	FE No. 25, 12th December, 2002	15%
05	Agro and Agro Products (Vegetables/Fruits/Agro Processing)	FE No. 05, 25th July, 2004	30%
06	Local Fabrics (I/C Handloom Fabrics) - For 2002-2003 - For 2003-2004 - For 2004-2005	FE No. 10, 5th June, 2002	15% 10% 5%
07	Jute Products	FE No. 19, 12th August, 2002	7.5%
08	Leather Products	FE No. 12th December, 2002	15%
09	Tobacco	FE No. 01, 28th December, 2003	10%
10	Potato	FE No. 01, 28th December, 2004	15%

8. Financial facilities

• 8.1 Use of foreign currency :

The exporters can deposit a certain amount of their export earning in foreign currency under a retention quota in their foreign currency account in the forms of US dollar, pound sterling, Japanese yen or euro. The amount of the retention (in terms of percentage) will be fixed by the government/Bangladesh Bank. This foreign currency can be used to fulfill real business needs like business trips abroad, participation in export fair or seminars in foreign countries, import of raw materials and spare parts and setting up office abroad. Presently 10% has been fixed for lower value added products (like RMG, petroleum by products, Naphtha, furnace oil etc.) and 50% for high value added products (like Computer software and data entry/processing service etc.)

• 8.2 Export Promotion Fund (EPF) :

(i) Offer venture capital with less interest rate and easy term for production;
(ii) Assist in getting foreign technical assistance, service and technology in product development and diversification
(iii) Assist in sending marketing missions abroad and taking part in international fairs for market promotion in foreign countries ;
(iv) Assist in setting up sales and display centre abroad and warehousing facilities ;
(v) Assist in participating product development and marketing training programmes for export promotion through attaining technical and marketing efficiency ; and
(vi) Facilitate in other activities for product and market development.

• 8.3 Providing fund for export :

(i) Interest free loans will be provided under duty-draw-back credit scheme
(ii) Import process of raw materials and related products will be made easier under the export promotion fund (EPF).
(iii) Facilities will be provided to open back to back LC for all exportable; and
(iv) The proposals for importing capital machineries with soft term loan with lesser interest rate can be considered for export promotion.

• 8.4 General facilities :

» The enterprises that export 80 percent of their products will get the facilities given to export-oriented industries.

» Reduced plane fare for priority products including vegetables and fruits.Biman will consider measures for reduced plane fare for exporting fruits, vegetables and ornamental plants by air.

» Withdrawal of royalty for expansion of cargo services of foreign airlines for export promotion:

» Fixing of limit for sending sample of export products annually :

» Arrangement and participation in international and single country trade fairs and other market development programmes abroad:

» Incentives will be given for organizing and participating in international trade fairs, single exhibition and other market development programmes and arranging single country trade fairs jointly by government and non-government organizations.

» Every year product-wise Commercially Important persons (CIPs) will be selected on the basis of the exporters' extra ordinary contributions to export promotion.

» National Export Trophy (NET) will be given in recognition of extra ordinary contribution to export.

» The Export Credit Guarantee Scheme (ECGS) will be restructured, activated and made efficient.

Source: Export Promotion Bureau.