1. 1 Bangladesh Export and Import

2. Bangladesh Foreign Trade - Introduction 2 Bangladesh negative trade balance since independence in 1971. In the mid-1980s, the annual pattern was for exports to cover only around 30 percent of the cost of imports. Merchandise exports reached the value of US$1 billion in FY 1987 for the first time, and in that year import payments were US$2.6 billion, leaving a trade deficit of over US$1.5 billion, about average throughout the 1980s.

3. Bangladesh Foreign Trade - Introduction 3 The annual deficit was limited by government controls to between US$600 and US$700 million on capital goods and US$500 million on nonagricultural industrial commodities. The largest component in the latter category was crude oil and petroleum products. Bangladesh incurred a debt each year for grain and other food needs, always higher than US$200 million, and sometimes going to double or even more. The country had a positive balance on nonfood agricultural production, because jute and ready-made garment exports eliminated the deficit in fibers, textiles, and garments.

4. Bangladesh Foreign Trade - Introduction 4 One way the society has been able to turn its economic problems and overpopulation to some advantage is by exporting workers to wealthy, Islamic countries, chiefly in the Persian Gulf. The remittances from these workers have come to constitute one of Bangladesh's greatest sources of foreign exchange.

5. Terms of Trade 5 Terms of trade or TOT is (Exports)/(Imports), or (Price Exports)/(Price Imports). An improvement in a nation's terms of trade (the increase of the ratio) is good for that country in the sense that it has to pay less for the products it imports. Terms of trade are widely used instruments to measure the benefits derived by a nation from international trade.

6. Terms of Trade 6

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8. Revealed Comparative Advantage (RCA) of: BANGLADESH 8 The Revealed Comparative Advantage (RCA) according to the CEPII formula shows the contribution of each sector to the country's overall trade balance. The higher the Index or the better (lower) the ranking, the larger is the contribution of the sector to net exports (exports minus imports) and the balance of trade. The Index indicates the difference between actual net exports and the adjusted net exports taking into account the country's overall trade surplus/deficit. Calculations based on COMTRADE of UNSD Source: ITC 2001

9. RCA – Bangladesh Competitiveness 9

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12. Tariffs and imports by product groups 12 Final bound dutiesMFN applied dutiesImports Product groups AVGDuty-freeMaxBindingAVGDuty-freeMaxShareDuty-free in % Animal products192.6 0 20010021.1 3.8 25 0.1 47.2 Dairy products157.5 0 20010024.4 0 25 0.6 0 Fruit, vegetables, plants193.2 0 20010020.3 2.2 25 1.6 61.7 Coffee, tea187.5 0 20010021.8 0 25 0.0 0 Cereals & preparations196.3 0 20010015.0 13.1 25 4.5 78.1 Oilseeds, fats & oils193.7 0 20010010.7 31.7 25 7.2 96.8 Sugars and confectionery190.6 0 20010022.7 0 25 2.0 0 Beverages & tobacco200.0 0 20010025.0 0 25 0.2 0 Cotton200.0 0 2001004.9 30.0 7 5.4 98.9 Other agricultural products190.2 0 20010011.9 15.7 25 0.9 4.6 Fish & fish products43.3 0 50 2.823.4 5.2 25 0.0 4.3 Minerals & metals35.6 12.5 50 0.914.1 2.9 25 11.5 15.7 Petroleum---017.8 0 25 12.4 0 Chemicals34.3 0 125 2.111.6 4.8 25 9.1 12.0 Wood, paper, etc.40.9 0 50 4.416.4 8.9 25 2.6 14.2 Textiles37.5 0 50 0.720.1 0 25 10.7 0 Clothing---024.2 0 25 1.0 0 Leather, footwear, etc.3.0 0 3 0.715.4 0.6 25 0.8 2.6 Non-electrical machinery48.6 0 125 5.75.8 0.7 25 12.4 0.1 Electrical machinery26.5 0 50 0.813.7 0 25 8.7 0 Transport equipment20.1 0 50 9.813.1 10.0 25 5.9 4.9 Manufactures, n.e.s.22.1 0 50 6.013.7 2.6 25 2.5 2.7

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17. Total Export July 2101 17

18. Export July 2010 – March 2011 18

19. Recession and Wal-Mart Effect 19

20. Recession and Wal-Mart Effect 20

21. Recession and Wal-Mart Effect 21

22. Export Earnings and Export Growth 22 The export sector performed rather well throughout the 1990s. This sector achieved a growth rate of 37.04% in the FY 1994-95. During the twelve years, 1991-92 to 2002-2003, Bangladesh experienced negative export growth (-7.44%) only in FY 2001-2002. The terrorist incident of September 11, 2001 in USA and subsequent events may be blamed for this unexpected suffering of the export sector in the particular fiscal year.

23. Comparative Advantage 23

24. Export Earnings and Export Growth 24 The export sector achieved a 9.39% growth rate, an increase of US$ 562.35 million, during 2002-2003, with total export earnings amounting to US$ 6,548.44 million compared to US$ 5,986.09 million in 2001- 2002. Readymade garments and knitwear are the main contributors to the export earnings of Bangladesh. Their contributions are, respectively, 52.20% and 24.37% of total export earnings in FY 2001-2002 and 49.75% and 25.26% in FY 2002-2003.

25. Export Earnings and Export Growth 25 The contribution of frozen foods, jute goods and leather in FY 2002-2003 are 4.91%, 3.93% and 2.92% of total export earnings respectively. The statistics reveal that tea, leather and handicraft experienced negative growth in FY 2002-2003. In terms of positive growth, engineering products topped the list (842.34%), followed by petroleum by products (215.45%), chemical products (50.95%), raw jute (34.89%), other products (20.77%), frozen food (16.55%), knitwear (13.34%), agricultural products (12.96%), jute goods (5.61%) and readymade garments (4.28%).

26. Country-wise Exports of Bangladesh 26 The destination wise export figures reveal that the United States is the most prominent buyer of Bangladesh’s products. Germany and UK occupied the second and third positions respectively. These three countries accounted for 57.33% of Bangladesh’s total exports in FY 2002-03. The increasing importance of USA and some European countries as the major export destination over the past years indicates market concentration for Bangladesh’s exports along with commodity concentration. The exports to USA, Germany, UK, France, Belgium, Spain and Canada have continued to increase in recent years with a few exceptions.

27. Major Issues, Challenges and Policy Options : Narrow Export Base 27 Domestic supply side constraints Infrastructure, communications, ports, capacity in implementing export incentive regime, functioning of export-related institutions, proper governance the role of real exchange rate problems caused by a surge of garment exports and remittances.

28. Meeting Challenges 28 To meet these challenges, Bangladesh must adopt appropriate policies. The overall policy framework may be as follows. An open international trading system must be ensured which would offer fullest access of Bangladesh exports to international markets. The government should play a major role through dialogue with foreign trading partners. Appropriate macroeconomic policies including price stability and an appropriate exchange rate must be ensured. Bangladesh Bank, the central bank of Bangladesh, must take appropriate steps independently in this regard. The government must also contribute by playing a helping role to maintain the price stability. Prudent fiscal policy, for example, would be helpful in this regard.

29. Meeting Challenges 29 Hassle-free regulatory framework in terms of transparent business regulations and simplified export and import procedures must be determined. Adequate infrastructure must be built to facilitate the country’s exports. Sufficient investments, both from internal and external sources, are vital to improve the existing infrastructure facilities. Foreign direct investment can play a contributory role in this regard. The government must create a favourable investment environment by improving law and order situation and controlling corruption.

30. Meeting Challenges 30 Proper quality of exportable items must be maintained to meet foreign demand. Better education and training to the workers and managers in the export industries, establishment of more technical schools and colleges, import of improved technology for export industries, and closed and regular product supervision can ensure the quality of exportable items. Government backed trade related services, such as export financing scheme, marketing and distribution services and trade promotion activities are essential. The government must be more supportive of these efforts.

31. Meeting Challenges 31 Close partnership between the Government and the business community is crucial. Honest businessmen, who are really contributing to the economy, deserve all kinds of cooperation from the government. A clear and constructive understanding between these two groups can undoubtedly improve the country’s export performance. Policy must be pursued for removal of all non-tariff barriers with respect to trade amongst countries of South Asia.

32. Meeting Challenges 32 Effective negotiations must be undertaken to have zero-tariff market access with the three developing countries of the SAARC, especially with India. Bangladesh can persuade India by raising the point that Bangladesh is a big market for Indian commodities. India is the largest import trading partner of Bangladesh. So the import capacity of Bangladesh must be increased for more trade with India.. Easy access of Bangladesh’s exportable items to the Indian market will increase Bangladesh’s export earnings and enhance import capacity, which will be beneficial for the Indian economy, as Bangladesh can use these earnings for increased imports from India.

33. Meeting Challenges 33 The government and the business community must work hard for export and market diversification. Efforts must be made to increase the export of traditional items. Frequent export fairs through the foreign missions can be helpful to introduce new exportable items to foreign buyers. The search for new markets for Bangladesh’s exports should be a continuous task for both the government and businessmen.

34. Nature of External Sector Management 34 A set of precautionary measures, an encouraging stimulus package and a number of strategic actions have helped addressing the negative impact of global crisis arising from the debacle in the financial sector of the developed and developing countries. The Task Force declared the stimulus package proposal -1 in FY 2008-09 and stimulus package proposal-2 in FY 2009-10 to face the adverse effects of global economic crisis on Bangladesh economy. The Government has also declared a ‘three-year Import Policy Order’ in line with the agreements signed with WTO and in conformity with import for the export- oriented organisations to strengthen export of the country.

35. Export Policy - Objectives 35 To make the import policy compatible with the changes in the world market that have occurred as a result of the introduction of market economy and signing of the GATT Agreement; To simplify the procedures for import of capital machinery and industrial raw materials with a view to promoting export and enhancing competitiveness and skills; To provide facilities for introducing technological innovation to cope with expanding modern technology; To make a strong base of indigenous exports by facilitating backward linkages for export oriented local industries; To ensure supply of qualitative and hygienic commodities to the consumers at right prices; To allow import of essential commodities on emergency basis for ensuring the supply of essential commodities in the national interest.

36. Export Policy - Changes 36 Substantial changes have been made in the Import Policy Order 2009-12. Included among the significant changes are: Provision has been made to import essential food item, garment accessories and capital machineries without letter of credit. Banks and the office of the Chief Controller of Export and Import have been involved in renewal of IRC of importers and indenters. A provision has been made to import baby food in the containers up to 25 kg for the retailers; A provision has been incorporated to import full cream milk product up to 2.5 kg by tin/bag/box/container; A provision has been made to import full cream milk and milk product in large closed airtight container; In case of import of canned food, a provision has been incorporated to mention the limit of preservative;

37. Export Policy - Changes 37 A provision has been incorporated to import machineries and parts without L. C. used in the industries established under 100 percent foreign initiative; A provision has been made to import recycle materials for 100 percent export oriented industries ; The last limit of free sample import has been extended from US$5,000 to US$10,000; Import facility of crude soybean and palm oil has been extended. A provision has been introduced to import second hand /reconditioned generator and generating set on commercial basis; A provision has been introduced to import paddy seed under conditionality; Ban has been imposed on import of poisonous Scrap vessel; A provision has been made to import chicken- swine and eggs under conditionality; A provision has been introduced to import raw materials for telecommunication in the private sector under conditionality; A provision has been expanded for TCB to import under industrial and commercial basis.

38. Simplification of Tariff Structure 38 Tariff structure is one of the main tools for conducting the trade policy of a county. Over the years efforts were made to simplify the disorderly and scattered tariff structure into an integrated one in order to facilitate smooth implementation of the import policy of the Government and this has resulted in substantial reduction in the tariff slabs and harmonisation of the overall tariff structure. There were 18 operative tariff slabs in FY1991-92 and 350 percent was the maximum tariff rate. These were the general exemption rates. Until FY1999- 00, tariff regime was divided into three rate classifications. The operative and statutory tariff rates were equalized in FY 2000-01 and Bangladesh has been following the Most Favored Nation (MFN) tariff rate since then.

39. Tariff Structure 39

40. Concessions and Exemptions 40 Duty concessions and general exemptions to the applied MFN tariff rates are being provided in accordance with Section 20 of Customs Act on a case-by-case basis through Gazette notification. At present, three types of tariff concessions on these MFN rates are being provided: 1. import under different bi-lateral/regional trade agreement, 2. import of capital machinery for registered industries including export-oriented industries 3. import by industries (for a specific use) such as dairy and poultry, pharmaceuticals, leather and textile industries.

41. Concessions and Exemptions 41 At present tariff concession are being provided along with MFN tariff rate in respect of following goods: a) Capital machinery and parts imported by export oriented industry. b) Capital machinery and parts imported by registered industry. c) Raw materials imported by Pharmaceutical Industry. d) Raw materials used in Textile Industry. e) Accessories used in Agriculture Sector. f) Computer and Computer accessories. g) Medical equipment and accessories. h) Newsprint imported by Newspaper and periodical Publishers. i) Raw materials used by the insecticide manufacturers which used in Agriculture j) Machinery, parts and accessories imported by Poultry Firm.

42. Reduction of Tariff 42 The process of reducing import tariff rate of Bangladesh started since FY1991-92 is still continuing in FY2009-10 in order to increase the efficiency of the local industries and bring consistency with the process of world-wide tariff reduction. The un-weighted import average tariff rate in FY1991-92 was 57.22 percent which decreased at 21.39 percent in FY2000-01. Because of reducing import tariff rate consecutively, the un- weighted import average tariff rate stood at 14.97 percent in FY2009-10. The MFN Un-weighted import average during 2000-01 to 2009-10

43. Tariff 43

44. Objectives of the Export Policy 2009-12 44 Updating and liberalising the trade regime in accordance with the needs and requirements of the World Trade Organisation and globalisation Encouraging labor-intensive (especially female labour) export-oriented production Ensuring availability of raw materials for producing export products Improving the quality of products; encouraging the use of modern, sustainable and environment-friendly technology; producing higher value products and improving the design of the products Initiating new strategies for the expansion of markets of export products, proper utilisation of computer technology, encouraging all modern technology including e-commerce Creating new exporters and providing all-out support to current exporters Establishing necessary new infrastructure for export-oriented goods and in some cases helping to create backward and forward linkage.

45. Export Development 45 To overcome the adverse effects arising from the current global economic recession, the Government has declared Stimulus Package -1 and Stimulus Package -2 under which several policy supports including some cash incentives are being given to exporters With a view to diversifying the exportable products, the Government has identified 8 products under ‘Highest Priority Sector’ while 12 products under ‘Special Development Sector’ and these sectors are being given special support for their development To extend the ability of the exporters, steps have been taken to expand the area of cash Incentive In compliance with the demand of the foreign buyers, the Compliance Monitoring Committee has been actively monitoring the compliance and standard of export goods Steps have been taken to enhance the institutional skills and working capacity of the Export Promotion Bureau (EPB) and other related organisations, such as, the customs, sea and land port authorities.

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