Some Basic Statistics on Trade Position of Bangladesh 177 Trade Per Capita (US$, 2004-2006) 42.1 Trade to GDP Ratio (2004-2006) -176 Current Account Balance (Million US$) 61,961 GDP (Million U.S $, 2006) 144.345 Population (in million, 2006)
Some Basic Statistics Rank in World Trade, 2006: Exports Imports Merchandise 72 66 Commercial Services 120 79 Share in World Trade : Exports Imports 0.10% 0.13%
Some Basic Statistics Breakdown in exports: Agricultural products 7.2% Fuels & mining products 0.7% Manufactures 92.1% Breakdown in imports: Agricultural products 21.0% Fuels & mining products 14.7% Manufactures 63.7%
Some Basic Statistics C ommercial Service Trade: Exports (mln US$) 493 Imports (mln US$) 2320 Share in World’s total Export (in 2006): 0.02% Breakdown in Service Export: Transportation 23.80 % Travel 14.80 % Other commercial services 61.4 %
Some Basic Statistics Share in World’s total Import (in 2006): 0.09 % Breakdown in Import: Transportation 76.80 % Travel 6.80 % Other commercial services 16.4 %
SAARC Trade in Merchandise 0.08 80 0.06 83 Sri Lanka 0.24 50 0.14 65 Pakistan 0.02 135 0.01 146 Nepal 0.01 136 0.00 169 Maldives 1.41 17 1.00 28 India 0.00 183 0.00 165 Bhutan 0.13 66 0.10 72 Bangladesh World Share in Imports(%) World Rank in Imports World Share in Exports(%) World Rank in Exports Country
SAARC Trade in Services 0.09 78 0.06 87 Sri Lanka 0.31 51 0.08 78 Pakistan 0.02 134 0.01 144 Nepal 0.01 160 0.02 121 Maldives 2.41 13 2.68 10 India 0.00 179 0.00 177 Bhutan 0.09 79 0.02 120 Bangladesh Share in World Imports World Rank in Imports World Share in Exports World Rank in Export Country
Bangladesh Export 1972-73 to 2007-08 (Figures in Million US$)
Export Destinations(Share) by Region 2.30 0.24 0.46 1.10 1.93 7.57 30.11 56.29 2003-04 1.62% 0.28% 0.45% 0.74% 2.53% 8.69% 32.29% 53.40% 2004-05 1.79% 0.31% 0.29% 0.63% 2.54% 8.84% 33.32% 52.28% 2005-06 2.19 % Others 0.35 % East Europe 0.25 % Oceania 0.64 % Africa 2.75 % Middle East 8.52 % Asia region (excluding M. East) 32.74 % America Region European Union (25) Regions 52.56 % 2006-07
Export Destinations by Region(2006-07)
Export by Commodities (2006-07) 12177.86 784.42 135.94 147.15 236.91 215.24 87.82 256.97 266.08 320.78 515.32 4553.60 4657.63 Million US$ 100 6.44 1.12 1.21 2.19 1.77 0.72 2.11 2.18 2.63 4.23 37.39 38.25 Share(%) Raw jute Agricultural products Total Other products Footwear Engineering products Chemical products Jute goods Home textile Leather Frozen food Knitwear Woven garments Commodities
Export by Commodities (2006-07) Value in mln US$
Exports by major groups of goods 95.34% 4.66% 95.20% 4.80% 92.51% 7.49% Share in 2004-05 95.16% 4.83% 95.70% 4.92% 92.55% 7.34% Share in 2005-06 96.16% 42.15% Non-jute 3.84% 57.85% Jute & Jute goods 96.10% 35.80% Non-traditional 4 3.90% 64.2% Traditional 3 93.17% 66.12% Manufactured 2 6.83% 33.88% Primary 1 Share in 2006-07 Share in 1984-85 Products
Exports by major groups of goods
1 Primary products include raw jute, vegetables, frozen food, tobacco, cut flower/foliage, agro-processed food, etc.
2 Manufactured products include woven and knit garments, jute goods, engineering products, chemicals, melamine and ceramic tableware, footwear, leather & leather goods, pharmaceuticals, textile fabrics, bi-cycle, electronics, etc.
3 Traditional items include raw jute, tea and jute goods (excluding carpets).
4 Non-traditional items include woven garments, knitwear, frozen food, chemical products, leather, home textile, pharmaceuticals, handicrafts, footwear, textile fabrics, etc.
Exports by major groups of goods
Main Features are:
Importance of raw jute diminished over the years, and so were the primary and traditional products;
Bangladesh has become an exporter of manufactured goods over the years.
By 1990, Bangladesh’s export overridden traditional items;
The share of jute & jute goods was 58% in 1984-85. This has gone down to 23% in 1990-91, 10% in 1996-97, and 4.83% in 2005-06, 3.84% in 2006-07.
Change in Export Price and Volume Index Primary Products: Year Price Volume Total Chan ge 2003-04 +0.31% + 19.31 % +19.62% 2004-05 +0.18% + 16.98% +17.16% 2005-06 -0.04% + 19.23% +19.19% 2006-07 +5.33 % + 2.39 % +7.72 % 2007-08(J-F) +6.39% +14.23% +20.62% Manufactured Products: Year Price Volume Total Change 2003-04 +4.13% + 11.71 % +15.84% 2004-05 +0.80% + 12.77% +13.57% 2005-06 -1.77% +23.59% +21.82% 2006-07 -1.11 % +17.43% +16.32% 2007-08(J-F) –0.64% +11.26% +10.62%
Export as a percentage of Import 76.25% 15971.35 12177.86 2006-07 71.38% 14746.00 10526.16 2005-06 40.54% 3758.70 1523.70 1989-90 12633.26 13147.00 10903.00 9658.00 8403 2641 Import (mln.US$) 70.71% 65.83% 69.73% 67.80% 68.45% 35.37% Export as a percentage of import 8932.59 2007-08 (up to Feb) 8654.52 2004-05 7602.99 2003-04 6548.44 2002-03 5752.20 1999-2000 934 1984-85 Export (mln.US$) Financial Year
Constraints to Export Growth
Demand & supply side constraints to export are:
Trade policies of partner countries;
Stringent EU rules of origin;
High tariffs in US market for Bangladesh RMG- average 16%;
Standards & qualities of products;
Lack of investment funds & working capital and high interest rate;
Shortage of skilled workers, lack of entrepreneurial and managerial skills;
Poor physical infrastructure;
Inefficient ports, high transport costs, weak institutions;
Invisible costs of doing business;
Environment & compliance issues, etc.
Overview of Trade Policy Reform Initiatives
Promoting trade through trade policy reforms & removal of structural obstacles since early 80s;
Liberalization policy focused on simplification of import procedures, reduction of quantitative restrictions (QRs), rationalization and diminution of import tariffs, and maintaining a competitive exchange rate;
Import Policy 2006-09 contains 25 items in the control list;
Highest import tariff has been brought down to 25% in FY06 from 300% in 1992-93;
No. of tariff slabs has come down to 4 (0%, 10%, 15%, 25%) in FY 07 from 24 in 1980s;
Un-weighted customs duty rate fall from 57.2% in 1991-92 to 13.01% in 2006-07;
Average nominal tariff (customs plus para-tariff) came down to 27.4% in 2005-06 from 40% in 1993-94;
Introduction of general promotional measures for exports - lower rates of interest on bank loans, duty free import of machinery & intermediate imports, cash incentives, duty drawbacks, exemption from VAT, etc.;
Anti-export bias fall from 59% in 1991-92 to 18% in 2002-03;
All these liberalization initiatives have contributed
successfully in energizing export & minimize the
gap between imports and exports substantially .
In the 1990s real exports grew at an annual rate of 12.5% with a 4.8% GDP growth rate against a growth rate of exports of 3.9% for the 1980s;
Separate policies for import and export;
Objective of the trade policy is to reduce poverty through employment creation, generation of income and diversification of markets and products of exports;
Import substitution policy is replaced by export-bias policy;
Accelerated withdrawal of the government from the industry to promote private sector;
Importance on institutional capacity building- BSTI, BIFT, NITRAD, etc.;
Emphasis on HR development;
Adopt new and aggressive strategies for diversifying export products and markets;
Ensure good use of IT and introduce e-governance, etc.; and
All these liberalization initiatives have contributed
successfully in energizing export & minimize the
gap between imports and exports substantially.
Main Features of Export Regime
Bangladesh exports 167 commodities to 186 countries;
In 1984-85, export was less than $1.0 billion. This shot up to $8.7 billion in 20 years in 2004-05, and 12.18 billion in 2006-07.
Major export commodities are: RMG, frozen food, leather, raw jute, jute goods, home textile.
These 6 products together accounts for about 90% of the total export of Bangladesh.
Last 2 decades witnessed phenomenal rise in exports led by readymade garments (RMG);
RMG industry grew under the protection of MFA quota, duty-free access to EC and other developed countries and supportive policy reforms undertaken by GOB;
RMG is the largest manufacturing sector in terms of income & employment.
More than 2.5 million workers in the RMG sector, 80% of whom are women working in more than 5,000 factories;
RMG alone generates about 75% of the total export revenue.
Growth of RMG Sector – Role of Policy Supports
Generous policy supports of the government to RMG sector was instrumental to its growth during last two decades;
Policy supports include back-to-back LCs, bonded warehouse facilities, cash incentives (5%) for domestic textile products incl. handloom replacing duty draw back system;
Campaign for duty-free access to developed markets-;
Simplified customs clearance procedure;
Formation of Social Compliance Forum to address the issues related to compliance and standards;
Encouragement of backward linkage industries including primary textile sector;
Export credits at lower interest rates;
Allowing FDI outside EPZs;
Creation of government and private owned EPZs.
Issuing Export Policy on 3 Years basis. Present Export Policy 2006-09 guides the export issues for these three years.
Export Policy deals with matters related to policy , conditions, requirements for conducting export activities and the strategies to accomplish the objectives;
List of prohibited goods, list of goods exportable under conditions/restrictions, etc. are included in the policy.
Export Policy aims at transforming the comparative advantages into competitive advantages through addressing the supply side constraints.
Supply-side constraints include issues related to compliance such as working conditions, workers’ rights, work environment, social safety, etc.
Supply side constraints also requires attention to a host of other interlinked issues such as port management, governance, corruption, transportation, infrastructure, sanitary & phyto-sanitary (SPS) aspects, market access conditions, etc. ; and
Export Policy is applicable to areas other than EPZs.
1. Diversification of export Market
2. Duty Free, Quota Free Market Access
3. Preferential Market Access
Regional: e.g. SAFTA, APTA, BIMSTEC etc
Multilateral: e.g WTO, TPS-OIC etc
4. Promotional Activities: e.g. Participation in international Fairs, Organizing Single Country fair abroad;
5. Diversification of Export Products:
Highest priority sector: It includes 6 products such as (1)Software & ICT products, (2)Agro-products & agro-processing goods,(3)Light engineering products including auto-parts & bi-cycle,(4)Footwear & leather products,(5)Home textile and, (6)Pharmaceuticals . These refer to products whose export potentiality is very high, but due to various reasons they are lagging behind and necessary support can promote their export significantly;
Special development sector: It includes 9 products such as (1) F inished leather;(2)Frozen fish; (3)Handicraft ; (4) Electronic; (5) Fresh flower and foliage; (6)Jute products; (7)Hand-woven textiles from hill areas; (8)Uncut diamond; and (9) Herbal medicine and medicinal plants . These products have export potentials but do not have strong production, supply and export base.
6. Three committees to oversee and implement the decisions to promote exports: (1) National Committee on Export (NCE) headed by the Prime Minister, (2)Task Force headed by the Commerce Minister to implement the decisions of the NEC, and (3) Export Monitoring Group chaired by Vice Chairman, Export Promotion Bureau (EPB).
7. Export Promotion Bureau (EPB) is responsible for promotion of Export. Five Business Promotion Councils under public private partnership have also been working to promote 5 sectors like ICT, Light Engineering Products, Leather, Herbal & Medicinal Products, and Frozen Food.
8. Declaration of one product as Product of the year
9. Awarding CIP and Export Trophy
10 . Providing Cash incentive
11.Capacity Building: Undertake projects for capacity building of exporters, improving quality of exportable products, product diversification, compliance, monitoring, transfer of technology etc.. At present, Ministry of Commerce is implementing 10 technical projects, like Quality Support Export Diversification Program, Support to Bangladesh RMG Sector in the post MFA, Small Project facilities, Bangladesh Trade Support Program, Computerization of the Office of Registrar Joint Stock Companies and Firms, Capacity Building of FBCCI etc
Incentives available to Highest Priority Sector & Special Development Sector
Project loan at reduced interest on priority basis;
Income tax rebate (5-7 years);
Financial incentives including cash assistance or subsidy;
Export credit on easy terms and reduced interest rates;
Air transport facilities with concessionary transport fares;
Assistance for setting up infrastructures and related units to reduce production cost;
Expansion of institutional and technical facilities for developing product quality and quality control;
Assistance in marketing of products;
Assistance in foreign investment, etc.
Export Supports/Incentives of General nature
Use of a portion of the foreign currency earned by the exporter under the retention quota of Bangladesh Bank for foreign trip, participation in international fairs and seminars, import of raw materials, spares and equipment, establishment of office abroad, etc.;
Export development Fund – offers venture capital at low interest rates, assistance for obtaining foreign technical assistance, service and technology, assist in sending marketing missions abroad, assist in the establishment of sales & display centers and warehousing facilities abroad, assist in participation in product development & marketing training programs for export promotion, etc.
Tax holidays (5 years for Dhaka, Chittagong & Khulna and 7 years for other areas;
Agro-processed industries, ICT, to be relieved from income tax;
Restructure the Export Credit Guarantee Scheme;
Up to 90% bank loan against irrevocable LC or confirmed contracts;
Other incentives include: subsidy on utilities, fixation of rates for industrial use of services such as water, gas, electricity, etc.;
Duty draw back system of non-conventional and new products;
Permission for selling rejected or stock lot products to local markets by export industries on paying of applicable duties & taxes;
Creation of an Export Credit Cell in Bangladesh Bank, and Special Credit Units for export promotions in Commercial Banks;
Creation of a powerful “Export Credit Monitoring Committee”;
Rebate on Insurance Premium for export of non-conventional products;
Cash incentives for export of non-traditional industrial products ;
Up to 50% exemption on income tax;
Duty free import of capital machinery and 10% spare parts;
Continuation of the bonded warehouse facilities for the export industries;
Encouragement of brands of products.
80% products exporting industries to be treated as export industries;
Encourage establishment of linkage industries;
Encourage investment on HR development and research & development activities;
Reduced plane fare for export of vegetables and fruits;
Encouragement of export sub-contracting jobs;
Fixation of limits of sending samples for promotion of exports ($3500 annually)
Facilities to import sample (up to $5000 annually) for RMG industries;
Multiple entry visa for foreign investors;
Setting up world trade centre;
Selection of Commercially important persons (CIPs);
Facilities for deemed exports;
Organization of international fairs;
Entre-pot and re-export facilities;
Export without LCs;
List of export Item under Cash incentives Rate Commodity
5. Agro and agro-products (vegetables/fruit) and agro-processing: (i) Local raw materials more than 80% (ii) Local raw materials more than 50% 15% 4. Crushed bone 15% 3.Bi-cycles (a) 20% (b) 15%
2.Products made of hogla, straw, coir of sugar cane:
Local raw materials more than 80%
Local raw materials more than 50%
10% 1.Frozen shrimp and other fish
Continued 20% 12. Liquid glucose produced at Iswardi EPZ 10% 13. Light Engineering Products 20% 14. Halal Meat Rate Commodity 15% 11. Hatching eggs and day old chicks of poultry industry 10% 10. Potato 10% 9. Tobacco 15% 8. Leather products 7.5% 7. Jute products 5% 6. Local fabrics (incl. handloom)
Recent steps to diversify exports
Improvement in port handling capacity & management;
Improvement of overall governance position;
Strengthening the Bangladesh Missions abroad and emphasis on economic diplomacy.
Income tax exemption on export business;
Total exemption of export earning from tax for handicrafts and cottage industries;
100% export-oriented RMG industries are subject to 0.25% tax at source if not enjoying tax holiday;
Industrial units ineligible for tax holiday may receive accelerated depreciation allowances at 100%;
VAT exemption through refunds on services such as C&F, customs broker services, up to 80% return of bills on telephone, telex, fax, gas, electricity, 60% WASA bills, shipping agent commission, etc.
Continued initiatives to expand markets in countries including USA and other regions/countries (SAFTA, BIMST-EC, APTA, TPS-OIC, D-8), etc.
Negotiations at other multi-lateral, regional and bilateral levels for preferential market access .