Industry and Trade

Draft Report
Election 2001 : National Policy Forum

Dhaka: 20-22 August, 2001 Organize !y: "entre #or Policy Dialogue, Prothom Alo, The Daily Star
PO$%"& '(%EF ON )%ND*+,(& AND ,(ADE)

"PD ,A+- FO("E (EPO(,
"entre #or Policy Dialogue

.ouse /00", (oa 11, Dhanmon i (0A, 1PO 'o2 2123, Dhaka 1203 ,el: 4550 26 512/7708 Fa2: 4550 26 51903:1 E-mail: c; <! online=com8 >e!site: ???=c; -!angla esh=org
CPD Task Force: Industry and Trade
Industry and Trade

Members of the Task Force
Policy Brief on
Chairman Mr. Syed Manzur Elahi Chairman, Apex Group of Industries Co-Chairman Mr. Latifur Rahman Managing ire!tor, "rans!om #angladesh Ltd. Member Secretary $rofessor Mustafizur Rahman Resear!h ire!tor, Centre for $oli!y ialogue Members Jamal Uddin Ahmed Chairman, %arom Consultants Ltd. Dr. Zaid Bakht Resear!h ire!tor, #angladesh Institute of e&elopment Studies Dr. De a!riya Bhattacharya Exe!uti&e ire!tor, Centre for $oli!y ialogue "a#. $en. Am#ad %han Cho&dhury '(etd) Chief Exe!uti&e, $roperty e&elopment Ltd. Imtiya* +ussain Chairman, Imtiyaz 'ussain ( Co. A,ta ul Islam Chairman, International )ffi!e E*uipment Pro,essor Ali (ashid Mem+er, #angladesh "ariff Commission Tauhid -amad Chairman, Sa&ar "extile Pro,essor (ehman -o han Chairman, Centre for $oli!y ialogue
Acknowledgement
The Task Force members would like to express their sincere gratitude to the many business leaders, experts and professionals who have sent their written comments on an earlier draft prepared by the Task Force The Task Force members would like to specially appreciate the insightful comments made by the participants at the regional dialogue held in !hulna on "uly #, #$$% which was &ointly organised by the 'P(, Prothom Alo and The (aily )tar *hilst it has not always been possible to accommodate all the suggestions and comments placed before the drafting committee, a large number of those have been incorporated in the present revised draft The Task Force has also benefited from and liberally drawn on the rich literature on the pertinent issues available in published form express their The Task Force team would like to sincere gratitude to all who have In this
contributed to the preparation of this report
context, the Task Force team would like to specially put on record its deep appreciation for the able research
ii
assistance
provided
by
+s
,rmee
!han,
-esearch
Associate, 'P(
iii
Policy Brief on .Industry and Trade.

Background of the Policy Brief Exercise Issues of short as also medium to long term de&elopmental interests to #angladesh are expe!ted to +e at the !entre of fo!us of dis!ussion during the run up to the next parliamentary ele!tions. Manifestos of the politi!al parties ,ill deal ,ith su!h issues, &oters ,ill +e interested to -no, the standpoint of the &arious politi!al parties on these issues, and ma.or sta-eholders ,ill +e arti!ulating ho, they ,ould li-e these issues to +e addressed +y the poli!y ma-ers. /uestions ,ill +e as-ed, ans,ers ,ill +e sought, positions of politi!al parties ,ill +e ,eighed and .udged. In all li-elihood, this ,ill +e a time of heightened interest as to ho, the e!onomy should +e run o&er the next fe, years !onse*uent to the assumption of offi!e +y the ne,ly ele!ted go&ernment. "he initiati&e of C$ to prepare Pre.election Policy Brie,s is geared to,ards !ontri+uting to this pro!ess +y stimulating an enlightened and !onstru!ti&e engagement +y the !i&il so!iety on -ey poli!y issues at this important .un!ture in our nation0s history. Su!h an exer!ise, apart from enri!hing the pre1ele!tion poli!y dis!ourse, is also expe!ted to !ontri+ute to,ards e&olution of a !onsensus +ased de&elopmental agenda to +e su+se*uently pursued and implemented +y the ne,ly ele!ted go&ernment. Arti!ulated through a pro!ess of intensi&e dis!ussion, and &alidated +y !onsultations ,ith multi1sta-eholders, su!h an agenda !ould !laim domesti! o,nership in design and +road1+ased support in implementation. In the a+o&e !ontext, the importan!e of industry and trade related issues, as areas of popular !on!ern and de&elopmental interest, !an not +e o&eremphasised. The Policy Brie, on Industry and Trade/ thus, o!!upies a !entral position in C$ 0s ongoing exer!ise to prepare a set of $oli!y #riefs to inform the ele!toral de+ate 2334 in #angladesh. Objectives "he o+.e!ti&es of this $oli!y #rief on Industry and "rade, inter alia, in!lude the follo,ing5

"o highlight important milestones in the de&elopment of #angladesh0s industry and trade se!tors o&er the re!ent past "o arti!ulate ma.or !hallenges in the area of industry and trade "o !ome up ,ith poli!y re!ommendations to address the attendant !hallenges "o pro&ide inputs to the ele!toral dis!ourse on issues related to de&elopment of industry and trade in #angladesh, and #ased on the a+o&e, to put +efore the ne,ly ele!ted go&ernment a set of a!tiona+le agendas to stimulate de&elopment of trade and industry.
"he present $oli!y #rief has +een prepared through an intensi&e !onsultation and dis!ussion pro!ess ,ith a!ti&e parti!ipation of the mem+ers of the Task Force on Industry and Trade. "he draft has also in!orporated many of the !omments and
suggestions made in the !ourse of dialogues ,ith ma.or sta-eholders in 6hulna ,here the initial draft of the report ,as presented. 1. The Context of the Discourse and the Emerging Challenges 1.1 Development of the ndustrial !ector" ssues and #hallenges 4.4.4
ha-a and
"here is a general !onsensus that in order to generate a!!elerated e!onomi! gro,th #angladesh ,ill need to ensure radi!al stru!tural shift fa&ouring the industrial se!tor. "he Industrial $oli!y 4777 sets a target !ontri+ution of 28 per !ent of G $ !oming from the manufa!turing se!tor, as also a target of 23 per !ent of employment to +e !reated in this se!tor. As is -no,n, the erst,hile poli!y emphasis on pu+li! se!tor1led, import1su+stituting industrialisation in #angladesh has no, gi&en ,ay to a mar-et1oriented, pri&ate se!tor1led export1oriented industrialisation strategy. In the !ontext of the limited resour!e +ase of #angladesh, the !onstraints of the domesti! mar-et, the pressure from a gro,ing la+our for!e in sear!h of gainful employment and also in &ie, of the emerging opportunities in the glo+al mar-et, the tas- of designing an industrial strategy !apa+le of ade*uately addressing the emerging !hallenges, +oth domesti! and glo+al, ha&e +e!ome one of paramount importan!e for future de&elopment of #angladesh. "he importan!e of industrial de&elopment as an engine of #angladesh0s e!onomi! gro,th is also reinfor!ed +y a gro,ing realisation that the de&elopment of agri!ulture se!tor, one of the mainstays of the !ountry0s e!onomy, !riti!ally hinges on its +a!-,ard and for,ard lin-age ,ith the industrial se!tor. Industrial de&elopment of #angladesh, during the post1independen!e period, +oth in terms of its gro,th rate as ,ell as the stru!tural !hanges, has +een rather modest. "his is not to say that there had +een any shortage of industrial poli!ies5 Industrial $oli!y of 479:, the ;e, Industrial $oli!y of 47<2 =;I$147<2>, the Re&ised Industrial $oli!y of 47<? =RI$147<?>, follo,ed +y a num+er of other poli!ies, ,ith the latest +eing the Industrial $oli!y of 4777, ha&e all attempted to re&amp the se!tor ,ith a &ie, to !reate a strong manufa!turing +ase in the e!onomy. Inspite of these efforts, +et,een 479:@9A and 4777@33 manufa!turing G $ has in!reased at a modest annual !ompound rate of only :.< per !ent. As a result, the se!tor0s !ontri+ution to G $ has +een delimited to a+out 44 per !ent during the entire period =48 per !ent a!!ording to re&ised estimates under the ne, system of national a!!ounting>. "o +e fair, the 4773s sa, some upturn in the se!tor0s performan!e5 a!!ording to ne, estimates, the annual !ompound rate of manufa!turing gro,th +et,een 47<<@<7 and 477A@78 ,as estimated to +e nearly <.2 per !ent, ,ith some de!line in the se!ond1half of the 4773s ,hen the gro,th rate !ame do,n to 8.8 per !ent.4 'o,e&er, the gro,th rate and the attendant intra1 industry stru!tural !hanges ,ere not ro+ust enough in a ,ay that !ould ma-e the
4.4.2
"he fall in gro,th rate to the le&el of :.2 per !ent in 4777 due mainly to flood 477< has !ontri+uted to this de!eleration in gro,th rate.
industrial se!tor play the role of an en1ine o, 1ro&th to ser&i!e the needs of an e!onomy geared to,ards a take.o,,.2
4.4.:
A disaggregated pi!ture of the performan!e of the industrial se!tor : pro&ides some useful insights. Bithin the industrial se!tor, it is the large industry ,hi!h has !ome to play an in!reasingly important role in re!ent years. "hus, a point to note here is that, in terms of &alue addition, the share of large industry has gone up from 84 per !ent to ?9 per !ent +et,een 479:@9A and 4777@33 =94.< per !ent a!!ording to ne, estimates>. "he annual !ompound gro,th rates for large industry ,ere <.A per !ent and 8.8 per !ent during the first and se!ond half of the 4773s respe!ti&elyC the !orresponding figures for the small s!ale industry ,ere 9.9 per !ent and 8.8 per !ent. A )f some !on!ern is the de!eleration in the gro,th rates for +oth large and small s!ale industries o&er the last !ouple of years.8 "he rise in the share of large industry in the industrial G $, ho,e&er, !on!eals the fa!t that the industrial +ase has !ontinued to remain rather narro,. A large num+er of these industries registered negati&e gro,th5 for example, 2< su!h industries a!!ounting for a !om+ined industry ,eight of 89 per !ent either posted negati&e gro,th or stagnated during the se!ond1half of the 4773s. Da!tors !ontri+uting to this de!eleration ha&e &aried from industry to industry5 .ute and textile industries ha&e suffered from falling demand and syntheti! su+stitutes, paper industry through displa!ement +y !ompeting imports, and sugar industry from high produ!tion !osts. It is to +e noted here that more than four1fifth of the gro,th of the industrial se!tor in the 47<3s ,as a!!ounted for +y 8 industries ,ith a !om+ined ,eight of 47.8 per !ent. )f these, three, readymade garments, fish and seafood and leather tanning and leather goods are predominantly export1oriented industries. "he other t,o industries, fertiliser and pharma!euti!als industries, registered ro+ust performan!es than-s respe!ti&ely to large s!ale pu+li! se!tor in&estment and prote!tion from !ompeting imports. "here ha&e +een some positi&e !hanges though in the 4773s, ,ith the industrial gro,th +e!oming more +road1+ased. A!!ordingly, the top fi&e industries !ontri+uted to a+out ?9.: per !ent of se!toral gro,th a!!ounting for a !om+ined ,eight of 29.< per !ent. )f interest to note here is that ex!epting RMG, the other four su!h industries +elong to import1
4.4.A
4.4.8
"his does not !ompare fa&oura+ly ,ith some of the neigh+ouring !ountries su!h as "hailand ,hi!h has seen the !ontri+ution of its industrial se!tor to G $ register a rise from 22 per !ent to :2 per !ent +et,een 47<3 and 477<. Industry is +roadly defined in the Industrial $oli!y 4777 to in!lude manufa!turing industry ,hi!h in!ludes all produ!tion, pro!essing and assem+ling a!ti&ities as ,ell as repairing and re!onditioning of pro!essed goods, and also ser&i!e industry ,hi!h in!ludes ser&i!e oriented a!ti&ities ,hi!h in&ol&e signifi!ant use of e*uipment or fixed assets. ELarge IndustryE is defined in the ne, Industrial $oli!y 4777 to in!lude all industrial enterprises ha&ing 433 or more ,or-ers and@or ha&ing a fixed !apital of o&er "a-a :33 million. Medium industry !o&ers enterprises employing +et,een 83 and 77 ,or-ers and@or ,ith a fixed !apital in&estment +et,een "a-a 433 million and "a-a :33 million. ESmall IndustryE means enterprises ha&ing fe,er than 83 ,or-ers ex!luding the !ottage units and@or ,ith a fixed !apital in&estment of less than "a-a 433 million. ECottage IndustryE !o&ers household1+ased units operated mainly ,ith family la+or. "here has, ho,e&er, +een some en!ouraging upturn during the first three *uarters of DF2334.
su+stituting !ategory5 pharma!euti!als, +idi, pu+li!ation and printing and re1 rolling mills. 'o,e&er, ex!epting !ement, ,hi!h ,as supported +y large D I infusion, dominant import1su+stituting industries su!h as pharma!euti!als, soap and detergent, fertiliser, re1rolling, sil- and syntheti!s ha&e failed to post ro+ust gro,th in re!ent years. )n the !ontrary, dri&en +y ro+ust export se!tor performan!e, export1oriented industries su!h as RMG =+oth ,o&en, and most nota+ly -nit>, leather and frozen food ha&e performed relati&ely ,ell. 4.4.? "he performan!e of the small and !ottage industry se!tor !alls for spe!ial attention +e!ause of its la+our1intensi&e !hara!ter, its fo!us on !atering to the demand of lo, and medium in!ome !onsumers and its !apa!ity for import su+stitution. Amongst the small s!ale industries, produ!tion of ele!tri! apparatus, plasti! toys, mis!ellaneous metal ,ears, tin plate and readymade ,ear has registered ro+ust performan!e in re!ent years. "o +e sure, this su+se!tor has also +een parti!ularly &ulnera+le to natural disasters and other produ!tion snags !ompared to medium and large s!ale industries. Bith the gradual dismantling of the pu+li! se!tor, and in!reasingly more emphasis +eing put on the pri&ate se!tor under,ritten +y the pri&ate se!tor led industrialisation strategies pursued in the 47<3s and 4773s, the share of pu+li! in&estment in total manufa!turing in&estment has !ome do,n from 89 per !ent in 47<3@<4 to only :.A per !ent in 477<@77. ? "he failure of the pri&ate se!tor, either domesti! or D I, to +ridge this gap in any su+stanti&e manner, has +een a ma.or !ause for the slo, gro,th of #angladesh0s industrial se!tor in re!ent years. Manufa!turing in&estment remained less than : per !ent of G $ throughout the last t,o de!adesC D I in E$Gs a!!ounted for less than 43 per !ent of the total manufa!turing in&estment during this period. Ma.or part of D I flo, to E$Gs ,as in garments, textiles, foot,ear and other la+our intensi&e se!tors ,hi!h a!!ounted for a+out 93 per !ent of total in&estment, ,hilst the share of relati&ely high1te!h industries su!h as ele!troni! and ele!tri!al goods and metal +ased produ!ts had +een around 42 per !ent only. D I flo, to #angladesh has +een !on!entrated only in a fe, su+se!tors su!h as gas, po,er and !ement, the a&erage annual flo, +eing less than HSI 233 million in the 4773s. 9 #angladesh0s failure to attra!t any signifi!ant *uantum of D I should +e .udged in the !ontext of the &ery li+eral, e&en +y regional standards, in&estment regime put in pla!e for attra!ting foreign in&estment5 #angladesh has no restri!tion on foreign e*uity parti!ipation, no prior appro&al is re*uired for any le&el of D I and there is a &ery li+eral poli!y in the area of remittan!e and profit repatriation. Da!tors inhi+iting industrial in&estment in #angladesh are rather !ommon for domesti! as ,ell as foreign in&estors5 poor infrastru!ture, a+sen!e of s-illed la+our and mid1le&el te!hni!al expertise, underde&eloped legal system, !onstraints originating from limited size of the domesti! mar-et, la, and order situation, +ureau!rati! red tapism, and ,ea-ness of institutions. "hough, as of no,, trade
4.4.9
4.4.<
As a matter of fa!t, fertiliser has +een the lone se!tor ,here pu+li! in&estment ,as made in any signifi!ant amount in re!ent years. "o !ompare, D I in "hailand a&eraged HSI 2.3 +illion annually o&er the !orresponding period.
unions are not allo,ed to fun!tion in the E$Gs, the re!ent de!ision +y the G)#, under pressure from some of the )EC go&ernments, to allo, trade union a!ti&ities in E$Gs +y 233A, is also expe!ted to ha&e important impli!ations in terms of in&estment in the E$Gs. 4.4.7 $erforman!e of the industrial se!tor has also suffered o,ing to only a modest rise in la+our produ!ti&ity, ,hi!h has failed to mat!h the rise in real ,ages, and also as a result of the marginal de!line in !apital use effi!ien!y as manifested in the !hange in the incremental ca!ital 4alue added ratio =ICJR> from :.2 during 4773@741477A@78 to :.< during 4778@7?14777@33. "he num+er of pu+li! se!tor enterprises =$MEs> has !ome do,n from their peaof A4? in 479?@99 to 4A? in 4773@74, and to 44? in 4777@33. Ex!epting four produ!ts, ,hi!h experien!ed a modest gro,th ranging :1? per !ent, all other $ME produ!ts experien!ed a de!lining output during the 4773s. "he total loss of $MEs stood at "-. A.< +illion in 4777@33, ,hi!h ,as e*ui&alent to A.: per !ent of industrial G $ in the large1s!ale manufa!turing se!tor during the !orresponding year.< "he !ountry is also +urdened ,ith the si!- industries5 of the 47?3 pri&ate enterprises applying for registration ,ith the Ministry of Industry in 4779, a+out t,o1thirds or 42?8 enterprises ,ere manufa!turing units ,ith 43 or more ,or-ers.7 "he pa!e of li+eralisation and the !hanging trade regime, failure to raise effi!ien!y and !ompetiti&e strength, under1de&elopment of !apital mar-et, la!- of timely a!!ess to loan, !ompounded +y !orruption and +ad go&ernan!e ha&e !ontri+uted to a situation ,here the performan!e of +oth industrial as ,ell as the finan!ial se!tors had +een seriously undermined. "he *uality of a signifi!ant part of industrial loan ,as *uestiona+leC the pra!tise of the +an-ing se!tor of +orro,ing short and lending long !ompounded the pro+lems. "he go&ernment, in its attempt to impro&e the situation has +een ta-ing a num+er of measures in!luding strengthening of legal frame,or-, institutions and pro!esses for de+t re!o&ery, reform of the ;C#s, and +etter monitoring of the pri&ate and pu+li! se!tor +an-s. Inspite of these efforts total !lassified loans stood at "-. 88.A +illion in %une, 2333, ,hi!h indi!ates that the aggregate rate of non1performing loans remained as high as :7.9 per !ent.43 Identifying appropriate modalities to un+urden the finan!ial se!tor of this huge non1performing loan remains a -ey measure in terms of redu!ing the !ost of !apital to +e +orne +y entrepreneurs, enhan!ed flo, of loana+le funds to the se!tor and, !onse*uently, for ensuring an a!!elerated gro,th of the !ountry0s industrial se!tor.
4.4.43
4.4.44
4.4.42 Setting up of the Pri4atisation Board in 477: and ena!tment of $ri&atisation La, in %uly, 2333 ,ere attempts +y su!!essi&e go&ernments to un+urden the pu+li!
8 9
uring the first ten months of !urrent DF2334 the losses in!urred +y $MEs amounted to "-. :.: +illion. "hese a!!ounted for A.A per !ent of all manufa!turing enterprises and ? per !ent of all employment in units ,ith 43 or more ,or-ers. 10 It is interesting to note here that the share of S)Es in the total outstanding loans ,as A7 per !ent, ,hilst that of pri&ate +orro,ers ,as 84 per !ent =as of %une, 2333>.
se!tor of losing S)Es. 'o,e&er, during 477:14778 the #oard had +een a+le to pri&atise only 42 mills ,ith a total &alue of "-. 4<?.7 !roreC during 477?133, < more enterprises &alued at "-. <.: !rore ha&e +een pri&atisedC sale pro!ess for 2 more units ha&e +een initiatedC letter of intent has +een issued for < other millsC shares of ? multinational and national !ompanies ha&e +een offloadedC in !ase of A pu+li! limited !ompanies G)# has deli&ered its share to IC#. )&er the re!ent past, G)# has handed o&er 7 textiles mills to the ,or-ers, employees and management of the !on!erned mills as a ne, form of pri&atisation. 'o,e&er, the pa!e of pri&atisation remains modest, indi!ated +y the fa!t that losses suffered +y the $MEs de!lined only at a rate of A per !ent per annum +et,een 4773@74 and 4777@33. 1.$ %rade &eforms' External !ector Performance and ndustrial (ro)th 4.2.4 "rade and in&estment regimes in #angladesh had traditionally +een designed to ser&i!e the in,ard loo-ing, import1su+stituting gro,th strategy ,hi!h informed the de&elopment agenda of the !ountry in the 4793s. "entati&e steps to deregulate, de!ontrol and li+eralise the #angladesh e!onomy ,ere first initiated in the early 47<3s. Li+eralisation poli!y pursued +y #angladesh sin!e then is o+ser&ed to ha&e passed three phases. "he first !on!erted effort at reforming the erst,hile import1su+stituting trade and in&estment regime ,as underta-en in the early 47<3s ,ith the introdu!tion of the ;e, Industrial $oli!y of 47<2. "he ;I$1<2 ,as adopted ,ith an o+.e!ti&e, inter alia, to en!ourage greater parti!ipation of the pri&ate se!tor in the industrialisation of the !ountry. "he poli!y !alled for important !hanges in the in&estment and trade poli!ies pursued +y the !ountry sin!e the post1independen!e period. "his phase of reform !o&ering the period +et,een 47<4@<2 to 47<8@<? ,itnessed a num+er of important initiati&es to,ards li+eralisation of the e!onomy, in!luding a shift from the !ositi4e list of import !ontrol to a ne1ati4e list, redu!tion in the num+er of !ommodities imports of ,hi!h ,ere +anned, expansion of export performan!e +enefits, introdu!tion of duty dra,+a!- fa!ilities to stimulate the export se!tor, and setting up of institutions to stimulate export1oriented a!ti&ities. "he se!ond phase ,as initiated in 47<? to !oin!ide ,ith the Re&ised Industrial $oli!y =RI$, 47<?> and !o&ered the period +et,een 47<?@<9 and 4773@74. "his phase sa, remo&al of a large part of the *uantitati&e restri!tions =/Rs> on imports. "he num+er of /Rs !ame do,n from A9< to 2:7 +et,een 47<8@<? and 4774@72. A su+stantial redu!tion in the anti1export +ias ,as a!hie&ed through rationalisation of tariffs, redu!tion in the num+er of tariff sla+s and introdu!tion of a system of !on!essions and in!enti&es for export1oriented a!ti&ities ,hi!h in!luded zero1tariff a!!ess to imported inputs, su+sidisation of export !redit and spe!ial in!enti&es for e!onomi! a!ti&ities in export pro!essing zones =E$Gs>. "he most re!ent one, the third phase initiated in 4774172, ,as the most intensi&e of these phases, +oth in terms of the depth of the reforms underta-en, as ,ell as their !o&erage. "he third phase ,as the most !omprehensi&e !ompared to the
4.2.2
4.2.:
reforms of the earlier t,o phases. "he third phase, in effe!t, !oin!ided ,ith the stru!tural ad.ustment programme =SA$> ,hi!h ,as +eing implemented in a+out the same period. "he SA$ en&isaged important and deep reforms in the fis!al, finan!ial and institutional poli!ies ,hi!h ,ere in pla!e in #angladesh. "his phase of reform ,ent a long ,ay in instituting a set of reforms ,hi!h !reated a poli!y en&ironment that ,as !ondu!i&e to export promotion and !apa+le of su+stantially redu!ing the existing anti1export +ias in the e!onomy. 4.2.A As a result of the reforms a&erage nominal tariff rates in #angladesh !ame do,n from <7 per !ent to 49 per !ent +et,een 4774@72 to 4777@33. Dor manufa!turing imports, the !orresponding import1,eighted tariff rates ,ere +rought do,n from 84.< per !ent to 48.7 per !ent o&er the mat!hed period. "he reforms helped redu!e the differen!e +et,een the statutory le&els of prote!tion and the o+ser&ed le&els. "he multiple rate sales tax, ,hi!h had an inherent import dis!riminating +ias ,as repla!ed +y a flat &alue added tax =JA"> 44 ,hi!h ,as imposed on +oth imports and domesti!ally produ!ed goods. Regulatory duties and sur!harges on imports ,ere repla!ed +y a supplementary ex!ise duty, ,hi!h is a trade1neutral !onsumption tax. "he degree of openness of the #angladesh e!onomy in!reased signifi!antly as a !onse*uen!e of the deepening of the li+eralisation reforms. Although #angladeshKs a&erage tariff rates are some,hat higher !ompared to a num+er of !ountries in Latin Ameri!a and South East Asia, these !ontinue to remain lo,er !ompared to other South Asian !ountries +arring Sri Lan-a and ;epal. As a matter of fa!t, ex!epting Colum+ia, #angladeshKs redu!tion in a&erage tariffs o&er the reform period ,as the highest in the ,orld. 42 Effe!ti&e prote!tion rates ha&e also registered signifi!ant de!line in !ase of most of the industries. 4: Ex!epting the textiles se!tor, /Rs in almost all other se!tors ha&e +een +rought do,n su+stantiallyC4A most of the remaining /Rs =a+out A3 per !ent> are on a!!ount of non1trade related fa!tors. "he !hange in the import regime in post1reform #angladesh appear to ha&e +een *uite radi!al ,hen posited against the pre1reform regime. Conse*uently, the domesti! import su+stituting industries are no, fa!ed ,ith a heightened degree of !ompetition ,ith su+stantial erosion in the le&els of prote!tion. "he redu!tion in prote!tion rates ha&e also gone hand in hand ,ith the export1promotion strategy ,hi!h ,as pursued o&er the same period. "ill the time ,hen trade poli!y !er se is a+le to eliminate the anti1export +ias in the poli!y regime, export promotion in!enti&es !ontinue to play a !ru!ial role as !omplementary to the li+eralisation pro!ess. "he in!enti&es ensure that export1 oriented industries are a+le to a!!ess imported1inputs at ,orld1pri!es, exporters
4.2.8
4.2.?
4.2.9
11 12
"he JA" ,as fixed at a flat rate of 48L from the &ery +eginning ,hen it ,as introdu!ed on %uly 4, 4774. "his is measured as a ratio of a&erage tariffs follo,ing the reforms !ompared to those prior to the reforms. 13 Effe!ti&e prote!tion rates measure prote!tion to net &alue added and is a *ualitati&ely +etter indi!ator of the degree of prote!tion en.oyed +y a !ertain industry sin!e it ta-es into a!!ount prote!tion on traded inputs 14 A+out 28 per!ent of all eight1digit harmonised system in textiles are under *uantitati&e restri!tions.
are su+sidised ,hi!h ena+le them to !ompete from position of strength in the glo+al mar-et, in&estments in export1oriented industries are en!ouraged, and that foreign dire!t in&estment in export1oriented industries in the E$Gs are promoted. "hese in!enti&es ha&e played a !ru!ial role in ena+ling #angladesh to a!hie&e a ro+ust annual export gro,th rate of 42.8L o&er the last de!ade. 4.2.< "he export in!enti&es pro&ided in #angladesh till no, !ould +e +roadly grouped into =a> assistan!e to gross &alue added or returns to primary fa!tors, =+> assistan!e to inputs or intermediates and =!> assistan!e to output. "he main o+.e!ti&es of these in!enti&es are to5 =a> ensure redu!tion of administrati&e +ottlene!-s, =+> enhan!e +a!-,ard lin-age and &alue addition, =!> di&ersify exports, =d> promote export1oriented in&estment, and =e> strengthen pri!e !ompetiti&eness in glo+al mar-ets. "he in!enti&es ha&e gone a long ,ay to ensure a norm situation for the export1oriented a!ti&ities in #angladesh, and ,ere a+le to su+stantially redu!e the anti.e8!ort ias in the e!onomy. "o stimulate export1oriented a!ti&ities, exporters ha&e +een pro&ided ,ith import fa!ilities under +a!-1to1+a!- L@Cs, +onded ,arehouse fa!ilities, assistan!e under !ash !ompensation s!heme and duty dra,+a!-C 433 per !ent export1oriented units outside the E$Gs are allo,ed to import !apital ma!hineries on a duty free +asis. "he appro&al of the Pri4ate 98!ort Processin1 Zone Act 0::6 +y the !a+inet ena+les pri&ate !ompanies to set up spe!ial E$Gs in sele!ted areas. "he go&ernment is also a!ti&ely !onsidering the option of allo,ing lo!al pri&ate entrepreneurs to set up export1oriented industrial par-s. 'o,e&er, due to implementational ,ea-ness and lo, !apa!ity of institutions, in!enti&es ha&e often failed to rea!h their o+.e!ti&es.
4.2.7
4.2.43 "he impa!t of the li+eralisation poli!y has +een mixed. Easier a!!ess to imported ra, materials, derestri!tion and deregulation !oupled ,ith ne, in!enti&e regimes ha&e !ontri+uted to,ards and en!ouraged export1oriented in&estment in the !ountry o&er the re!ent past.48 )n the other hand, some of the import1su+stituting industries ha&e +een negati&ely impa!ted as a !onse*uen!e of the poli!y of import li+eralisation. "his has +een a!!entuated +y the relati&ely rapid pa!e of li+eralisation, la!- of prior and !lear understanding a+out the !alendar of reforms and their potential !onse*uen!es for the e!onomy, and also +e!ause the reforms to li+eralise the e!onomy ,as not a!!ompanied +y ade*uate !omplementary reforms in other areas ,hi!h !ould stimulate the re*uired supply side response. 4.2.44 As a result of the trade reforms, its !on!omitant impa!t on the produ!tion !apa!ities ,ithin the !ountry, enhan!ed a!!ess to produ!tion and non1produ!tion related imports and a!!elerated gro,th of exports, the degree of openness of the #angladesh e!onomy has gone up signifi!antly o&er the re!ent past5 from 24 per !ent in 47<3@<4 to :3 per !ent in 4777@33.4? Exports expanded at 7.2 per !ent and
15
It is, ho,e&er, diffi!ult to esta+lish one1to1one !orrelation +et,een #angladesh0s ro+ust export se!tor performan!e and the poli!y of import li+eralisation. 16 egree of openness of the e!onomy sho,s share of export and import as a per!entage of the !orresponding G $.
4A.A per !ent during the 47<3s and 4773s respe!ti&ely, ,hilst the !orresponding figures for imports ,ere A.A per !ent and 43.7 per !ent. Conse*uently, there has +een a steady rise in the !apa!ity of export se!tor to pay for the rising imports5 from :4 per !ent in 47<3@<4 to ?9 per !ent in 4777@33. )&er the last t,o de!ades there has +een signifi!ant shift from resource. ased to !rocess. ased exports and, from a signifi!ant dependen!e on primary !ommodities to manufa!tured ones ,ithin the export +as-et. 'o,e&er, the flip side of this is that there has +een a parallel shift from #ute.centric e8!ort structure to an ("$ centric one ,ith the result that the degree of !on!entration in exports has gone up signifi!antly in the 4773s. Bo&en and -nit1RMG no, !ontri+ute a+out three1fifths of total exports from the !ountry. "his gro,ing produ!t !on!entration ,as also a!!ompanied +y a gro,ing mar-et !on!entration, ,here EH and HSA a!!ount for more than four1 fifths of the total export. Export1di&ersifi!ation and mar-et di&ersifi!ation !ontinue to remain ma.or !hallenges !onfronting the export se!tor of the !ountryC a la!- of !apa!ity on +oth these !ounts has added *uite a signifi!ant measure of &ulnera+ility to #angladesh0s export se!tor performan!e. As ,as mentioned earlier, export1oriented industries a!!ount for a+out a1third of the industrial !apa!ity in the !ountryC the share of this segment of the industrial +ase in terms of fixed assets, in&estment, industrial loan and employment has +een on the rise in re!ent years, not least, as has +een pointed out earlier, +e!ause of the fa!t that the rate of gro,th of export se!tor ,as more than dou+le the rate of gro,th of the manufa!turing se!tor throughout the 4773s. 4.2.42 Inspite of the ro+ust performan!e demonstrated +y the export se!tor, it is fa!ed ,ith ma.or ris-s and +eset ,ith a!ute pro+lems originating from domesti! supply side !onstraints and fa!tors related to the demand side in the form of mar-et a!!ess !hallenges and pressure from emerging !ompetitors. #oth these fa!tors ha&e the potential !apa!ity to undermine the re!ent relati&e su!!ess en.oyed +y #angladesh0s export oriented se!tor. 4.2.4: Supply side +ottlene!-s pose formida+le !hallenge in translating #angladesh0s !otential o!!ortunities into realised o!!ortunities. Dor example, la!- of ade*uate +a!-,ard lin-age industries in spinning and ,ea&ing not only undermines #angladesh0s !ompetiti&e ad&antage, +ut also se&erely limits her !apa!ity to a!!ess the GS$ fa!ilities pro&ided +y the EH in the apparels se!tor.49 At a time ,hen the lead period allo,ed +y international +uyers is +eing drasti!ally redu!ed, esta+lishing +a!-,ard lin-age in textiles has +e!ome an important fa!tor in terms of the !ontinued !ompetiti&eness of the !ountry0s RMG se!tor. #ottlene!-s related to infrastru!ture, !ommuni!ation, ports,4< go&ernan!e of the external se!tor, and la!- of !apa!ity in implementing the in!enti&es regimes47 as ,ell as the effe!ti&e
17
#angladesh is a+le to a!!ess GS$ fa!ilities for her apparels export to the EH mar-et only to the tune of a+out :81A3 per !ent of her total export +e!ause of her ina+ility to !omply ,ith the t&o.sta1e con4ersion re*uirement for a!!essing GS$ fa!ilities. 18 Dor example, for handling a 23 "EH e*ui&alent ship, ,hen an entrepreneur has to in!ur a !ost of HSI 223 in Singapore and HSI :?3 in Colom+o, he has to in!ur HSI ??3 for the same ser&i!e in Chittagong port. 19 Although the in!enti&es pro&ided in the export se!tor in #angladesh are not insignifi!ant, there is formida+le diffi!ulty in a!tually a!!essing su!h in!enti&es. "he result of a sur&ey sho,s that on a&erage it ta-es 42 days for export1oriented inputs to +e released thorough the !ustoms, 7 days to o+tain !ustoms !learan!e for
proper fun!tioning of export related institutions ha&e se&erely !onstrained the effi!ien!y of the export se!tor of the !ountry. Su!h +ottlene!-s add to the !ost of doing +usiness in #angladesh and dis!ourage further in&estment in export1 oriented a!ti&ities. 4.2.4A Sin!e !omplian!e ,ith stringent *uality standards has +e!ome an essential pass,ord to a!!ess the glo+al mar-et, !urrent la!- of ade*uate human resour!e and te!hnologi!al !apa!ities in export1related produ!tion and ser&i!e se!tors are also expe!ted to se&erely limit #angladesh0s a+ility to a!!ess glo+al mar-et in near future. Competiti&e pressure on #angladesh0s exporta+les is li-ely to gro, in the fa!e of !ontinuing erosion of the GS$ margin +e!ause of tariff redu!tion +y de&eloped !ountries, gradual phase1out of the Multi1fi+re Arrangement =MDA> o&er the next three and half years, and in!reased !ompetition from !ountries su!h as China ,hose a!!ession to the B") is most li-ely ,ithin the shortest period of time. "he ena!tment of HS " A2333 pro&iding zero1*uota, zero1tariff mar-et a!!ess to non1Asia1$a!ifi! L Cs, gro,ing presen!e of Mexi!o in the HS apparels mar-et than-s to ;AD"A23 and ne, issues su!h as la+our standards, en&ironment, !ompetition poli!ies, and e!o1la+elling are expe!ted to put up ne, !hallenges for the export se!tor of the !ountry. 4.2.48 A ma.or !hallenge for #angladesh ,ill +e to ensure !omplian!e ,ith her !ommitments under the B") rules. "hese are expe!ted to ha&e important impli!ations in terms of the manner in ,hi!h industrial and the external se!tors of the !ountry ,ill need to operate in future. B") pro&isions and !ommitments in the area of "RI$s, "RIMS, GA"S and AoA ,ill re*uire important regulatory !hanges in su!h areas as su+sidies, tariff regimes, !onformity ,ith patents and !opy rights standards et!. )n the other hand, #angladesh ,ill also need to play a more proa!ti&e role, not least as the leader of the L Cs in B"), in terms of ensuring implementation of Pro1ramme o, Action agreed during the "hird H; Conferen!e on the L Cs, and also putting into effe!t the S( !ommitments in the B") in the area of trade related te!hni!al assistan!e, ensuring flexi+ility in !omplian!e ,ith B") pro&isions, ensuring greater mar-et a!!ess to de&eloped !ountries, and !ontinuing to re!ei&e preferential treatment for her exports. "hese are +e!oming !riti!al to #angladesh0s sur&i&al in a glo+alised ,orld. Strategies ,ill also need to +e designed to address non.tari,, arriers =;"#s> to trade. In re!ent years #angladesh has +een fa!ing a deteriorating terms of tradeC ex!hange rate has often +een misaligned and an in!reasingly larger share in in!remental exports is !oming from !hanges in 4olume inde8 relati&e to the !rice inde8. 4.2.4? "he upshot of the a+o&e dis!ussion is that the report !ard on the re!ent performan!e of industry and trade se!tors of #angladesh e&in!e a rather mixed
exporting a shipment, 9 days to !lear all the do!uments re*uired for exports and 82 days to o+tain refunds from E ). )n a&erage a firm spends more than half a person year to deal ,ith the &arious go&ernment agen!ies in&ol&ed in promoting exports. "he administrati&e !osts of the duty free a!!ess me!hanism is perhaps as high as ? per !ent of the &alue of the total &alue1added. 20 Dor example, Mexi!o has +een a+le to in!rease her share in the HS mar-et from ? per !ent to 4A per !ent sin!e the esta+lishment of ;AD"A.
0<
signal. )ne !ould go e&en further and say that the performan!e of these se!tors lea&es mu!h to desire in the !ontext of the fast pa!e of li+eralisation and glo+alisation o+ser&ed during the re!ent years. "he modest gro,th rate a!hie&ed +y the manufa!turing se!tor in the 4773s ,as, in large part, under,ritten +y the in!remental !ontri+ution of the export1oriented industries. Industrial +ase !ontinues to remain essentially narro,, and though the share of pu+li! se!tor in manufa!turing G $ has !ome do,n signifi!antly, the gap has not +een ade*uately +ridged through pri&ate se!tor in&estment and the D I flo,. #angladesh is indeed in urgent need of a for,ard loo-ing industrial1strategy to strengthen the !ompetiti&e strength of her domesti! mar-et1oriented as ,ell as the export1oriented industries. "he a+o&e dis!ussion also +ears out the fa!t that the tas- of addressing the !hallenges fa!ed +y #angladesh0s industrial se!tor is !losely related to pursuing an a!ti&e trade poli!y !apa+le of addressing the !hallenges of glo+alisation and li+eralisation. Bhilst the trade poli!y reforms of the 4773s ha&e played a -ey role in putting into pla!e a predominantly mar-et1dri&en e!onomy, the reforms ha&e also put the domesti! industries under in!reased !ompetiti&e pressure from imported goods. Inspite of fis!al, finan!ial and institutional in!enti&es the export +ase has !ontinued to remain narro, and shallo,C the !ountry0s potentials in the glo+al mar-et has also !ontinued to remain unrealised +e!ause of the formida+le supply side and demand side !onstraints. "he issue of impro&ing the *uality of go&ernan!e is +e!oming !riti!ally important in terms of impro&ing #angladesh0s trade and industrial se!tor performan!e. In the a o4e conte8t/ the task o, desi1nin1 a com!rehensi4e strate1y to ,ace the challen1es and access the o!!ortunities ori1inatin1 ,rom 1lo alisation ha4e ecome one o, !aramount im!ortance ,or Ban1ladesh=s industrialisation and ro ust e8ternal sector !er,ormance. . Tas!s "head and "ctionable "gendas 2.4 "he gro,th rate of #angladesh0s industrial se!tor is still far off the mar- ne!essary for the manufa!turing se!tor to !laim a share of 28 per !ent in her G $, a target ,hi!h, as ,as mentioned earlier, is en&isaged under the Industrial $oli!y of 4777. In the !ontext of glo+alisation and li+eralisation ,here the !ountry0s trade and industrial se!tors are fa!ing in!reasing !hallenges in translating !omparati&e ad&antages into !ompetiti&e ad&antage, and !ompetiti&e ad&antage into re&ealed !ompetiti&e ad&antage, there is an urgent need to design a!tiona+le agendas to !ope ,ith the attendant ris-s, and also ma-e good use of the ne,ly emerging opportunities. 2.2 In the !ontext of the a+o&e, there is a need to !on!retise three types of doa+les and inter&entions to energise the !ountry0s industrial and trade se!tors5 =a> $oli!y1 indu!ed Inter&entions, =+> Stru!tural Change Related Inter&entions, and =!> Inter&entions to,ards Impro&ements of /uality of Go&ernan!e. Many of these doa+les ,ill relate to three areas of a!tions5 =a> fis!al in!enti&es, =+> finan!ial measures and =!> institutional initiati&es.
00
Related to the a+o&e, ma.or areas ,here !on!rete a!tions ,ill +e urgently re*uired in!lude5 esigning a Long "erm Jision Strategy for Industrialisation Stimulating Resour!e Mo+ilisation for Industrial e&elopment Enhan!ing Competiti&e Strength and En!ouraging "e!hni!al Hpgradation in +oth omesti!1Mar-et )riented as ,ell as Export1)riented Industries Supporti&e Measures for Small and Cottage Industries Raising the Effi!a!y of Industry and "rade Related Institutions Strengthening #a!-,ard and Dor,ard Lin-ages in Export Se!tor and i&ersifying Export #ase esigning In!enti&es to En!ourage In&estment in ;e, Export1oriented Industrial A!ti&ities Raising the Effi!ien!y of Management of Export In!enti&es Enhan!ing Export Dinan!e Da!ilities Raising Effi!ien!y of Export Related Infrastru!ture Ensuring Greater A!!ess to "rade Related Supporti&e Ser&i!es Raising the Effi!a!y of Import Administration esigning a Effe!ti&e Ex!hange Rate $oli!y Ma-ing Glo+alisation Bor- for #angladesh and Da!ilitating Glo+al Mar-et A!!ess +y #angladeshi Dirms
#. $roposed "ction "gendas for Stimulating %angladesh&s 'ndustry and Trade Sectors (ocus of "ction #.1 Design a )ong Term *ision Strategy for 'ndustrialisation
"here is a need to ma-e a distin!tion +et,een poli!ies and strategies. Bhilst poli!ies are designed to fa!ilitate industrialisation and trade in general, and this has +een attempted through su!!essi&e poli!ies during the de!ades of the 47<3s and 4773s, a strategy ,ill need to identify !on!rete measures to ta!-le pro+lems ,hi!h !onstrain sur&i&al of existing industries, stimulate de&elopment of next generation of industries and ensure !ompetiti&e strength of +oth import1su+stituting and export1oriented industries in the !ontext of li+eralisation and glo+alisation. Action 0: Take measures ,or creatin1 a com!rehensi4e data ase on Ban1ladesh industry. earth of relia+le data on in&estment, !apa!ity, !apa!ity utilisation, produ!tion, &alue1addition, and employment seriously undermine strategi! industrial poli!y ma-ing in #angladesh. Dor example, the !ensus of Manufa!turing Industries =CMI> data for 4778@7? is yet to +e pu+lished. ata on rural and small s!ale industries is seriously inade*uate. "o address this !on!ern, the !apa!ity of ##S should +e suffi!iently strengthened to ensure regular generation of industrial data and pu+li!ation of CMI. An
CPD Task Force: Industry and Trade 02
institutional frame,or- should +e designed to regularly !ollate, systemise and pu+lish a relia+le set of information on Small and Medium Enterprises =SMEs>. Action 2: "easures to ensure systematic and re1ular in,ormation ,lo& on re1istration/ in4estment on the 1round and !ro1ress o, in4estment co4erin1 all units enlisted &ith the Board o, In4estment. Easy a!!ess +y potential in&estors to this data+ase, to +e posted on line, must +e ensured. Action 2: -et u! a >ational Commission on Industry to desi1n a clearly articulated strate1ic 4ision ,or Ban1ladesh=s industrialisation. Su!h a strategi! do!ument, as distin!t from industrial poli!y, must identify the dynami! !omparati&e ad&antage of #angladesh0s industries in a glo+al setting, arti!ulate !on!rete modalities to raise !ompetiti&e strength of #angladeshi enterprises, estimate the in&estments re*uired for implementing the strategy, identify sour!es of finan!ing as ,ell as entrepreneurial resour!es and institutions to realise the goals and put in pla!e the re*uired in&estments in supporti&e infrastru!ture, and also arti!ulate appropriate poli!y instruments to gi&e effe!t to these goals. "he spe!ifi! role of the G)#, pri&ate se!tor and the ;G) se!tor to implement these goals ,ithin a time1+ound programme ,ill ha&e to +e ,or-ed out ,ithin the frame,or- of this strategy. Su!h a strategy, to +e implemented o&er the next 43 years, may +e made !oterminous ,ith the Sixth and Se&enth Di&e Fear $lans of #angladesh. (ocus of "ction #. Stimulating Resource Mobilisation for 'ndustrial De+elopment Mo+ilising ade*uate funds for industrialisation !ontinues to remain a -ey area of !on!ern spe!ially in &ie, of the relati&ely lo, domesti! and national sa&ings rates and in the !ontext of a +an-ing se!tor +urdened ,ith +ad and dou+tful loans and the negligi+le flo, of D I !oming for,ard to in&est in the !ountry0s industrial se!tor. Conse*uently, fund shortage and high !ost of !apital ha&e seriously undermined industrial in&estment in the !ountry. "he !ommer!ial +an-s ha&e not +een a+le to repla!e the DIs, and in&estment !ompanies ,hi!h !ame into existen!e has not +een su!!essful in realising their statutory o+.e!ti&es and tended to operate as *uasi1!ommer!ial +an-s. "he sto!- mar-et has also not +een a+le to o&er!ome the +oom and +ust experien!ed in 477?. La!- of ade*uate industrial finan!ing is a ma.or reason for the de!eleration in industrial gro,th in re!ent years. ;e, institutions and instruments ,ill need to +e de&ised to mo+ilise the re*uired resour!es for industrial finan!ing. Con!rete measures may in!lude the follo,ing5 Action 0: Create a ne& In4estment Finance Com!any. "he o+.e!ti&es of su!h a Company ,ould +e =a> to mo+ilise funds for industrial term loan finan!ing, and =+> to a!ti&ely engage in industrial in&estment promotion a!ti&ities. It is to +e ensured that the industrial !apital mo+ilisation strategy should +e geared to,ards enlargement of the aggregate finan!ial resour!e a&aila+ility rather than +ased on di&ersion of the limited a&aila+le funds. "he proposed !ompany !ould generate the re*uired fund +y a!!essing the follo,ing potential sour!es5 =a> ;C#s, =+> lo!al pri&ate +an-s, =!> IDC, =d> G)#, =e> glo+al finan!ial mar-et, =f> D I, =g> non1resident #angladeshis and migrant ,or-ers, and
02
=h> domesti! !apital mar-et. "his !ompany ,ould essentially fo!us !apital support need of medium to large s!ale industries in the area of !ollateral +ased !redit, lease finan!ing as ,ell as &enture !apital finan!ing. Action 2: (educe the cost o, industrial orro&in1. Interest rate on loana+le funds from the !ommer!ial +an-ing system ,ill need to +e +rought do,n +y un+urdening the ;C#s of the a!!umulated +ad de+t +y !reating a ne, agen!y for loan re!o&ery. Su!h an agen!y, to +e a .oint su+sidiary of all the ;C#s, ,ould +e ex!lusi&ely !ommitted to the tas- of loan re!o&ery through su!h instruments as asset s,aps, asset !on&ersion and de+t sales. "his ,ould +ring do,n the !ost of +orro,ing from the ;C#s and is also li-ely to ha&e positi&e impa!t on !ost of +orro,ing from pri&ate finan!ial institutions. Action 2: "o ilise ,unds ,or industrialisation y issuin1 industrial onds throu1h the ca!ital market and also y sale o, such onds to the >(Bs. Spe!ial tax in!enti&es may +e announ!ed to promote in&estment in this type of +onds. Action 3: 9ncoura1e access to ,acilities ,rom leasin1 com!anies. In re!ent years industrial finan!ing through leasing !ompanies has turned out to +e an in!reasingly attra!ti&e form of industrial finan!ing. Spe!ial in!enti&es may +e designed to stimulate this type of finan!ing. Action 5: (emo4e the ottlenecks to ,acilitate access to industrial credit ,rom the -AA(C De4elo!ment Fund. Action 6: Create an en4ironment conduci4e to smooth conduct o, in4estment and trade acti4ities. Ci&il so!iety, in !olla+oration ,ith politi!al parties, should ta-e an initiati&e in support of rea!hing a !onsensus to the effe!t that politi!al a!ti&ism ,ill not hamper the greater interests of the !ountry0s industry and !ommer!e. Action 7: Take ade?uate measures to maintain 1ood &orkin1 en4ironment and a satis,actory la& and order situation in the industrial *ones. Esta+lishment of an Industrial Police Force/ ,hi!h ,ill +e trained to safeguard the interest of all sta-eholders, may +e !onsidered in this respe!t. Action ;: Percei4e and !ursue ,orei1n in4estment not as a su stitute o,/ ut as com!lementary to/ domestic in4estment. Policies should e 1eared accordin1ly. Added thrust needs to +e gi&en to !reate !ondu!i&e !onditions for setting up .oint &enturesC ade*uate pro&isions ,ill need to +e put in pla!e for lo!al expertise de&elopment and te!hnology transfer in !ase of in&ol&ement of D I. Action :: 9nsure en,orcement o, !olicy and strate1ies. #oth the In&estment A!t and E$G Authority A!t should +e re&ised to remo&e the !lauses that ha&e +e!ome redundant o&er time and to in!orporate pro&isions ,hi!h are re*uired to meet the demands of the present time. Appropriate rules should +e framed to pro&ide legal +a!-ing for the A!ts. All other la,s of the land, e.g. la+our la,s, ha&ing a +earing on the in&estment situation, should +e +rought into !onformity ,ith In&estment A!t.
03
Action 0<: -treamline Institutional Frame&ork. a) Create a "onitorin1 Cell in B@I A strong and ,ell1e*uipped monitoring !ell should +e put in pla!e in the #oard of In&estment to5 Monitor the in&estment situation on a !ontinuous +asis. Monitor the progress of implementation of pro.e!ts ,hi!h ha&e +een registered. Re&ie, !apa!ity utilisation of existing industries on a !ontinuous +asis. Maintain !lose liaison ,ith trade and in&estment promotion organisations. A proposal should +e !onsidered in this !ontext to enfor!e registration as !ompulsory and intimation of the periodi! status of implementation of an in&estment pro.e!t as mandatory in order that #)I !an !ompile and +ring out statements refle!ting the progress of in&estment +y foreign in&estors. ) U!1rade the ca!a ility o, @ne -to! -er4ice Centre "he )ne Stop Ser&i!e Centre, as it stands no,, is not &ested ,ith de!ision1ma-ing authority and, therefore, fails to deli&er the goods properly and effe!ti&ely. It needs, therefore, to +e upgraded +y pro&iding it ,ith de!ision ma-ing authority. c) -et u! an In,ormation and Data Bank at B@I An information and data +an- needs to +e set up ,ithin the #oard of In&estment to ser&e as a !entral pool of information and data to address the re*uirements of in&estors for ,ide1ranging information relating to in&estments. "he data +an- should also gather information pertaining to the in&estment situation of foreign !ountries, and should also gather information on te!hnology. An important tas- may +e performed +y the unit in !ompiling a list, ,ith periodi! upgrading, of the prospe!ti&e in&estors ,illing to put up e*uity ,ith foreign in&estors. "his unit should maintain a steady intera!tion ,ith our em+assies to !olle!t and disseminate information on foreign in&estment through Internet fa!ilities. "he unit should +e e*uipped ,ith fa!ilities for !omputer net,or-ing ,ith all the !ham+ers of #angladesh as ,ell as internet lin-age ,ith sele!ted foreign !ham+ers of the de&eloped and de&eloping !ountries together ,ith our em+assies a+road.
d) Initiati4es &ith (es!ect to T(IPRele&ant national poli!ies should re!ognise the role of Intelle!tual $roperty Rights =I$R> as an important issue ,hi!h has a !riti!al pla!e in the B") and also in terms of attra!ting foreign in&estment. "he amendment and formulation of I$ la,s should +e gi&en priority !onsideration to !on&ey a distin!t message to the potential foreign in&estors that
05
#angladesh is serious a+out prote!tion of I$R and fulfilment of its due o+ligations to,ards "RI$S. Action 00: Chan1e the de,inition o, =e8!ort oriented= industries. "he !urrent pra!ti!e of !ategorising industries ,ith at least 93 per !ent of produ!ts +eing exported as export oriented appears to +e too stringentC a!!ordingly the limit should +e s!aled do,n to ?3 per !ent of the output. "o stimulate domesti! lin-ages, industries ,ith su+stantial lo!al ra, material !ontents =83 per !ent and a+o&e> should *ualify as export oriented e&en if their export1output ratios are lo,er than ?3 per !ent. Dor su!h industries export re*uirements may +e redu!ed to 83 per !ent. Action 02: 98istin1 discre!ancies et&een e8!ort and deemed e8!ort should e reduced. Action 02: (educe cor!orate ta8 rate. "he high rates of !orporate and other taxes in #angladesh ha&e e&o-ed !on!erns on the part of foreign in&estors. "hese rates are found to !ompare &ery unfa&oura+le ,ith many South and South East Asian !ountries. A!!ordingly, !orporate tax rates should +e determined in a manner ,hi!h allo,s #angladesh to +e attra!ti&e in the regional !ontext. (ocus of "ction #.# Capital Mar!et De+elopment Action 0: Im!ro4e o, the ,lo& o, in,ormation/ introduction o, a system o, market.maker in addition to the !re4ailin1 order.dri4en system/ credi le and ?uick settlement and the de4elo!ment o, o4er.the.counter markets '@CT) ,or lar1e 1reen ,ield !ro#ects and non. listed securities are the !rere?uisites. Action 2: Desi1n a com!rehensi4e !lan to address the reasons ,or the stock market oom and ust o, 0::6 &ith a 4ie& to restorin1 in4estor con,idence throu1h 1reater trans!arency and accounta ility o, the tradin1 o, the e8chan1es. "o,ards this speedily implement the plan to introdu!e a !entral depository system =C S>. Action 2: Introduce ne& and &ide ran1in1 instruments &hich !ro4ide minimum returns &ith certainty to in4estors/ such as !re,erred stocks/ s&eeteners accom!anyin1 de t and e?uity &arrants etc. "his ,ill impro&e the supply side of the se!urities mar-et. Action 3: -tren1then the D-9 and C-9 y u!datin1 the rules and re1ulations 1uidin1 these institutions in order to ,acilitate sur4eillance and en,orce com!liance o, rules. Action 5: Take u! !lans to de4elo! !ro,essionalism amon1 the market o!erators/ es!ecially dealers. rokers. Action 6: 9nsure a 1reater and e,,ecti4e role ,or merchant anks. Capital mar-et de&elopment is related ,ith the finan!ial deepening, ,hi!h in turn, depends on effe!ti&e finan!ial intermediation as ,ell as on the a&aila+ility of a ,ide &ariety of finan!ial
06
instruments. In this !ontext, mer!hant +an-s ha&e to play due role in re&italising the sto!mar-et. Action 7: 9sta lish a Ca!ital "arket sta ilisationADe4elo!ment ,und to reduce the !ro a ility o, the recurrence o, 0::6 situation. (ocus of "ction #., S-Es and the $olicy of $ri+atisation Dor o&er t,o de!ades no, #angladesh has attempted to pursue a poli!y of denationalisation, di&estiture and pri&atisation. Although the state has +een gradually ,ithdra,ing from many produ!ti&e a!ti&ities, and the share of pu+li! in&estment in total in&estment has +een se!ularly de!lining, the !ountry0s industrialisation itself has suffered +oth from a la!- of a sense of dire!tion for the existing S)Es, as ,ell as a la!- of any &isi+le su!!ess as regards the poli!y of pri&atisation. )n +oth !ounts there is an urgent need for doa+le a!tions. $ri&atisation does not mean only transferring the lia+ility of the state to pri&ate shoulders 11it means a!hie&ing !ompetiti&e effi!ien!y in order to ha&e a positi&e impa!t on gro,th and de&elopment Action 0: Constitute a commission to su11est strate1ies to&ards commercial 4ia ility o, the state o&ned enter!rises '-@9s)/ more s!eci,ically identi,y those sectors &hich ha4e a natural com!arati4e ad4anta1e to e an -@9 ',or e8am!le/ these !ro4idin1 utility ser4ices since ,or o 4ious reasons these &ould still remain as -@9s o4er the near ,uture). Action 2: Create a ,rame&ork ,or !ri4atisation o, state o&ned mono!olies. "he poli!y frame,or- in pla!e at present does not ha&e a +uilt1in me!hanism for !reating and enfor!ing regulatory and !ompetition poli!ies. If the authorities !arry forth the pri&atisation program of pu+li! monopolies in utilities, infrastru!ture, and !ommuni!ations to the pri&ate se!tor, in order to ensure gains from pri&atising in these non1!ompetiti&e se!tors, industry regulations must +e in pla!e and +e implemented rigorously to prote!t !onsumer interests and so!ial o+.e!ti&es. $ri&atisation, and pri&ate se!tor entry in monopoly and oligopolisti! mar-ets should +e super&ised +y a strong, !redi+le, transparent regulatory frame,or- that limits the s!ope for a+using mar-et po,er and appropriating rents. Action 2: Undertake a com!rehensi4e study on the !er,ormance o, !ri4atised industries and incor!orate the lessons learnt in ne& !ri4atisation initiati4es. Action 3: Identi,y and address the !ro lems associated &ith the a sence o, a =market= ,or enter!rises earmarked ,or !ri4atisation. "o,ards this5 a> 9nsure !ro!er 4aluation o, enter!rises on the !ri4atisation list. Assets and lia+ilities of the enterprises should +e &alued +y a sele!ted a!!ounting firm, using one or more internationally a!!epted a!!ounting and auditing pro!edures, su+.e!t to re&ie, +y the
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authorities and, if ne!essary, re&aluation +y another sele!ted a!!ounting firm. "he authorities ,ill need to ensure that there is no !ollusion +et,een the a!!ounting firms and the potential +uyer. Stri!t san!tions should +e put in pla!e to address this possi+ility. +> 9nsure com!etiti4e en4ironment. Generally the mar-et pri!e should refle!t the E&alueE of the firm, pro&ided it is +eing &alued in a ,ell1fun!tioning and informed mar-et pla!e, !omposed of a large num+er of agents operating ,ithin a !ompetiti&e en&ironment. Sin!e the !apital mar-et in #angladesh is underde&eloped, the flo, of information for in&estors in the !apital mar-et is often imperfe!t and in!omplete. "hus, the highest +id pri!e may not refle!t the &alue of the firm in terms of e!onomi! fundamentals. It should, therefore +e, ensured that the tendering pro!ess is !ompetiti&e and dra,s a large num+er of +uyers. In the a+sen!e of a !ompetiti&e en&ironment there is s!ope for under &aluation, parti!ularly in a oligopolisti! situation ,here the num+er of potential +uyers are fe, and there may +e stru!tural features ,hi!h ena+le !ollusi&e +eha&iour. Action 5: Facilitate ,inancin1. #uyers should +e allo,ed to sell Epri&atisation +ondsE in the !apital mar-et to raise funds to +uy enterprises. Action 6: 9nsure !ro!er re4enue mana1ement. Hnder present poli!y, the re&enue from pri&atisation a!!rues to the Go&ernment. "he pro!eeds should not +e &ie,ed as di&idends +ut rather as sale of assets. "he pro!eeds from pri&atisation of enterprises, at least a signifi!ant part of it, should +e used for addressing the !onse*uen!es of retren!hment of la+our o,ing to pri&atisation. Action 7: Undertake a com!rehensi4e !olicy ,or retrainin1 o, retrenched &orkers. Action ;: -et a time ta le. An indi!ati&e time ta+le for pri&atisation, ,ith set goals for ea!h stage of pri&atisation, ,ill send strong signals to in&estors and !reate !onfiden!e in the !ommitment of the go&ernment fa&ouring an effe!ti&e and goal1oriented pri&atisation program. Action :: 9nsure s!eedy im!lementation. A!!ording to the poli!y, the state shall ensure that the transfer of the pri&atised enterprises is !omplete ,ithin 73 days of signing of the agreement. "he less delay there is in the transfer pro!ess, the +etter it is for !orporate management. )n!e a de!ision has +een rea!hed, it ,ill need to +e speedily implemented.
(ocus of "ction #.. Enhance Competiti+e Strength and Encourage Technical /pgradation in both Domestic-Mar!et -riented as 0ell as Export--riented 'ndustries
0;
La+our produ!ti&ity and !apital output performan!e are +e!oming in!reasingly !riti!al fa!tors for sur&i&al of #angladesh0s industries in the !ontext of the mar-et1led reforms, !ompetition in domesti! mar-et from imported produ!ts and !ompetition in the export mar-ets from lo!al and other foreign produ!ts. Hpgradation of +oth s-ills and te!hnology of export1oriented enterprises is essential for translating !omparati&e ad&antage into !ompetiti&e ad&antage. Energeti! steps ought to +e ta-en to address the attendant !hallenges. Action 0: -timulate in4estment in 4ocational trainin1 system and relate it to the re?uirements o, te8tiles/ a1ro. ased/ leather/ en1ineerin1 and other related industries. "he pri&ate se!tor should !olla+orate ,ith the Go&ernment in setting up s-ill1training institutes. Action 2: -u!!ort in.,actory skill u!1radation and trainin1 acti4ities throu1h ,iscal and other incenti4es. Action 2: (e4ie& outdated la our la&s to ensure com!liance &ith the ne&ly emer1in1 re?uirements o, the uyers in de4elo!ed countries and also 4arious con4entions on la our. Action 3: Put in !lace ade?uate measures to stimulate technolo1y trans,er and technolo1y di,,usion to local industries ,rom ,orei1n in4estors. Action 5: "ore ,ashion and desi1n institutes should e set u! to ena le 1arments e8!orters to mo4e to hi1her 4alue.added ,ashiona le &ear. Action 6: Technolo1y ac?uisition / ada!tation and u!1radation must e 1i4en to! !riority and 4ocational education must e re.desi1ned to cater to this need. Action 7: -tren1then ca!acity o, industries to con,orm &ith the increasin1ly strin1ent ?uality standards in the 1lo al market y stren1thenin1 ?uality control measures and related institutions. A central !ool o, technical resources could e created to !ro4ide such su!!orts. Action ;: Create a technolo1y u!1radation ,und to !ro4ide su!!ort ,or modernisation and technolo1y ac?uisition initiati4es o, oth -@9s and !ri4ate sector. Action :: Be acti4ely in4ol4ed in 1lo al initiati4es in su!!ort o, trans,er o, technolo1y ,a4ourin1 the de4elo!in1 countries and the BDCs. Action 0<: -timulate (CD acti4ities y creatin1 incenti4es ,or close colla oration et&een industries and academic institutions. Export1oriented produ!ers need to +e en!ouraged to underta-e R( through pro&ision of appropriate fis!al and other in!enti&es.
0:
(ocus of "ction #.1 Supporti+e Measures for Small and Cottage 'ndustries Small and !ottage industries ha&e a !apti&e domesti! mar-et ,hi!h !aters to lo, in!ome groups. Employment generation !apa!ities of these industries is also *uite su+stantial. In many de&eloping !ountries these industries are also important export1earners. 'o,e&er, support to these industries ha&e tended to +e negle!ted in the earlier industrial poli!ies. "he impa!t of pre&ious industrial poli!ies to !ontrol pri&ate in&estment fell une&enly on small and !ottage industries. "his ,as +e!ause of the relati&e ina+ility of the small and !ottage industries, !ompared to their large1s!ale !ounterparts, to !ope ,ith the regulations. )ften small s!ale industries suffer from long and !um+resome pro.e!t e&aluation pro!edures and stringent !ollateral re*uirements +ased on o,nership of fixed assets. Conse*uently, the poli!y regime ,as often +iased against small and !ottage industries. #e!ause of their stru!tural ,ea-nesses, these industries re*uire an a!ti&e poli!y support for their de&elopment +eyond the mere remo&al of poli!y +iases. Action 0: De4ise !ro!er and uni,ied method o, classi,ication. Jarious agen!ies of the go&ernment should use a !onsistent set of definitions ,ith respe!t to !lassifi!ation of enterprises +y size. 'o,e&er, this is not the !ase at present. "he 4777 Industrial $oli!y defined small and !ottage industry using +oth the !riteria of employment and fixed assets. "his is at &arian!e ,ith the definition used +y the ##S. Similarly, the ;ational #oard of Re&enue =;#R> uses a different definition of ECottageE enterprise for exemption from Jalue Added "ax =JA"> and "urno&er "ax, ,hi!h is +ased on a !ut off limit of fixed !apital and annual turno&er. An uniform set of definitions should +e designed for use +y all pertinent agen!ies to ensure !onsisten!y in this regard. Action 2: 9nsure Flo& o, !u lic e8!enditure. "here is need for su+stantial in!rease in pu+li! in&estment in the se!tor parti!ularly in the area of training, extension, resear!h, mar-et promotion et!. Action 2: -timulate !ri4ate in4estment. )ne of the !riti!al elements of industrial promotional poli!y should +e to guide in&estment into the small and !ottage se!tor. Dor this purpose, there is need for ade*uate pre1in&estment !ounselling. "he existing fa!ilities pro&ided in this respe!t +y rele&ant agen!ies su!h as the Ban1ladesh -mall and Cotta1e Industries Cor!oration =#SCIC> should +e su+stantially impro&ed through ade*uate logisti! support. Action 3: (ationalise ta8 structure. In terms of indire!t taxes, there is &irtually no distin!tion +et,een small and !ottage industries and their large1s!ale !ounterparts. Similarly, there is hardly any differen!e in the treatment of small and !ottage industries on the one hand, and large s!ale manufa!turing industries on the other, either ,ith respe!t to duty on !apital ma!hinery or dire!t taxes. #angladesh0s fis!al poli!y needs to +e parti!ularly tailored to pro&ide support to small and !ottage industries +y raising the !eiling of exemption limits as regards taxation, and +y lo,ering the JA" rates.
2<
Action 5: Pro4ide marketin1 assistance. A di&ersified +ase of export oriented small and !ottage industries is an important sour!e of foreign ex!hange in many de&eloping !ountries. "o stimulate foreign ex!hange earning !apa!ities of small and !ottage industries, ensure that they ha&e ade*uate representation in trade fairs and support mar-et promotion of their produ!ts a+road. Set targets for #angladeshi Missions a+road in terms of exports of !ottage industry +ased produ!ts. Action 6: -timulate su .contractin1 acti4ities. Su+1!ontra!ting a!ti&ities ha&e played an important role in the industrialisation of many !ountries. Support for an!illiary a!ti&ities and produ!ers of spares and ma!hineries need to +e ensured in light of G)#0s su+1 !ontra!ting poli!y, in!luding through pro!urement and pur!hase poli!y of the go&ernment. Action 7: Desi1n a credit 1uarantee scheme ,or small scale entre!reneurs &ho do not ha4e the necessary collateral. (ocus of "ction #.2 $romote 3omen Entrepreneurship Many small and rural industries are run +y ,omen entrepreneurs, often home1+ased. Bomen entrepreneurs are also !oming for,ard in export1oriented a!ti&ities in an in!reasing num+er. Sin!e they are parti!ularly disad&antaged in the !ontext of the pre&ailing situation in the !ountry, there is a need to ta-e up targetted initiati&es in support of this parti!ular group of entrepreneurs. Action 0: -et u! a ,und to su!!ort &omen entre!reneurs. Commer!ial +an-s may +e as-ed to set up dedi!ated funds to support ,omen entrepreneurs. Action 2: $i4e &omen=s 1rou!s or or1anisations a,,irmati4e treatment in allocatin1 !lots and other ,acilities in B-CIC=s Industrial 9states. Action 2: "ake ade?uate !ro4isions to !ro4ide &omen entre!reneurs &ith !re,erential access to su!!ort ser4ices. Action 3: -et u! se!arate &omen entre!reneurs su!!ort cells in 4arious or1anisations/ includin1 B-CIC/ 9PB/ B-B and also in the cham ers. Action 5: Pro4ide s!ecial su!!ort to &omen entre!reneurs &ho are in4ol4ed in e8!ort. oriented acti4ities ,or !romotion o, marketin1 o, their !roducts in o4erseas markets. Action 6: -et u! !ro1rammes ,or trainin1 o, &omen entre!reneurs as !ro,essional mana1ers and in this res!ect su!!ort the initiati4es o, usiness cham ers.
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(ocus of "ction #.4 'ndustry and Trade Related 'nfrastructure #angladesh0s industrial and trade related !omparati&e ad&antages are seriously undermined +y inade*uate and ,ea- infrastru!ture. "his not only raises !ost of doing +usiness and there+y !reates disin!enti&es for existing industries, +ut also undermines potential in&estment in ne,ly emerging se!tors su!h as I" and e1!ommer!e. "hese supply side +ottlene!-s must +e remo&ed through !on!rete a!tions. Action 0: Take ste!s ,or !ro!er !ort mana1ement. A master !lan should +e designed ,ith a &ie, to transforming #angladeshi ports into regional hu+s. "o,ards this ta-e !on!rete steps to de&elop inland !ontainer freight stations ,hi!h are to +e de&eloped at strategi! industrial and !ommer!ial lo!ations to ena+le multi1modal operation of !ontainers from the shippers0 premises to the premises of the !onsignees ,ithout stuffing and destuffing of !ontainers at the portsC esta+lishment of a modern port at 6ua-ata, to +e run +y the pri&ate se!tor, should +e explored after proper feasi+ility studyC the de&elopment plans of Chittagong and Mongla ports must +e !ompleted a!!ording to time1+ound s!hedule. Action 2: (e,orm telecommunication sector to stimulate and ,acilitate IT ased industrial acti4ities 'details are !resented in the Task Force (e!ort on IT -ector). Action 2: Introduce !riority in4estment !ro1rams ,or in,rastructure de4elo!ment. "o,ards this, the ha-a Eastern +y1pass, %amuna Rail,ay Lin- pro.e!t and reha+ilitation of !ore rail,ay net,or- should +e implemented. e&elopment of a ne, !argo1!um1 general !ontainer !omposite port at ha-a, and inland Rail,ay !ontainer depot at "ongi@%oyde&pur should +e underta-en. Action 3: Declare the Dhaka.Chitta1on1 hi1h&ay an 98!ort +i1h&ay. Industrial par-s should +e set up along the high,ay. Industries should +e gradually mo&ed out of the !ities and lo!ated along the high,ay, ,ith po,er and other infrastru!tural utilities to +e set up a!!ordingly. Action 5: "odernise the rail&ay trans!ort system ,or industrial trans!ortation. "o,ards this, introdu!e modern freight handling and terminal fa!ilities at the ma.or yards and +ulhandling terminalsC !ommer!ialised ser&i!e operations and mar-et +ased pri!ing should +e put in pla!e to reenergize the se!tor ,hi!h is !urrently plagued +y operational ineffi!ien!iesC the rail,ay system should +e +etter integrated ,ith other surfa!e modes to fa!ilitate mo&ement of industrial goods. Action 6: 9sta lish !ro!er in,rastructure ,or multi modal trans!ort in the ,orm o, inland container de!ots and dry !orts at !oints rele4ant to Chitta1on1 and "on1la !orts.
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(ocus of "ction #.5 Raising the Efficacy of 'ndustry and Trade Related 'nstitutions In order for industry and trade strategies to +e su!!essfully implemented, related institutions must fun!tion in an effi!ient manner. In #angladesh, the *uality !o&erage and depth of ser&i!es pro&ided +y su!h institutions ha&e tended to suffer +e!ause of limited mandate, legal ,ea-nesses, ,ea- human resour!e !apa!ities, inade*uate resour!e +ase and inade*uate supporti&e infrastru!tures and !apa!ities. Con!rete measures need to +e underta-en to raise the le&el of effi!ien!y of su!h institutions as #)I, E$#, E ), #S"R, !ustoms and port authorities =+oth sea and land>. (ocus of "ction #.16 Strengthening the RM7 Sector to Meet $ost-M(" Challenges
#angladesh0s export1oriented RMG se!tor is going to fa!e tough !hallenges on!e the MDA is phased out under the GA"" A"C. "here is, thus, an urgent need to ta-e energeti! steps to ensure #angladesh0s !ontinued !ompetiti&eness +eyond 2338. Gi&en the singlemost importan!e of the se!tor in terms of export earnings and employment, #angladesh !an hardly afford to ta-e a usiness as usual stan!e. Action 0: Desi1n a com!rehensi4e strate1y ,or the e8!ort.oriented ("$ to address the challen1es in the 1lo al market. "his plan should in!lude =a> areas of ma.or ris-s, =+> a!tion agendas to address the ris-s and =!> implementing agen!ies. Action 2: -et u! a A!!arels.Te8tile Board &ith the Prime "inister as the Chair to ensure that all initiati4es as concernin1 the ("$ sector recei4e !riority attention and su!!ort. Action 2: Desi1n and im!lement a com!rehensi4e strate1y to stren1then ("$=s ack&ard linka1e in te8tiles and ,or&ard linka1e in marketin1. "o,ards this, !reate a dedi!ated fund for support to the textile se!tor and put in pla!e ade*uate in!enti&es to stimulate in&estment, +oth domesti! and foreign, in this se!tor. Lin- de&elopment of the +a!-,ard lin-age textile industry to promoting intra1RMG di&ersifi!ation. In this !ontext tying up aid ,ith +a!-,ard lin-age initiati&es should +e explored. Action 3: 98!lore the ,easi ility o, centralised onded &are houses to cut do&n on lead time. Action 5: (emo4e anomalies in the o!erations o, Banks &hich hinder the ,unctionin1 o, e8!ort.oriented ("$ sector. Some of these are5 =a> $ro!edure of o+taining prior permission from #angladesh #an- for exporting goods against sto!-1lot should +e ,ithdra,nC =+> ;egotiating +an-s should +e authorised to !onsider dis!ounts up to 23LC =!> Condition for o+taining appro&al for dis!ount from the #angladesh #an- should +e relaxed and dis!ount appro&ed +y the E$# should +e treated &alidC =d> $ri&ate
22
!ommer!ial +an-s should immediately !ease !harging ELC A!!eptan!e ChargesE as done +y the ;ationalised #an-s of the !ountry. Action 6: Identi,y the im!lications o, U- TDA2<<</ ,ormation o, >AFTA/ accession o, China into DT@ and other related de4elo!ments on Ban1ladesh=s ,uture e8!ort sector !er,ormance and desi1n strate1ic res!onse to address the attendant challen1es. Action 7: 9sta lish locational ,acilities such as ("$ 4illa1es to ,acilitate smooth o!erations o, the e8!ort.oriented ("$ enter!rises. (ocus of "ction #.11 S!ill and Technology /pgradation in )eather and )eather $roduct 'ndustries
"he unrealised potential of leather industry is refle!ted in the fa!t that almost ?8 per !ent of the export earnings in the leather se!tor is still a!!ounted for +y export of !rust leather. "he extent of &alue addition in the se!tor, is thus, mu!h less !ompared to ,hat !ould ha&e +een for exports of finished leather and leather produ!ts. Apparently, there is su+stanti&e s!ope for tapping unrealised potentials in the export1oriented leather se!tor +y in!reasing lo!al &alue1addition. Action 0: -et u! a =Tannery "odernisation Fund= to re4am! technolo1y and raise !roducti4ity. Action 2: Introduce ade?uate ,iscal and ,inancial incenti4es and other necessary su!!ort !olicies to raise !roducti4ity and im!ro4e ?uality to make the sector 1lo ally com!etiti4e. Action 2: -u!!ort the esta lishment o, linka1e industries such as lasts/ cuttin1 dices etc to reduce hi1h im!ort de!endence and !romote !rice com!etiti4eness o, the sector. Action 3: Allo& duty ,ree im!orts o, ra& hides and skin and also &et lue and ,inished leather ,or leather ,oot&ear e8!orters. Action 5: Introduce measures to ena le ada!tation o, ne& and modern technolo1y such as modern solin1 throu1h #oint 4entures and international colla orations. Action 6: -u!!ort the u!1radation o, the com!onent industries such as lasts/ cuttin1 dices and shoe trims throu1h duty concessions/ duty ,ree stock ,acilities/ etc. Action 7: Introduce ,inancin1 and other incenti4es to stimulate local in4estment in this sector. Action ;: 9nsurin1 le1al/ institutional and other su!!orti4e measures ,or the de4elo!ment o, ack&ard linka1e industries o, this sector.
23
Action :: $ro&ide support to promote !omplian!e ,ith !onsumer safety and international standard of pa!-aging to impro&e mar-eting of leather and leather goodsC ensuring dire!t fis!al in!enti&es in the form of export !ash su+sidies, import li!ense +enefits against export performan!eC allo, tax1free export earnings, redu!e airfreight !osts, duty dra,+a!-, et! to promote exportC introdu!e export !redit guarantee s!hemes to retain export earnings in foreign ex!hangeC pro&ide finan!ial supports for +a!-,ard lin-age industries in this se!torC exempt tax and JA" on exporta+les in this se!torC exempt JA", ,hi!h is at present 48L, on import of se,ing ma!hine needles and partsC in pla!e of L@C introdu!e open a!!ount fa!ilities or other flexi+le import arrangements to promote exportC pro&ide long1term tax holiday to en!ourage lo!al and foreign in&estment in this se!tor. (ocus of "ction #.1 De+elopment of Export-oriented "gro-based 'ndustries
Analysis sho,s that agro1+ased industries ha&e great potential +oth in terms of import1 su+stitution as also as a potentially important foreign ex!hange earner. "he re!ently initiated 0E&erything +ut Arms0 proposal of EH =EH1E#A>, ,hi!h pro&ides L Cs ,ith zero1tariff, zero1*uota export fa!ilities to the EH mar-et, !ould potentially open up signifi!ant mar-et opportunities for #angladeshi exporters of agri1pro!essed produ!ts. A num+er of initiati&es ,ill need to +e underta-en to support the se!tor. Action 0: Pro4ide credit/ interest and ta8 su!!ort and other ,acilitiesAincenti4es to !romote e8!ort.oriented a1ro.!rocessin1. Action 2: For su!!ortin1 !reser4ation o, horticulture !roducts/ im!ort o, related e?ui!ments such as rea!er 4ans and re,ri1erated.containers should e e8em!ted ,rom duty and EAT. Action 2: To su!!ort ,ood !rocessin1 industries im!ort o, !reser4in1 chemical and technolo1y should e e8em!ted ,rom ta8/ EAT and duty. Action 3: 9sta lishment o, F98!ortin1 Firms $rou!F ased on e8!ort markets should e encoura1ed and su!!orted throu1h credit/ ta8/ EAT and duty e8em!tion ,acilities/ and technolo1y trans,er. Action 5: Pro4ide credit/ ta8/ EAT and duty ,acilities ,or im!ort o, technolo1y to su!!ort standard !acka1in1. Action 6: Air car1o s!ace ,or e8!ort o, a1ro.!roducts should e increased and other ,acilities includin1 o,,loadin1/ cool room ,acilities in the car1o shed should e enhanced. Action 7: (educe e8!ort ,rei1ht char1e to re1ional le4els.
25
Action ;: -u!!ort o4erseas market search ,or a1ro.e8!orts throu1h !ro#ects such as "atchin1 $rant Facility '"$F). Action :: Institutionalise and im!lement ?uality control measures. The B-TI should e e?ui!!ed &ith a!!ro!riate technolo1y and ?uali,ied man!o&er to su!!ort standardisation o, e8!ort.oriented a1ro.industry !roducts. Action 0<: 9sta lish a research institute ,or a1ro.industry. Action 00: -u!!ort the de4elo!ment o, suita le 4arieties such as a y corn/ ,rench ean/ okra/ mushroom etc. and !romote their introduction in the market/ oth domestic and o4erseas. Action 02: +armonise ,iscal and tari,, structuresG e8istin1 anomalies in duty structure/ &hich le4ies hi1her duty on ra& materials/ in!uts and !acka1in1 as a1ainst !rocessed im!orts and thus makes locally !roduced a1ro !roducts relati4ely incom!etiti4e/ &ill ha4e to e remo4ed. Action 02: 9sta lish intermediate in!ut industries/ i.e !acka1in1/ ottlin1/ !rintin1/ etc. Action 03: @!erationalise the 9ntre!reneurs 9?uity ,und ,loated in the 2<<.2<<0 ud1et to e tar1etted to a1ro.!rocessin1 industry. . Action 05: De4elo! !ro!er in,rastructure ,or trans!ortation o, !erisha les. Action 06: Pro4ide onded &arehouse ,acilities to ena le a1ro industries to im!ort their in!uts. Action 07: 9sta lish a +HE seed research and multi!lication institute. Action 0;: 9sta lish an a1ricultural !roduct de4elo!ment authority to o,,er one &indo& assistance to local e8!orters and ,orei1n im!orters o, a1ro. ased industries. Action 0:: 9nsure ade?uate human resource de4elo!ment throu1h esta lishment o, a ,ood technolo1y institute &ith modern ,acilities. (ocus of "ction #.1# 'ncenti+es to Encourage 'n+estment in 8e0 Export-oriented 'ndustrial "cti+ities
Action 0: Zero im!ort tari,, on ca!ital machineries ,or e8!ort.oriented industries should continue.
26
Action 2: Customs duty rates on asic ra& materials and intermediate im!orts used y e8!ort.oriented industries should e ,urther reduced and the e8istin1 anomalies remo4ed. Action 2: Ta8 holiday o, 0< years on accelerated de!reciation allo&ance asis should e !ro4ided ,or ne& e8!ort industries. Action 3: In order to encoura1e industries related to #e&ellery/ diamond cuttin1 and !olishin1 and electronic 1oods/ &hich are elie4ed to ha4e 1ood e8!ort !otential/ s!ecial onded &arehouse should e set u! s!ecially in 4ie& o, the ,act that these are in!ut. intensi4e acti4ities. Action 5: At !resent/ onded &arehouse ,acilities are a4aila le ,or readymade 1arments and leather. BD ,acilities should e e8tended to ne& e8!ort industries as &ell. Action 6: Im!ort to BDs are currently made under com!ulsory ack.to. ack BACs o!ened in ,a4our o, ,orei1n anks. "he high interest rates !harged +y the +an-s dis!ourage export +y redu!ing profits. It is therefore suggested that a s,it!h should +e made from the !urrent system of !ompulsory +a!-1to1+a!- L@Cs to a more flexi+le system ,hi!h ,ould allo, exporters to !hoose from the &arious export finan!ing options a&aila+le in the mar-et. (ocus of "ction #.1, Raise the Efficiency of Management of the Export 'ncenti+es
Effi!ient management of export in!enti&es is !riti!al in ensuring su!!ess in efforts to promote export. A num+er of sur&eys !ondu!ted re!ently has exposed serious ,ea-nesses in the management of export in!enti&es. 'ere energeti! steps are !alled for along the follo,ing lines5 Action 0: The customs clearance !rocedures ,or im!ortin1 in!uts and ,or e8!ort shi!ment are cum ersome/ time consumin1 and/ more o,ten than not/ characterised y rent.seekin1 eha4iour o, concerned o,,icials. Customs clearance !rocedure should there,ore e sim!li,ied. Action 2: The !rocess o, com!uterisation o, customs assessment and related acti4ities should e accelerated. Action 2: Des!ite the use o, ,lat rates ,or re!ayment o, duty/ the !re4ailin1 system o, duty dra& ack o!erated y the Duty 98em!tion and Dra& ack @,,ice 'D9D@) is cum ersome. "he pro!ess of duty reim+ursement should +e left ,ith dealing +an-s so as to ma-e the pro!ess more effi!ient and less !ostly. Action 3: The !re4ailin1 cash com!ensation scheme o, 25 !er cent o, e8!ort 4alue is re!ortedly ein1 used unethically. Ade*uate safeguards need to +e ta-en against su!h
27
malpra!ti!es. Durthermore, this s!heme ,ould +e !onsidered as a prohi+ited su+sidy under the B") Agreement on Su+sidies and Counter&ailing Measures, and hen!e ,ill need to +e phased out in the near future. 'en!e, to a&oid import san!tions +y trading partners, the rate of !ompensation under the s!heme should +e gradually redu!ed in !onsonan!e ,ith redu!tions in import tariffs. 'o,e&er, any su!h initiati&e must also ta-e into !ognisan!e the long1term interests of the se!tor and should put in pla!e ade*uate measures to ensure the !ontinued !ompetiti&eness of the export1oriented industries. (ocus of "ction #.1. Enhance Export (inance (acilities
Easy a&aila+ility of export finan!e is !ru!ial for export de&elopment. A sur&ey +y H;C"A in 4779 sho,ed that #angladeshi exporters identified la!- of a!!ess to export finan!e as the singlemost important pro+lem ,hi!h they fa!e. "his issue needs to +e addressed urgently. Action 0: The 98!ort De4elo!ment Fund o!erated y the Ban1ladesh Bank needs to e stren1thened. Action 2: 98!ort.im!ort anks s!ecialisin1 in trade ,inancin1 should e set u! on a !riority asis. Su!h +an-s ,ould not only redu!e !osts of doing export +usiness +ut also *uietly fa!ilitate export1related in&estment a!ti&ities. Action 2: The esta lishment o, 9?uity De4elo!ment Fund in the Ban1ladesh Bank &ith allocation o, Tk 0 illion ,or !romotin1 in4estment in so,t&are e8!ort and a1ro.!rocessin1 industries is a &elcome ste!. "he size of this Dund may ho,e&er +e enlarged to !o&er other potential export industries. (ocus of "ction #.11 Raise Efficiency of Export Related 'nfrastructure
Bea-nesses in #angladeshKs export1related infrastru!ture ha&e raised !ost of export and redu!ed their !ompetiti&eness. Steps must +e ta-en to strengthen the trade1related infrastru!ture. Action 0: Immediate ste!s must e taken to enhance the car1o.handlin1 ca!acity o, Chitta1on1 Port. Action 2: -tudies ha4e indicated the com!arati4e ad4anta1e o, Chitta1on1 and "on1la Ports is emer1in1 as the re1ional trans!ort hu in the ,uture. Dor realising su!h potentials, urgent inter&entions are !alled for in the areas of e*uipment handling, !ontainer +erths and transport fa!ilities.
2;
Action 2: All !orts should e ,ully com!uterised to ,acilitate and s!eed u! tradin1 acti4ities.
(ocus of "ction #.12 Ensure 7reater "ccess to Trade Related Supporti+e Ser+ices
"rade fa!ilitatory a!ti&ities, in!luding pro&ision of trade information, export promotion and training ser&i!es, are !ru!ially important for export de&elopment. "rade fa!ilitation needs to +e further strengthened. Action 0: Access to u!.to.date trade in,ormation throu1h the $lo al Trade Point >et&ork '$TP>) introduced y the U>CTAD is not a4aila le at the 9PB. "o ensure easy a!!ess to trade1related information, steps must +e ta-en to !reate trade points in the E$#, Go&ernment ministries, !ham+ers of !ommer!e and industry and trade1related resear!h institutions ,hi!h ,ould +e !onne!ted through the G"$;. Action 2: Collecti4e e,,ort must e made y the !ri4ate sector/ actin1 throu1h the cham er odies/ to undertake necessary market intelli1ence acti4ities/ and to access/ collect/ store/ !rocess and disseminate trade in,ormation. Su!h !apa!ity is &ery limited at the moment. Ade*uate supporti&e measures for !apa!ity +uilding should +e put in pla!e to,ards this. Action 2: The $o4ernment and the !ri4ate sector should colla orate to re1ularly or1anise trade ,airs/ !articularly in emer1in1 markets. Action 3: The commercial sectors o, Ban1ladesh=s ,orei1n em assies must !lay a critical role in collectin1 market in,ormation and ,eedin1 these to Ban1ladeshi e8!orters. "he Ministry of Commer!e should !losely monitor the performan!e of the !ommer!ial se!tions of different em+assies in this regard. Action 5: The 9PB must de4elo! in.house ca!acity to !ro4ide e8!ort.related trainin1 on an on.1oin1 asis/ !articularly ,or small and medium scale entre!reneurs includin1 ne& e8!orters. Similar training fa!ilities, in line of CCI1G ' partnership pro.e!t and the CCI1G"G +usiness ad&isory ser&i!e pro.e!t, should +e de&eloped in the pri&ate se!tor. (ocus of "ction #.14 Raise the Efficacy of 'mport "dministration
Import administration and the poli!y of import li+eralisation ha&e important +earing on export performan!e in &ie, of the import1dependen!e of many of #angladesh0s exporters. Import administration needs to +e made more effi!ient ,hilst the speed of import li+eralisation has to +e also !losely monitored at the same time.
2:
Action 0: Althou1h im!ro4ement has recently een achie4ed in the area o, customs clearance ,ormalities/ more needs to e done. In parti!ular, !omplete !omputerisation of import !learan!e pro!edure needs to +e a!hie&ed on an urgent +asis. Action 2: P-I.certi,ied im!ort 4alues ,or !ur!oses o, customs assessment are re!ortedly causin1 !ro lems. "he matter should +e thoroughly in&estigated +y the ;#R and ne!essary solutions identified. Action 2: Im!ort li eralisation !olicy has not yet !ro4ed 4ery e,,ecti4e in di4ersi,yin1 e8!orts. A ma#or reason ehind this has een a ,aulty se?uencin1 o, re,orms. "he impa!t of li+eralisation should +e !losely monitored +y the Ministry of Commer!e. At the same time, human resour!e !apa+ility must +e de&eloped through appropriate training to lo!ally design trade poli!y reform. (ocus of "ction #.15 "n Effecti+e Exchange Rate $olicy
In re!ent years #angladesh has underta-en important reforms in the area of ex!hange rate poli!y. Conse*uently, the !ountry has +een pursuing a mar-et oriented ex!hange rate poli!y ,hi!h is geared to,ards -eeping the real effe!ti&e ex!hange rate =REER> un!hanged, or to depre!iate it marginally. 'o,e&er, it appears that the !urrent +as-et of !urren!ies for determination of REER does not refle!t the a!tual dire!tion and &olume of trade, +oth formal and informal, ,hi!h !onse*uently has gi&en rise to erosion of !ompetiti&eness &is1M1&is important trading partners su!h as India and $a-istan. Action 0: (e,lect actual trade com!osition ' oth ,ormal and in,ormal) in the currency asket in determinin1 the real e,,ecti4e e8chan1e rate '(99(). Action 2: To encoura1e retention o, ,orei1n e8chan1e &ithin the country and discoura1e leaka1e throu1h hundi/ desi1n attracti4e incenti4es ,or ,orei1n e8chan1e earners 'in line &ith introduction o, the conce!t o, CIPs) and also ensure ,le8i ility in the o!eration o, ,orei1n currency accounts y resident Ban1ladeshis. Action 2: It needs to e ensured that there is no serious misali1nment et&een the nominal e8chan1e rate and the e?uili rium e8chan1e rate. (eal a!!reciation o, the Taka should e !re4ented. (ocus of "ction #. 6 Ma!ing 7lobalisation 3or! for %angladesh and (acilitate 7lobal Mar!et "ccess by %angladeshi (irms
Action 0: De4elo! a trade cadre to ade?uately monitor/ and address the challen1es stemmin1 ,rom 1lo alisation.
2<
Action 2: -tren1then the DT@ cell in the "inistry o, Commerce &ith ade?uate man!o&er and su!!orti4e lo1istics. Action 2: Take s!ecial measures to de4elo! skilled man !o&er to conduct the com!le8 ne1otiations &ithin the DT@ system. Action 3: Conduct a com!rehensi4e study to look at the o!erationalisation o, -CD status ,or BDCs !ro4ided &ithin the DT@ system and use its ,indin1s ,or ne1otiations durin1 the u!comin1 ,ourth "inisterial "eetin1 o, the DT@ to e held in >o4em er in Doha and also in any !ossi le ,uture DT@ (ound. Action 5: Ei1orously !ursue resource commitments ,rom the de4elo!ed countries in the li1ht o, Ban1ladesh=s technical assistance needs &hich ha4e een identi,ied under the inte1rated ,rame&ork 'IF) initiati4e o, si8 1lo al institutions. Action 6: The $o4ernment must ensure that shrim! !rocessin1 units can access the technolo1y and ac?uire the ca!a ility to !ut in !lace ?uality control measures re?uired y the im!ortin1 countries. Ade*uate !redit must +e san!tioned to shrimp exporters to help them upgrade pro!essing te!hnology. Action 7: The $o4ernment must undertake a 4i1orous cam!ai1n to ,amiliarise the e8!orters &ith I-@.:<<< '?uality standard) and I-@.03<<< 'en4ironmental standard) and !ro4ide ade?uate !olicy su!!ort and incenti4es to encoura1e indi4idual entre!reneurs to achie4e such standards. Regulatory measures must +e designed to enfor!e these measures. Action ;: The $o4ernment should create a -!ecial Fund to !ursue !ossi le liti1ation and ar itration acti4ities in the Dis!ute -ettlement Body 'D-B) o, the DT@/ !articularly to ,ace un#usti,ied anti.dum!in1 andAor counter4ailin1 actions !ursued y im!ortin1 countries a1ainst Ban1ladesh=s e8!orts.
20
(act Sheet
T"%)E 19 7)-%") '8TE7R"T'-8 -( %"87)"DES: EC-8-M; <in bln. /S => 1525-46 1545-56 1555-66 Indi!ators 7D$ "'D TR"DE E*PO&% +PO&% REM'TT"8CE (D' +emo tems ,in -. Share of "id <Disbursed> in 7D$ Share of Trade in 7D$ !hare of Export in (DP !hare of mport in (DP Share of Remittance in 7D$ Share of (D' in 7D$ 8o. of 3or!ers 7oing "broad <in thousand> Exports as - of /id ,Disbursed. Exports plus &emittance as - of /id ,Disbursed. mports as - of /id 42.9 4.2 :.3 <.7 2.2 3.2 3 7.9 2:.< 5.7 0;.0 4.7 1 2<.3 5:.2 7:.7 0:0.6 22.A 4.< 8.: 0.5 2.; 3.9 3.3: <.4 2:.? 6.; 06.; :.A 3.4 443.3 ;3.2 026.2 200.0 :7.A 4.? 4:.2 5.; ;.3 2.3 3.: A.3 ::.: 03.5 0;.; A.7 3.? 2A<.3 265.2 3;:.2 525.2
Source9 Compiled from &arious sour!es =E$#, Ministry of Commer!e and #angladesh #an- data>.
22
T"%)E 9 C:"87ES '8 TR"DE RE)"TED $-)'C'ES9 $RE-"8D $-ST S"$ $ER'-D
Trade Related "rea ;ominal $rote!tion Hn,eighted Imp1,eighted 'ighest "ariff Rate /uantitati&e Restri!tions =num+er !ommodities at A digit le&el> ,or trade reasons ,or non.trade reasons $ro&ision for Import ;um+er of Con!essionary Categories for Import ;um+er of 'S1A 'eadings ,ith Di&e or more "ares System of "ax on Imports of $re-Reform <<.?L A2.4L :83.3L 2:7 497 ?3 "hrough N$ositi&e ListO 23 Categories 97 'S1A 'eadings Multiple uty Sales "ax and Regulatory uties and Sur!harges edu!tion on 3.83L of Export In!ome 48.3L 9.8L $ost-Reform 2A.?L 24.3L 83.3L 44A 2: 74 "hrough N;egati&e ListO 9 Categories 8: 'S1A 'eading JA" at 48L Dlat Rate and Supplimentary Ex!ess uties 3.28L of Export In!ome 28.3L 3.3L
Ad&an!e In!ome "ax Export Earnings
Cash Compensation S!heme =L of lo!al &alue addition> )perati&e "ariff on Imports of Capital Ma!hineries for Export )riented Se!tors uty ra,+a!- Rate
ifferentiated Rates of Re+ate Eligi+ility for uty ra,+a!ire!t Exports Interest Rates on #an- Loan to Export )riented Se!tors In!enti&es +et,een E$G and "A Existen!e of Su+stantial ifferen!e <.3142.3L
Dlat Rates of Re+ates for a Large ;um+ers of Imported Inputs ire!t as ,ell as eemed Exports <.3143.3L ifferen!e in in!enti&es +et,een E$G and "A is +eing gradually redu!ed
Source9 Hpdated from #hatta!harya, ., Rahman, M. and 6hatun, D.C 4777.
22
T"%)E #9 RE*'SED EST'M"TES -( M"8/("CT/R'87 7D$ "T C-8ST"8T 155.-51 $R'CE Fear Jalue Added =Million "a-a> Share in )&erall G $ =L> 42.82 42.73 4:.2< 4:.<2 4A.:8 48.48 48.A: 48.A4 48.<< 48.?3 48.A3 Fearly Gro,th Rate =L> Fearly Compound Gro,th Rate =L>
1545-56 up to 47<7173 48?4?: 4773174 4??4:: 4774172 49<:74 477217: 47:994 477:17A 23788A 477A178 2:4849 155,-5. up to 477817? 2A?:84 477?179 28<978 477917< 2<373< 477<177 2<7<<2 4777133 :32238 Source9 #a-ht, G. 2334.
?.A 9.A <.? <.4 43.8 ?.A 8.3 <.8 :.2 A.:
?.A ?.7 9.8 9.? <.2 ?.A 8.9 ?.9 8.< 8.8
T"%)E ,9 M"?-R C-8TR'%/T-RS T- '8D/STR'") 7R-3T:9 1544@45-155,@5. Industry =4> Readymade garments $harma!euti!als Bidi #oo-s ( periodi!als Re1rolling mills Sil- ( syntheti!s Dertilizer #a-ery $aints ( &arnishes Dish ( seafood Leather tanning "otal Source9 #a-ht, G. 2334. Beight =2> 7.4: 9.34 :.<8 4.<< 4.74 4.87 4.?3 3.7? 3.3? 4.<4 2.A7 :2.27 Fearly Gro,th in /I$ =L> =:> 2?.4 2:.< 29.: 82.9 :3.9 :9.8 ::.< A9.? AA?.< 43.A2 A.9< 1 Beighted Fearly Gro,th =L> =A>P=2>Q=:>@433 2.:< 4.?9 4.38 3.77 3.87 3.87 3.8A 3.A? 3.29 3.47 3.42 <.<8 Share in su+1 se!toral )utput Gro,th =L> =8> 2A.3 4?.< 43.? 43.3 8.7 8.7 8.A A.? 2.9 4.7 4.2 <7.3
23
T"%)E .9 ()-3 -( (-RE'78 '8*ESTME8T '8 E$As Fear 47<:1<A 47<A1<8 47<81<? 47<?1<9 47<91<< 47<<1<7 47<7173 4773174 4774172 477217: 477:17A 477A178 477817? 477?179 477917< 477<177 4777133 Source9 #E$GA. "otal In&estment in E$G 3.<9 4.? :.? ?.? 4.< 2.9 <.? 22.4 2:.9 22.3 :9.A :8.7 :3.? 8:.7 ?<.< 94.? :8.3 "otal D I in the E$G 3.<? 4.3 2.7 A.7 4.9 2.A ?.A 24.: 24.8 28.7 2A.8 48.? 27.3 83.< 82.3 A9.? 29.A =Million HS I> D I in E$G as L of "otal Mfg In&estment 3.< 4.: A.3 A.9 2.: 4.7 A.? A.3 A.A :.7 ?.2 A.: :.9 <.8 9.: <.4 1
T"%)E 19 SECT-R") D'STR'%/T'-8 -( (D' -/TS'DE E$A D/R'87 1556s =Million HS I> Se!tors 477A178 477817? 477?179 477917< 477<177 Gas 4A A3 493 249 47A $o,er 3 3 3 ?3 :24 "ele!om 3 A :4 2? 4: Cement 48 :8 3 3 <7 "extiles and RMG A 7 4? 3 3 )ther Mfg ( ser&i!es 47 429 :A 28 49 Source9 Borld #an-, Forei1n Direct In4estment in Ban1ladesh: Issues o, Bon1 run -ustaina ility , )!to+er 4777. T"%)E 29 TRE8DS '8 8-M'8") $R-TECT'-8B 1556@51 - 155.@51 es!ription Agri!ulture Pre.re,orm/ 0::<A:0 Hn,eighted 73.8 Import1,eighted 23.7 Post.re,orm/ 0::5A:6 Hn,eighted 2?.3 Import1,eighted 43.4 Current -tatus 0:::A<< Hn,eighted 1 Import1,eighted Source9 Borld #an- Staff Estimates. Mining 8A.4 2A.3 4:.? :<.< 1 Manufa!turing <7.3 84.< 2A.? 24.7 2A.2 1 All "rada+les <<.? A2.4 2A.? 24.3 2A.9 1
25
T"%)E 49 EC$-RTS "8D 'M$-RTS -( %"87)"DES: D/R'87 1546S "8D 1556s es!ription 47<3@<4 4773@74 494< :843 4972 A<.7 9.: 48.3 22.: 4777@33 8982 <8?? 2<4A ?9.4 42.4 49.7 :3.3 Annual !ompound gro,th rate =L> 47<3s 4773s 7.2 4A.A A.A 43.A 4.: 8.4
Export =million I> 943 Import =million I> 22<2 "rade defi!it =million I> 4892 Export as L of import :4.4 Export as L of G $ 8.3 Import as L of G $ 4?.3 )penness of the e!onomy =L> 24.3 Source9 Export $romotion #ureau and Borld #an-.
T"%)E 59 C:"87'87 STR/CT/RE -( EC$-RT9 1546@41-1555@66 Item Primary commodities Ra, .ute "ea Drozen food )ther primary "anu,actured 1oods %ute goods Leather ( leather goods Bo&en garments 6nit,ear Chemi!al produ!ts )ther Manufa!tured goods Total 98!ort 47<3@<4 2<: '2:.3) 447 =4?.<> A4 =8.<> A3 =8.?> 7 =4.:> 5<0 '7<.6) :?9 =84.9> 89 =<.3> : =3.A> 3 =3.3> 44 =4.8> ?: =<.7> 70< '0<<) 4773@74 2<6 '07.;) 43A =?.4> A: =2.8> 4A2 =<.:> 49 =4.3> 0300 ';2.2) 273 =4?.7> 4:? =9.7> 9:? =A2.7> 4:4 =9.?> A3 =2.:> 9< =A.8> 0707 '0<<) 4777@33 36: ';.2) 92 =4.:> 4< =3.:> :AA =?.3> :8 =3.?> 52;2 ':0.;) 2?? =A.?> 478 =:.A> :3<: =8:.?> 4293 =22.4> 7A =4.?> :98 =?.8> 5752 '0<<) =million I> Gro,th=L> 477314777 3.: ;egati&e ;egati&e 43.: <.A 05.; ;egati&e A.4 49.: 2<.9 7.7 47.4 03.3
Digures ,ithin parentheses sho, L share in exports

Source9 Export $romotion #ureau. T"%)E 169 $R'CE '8DEC -( EC$-RT "8D 'M$-RT 4797@<3 4773@74 4777@33 Fearly gro,th =L> 479714777 433 434.7 4A3.? 4.9 433 439.A 48<.3 2.: 433 7A.7 <7.3 ;egati&e
es!ription Export $ri!e Index Import $ri!e Index "erms of "rade
26
Source9 Ministry of Commer!eC 2333.
27
%he follo)ing reference materials )ere consulted in preparing the draft report ,this list is not exhaustive.
A-ram, "an,eerC E#angladesh0s $ri&atisation $oli!yE, Journal o, 9mer1in1 "arkets/ Jolume A, ;o. 2, Centre for Glo+al Edu!ation, ;e, For-, HSA, 4777 Annual Report 2333, "he ha-a Cham+er of Commer!e and Industry #a-ht, GaidC $reparation of the Sixth Di&er $lan5 $osition paper on Industry, %anuary, 2334 #angladesh E!onomi! Re&ie, 4777, Ministry of Dinan!e, Go&ernment of #angladesh #angladesh5 6ey Challenges for the ;ext Millennium, "he Borld #an-, April, 4777 Centre for $oli!y 2333E ialogue =C$ >, EChanges and Challenges5 A Re&ie, of #angladesh0s e&elopment
Centre for $oli!y ialogue =C$ >, EExperien!es ,ith E!onomi! Reform5 A Re&ie, of #angladesh0s e&elopment 4778E Centre for $oli!y 477?E ialogue =C$ >, EGro,th or StagnationR A Re&ie, of #angladesh0s e&elopment
Industrial $oli!y 4777, Ministry of Industries, Go&ernment of #angladesh Memorandum of the $resident of the International e&elopment Assistan!e and the International Dinan!e Corporation to the Exe!uti&e ire!tors on a Country Assistan!e Strategy of the Borld #an- Group for the $eople0s Repu+li! of #angladesh, Mar!h, 477< Re!ommendations of the Seminars )rganised +y the ha-a Cham+er of Commer!e and Industry in the Fear 2333 Report of the "as- Dor!es on #angladesh e&elopment Strategies for the 47730s, Infrastru!ture, Jolume "hree, Hni&ersity $ress Limited, 4774 e&eloping the
"he Eighth Di&e Fear $lan 477214779, Jolume I, $lanning Commission, Go&ernment of India "he Difth Di&e Fear $lan 477912332, $lanning Commission, Ministry of $lanning, Go&ernment of #angladesh "rade $oli!y Reform for 'igher Gro,th, Borld #an-, 477?
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Draft Report

Election 2001 : National Policy Forum

PO$%"& '(%EF ON )%ND*+,(& AND ,(ADE)

"entre #or Policy Dialogue

CPD Task Force: Industry and Trade