Trade Policy of

Bangladesh
What is the main economic problem of
Bangladesh?
 Some say population,
 Some say distribution of income
 Some others industrialization.
 We start with Dual Gap

Savings-Investment Gap
Export-Import Gap
How we can minimize the Gap
 Slashing imports
 It might slow down GDP and Exports growths
 Encouraging Exports
 It has limitations
 Increasing remittances
 Depends on foreign demand and our capacity to
compete
 Depending on Foreign Aid
 Is it Desirable? It is bleak in the coming years
 Depleting reserves
 Reserves are limited. Emergency situation.
What is desirable
 Previous
 An Inward-looking import policy
 Controlling imports for luxury and undesirable
items and providing incentives and subsidies
for exports.
 Licensing
 Higher exchange rate for WES/SEM
 XPL, XPB and subsidies.
What is desirable (contd.)
 Present
From an Import-substitution Policy to an Export
led growth strategy.
 Liberalization of imports
 Market mechanism
 Unification of Exchange rate
 Floatation of Exchange rate
 Policy of Export-led Growth.
 Convertibility of Taka on Current Transactions.
Historical Review of
Export Policy
 1971
Rehabilitation Policy
 1970s
Inward looking and Import substitution policy (explain)
 1980s
 Shortcomings of Inward Looking Policy
 Global Opening
 Market Mechanism
 Towards Outward looking policy
Historical Review of
Export Policy (contd.)
 Up to 1990
 Ad hoc – year on year basis
 Complex trade and Investment policies

 1993
 Two-year basis
 Incentive given
 1997
 Five year policy
Export Policy
Objectives
1. Quality Improvement
2. Diversification
3. Market Expansion
4. Backward Linkage
Export Policy
Strategy
a. Simplification of procedure
b. Market determined exchange rate
c. Establishment of Export Promotion Fund
d. Backward Linkage
e. Participation in international trade fairs,
f. Technology transfer (leather, shrimp) ‡mvbvi
Lwb
g. Labor intensive items (electronic, electric)
h. Infrastructure development
i. Quality improvement (wPswo †c‡iK)
Export Policy
Incentives and Facilities
 MONETARY
 Export credit at lower interest rate (refinance)
 Export Credit Guarantee Scheme
 Credit Card
 FOREX
 Withdrawal of XPB and multiple ER.
 Forex Account
 Travel Quota
 Retention Quota
 Floatation of Currency
Export Policy
Incentives and Facilities (contd.)
 FISCAL
 Rationalization of Tariff
 Bonded Warehouse
 Duty Drawback
 Cash Assistance in lieu of Bonded warehouse Duty
Drawbacks
 Concessional duty on import of machinery
 Income tax rebate
 INSTITUTIONAL
 Export Promotion Fund
 Electricity rate
 Shipping and airways
Export Policy
Incentives and Facilities (contd.)
 INVESTMENT
 Joint Venture
 Foreign Direct Investment
 EPZ

 COMMERCIAL
 Liberalization of Import Policy.
Export Review
Share in GDP

Country 1973 1997

Bangladesh 5.7 15.0

India 3.6
Nepal 6.6 24.0
Pakistan 14.3 17.0
Sri Lanka 14.3 35.0
 Composition of Export Receipts

In percentage of total

1972- 1978- 1988- 1993- 1997- 2005-

Commodities 73 79 89 94 98 2006

Jute 89.9 69.3 29.3 13.5 7.5 4.8

Jute Goods 10.1 30.7 60.7 86.6 92.5 95.2
             
Traditional 97.3 88.3 43.0 14.5 11.0 9.0
Non-traditional 2.7 11.7 57 85.5 89 91
             
Primary Products 43.0 38.1 23.3 13.7 9.7 6.0
Manufactured
Products 57.0 62.0 76.7 86.3 90.3 94.0
Import Policy
From a ‘resource allocative policy’ to a ‘liberalized policy’.
Resource Allocative Policy
 Social Justice
 Priority Attached by planners
 Inward looking
 Import Substitution
 Import Budget
Problems
 Corruption
 Planners inadequate knowledge
 Less competition with world products (Ambassador car)
 Import Substitution had no impact (milk product, edible oil).
Import Policy
Liberalized Policy
 No import budget
 Outward looking
 Resource according to market
demand/supply
 Liberalized exchange rate policy
Import Policy
OBJECTIVES
1. Supply of machinery and raw materials for industrial
growth
2. Supply of agri inputs, insecticides, fertilizers for
agricultural growth
3. Simplification of procedure
4. Employment generation
5. Price level stability
6. Supply of necessary goods
7. Technology adoption.
History
Gradual Liberalization
Reforms in Trade and Tariff

Dismantle Reduce Tariff Duration of Import

Slabs Policy
- Tariff and
- Non-tariff barriers
Policy Issues
1. Reducing Tariff (infant industry) restrictions and stoppage of
non-tariff barriers.
2. Gradual trimming of control list
Year Items
1991 193
1992 100
1993 All items are free but that threatens
a. Security
b. Health
c. Social
d. Religious
e. Environment.
Policy Issues (Contd.)
Year Tax
3. Rationalization of Tariff Rate Slabs
- Low duty: raw materials
1995 9
- Moderate duty: intermediate
goods 1997 6
- High duty: luxury products. 2002 3
2003 3
Year Highest
Rate
Unweighted Import
1997/98 42.5 Weighted

1998/99 40.0 1992/93 47.4 23.6

1999/2000 37.5 1999/00 19.5 13.8
2002/03 16.4 12.4
Policy Issues (Contd.)
4. Procedure Simplification
Tax administration streamlined
5. Sources of Funds
- Cash
- Barter
- STA
- Credit/loans
- Grants
6. No License is required
7. Back to Back Imports
Comments
 Can these policies improve Imports and Exports?
- Globalization (Opportunities and Risks)
- Quantitative Restrictions
- Bangladesh Price Taker
- Less progress of SAPTA under SAARC.
 Diversification is limited (we have limited export items,
prospect of software and ship-breaking)
 Less price elasticities
 Dependence on primary products and RMG
 Smuggling and hundi business
 Import for consumption and not for investment
 Floatation and uncertainty.