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Implications of Foreign Trade Policy and Facilitation of Foreign Trade

S.R.Rao Chief General Manager Export-Import Bank of India

A Presentation

Where Does India Stand Globally?


Exim India

International Trade of Select Countries in 2003


Country Exports
(US$ bn.)

Imports
(US$ bn.)

GDP
(US$ bn.)

Trade as % of GDP 61.7 57.5 53.7 48.7 46.0 32.8 24.7 22.3

Korea 197.6 175.5 China 438.3 393.6 Mexico 165.4 171.0 Russia 135.9 75.4 South Africa 38.7 35.0 Argentina 29.4 13.1 Brazil 73.1 48.3 India 57.0 74.3 Source: Economist Intelligence Unit

605.0 1446.9 626.1 433.5 160.1 129.7 492.1 588.8

 Indias share in global merchandise exports: 0.8% (2003)


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Indias Export Performance


Exim India

India's Export Performance (1999-2000 to 2003-04)


70000 60000 50000 US$ million 40000 30000 20000 10000 0 1999-2000 2000-01 2001-02 Years 2002-03 2003-04 29751 44147 36760 43976 52856 63623 47742

All Commodities Ores & minerals Petroleum & crude products

Agricultural & allied products Manufactured goods

Source: DGCIS, MOC&I


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Indias Import Performance


Exim India

India's Import Performance (1999-2000 to 2003-04)


90000 80000 70000 60000 US$ million 50000 40000 30000 20000 10000 0 1999-2000 2000-01 2001-02 2002-03 2003-04 Non-POL items 37172 49799 50056 51588 61572 56613 77237

All Commodities

Years Petroleum crude & products

Source: DGCIS, MOC&I


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Trade Policies in India


Exim India

Exim Policies  Streamlined trade procedures  Liberalised import regime  Thrust on export orientation

Medium Term Export Strategy, 2002  1% share in global exports by 2007

Foreign Trade Policy 2004-2009


 To double Indias share in global merchandise trade by 2009

Role of Institutions
Exim India

 Institutions

dedicated

for

promoting

foreign trade have played an important role towards enhancing the process of internationalisation of Indian companies, viz.  Export-Import Bank of India,  Export Credit Guarantee Corporation,  Indian Institute of Foreign Trade
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Exim Bank
Exim India

 Set up

by an September, 1981

act

of

parliament

in

 Wholly owned by Government of India  Commenced

operations in march, 1982

 Established for providing financial assistance

to exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the countrys international trade
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Foreign Trade Policy 2004-09


Exim India

Quantum Jump in Merchandise Exports Required:




Enhance exports of major export commodities

 

Identify potential export commodities Diversify export destinations


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Foreign Trade Policy 2004-09


Exim India

Exim Bank Study Strategy for Quantum Jump in Exports: Focus on Africa, Latin America and China
India

could aim to achieve:  US$ 18 billion in Africas Imports by 2007 from US$ 3.8 bn in 2003-04  US$ 4 bn in Chinas imports by 2007 (in 64 identified groups) from US$ 0.86 bn in 2000  US$ 1.8 bn in LACs imports by 2007 (in 100 identified groups) from US$ 0.6 bn in 2000

Share in Indias Exports in 2003-04: Africa (6%); Latin America (1.8%); China (4.7)
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Lines of Credit
Exim India

 Overseas Governments  Parastatal Organisations/ Govt. Agencies  Commercial Banks  Regional Financial Institutions  Particularly relevant for SMEs  Eligible items all items permissible under Exim Policy  Engineering Goods  Consumer Durables  Commodities
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LOCs Extended by Exim Bank


Exim India

AFRICA
ALGERIA PTA BANK covering GHANA BURUNDI KENYA COMOROS MALAWI DJIBOUTI MAURITIUS ERITREA, EGYPT NAMIBIA ETHIOPIA SEYCHELLES KENYA SOUTH AFRICA MALAWI SUDAN MAURITIUS TANZANIA RWANDA TUNISIA SOMALIA UGANDA SUDAN ZAMBIA TANZANIA UGANDA BOAD covering ZAMBIA BENIN ZIMBABWE BURKINA FASO COTE DIVOIRE MALI EADB covering NIGER KENYA SENEGAL TANZANIA TOGO UGANDA

ASIA

EUROPE

BANGLADESH INDONESIA KAZAKHSTAN IRAN , IRAQ BULGARIA SRI LANKA RUSSIA KOREA ROMANIA MALAYSIA HUNGARY THAILAND POLAND VIETNAM PHILIPPINES

LATIN AMERICA & CARIB.


BRAZIL JAMAICA MEXICO COLOMBIA VENEZUELA BCIE covering COSTA RICA EL SALVADOR GUATEMALA HONDURAS NICARAGUA 11

CAF covering BOLIVIA COLOMBIA ECUADOR PERU VENEZUELA

Foreign Trade Policy 2004-09


Exim India

Simplifying procedures and bringing down transaction costs  Transaction costs are incurred at the pre and postproduction stages, and arise out from several procedural complexities associated with administrative processes, availability of finance and transportation problems.  For enhancing the growth of exports it is important to reduce the transaction costs involved.  Exim Bank Study on Transaction Costs of Indian Exports
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Foreign Trade Policy 2004-09


Exim India

Findings of Exim Banks Study


Sector No. of Firms Transaction costs as % of export revenue (2003 Survey) 3-10 <5 e8 <5 1-5 1-2 5 5-10 5-7 1-2 13 Transaction costs as % of export revenue (1998 Survey) 15 10 10 14 10 7-8.5 -

Textile/Garments Engineering goods Pharmaceuticals Chemicals Computer software Agro-Industries Electronic & Electrical machinery Plastic components Paper Industry Others

23 18 9 7 9 2 3 2 2 7

Foreign Trade Policy 2004-09


Exim India

Transaction Costs: International Experience




Simplified and less stringent bureaucratic procedures like single window clearance and business friendly approach Better technology due to higher levels of foreign investment, faster loading/unloading methods Flexible labour laws Cheap availability of power and raw materials, Freight incentives by the Government, Lower ocean freight rates due to greater availability of vessels
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Foreign Trade Policy 2004-09


Exim India

Special package for agriculture




Duty free imports of capital goods


 Will lower production cost and hence improve profitability

Exports of medicinal plants & herbal products facilitated


 Global imports of medicinal plants: US$ 1 bn (2001)  India second largest exporter after China  Potential to increase export to Rs. 1750 crore by 2006-07 and more than Rs. 2500 crore by 200910.  Global market for Herbal products: US$ 80 bn  Indias exports of Herbal products: US$ 280 mn (2002-03)
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Foreign Trade Policy 2004-09


Exim India

Textile sector incentives




Duty free entitlement for garments & handicrafts increased from 3% to 5%  Will help exporters to move up the value chain  However, further incentives required to consolidate Indias position in the postMFA era Handicraft Special Economic Zone to be established  Will contribute to strong growth in handicraft exports  Will generate employment opportunities
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Foreign Trade Policy 2004-09


Exim India

Export Promotion Schemes




Target Plus scheme introduced  Will further boost exports from the successful exporters

Vishesh Krishi Upaj Yojana to boost horticulture exports  Global trade in horticulture: US$ 79 bn (1999)  Indias exports: US$ Rs. 1830 cr (1999-2000)  Success of AEZs for horticulture depend on the ability of the states to overcome existing shortcomings in infrastructure, institutional mechanism and policy and programme support to achieve desired export orientation
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Foreign Trade Policy 2004-09


Exim India

Export Promotion Schemes




Services Export Promotion Council to be set up

Served from India scheme: Service providers who earn forex of at least Rs. 5 lakhs will be eligible for duty credit entitlement  Will help small scale service providers  Will enhance Indias share in global exports of services (1.4% in 2003)
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Exim Bank as a Consultant


Exim India

Sharing Institutional Building Capabilities World wide




Feasibility study for establishment of an export credit and guarantee facility for Gulf Cooperation Council countries

  

Regional cooperation in export finance and export credit guarantees for ESCAP Study on promotion of international competitiveness and exports of manufactured goods for ESCAP

 

Setting up the Afrexim Bank Designing of Export Financing Programmes - Turkey


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Exim Bank as a Consultant


Exim India

Sharing Institutional Building Capabilities World wide


    

Setting up an Exim Bank in Malaysia Design of Export Marketing Seminars for SMEs in Vietnam Export Development Project : Ukraine Enterprise Support Fund : Armenia Establishing an Export Credit Guarantee Company in Zimbabwe Advisory services to Industrial Development Corporation of South Africa for international finance products Mauritius Study on Projecting Mauritius as an Investment Hub for Indian Firms
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Promoting Indian Consultancy


Exim India

Tie-up with
 International Finance Corporation, Washington D.C.
      
 


Africa Project Development Facility Africa Enterprise Fund Mekong Project Development Facility South-East Europe Enterprise Development Facility Private Enterprise Partnership (CIS Countries) China Project Development Facility South Asia Enterprise Development Facility

Eastern & Southern African Trade & Development Bank (PTA Bank) African Management Services Company (AMSCO)
Exim sponsors consultants under GoI-AfDB cooperation Agreement
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Advisory Services
Exim India

Multilateral Agencies Funded Projects Overseas (MFPO)


Information and support services to Indian companies to help improve their prospects for securing business in multilateral agencies funded projects.  Dissemination of business opportunities in funded projects  Providing detailed information on projects of interest  Information on Procurement Guidelines, Policies, Practices of  Multilateral Agencies  Assistance for Registration with Multilateral Agencies  Advising Indian companies on preparation of Expression of Interest, Capability Profile  Bid Intervention
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Foreign Trade Policy 2004-09


Exim India

Export Oriented Units


 

Exemption from service tax EOUs permitted to retain 100% of export earnings in EEFC accounts

Income tax benefits to DTA units which convert to EOUs  All these should considerably increase export growth from the EOUs
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Exim Bank: Financing of Export-Oriented Companies


Exim India

Term Loans

Project Finance

Equipment Finance

Working Capital
Short Term < 1 year Term Loans for 1-2 years Long Term upto 5 years

Overseas Other Investment Finance Programmes


Loans to Indian companies for Equity Investment in their ventures overseas Loans to Indian companies to olden to their overseas ventures Direct Equity stake
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EOU Projects & TUFS Software Training Institutes Minor Ports Technology Parks

Export Marketing Finance Export Product Development Finance for R&D

Institutional Linkages
Exim India

Multilateral Agencies
 World Bank

Asian Development Bank  African Development Bank  European Bank for Reconstruction & Development  Multilateral Investment Guarantee Agency (MIGA)  International Finance Corporation (IFC)  UNIDO - Industrial Promotion Offices  Afrexim Bank  Eastern & Southern African Trade &  Development Bank (PTA Bank)

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Institutional Linkages
Exim India

Trade & Investment Promotion Agencies



Board of Investment of Sri Lanka Hatton National Bank, Sri Lanka China National Technical Import & Export Corporation Polish Agency for Foreign Investment (PAIZ). Hungarian Investment and Trade Development Agency UNIDO Industrial Cooperation & Investment Promotion Service,

          

Poland Economic Development Board, Bahrain Investment & Trade Promotion Centre, Vietnam Centero Estero Vineto, Italy Centro Estero Camere Commercio Piemontesi, Italy. Netherlands Council for Trade Promotion. Board of Investment of Mauritius
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Institutional Linkages
Exim India

Export Credit Agencies

       

The Export-Import Bank of China. Croatian Bank for Reconstruction and Development. Czech Export Bank. Hungarian Export-Import Bank Ltd. Uzbekinvest National Export-Import Insurance Company. Exim Bank of Romania. Export-Import Bank of the Russian Federation. Forum of Asian ECAs
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Institutional Linkages
Exim India

Trade & Investment Promotion Agencies



Board of Investment of Sri Lanka Hatton National Bank, Sri Lanka China National Technical Import & Export Corporation Polish Agency for Foreign Investment (PAIZ). Hungarian Investment and Trade Development Agency UNIDO Industrial Cooperation & Investment Promotion Service,

          

Poland Economic Development Board, Bahrain Investment & Trade Promotion Centre, Vietnam Centero Estero Vineto, Italy Centro Estero Camere Commercio Piemontesi, Italy. Netherlands Council for Trade Promotion. Board of Investment of Mauritius
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Exim Bank : Partner in Globalisation


Exim India

Technology Capital (Foreign Investment) Raw Materials Capital Goods


I

Final Products Capital Goods Capital (Overseas Ventures)

Product Development Production Marketing Pre shipment Post shipment


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Foreign Trade Policy 2004-09


Exim India

Final Observations
 Import of second hand capital goods allowed without age restrictions  No outdated imported technology should be

 Special Focus Initiatives  Could be extended to other sectors of high export orientation like chemicals & pharmaceuticals  Export orientation of FDI should be increased
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FDI and Exports


Exim India

Low share of FDI in major export sectors Sector Transportation industry Computer software industry Chemicals & pharmaceuticals Textiles Leather & leather goods Services (incl. Hotels & Tourism)
Source: SIA, MOC&I
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Share in FDI (%) 7.50 6.46 5.70 1.20 0.20 8.37

Exim India

THANK YOU
www.eximbankindia.com

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