A good number of export-oriented industries are allegedly failing to draw funds from the Export Development Fund (EDF) formed to help entrepreneurs, especially new exporters, diversify into higher value-added products.
Trade sources said industries from a few sectors are enjoying the benefit, leaving most other export industries outside the financing facility mainly for, what they claim, stringent rules and regulations.
Short duration, non-assertion of value-addition criteria for most of the sectors and inclusion of sectors through official circular are identified as the major hindrances shutting out many of the non-traditional export-oriented industries from the government stimulus package meant for export promotion, diversification and growth.
At present enterprises from textile and apparel sectors, garment accessories and packaging manufacturers, plastic goods manufacturers and exporters are enjoying the benefit of low-cost funds.
Very recently, leather goods and footwear manufacturers and exporters and ceramic-ware manufacturers have been allowed to draw EDF finances for bulk imports against their estimated requirements for up to one year, based on their export performance over the preceding year.
Among the beneficiaries, the sources said, industries from textile and apparel sectors are consuming the lion's share of the fund followed by plastic goods manufacturers.
A good number of export-oriented industries such as ship-building, light engineering, jute goods, electronics, and food processing are yet to avail the benefit due to the barriers put up with strict conditions.
Bangladesh Bank officials, however, said the fund has been created to facilitate financing in foreign currency to meet the import requirements for non-traditional manufactured items.
It is allowed only for input procurements against back-to-back import letters of credit (LCs) by manufactures producing final output for direct export and also by producers of local deliveries to manufacturers of the final exports.
"Any exporter who fulfils the criteria can avail the opportunity," said Kazi Saidur Rahman, General Manager of Forex Reserve and Treasury Management Department of Bangladesh Bank.
"But, we cannot help anyone who does not meet the criteria set by the central bank for availing the financing facility."
Bangladesh Bank created the fund in 1989 with financial assistance from the International Development Association (IDA) to assure availability of foreign exchange to meet import requirements of non-traditional manufactured items.
The central bank disburses funds from the EDF through authorized dealer banks.
According to the Bangladesh Bank authorities, any exporter of non-traditional manufacturing items, having at least 20 per cent value addition as per import policy, can draw money from the fund for a period of 180 days.
Any exporter, regardless of the sector it operates in, can apply for the financing if he qualifies as per the criteria.
But many of the exporters complained that they failed to get the funds due to some ambiguities and complex procedures of approval.
Many failed to avail the funds due to short duration as they need more time to repay the money because of nature of their business.
In some cases, the AD banks even refuse to process application for funds unless there is any circular mentioning the name of the sector.
"We could not avail the funds as the central bank did not issue any circular qualifying our sector (ship building) for the funds," said Md. Saiful Islam, Chairman of Western Marine Shipyard Ltd (WMSL).
"Every time we approached the central bank, they advised that it did not require any circular as it is open for all," the WMSL chief added.
But the AD banks, Mr Saiful lamented, did not proceed without the circular from the central bank. "Despite relentless efforts, we could not solve the problem."
Asked about the dilemmas, BB officials, however, said the fund is meant to provide short-term liquidity support.
The loans are payable by the banks upon receipt of export proceeds within 180 days. Sometimes it is extended up to 270 days by the central bank in case of a longer period for repatriation of export proceeds.
"But, we cannot extend the loan to those who need it for a long-term requirement," said the Bangladesh Bank GM, Saidur Rahman, adding that it also requires approval from the central bank.
The GM, who heads the central bank's Forex Reserve and Treasury Management Department, however, said the government is contemplating introducing another EDF fund to cater longer-term requirements. The fund is expected soon.
Some of the exporters are also facing problems regarding assessment of value addition, as there was no mention of value addition in case of many non-traditional export items in the import policy.
To overcome the hurdles, exporters also stressed the need for declaring a value-addition criterion instead of referring to import policy.
A survey by Business Initiative Leading Development (BUILD), a platform for fact-based and research-backed dialogue and advocacy, also found the refinancing scheme currently available only to a few exporting sectors for diversifying into higher-value exports and diversifying into new markets.
"Only members of 5-6 associations are being allowed to draw EDF finance for input imports. Indeed, a good number of potential non-traditional exporters are left out from the excellent financing facility offered by EDF," said Build Chief Executive Officer (CEO) Ferdaus Ara Begum.
"We also recommended that the criteria of availing EDF in bulk should be expanded to include some of the high-potential export-oriented sectors, including shipbuilding, light engineering, etc.," also said the Build CEO.
The refinancing fund allocated for EDF has grown manifold over the years. Started with only US$ 31.2 million, the fund size stands at US$ 2.0 billion at present.
Currently, the exporters are allowed to get the foreign currency loan at the London Inter-bank Offered Rate (LIBOR) plus 2.50 per cent interest.
In the last fiscal year (2014-15), the central bank handed out an amount of US$3.55 billion to exporters as against US$2.49 billion in the previous fiscal.
mzrbd@yahoo.com
Some sectors allege bias
Ziaur Rahman | Published: August 26, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
Share if you like