Stabilising import operations
Saturday, 8 November 2008
STABLE or normal import operations are very necessary for a developing economy like that of Bangladesh. This is vitally important for ensuring smooth flow of goods to meet the domestic demand for consumer essentials as well as raw materials and intermediate goods for manufacturing and related sectors. Falling imports that may, thus, be considered apparently comforting for such countries from the thought that reduced import volumes would translate into a stronger balance of payments position, are not necessarily healthy. The lower imports can create supply shortages of essentials driving up their prices or the rate of inflation based on the scarcities. Declining imports of goods considered as industrial raw materials, can undermine industrial productivity from their insufficient availability and undue higher prices.
Thus, the imperative is strong for maintaining normalcy in the import operations as hedges against the above ills. But according to a report in this paper last Wednesday, the rate of cancellation of letters of credit (LCs) against import of edibles such as rice, wheat and edible oils, has been relatively high in recent weeks. The LCs for import of edible oil worth $26.21 million were cancelled during the first quarter of the current fiscal whereas such cancellation was worth only $2.42 million during the corresponding period of the previous fiscal year. The report mentions that LCs for rice import, valued some $39.69 million, were cancelled during July-September of the current fiscal in contrast to such cancellation of LCs amounting to $22.4 million in the corresponding period of the last fiscal. The LCs for scrap vessels worth $3.06 million were cancelled in the same period compared to cancellation of orders valued $0.09 million in the previous corresponding period.
The above are only some of the statistics in relation to mainly foodstuffs and an important industrial raw material, steel scraps. But the same sort of deceleration of import activities is also noted in respect of many other imported products. That suggests otherwise a difficult phase of operations on the part of the importers as a whole. A similar phenomenon was witnessed nearly eighteen months ago in the wake of the government's crackdown against some sections of dishonest businesses. But there has been remarkable upsurge in business confidence since that time in response to revised governmental policies and actions. Therefore, tracing the causes of the recent slumping of import activities again, only one major factor can be identified for it: the drastic fall in the prices of many goods in international markets. This is forcing the importers to recalculate downwards the prices at which they would have to market now many imported products.
Government has started keeping an watch over the situation, according to the report. But businesses should be drawn into a dialogue by the relevant ministry to sort out the issues. For falling import activities if they persist, would, apart from creating the danger of scarcities and unjustifiably pushing up prices in local markets, also push the banking sector into troubles. For the importers' unwillingness to open new LCs would curtail the business of banks as well as reduce the ability of some importers to go on servicing satisfactorily their past loans from a sheer lack of earnings. Thus, there is every reason to watch over this growing problem before it can become a further deep-seated one. Government, of course, cannot dictate to businesses to open LCs. But sitting across the table and exchanging ideas should pose no problems pointing perhaps to a solution acceptable to all. Businesses may be allowed some flexibility while fixing prices of goods imported in the past. All possible policy-supports which do not also deprive unduly the consumers of the benefits of lower prices in the global markets, should be provided for getting the import activities up and going on full gears in the broader interests of the economy.
Thus, the imperative is strong for maintaining normalcy in the import operations as hedges against the above ills. But according to a report in this paper last Wednesday, the rate of cancellation of letters of credit (LCs) against import of edibles such as rice, wheat and edible oils, has been relatively high in recent weeks. The LCs for import of edible oil worth $26.21 million were cancelled during the first quarter of the current fiscal whereas such cancellation was worth only $2.42 million during the corresponding period of the previous fiscal year. The report mentions that LCs for rice import, valued some $39.69 million, were cancelled during July-September of the current fiscal in contrast to such cancellation of LCs amounting to $22.4 million in the corresponding period of the last fiscal. The LCs for scrap vessels worth $3.06 million were cancelled in the same period compared to cancellation of orders valued $0.09 million in the previous corresponding period.
The above are only some of the statistics in relation to mainly foodstuffs and an important industrial raw material, steel scraps. But the same sort of deceleration of import activities is also noted in respect of many other imported products. That suggests otherwise a difficult phase of operations on the part of the importers as a whole. A similar phenomenon was witnessed nearly eighteen months ago in the wake of the government's crackdown against some sections of dishonest businesses. But there has been remarkable upsurge in business confidence since that time in response to revised governmental policies and actions. Therefore, tracing the causes of the recent slumping of import activities again, only one major factor can be identified for it: the drastic fall in the prices of many goods in international markets. This is forcing the importers to recalculate downwards the prices at which they would have to market now many imported products.
Government has started keeping an watch over the situation, according to the report. But businesses should be drawn into a dialogue by the relevant ministry to sort out the issues. For falling import activities if they persist, would, apart from creating the danger of scarcities and unjustifiably pushing up prices in local markets, also push the banking sector into troubles. For the importers' unwillingness to open new LCs would curtail the business of banks as well as reduce the ability of some importers to go on servicing satisfactorily their past loans from a sheer lack of earnings. Thus, there is every reason to watch over this growing problem before it can become a further deep-seated one. Government, of course, cannot dictate to businesses to open LCs. But sitting across the table and exchanging ideas should pose no problems pointing perhaps to a solution acceptable to all. Businesses may be allowed some flexibility while fixing prices of goods imported in the past. All possible policy-supports which do not also deprive unduly the consumers of the benefits of lower prices in the global markets, should be provided for getting the import activities up and going on full gears in the broader interests of the economy.