A government team has suggested providing policy supports to help enhance export capability of local manufacturers, taking into consideration the assistance given by competitor countries like Vietnam, India, Thailand, and Indonesia to their exporters.
The suggestion was given, as export dropped significantly during the July-December period of this fiscal year (FY), 2019-20, and continued falling thereafter.
The Ministry of Finance (MoF) formed a team, and sent four of its high officials to those countries to study the facilities given to exporters there, and make recommendations to facilitate local export.
Vietnam, India, Thailand, and Indonesia were doing well, although most other countries were experiencing a decline in their export earnings.
The policy supports that the team suggested include enhancing trade competitiveness by improving the country's business environment, raising position in the World Bank's ease of doing business (EODB) index to at least 100, and providing investment facilities like Vietnam, India, Thailand, and Indonesia.
It also suggested initiating strong measures for trade facilitation, so that cost of doing business goes down.
The team opined that a coordinated supply chain management can be ensured, and time of releasing goods from ports can be lowered.
"It will help expedite completion of export procedures, and create confidence among foreign investors."
The team further suggested creating a dynamic web portal and establishing a resource centre, containing upgraded trade and business-related information.
It will help local exporters to get updated information about foreign export markets, and remove information asymmetry regarding competing countries.
After making a competitive study, the team members recently submitted the report to the MoF, which later forwarded it to the ministers and divisions concerned for taking necessary steps.
The study found that currency devaluation had no important role in raising export earnings of the countries like Vietnam, India, Thailand and Indonesia.
"Thus, intervening in the exchange rate by devaluing taka against the US dollar will not be the right decision for Bangladesh."
Since currency depreciation is a short-term step, it can lift prices of imported raw materials, and create anti-export bias. The step may also cause pressure on consumers by raising inflation, it noted.
The study also found that Vietnam, Thailand and Indonesia are not paying any cash incentives to encourage export, while India is providing export subsidy in the form of duty credit scrip instead of giving cash support.
India, however, will soon withdraw the support, as being a developing country it cannot provide any kind of cash incentive or export subsidy.
On the other hand, Bangladesh's apparel industry is now getting five types of cash incentives ranging between 5.0 per cent and 15 per cent.
These include: 4.0 per cent alternative cash incentives against customs bond, an additional 4.0 per cent facility for all small and medium enterprises (SMEs), 4.0 per cent assistance for new products and new market creation, and 6.0 per cent special assistance for exporting goods to Euro Zone.
Besides, in FY 2019-20 a special cash incentive at the rate of 1.0 per cent is given to all apparel sector exporters.
The study found that apart from cash incentives the government is providing a hefty subsidy in electricity and gas, whose main beneficiary is the manufacturing sector.
A senior MoF official told the FE on Sunday that they are examining the study report, and will consider the recommendations in devising policies regarding export subsidy or case incentives in the future.
"Actually we are providing enough cash support. We now need to provide other policy supports to facilitate export," he opined.
Data shows that the country's export earnings fell by 4.79 per cent to US$ 26.24 billion in July-February period of FY20 against $27.56 billion in the corresponding period of last fiscal. The earnings also fell short of the target, set for the period, by 12.72 per cent.
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