Bangladesh fails to realise full potential of trade

In spite of a lot of emphasis by policymakers and top bureaucrats on facilitating trade and investment to bolster the economy, businesses are yet to get adequate support and services because of a lack of service-oriented attitude and an unfriendly mindset of public officials at the field level.

This, along with a lack of diversification of the export basket, longer clearance time, involvement of over three dozen agencies issuing certificates, licences and permits, and inadequate digitalisation, increases the cost of doing business.

As a result, Bangladesh fails to realise the full potential of trade, said analysts and top business leaders at a webinar on trade facilitation for Bangladesh's export competitiveness.

"At the senior level of bureaucracy, there is a realisation that a major reform is necessary," said Salman F Rahman, the prime minister's private industry and investment adviser.

"Unfortunately, this has not been translated at the field level," he told the webinar organised by the Policy Research Institute of Bangladesh.

"The big challenge now is to make their junior colleagues realise the benefit. Change in attitude and mindset is needed."

He said a lot of samples of products were coming to Bangladesh and a number of products were not on the list of those eligible for bonded warehouse benefits.

Radiofrequency identification (RFID) tags are not on the list, so customs houses are facing difficulties in releasing the products.

"But why can't we get the RFID tag in the list of the items to get bonded warehouse benefit?" he asked.

His remarks came after Fazlul Hoque, a former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), shared his experience regarding the release of a parcel of samples from Brazil that arrived at Dhaka's Hazrat Shahjalal International Airport on August 28.

Hoque, also the managing director of Plummy Fashions, said his company tries to export goods to Latin America in order to diversify markets and the parcel was related to that initiative.

"It is still in the hands of customs. I am not sure if we can get the product cleared tomorrow. If not, we will have to wait until next week," said Hoque, expressing his frustration for the delay.

He said there has been a lot of improvement but one thing that has not changed was the attitude of officials who were implementing policies.

"Until and unless attitude and mindset are changed, nothing will change and we will not be able to realise the potential," Hoque said.

The entrepreneur demanded reducing the time it takes to get licences for bonded warehouse facilities to import raw materials at zero duty to make products for exports and increasing the validity period of certificates and various licences.

"We can minimise the cost," he said.

Asif Ibrahim, a director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said exporters were adding value to garments.

A lot of products are still not included in the "harmonised system", which are codes used by customs authorities around the world to identify products, he said.

"Exports are getting delayed," he said.

Ibrahim, also the chairman of the Chittagong Stock Exchange, cited the malfunctioning of the central effluent treatment plant (CETP) at the Savar Tannery Industrial Estate.

He said the government should not have given the Bangladesh Small and Cottage Industries Corporation the task of implementing a project of such a magnitude.

Had the CETP functioned properly, export earnings from leather and leather products would have grown several times by now, he said.

PRI Chairman Zaidi Sattar said a change in mindset was important.

He said because of the switch to trade openness, Bangladesh was described as a "globaliser" among developing economies.

The trade to gross domestic product (GDP) ratio shot up from 19 per cent in 1989-90 to 38 per cent in the next 15 years, peaking at 49 per cent in FY2011.

Thereafter, trade growth did not keep up with the growth of nominal GDP. Consequently, the trade-to-GDP ratio has been sliding down, reaching 30 per cent in FY2021.

In a presentation at the event, M Masrur Reaz, chairman of the Policy Exchange, said Bangladesh has fallen behind in taking full advantage of the virtuous link of trade facilitation (TF). The TF refers to the measures that aim to reduce the costs and barriers to trade beyond traditional policy tools.

"Trade is an important development driver. Trade leads to many gains in productivity and innovation, and exposes the private sector to better ideas, innovative ideas and practices," said Reaz.

"But a weak trade facilitation environment can increase transaction costs of a shipment by 2 per cent to 24 per cent."

He said Vietnam's spectacular export-led growth success hugely benefitted from its improvements. Its exports grew from $14.5 billion in 2000 to $265 billion in 2019, he said.

"For Bangladesh, trade competitiveness is extremely critical. Diversification is extremely critical."