UK export may widen as DCTS surrogates GSP

Vistas for higher exports to the United Kingdom open as UK's Developing Countries Trading Scheme (DCTS) surrogates the European Union's GSP facility, and leather products hold untapped prospects alongside apparel.

Such findings come in a research that points out that export potential of Bangladesh's leather goods and footwear remained highly underutilized, thus hindering its contribution to the efforts to diversify the country's export base which has been largely dependent on readymade garments for long.

A stakeholder consultation held Monday in Dhaka on 'Increasing and diversifying exports to the UK under Developing Countries Trading Scheme (DCTS)' revealed that the United Kingdom is a prospective market where Bangladesh can expand its export of leather products and footwear.

Data analysis showed that Bangladesh received US$4.8 billion from exports to the UK last fiscal, and US$4.49 billion of that came from RMG.

In 2021, Bangladesh's exports of leather goods and footwear to the UK were worth only $38 million, a minuscule fraction or only 0.7 per cent of UK's overall imports of over $5.3 billion in the same year, according to data.

Leather goods and footwear exports in fiscal year 2021-22 fetched US$1.7 billion, which is 3.2 per cent of total export earnings worth US$52 billion.

Considering the sector's potential, the government has set a target of earning US$10 to US$12 billion by 2030.

"The UK DCTS can be a game changer for Bangladesh to break into non-RMG export sectors, including leather goods and footwear (both leather and non-leather footwear)," says Dr MA Razzaque, chairman of Research and Policy Integration for Development (RAPID), in his keynote paper presented at the meet.

The United Kingdom has introduced its preferential trading scheme for developing countries, called DCTS, this year that marks its departure from the European Union's Generalized System of Preference (GSP).

Under the new scheme, Bangladesh as an LDC enjoys duty-free market access through the DCTS Comprehensive Preferences, and after its graduation in 2026, the country will continue to enjoy the same LDC benefit for another three years until 2029, he noted.

Bangladesh will also get duty-free benefits on more than 85 per cent of its UK-bound product lines under DCTS Enhanced Preferences.

As an LDC, Bangladesh also stands to benefit from more generous UK Rules of Origin (RoO) requirements as the minimum value-addition requirement for LDCs has been reduced to 25 per cent from 30 per cent in half of the chapter headings (48 chapters) defined at HS 2-digit level.

The DCTS removes the requirement for countries to ratify and implement certain international conventions as a precondition for trade preference, he noted.

RAPID is undertaking research and consultation exercises to help Bangladeshi exporters take advantage of the UK DCTS Scheme, he said, adding that the Secretary of State for the Foreign, Commonwealth and Development Office of the United Kingdom has commissioned RAPID to conduct this research and consult stakeholders to determine the best ways to boost, expand, and promote exports from Bangladesh to the UK.

As part of the study, RAPID has identified several potential export sectors for the UK market. Leather goods and footwear are among the most prominent products to unleash their export potential, he noted.

Speakers, however, identified a number of problems like absence of market-related information, British business culture, poor traceability, image crisis over Bangladesh's capability to produce quality goods, issues related to bond licensing, import of chemicals, and shortage of skilled workers that are hindering the sector's export growth.

Only a few companies have environmental certification that matches global standards, they said, adding that exporters can't use local raw materials, especially crushed and finished leather, due to compliance issues.

They stressed effective functionality of CETP and tannery estate at Savar and bringing more companies under the LGW (leather working group)--a global multi-stakeholder community committed to building a sustainable future with responsible leather.

Speaking there, Syed Manzur Elahi, chairman of Apex Footwear Limited, said without ensuring compliance, it is not possible to do business in the sector.

"You can't pollute environment and do business," he said, adding that readymade garment sector has invested huge sum of money to be compliant.

The renowned business entrepreneur in the sector, however, stressed policy supports and one-on-one meeting between buyer and exporter to expand export to the UK.

Mohiuddin Ahmed Mahin, chairman of Bangladesh Finished Leather, Leathergoods and Footwear Exporters' Association, suggested penetrating in low and mid levels to increase earnings as he said RMG has been performing well due to its reach to mass market.

Raising question over effectiveness of tannery and CETP at Savar, Abu Taher, Chairman of Fortuna Group of Industries, stressed policy support, including resolving issues related to chemical import.

Tania, an SME entrepreneur, identified bond complexities, difficulties in claiming incentives as major obstacles and stressed availability of market-related information, design, and buyer-maker meet to expand market.

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