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Ensuring enabling trade environment

| Updated: October 22, 2017 20:34:51


Ensuring enabling trade environment

Bangladesh slipped three steps back to stand 123rd in this year's Enabling Trade Index (ETI) of the World Economic Forum (WEF) mainly for underperformance on three counts. The country failed to perform to the desired level in quality transport infrastructure, efficiency, and transparency in border administration.
Prepared every two years, the WEF index is considered a benchmark for governments looking to boost growth and development through trade.
In the previous ETI,  the country held 120th position among the 136 countries measured on account of creating conditions that support better trade operations. The index was carried in the Global Enabling Trade Report 2016, released by the WEF and the Global Alliance for Trade Facilitation last week. It covers 136 economies, which together account for 98 per cent of world gross domestic product (GDP) and 98.3 per cent of world merchandise trade.
According to the ETI, Bhutan is reported to be the most improved country in the South Asia region, climbing 12 positions and becoming the regional leader at 92nd, followed by India and Nepal. Besides, Sri Lanka secured 103rd, and Pakistan 122nd positions--all slipping down the rankings in spite of improved scores. The index placed Singapore as the top country in enabling trade while Venezuela at the bottom.
The enabling trade report says governments are making slow progress in improving the efficiency of customs and border procedures, with many small businesses and entrepreneurs cutting off from the global trading system as a result.
The index surveyed seven different pillars of 136 economies across the globe based on domestic market access, foreign market access, efficiency and transparency of border administration, availability and quality of transport infrastructure, availability and quality of transport services, availability and use of ICTs, and operating environment.
Bangladesh secured 3.48 points on the 1-7 scale in the ETI 2016. In the 2014 index, it scored 3.39. Although the country secured more points in the 2016 version of the ETI than in the 2014, its overall rank has dropped three positions to 123rd as other economies in the world have done better, the report says.
At a time of growing scepticism towards many bilateral and regional trade agreements focused on cutting tariffs and harmonising product regulations, the report shows that improving the efficiency of border administration is a 'largely untapped tool that governments can use to boost economic growth'.
The biggest beneficiaries of customs reforms are small and medium-sized enterprises (SMEs) which typically lack the resources to comply with complex, expensive or time-consuming measures, it said.
The report shows that no convergence between countries on border administration has been achieved in the last two years -- and, in fact, the performance gap between high and low-income economies has even widened slightly during this period, by 0.1 points on a 1-7 scale.
Yet in another report, World Bank (WB) expressed its optimism over trade potential of Bangladesh. It said the country can become an export powerhouse like its East Asian neighbours by improving its business competitiveness and trade regime, which will help firms compete globally.
The report said Bangladesh is a wonderful case of how the rise in competitiveness can help cut poverty. Now the challenge for the country is to continue the success and diversify into other areas.
With support from the government, local firms can improve their productivity and competitiveness by investing more in training their workers and managers, innovating to introduce new products and processes, as well as making greater use of the internet to buy, sell, market, or manage their inventory.
Private sector investment should increase to create more and better jobs, an important development objective for Bangladesh. Critical for private sector growth will be enhanced competitiveness that requires policy support to improve investment climate and increase integration with global and regional markets.
The report said the country should expand bonded warehouse scheme, harmonise tariffs to a lower base and improve customs, ports and logistics in a bid to connect to the global value chain.
Bangladesh should, on the other hand, continue its effort to reduce its cost of doing business and also take immediate measures to eliminate the hidden cost on a priority basis to increase its competitive edge compared to other countries.
Cost of investment in Bangladesh is not getting cheaper as all the cost components have increased considerably over the years. Hidden cost, which is non-figurative but exists in matters relating to procedurement, policy, law and infrastructure, has high correlation with the cost of doing business and cost of investment in a country. The hidden costs and loopholes in policies are eating up Bangladesh's FDI (foreign direct investment) future.
It is thus necessary for the country to address and eliminate the impediments that are responsible for the high cost of investment. To be more competitive, immediate attention should be given to the cost components that still remain less competitive, especially in container transportation, land price of industrial estate, initial internet connection fee, monthly basic internet connection fee, mobile phone subscription fee, corporate income tax etc.
In order to gain competitiveness, the country needs to start by focusing on improving its trade policy regime and the business environment, and address the acute shortage of industrial land. With right set of policies for doing business and an enabling trade environment regime, there is no reason why Bangladesh cannot become the next Asian business giant.
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