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Export diversification is one of the main strategies of the government. The Export Policy 2018-21 brings a number of changes in favour of some non-traditional export sectors such as plastic, leather and light engineering. The policy, once translated into reality, can contribute to export diversification.
PLASTIC INDUSTRY: The policy puts emphasis on making six established business promotion councils (BPCs)--working separately for information and communication technology (ICT), leather sector, light engineering products, medicinal plants and herbal products, fishery products and agro products--under Ministry of Commerce more dynamic. It mentions that another council will be established for plastic products. Plastic sector is growing at a rate of 20 per cent and contributes about 1.5 per cent of the total export.
An export road map for plastic sector is in the process. The policy mentions detailed benefits to be provided and initiatives to be taken by the government for 14 exportable products. As plastic is the 12th largest export product and included in the high priority sector in the export policy, benefits can be included separately in the product-specific export facilities.
According to the export policy, deemed exporters of plastic sector will be eligible for enjoying Export Development Fund (EDF). Mould is one of the important supporting products for plastic. The policy also mentions that for establishing mould industry for plastic products, loan at a simple interest rate will be allowed. Not only that, plastic products will be encouraged to attend international fairs abroad and accredited laboratories will be established for quality certification so that Bangladesh Standards and Testing Institution (BSTI) can support the sector.
The export policy mentions initiatives will be taken to include plastic industry sector in the green category. It has always been argued by the industry experts that plastic industry is not responsible for pollution. It is the consumers who pollute the environment, so use of plastic would need to be brought under stringent guidelines, as enviromental pollution created by plastic products is tremendous and people are aware about the risks and dangers.
Plastic industry provides direct employment to more than 620 million people. Export was $ 98.48 million in 2017-18 according to Export Promotion Bureau (EPB). Private sector claimed that deemed export was about US$ 700 million, the products are hangers, buttons, boxes, poly sheets and other accessories of sectors like ready-made garment (RMG), pharmaceuticals, food processing etc. Data of deemed exports are not officially available, as these exporters are not registered with EPB. Only National Board of Revenue (NBR) knows about that. Deemed export would need to be shown differently to encourage the sector working as backward linkage--mostly small and medium enterprises (SMEs).
Business Initiative Leading Development (BUILD) recommended inclusion of a detailed chapter on deemed export to support SME exporters of the country.
For the first time, this policy defines deemed export aligning with the Value Added Tax (VAT) and Supplementary Duty (SD) Act and it also mentions that duty drawback will be allowed for the deemed exporters. Before 2022, new VAT and SD Act will not be fully in operation, as the new VAT and SD Act will start percolating benefits only after the full automation system is in place.
LIGHT ENGINEERING PRODUCTS: Another emerging non-traditional export sector is light engineering (auto parts, bicycles, motorcycles, batteries etc.). It can be considered a high priority sector. The Export Policy 2018-21 regards this as a special development sector. This sector was considered a high priority sector in the Industrial Policy 2016. Earning US$ 688 million in FY 2016-17, this sector has an immense export potential.
In the present fiscal, motor cycle export was given 10 per cent cash incentives on condition of 30 per cent local value addition. If producers export from their own factories, they will enjoy this benefit. This would definitely be an excellent step towards adding an important manufacturing product in the export basket. But companies established in the export processing zones (EPZ) will not enjoy the benefit, as EPZs are running according to their own policies.
A Japanese company has started production of motorcycles in one of the economic zones in the country. It is expected the same company will export motorcycles in future.
LEATHER AND LEATHER GOODS: Reduction of lead time from 90 days to at least 66 days for leather and leather goods was an important issue. It can save a number of export orders of the companies. It was one of the recommendations from a BUILD study. The new export policy mentions central bonded house will be established to reduce lead time. It is seen that it takes seven to ten days to finish customs procedures of loading of finished goods. This should be reduced to maximum three days. Full implementation of ASYCUDA World (Automated System for Customs Data) and cutoff time for this process is a must to be competitive in the export market. The export policy mentions leather and leather goods sector will enjoy support similar to RMG sector with regard to Export Development Fund (EDF), inter-bond facilities and import of safety equipment facilities.
The import duty of 21 chemicals used for processing leather by non-bonded tannery owners can be lowered from five per cent to three per cent.
ROLE OF BUILD: BUILD has been working for long for simplification of import registration certificate (IRC) and export registration certification (ERC) renewal through nominated banks (NB). The import policy mentioned that IRC can be renewed through nominated banks. Import registration through nominated banks has been challenging since 2011. There are examples of several other countries where with the submission of fees, licenses are generated automatically. BUILD proposed that like IRC, ERC can be renewed through nominated banks and at the same time process for renewal of IRC through NB can be simplified.
The Export policy 2018-21 indicates that the concerned body would examine whether it is possible to extend ERC renewal facilities by nominated banks. This will be a support for the exporters. Office of the Chief Controller of Imports and Exports is going through transformation. It recently has introduced automation to provide services. Once this transformation will be finalised, exporters and importers will enjoy better services to complete their export-import formalities.
BUILD conducted a study on simplification of sample export and import policies to increase the export of non-traditional sectors. BUILD recommended inclusion of a clear definition of 'sample' so that sample products can be imported duty free. The export policy mentions that 'sample' would mean those products which will have no commercial value and will be imported in a limited amount. At present, sample import is taxed though it has no commercial value and thus it takes longer time and creates hassles to the exporters.
CONCLUSION: The Export Policy 2018-21 is a reflection of government's export diversification strategy. The policy introduces review or evaluation of implementation of the policy every year, which is a very important step. It always takes time to issue orders, gazettes, etc. People would like to see implementation of this policy so that it can contribute further to export competitiveness, diversification and thus create more decent employment opportunities.
Ferdaus Ara Begum is Chief Executive Officer at Business Initiative Leading Development (BUILD).