Double counting: Mystery behind inflated export figures

The country's export numbers are being miscalculated resulting in reporting inflated numbers than actual export figures, examination of export data shows. This has also been admitted by NBR officials.

This issue is known as "double counting" and Bangladesh has been facing this problem for years as goods and accessories bought from local EPZs by exporters are counted twice: once as the export of the exporter, and again as the export of the EPZ company.

Stakeholders say the double counting of exports inflates the country's export figures, making it difficult to assess the true performance of the export sector.

This misleading data is the result of two different methods of calculating export numbers by the National Board of Revenue (NBR) and the Export Promotion Bureau (EPB), officials have told TBS.

The double counting of exports is being considered a reason for the large gap between the export figures of the EPB and the Bangladesh Bank. In FY23, the EPB calculated Bangladesh's exports at $55.56 billion, while the Bangladesh Bank said there is at least $10 billion in unrealised proceeds in that figure.

Stakeholders say the unrealised amount includes the double counting portion.

This phenomenon of double counting can be understood from a readily available example of MB Knit Fashions Limited of Narayanganj. The company purchased around $1,00,000 worth of garment accessories from the EPZ in the last fiscal year. It then used these accessories to produce garments for export. The value of the exported garments, including the cost of the accessories, is counted as an export of MB Knit Fashions, and at the same time, it is counted as an export of the company from which it purchased the accessories.

Thus the exports of hundreds of companies are double counted in this method and the amount is astonishing.

According to data published by the EPB, exports through the local export code amounted to $1.7 billion in the fiscal 2022-23. This means the amount of exports has been double counted and the practice has been going on for years, say stakeholders.

In FY21, the amount of double counts in export was $0.49 billion and in FY22 it was $1.06 billion, as per EPB data.

"In the current practice, when a company purchases products from an entity in the EPZs, it is considered as an export by both companies. But, this does not reflect the actual export data accurately," Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), tells The Business Standard.

Hatem suggests that the amount should be excluded from one of the companies when calculating the primary export figures.

"For example, if I buy $60,000 worth of raw materials from a company in the EPZ, add $40,000 of value, and export the finished product for $100,000, then $100,000 is shown as my export, but $60,000 is also shown as the export of the EPZ company. In reality, however, the actual export amount is only $100,000," he says.

Similarly, when a company sells goods or accessories to a company in the EPZ, it is counted twice, he adds.

The BKMEA executive director further says products exported abroad are not excluded from export data even if they are discounted, rejected by the buyer, or returned to the country.

Shahidullah Azim, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), says more than $500 million was counted as exports for products that were discounted or rejected in the last financial year. "It should not have been," he says.

Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), tells TBS that exports from EPZ companies are being double counted and that discounts given after export and returned goods are not excluded from the original export calculation. These issues need to be addressed to ensure accurate calculations.

The gap between the export figures of the EPB and the Bangladesh Bank should not be so large, even after accounting for the factors discussed. Whether something unethical is happening here needs to be investigated in order to reduce this gap in the long run, he added.

Why double counting?

EPZ companies can sell 10% of their products locally. These sales are also counted as exports, but the EPB could not provide information of the amount of such sales.

Officials say the customs department of the NBR accounts for all types of exports in the country under the same code, resulting in double counting.

However, an official of the NBR's customs department tells TBS on condition of anonymity that the EPB can segregate and show actual export accounts if it wanted to, but that it is unclear why it is not doing so.

EPB officials, however, refused to agree to this statement.

EPB Director Kumkum Sultana says there is no scope for separating the data, which is why the EPB cannot show it separately. She says the EPB must compile the data based on export information given to it by customs as per the assessment of the bill of export.

Abdur Rahim Khan, additional secretary of the commerce ministry, says the amount of double counting will not be very high.

He, however, says a committee has been formed to investigate the reason for the large gap between the EPB's and Bangladesh Bank's export data.

"Why is there such a big gap? There must be another reason. We are working to find out the matter," he says.

NBR's initiative

The NBR's customs department met earlier this month to discuss the issue of double counting exports. At the meeting, they decided to show exports that are being double counted, including EPZ exports, under a separate code.

A senior NBR official who attended the meeting confirmed this information to TBS. He said, "We have taken a preliminary decision in the meeting to avoid double counting of exports. All exports will not be accounted for under the same code."