Export fund facility to expand

The Ministry of Commerce wants to provide companies that both sell locally and export with loan facilities from the Export Development Fund (EDF) and other policy assistance – just as it does for the export-oriented industries – to boost their falling export earnings.

It plans to increase the size of the EDF and the newly formed Technology Development Fund (TDF) to cover all export sectors.

The ministry is also going to propose providing a 100% bank guarantee facility to these partial exporters like the export-oriented industries.

These proposals will be presented at a meeting of the National Committee on Exports to be held under the chairmanship of Prime Minister Sheikh Hasina. The date for the meeting is yet to be decided.

According to sources, although there are various policy incentives for 100% export-oriented companies, partial exporters do not enjoy such facilities. If they are given the same benefits, export earnings will increase.

Commerce Secretary Md Zafar Uddin told The Business Standard, "We expected export earnings to go up after the Covid-19 lockdown was lifted worldwide. But now the situation is getting worse. We shall request directives from the prime minister for different policies as part of measures to increase export earnings."

The secretary said they have two goals: bringing back growth in exports and building capacity to meet the challenges.

"We will face these challenges after graduating as a developing nation. The agenda of the meeting is being finalised and then the date of the meeting will be fixed," he added.

City Group is a partial exporter as it markets edible oil and sugar in the domestic market and also exports these products. Biswajit Saha, the group's director of corporate and regulatory affairs, said, "We do not get 100% bank guarantee against EDF or export orders. If we get such benefits, our exports will increase."

The commerce ministry held several meetings with various organisations in November last year to decide on the agenda of the meeting. It formed a committee to finalise the agenda based on the views raised there. The committee met on 5 January and finalised several plans.

To stop the misuse of duty drawback or duty bond, the ministry will seek instructions from the prime minister to formulate a framework to combine the facility with cash incentives. In this case, the export-oriented companies have to pay the prescribed duty at the time of raw material import. The government will compensate the exporters by increasing the rate of cash assistance.

The ministry will also seek the prime minister's instructions on signing Free Trade Agreements (FTAs) with developed countries, including the United States, Canada, Australia and Japan. Bangladesh has a trade surplus with these countries and expects investment from these trade partners.

A need for a meeting of the committee was felt necessary as export earnings started to dip from the beginning of the last financial year.

The government has a plan to increase Bangladesh's export earnings to $60 billion by 2021. However, export earnings decreased by about 17% in the last financial year compared to FY2018-19.

In FY2018-19, export in the commodity sector was more than $40 billion. In the last financial year, the amount fell to about $34 billion. In the first six months of the current financial year, export income decreased by more than 1% compared to the same period of the previous year.

Mohammad Hatem, senior vice-president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Standard he had attended several preparatory meetings with the prime minister organised by the commerce ministry where he proposed including some more agenda.

"We have to face constant harassment in different ministries and departments to solve different problems. We proposed that the prime minister should form an inter-ministerial committee headed by the commerce minister or secretary to decide on any issue related to exports. All government agencies, including the Bangladesh Bank and the National Board of Revenue, will make decisions as per the committee's instruction," he added.

Hatem also said the establishment of a platform for online export orders through the ICT division and the signing of FTAs ​​with major export markets, including the European Union, had been proposed to be included in the agenda of the meeting with the prime minister.

The Ministry of Commerce is taking various initiatives to increase exports. As part of this, it has increased supervision of the work of commercial councillors in 21 countries. The ministry has directed the councillors to send detailed written information on what initiatives they are taking to increase exports and who they are meeting abroad.

The commerce secretary said, "I will be holding regular meetings with commercial councillors from 8 February. If each of the 21 councillors can increase exports by $1 billion, then $21 billion can be earned. Now, if exports can be grown to at least $2 billion, that will be a huge increase."

Officials of the Foreign Exchange Policy Department of the Bangladesh Bank said although the EDF was set up in 1989 to assist export-oriented industries in importing raw materials, its use had increased since 2009. The size of the fund at that time was $300 million, which is now $5 billion.

Members of Bangladesh Textile Mills Association (BTMA), Bangladesh Garment Manufacturers and Exporters Association (BGMEA), and BKMEA get loans up to $30 million from the fund at 1.75% interest rate. Exporters who are not members of the associations get a loan of $0.5 million to open a back-to-back letter of credit to import raw materials in bulk. Partial exporting companies outside the scope of the bond facility do not benefit from the EDF.

Officials of the Bangladesh Bank said if export earnings continue to increase, the import of raw materials will increase. Then the size of the fund will also increase. However, more sectors can be included in the fund by increasing the size if instructions are received from the government.

To meet the challenges of the Fourth Industrial Revolution, the Bangladesh Bank has formed a Technology Development Fund of Tk1,000 crore for the modernisation of industries and development of technology. Industries which are prioritised and included in the special developmental sector as per the national export policy will be able to borrow from this fund at 5-6% interest.

The commerce ministry will seek the prime minister's directives to further increase the size of the fund and ensure this facility for all export-oriented sectors.

Export-oriented companies get e-loan facility without collateral under 100% bank guarantee facility against export orders. They also get tax-free facilities for the import of raw materials, but partial exporters do not get these benefits. The Ministry of Commerce will offer similar benefits to them to increase exports.