Traders want EDF back to $7 billion

Fearing negative impacts on exports due to the downsizing of the Export Development Fund (EDF) as well as reduction in the amount of loans taken from the fund, traders have called for the EDF to be reverted back to the original state.  

In a meeting of the Advisory Committee on Trade Support yesterday at the commerce ministry, traders also said that consumption in the international market has decreased and it is also having a negative impact on Bangladesh's exports.

Besides, a series of gas and electricity price hikes by the government has increased business costs, further reducing competitiveness, they added.

Traders pointed out that there was a negative trend in overall exports, including ready-made garments.

In such a scenario, downsizing the EDF and the increasing of interest rates may lead to export to fall further in the coming months, they said, urging the EDF to be restored back to seven billion dollars and the reinstatement of previous interest rates. 

Besides, traders have proposed to reduce the source tax on exports from 1% to 0.25% for the next five years and reduce the existing 10% tax on cash incentives against exports to 3%.

They have also recommended opening of back-to-back letter of credits (LCs) by non-bonded institutions and exemption of cash incentives based on repatriated export proceeds.

Officials of the Bangladesh Bank, the National Board of Revenue (NBR) and leaders of top trade bodies including the Federation of Bangladesh Chambers of Commerce & Industries (FBCCI), Federation of Bangladesh Chambers of Commerce & Industries (BGMEA) and Federation of Bangladesh Chambers of Commerce & Industries (BKMEA) were present in the meeting chaired by Commerce Minister Tipu Munshi.

The minister called on businessmen to prepare to meet export targets of $80 billion by next year, $150 billion by 2031 and $300 billion by 2041.

The commerce minister told traders that he will inform the Bangladesh Bank and the Finance Ministry in writing about the concerns of the businessmen regarding EDF.

A member of the National Board of Revenue and a director of Bangladesh Bank were also present in the meeting and they said they would convey the businessmen's concerns to the top executives of their organisations.

To comply with the IMF condition of taking the foreign reserve to $24.46 billion by next June, the Bangladesh Bank has downsized the EDF to $5 billion and added the rest to the reserves.

Besides, to discourage businessmen from taking loans from this fund, the interest rate of loans from this fund has been increased in several stages and the loan amount has been reduced.

After the meeting, former president of FBCCI Safiul Islam Mohiuddin told The Business Standard, "Our exports are already having a negative impact due to the decrease in global demand. In this situation, moves like reducing EDF, increasing interest rates and increasing gas and electricity prices are happening. As a result, the traders said that there is a fear of negative impact on the export income in the coming months."

He also said that at a time when the cost of doing business is rising and traders are having a tough time, various organisations including the NBR are harassing traders in the name of inspection.

"Traders are being sent to various places including BSTI, BUET, Bangladesh Council of Scientific and Industrial Research (BCSIR) for product quality testing. This is simply harassment. We have requested the concerned organisations including NBR to stop such harrasment," he said.

He also said that the government is discouraging gas-electricity connections to industrial plants set up outside economic zones. Due to such decisions of the government, the import of capital machinery is already decreasing.

"It will take about five years for the economic zones to be fully ready for investment. Businessmen have requested the ministry to take necessary initiatives to solve this problem," he added.

BKMEA Executive President Mohammad Hatem told The Business Standard that exporters have been suffering from various problems related to customs for a long time, which they have sought to solve.

"The system of providing cash assistance to the textile sector is quite complex. As a result, many are getting scopes for corruption. In other sectors, cash assistance is given on the basis of repatriation of export earnings, but to provide cash assistance to the textile sector, complex processes including audit are followed," he said.

Mohammad Hatem said that a committee was formed under the leadership of the additional secretary of the Ministry of Commerce to solve this problem. The committee has submitted a report to the finance ministry recommending cash assistance against repatriated export earnings, but it is not being implemented.

Everyone in the meeting agreed to sort this issue, he said.

Last year there was a complication with opening of back to back LCs by non-bonded exporters. To eliminate it, an inter-ministerial committee headed by an additional secretary of the Ministry of Commerce was formed. 

The committee recommended amendments in the Import Policy Order, VAT Policy and Foreign Exchange Policy to continue opening of the back-to-back LCs by non-bonded institutions – which is yet to be implemented.

Mohammad Hatem said that the businessmen have expressed their disappointment that these recommendations have not been implemented and have sought the intervention of the Ministry of Commerce to implement them quickly.