Dialogue on “Challenges and Way forward on Export diversification of Bangladesh upon LDC graduation- A regulatory reform perspective

Policy reforms, aligned polices with the WTO directives, fiscal and non-fiscal benefits, domestic measures, equal treatment to the potential export oriented sectors, competitiveness, skill development and technological advancement are key to over the challenges of LDC graduation for Bangladesh, speakers urged in the 2nd Dialogue on “Challenges and Way forward on Export diversification of Bangladesh upon LDC graduation- A regulatory reform perspective” organized by Dhaka Chamber of Commerce & Industry (DCCI) in association with Export Promotion Bureau (EPB) on July 11, 2021.

Md. Tofazzel Hossain Miah, Secretary, Prime Minister’s Office joined as the chief guest.

Vice Chairman & CEO of Export Promotion Bureau (EPB) A.H.M. Ahsan made the opening remarks. He said that many experts estimated that due to pandemic export of Bangladesh might fall to USD 4-6 billion. He informed that last year export earning was USD 38.75 billion. Of which RMG sector alone constitutes 81% but it was 84% in the previous fiscal. It showed that non-RMG export increased despite it is not in line with the faster pace of RMG sector. He said policy reforms and policy support will expedite boosting non-RMG export. “End of the day, this is the world of business and government do not do business rather play a role of facilitator” he told.

Md. Tofazzel Hossain Miah, Secretary, Prime Minister’s Office said that it inevitable that we may lose a lot of waivers after graduation. But now it is the right time to grow other potential export items. Moreover, he urged to utilize country’s local market. Terming private sector as the engine of growth he said every person is the brand ambassador. We must to be competitive, he said. How can we go for more FTA or RTA we need to work out. High value product quality and stringent compliance will increase our branding. He also underscored importance on human resource development, research and development, value chain, backward linkage.

DCCI President Rizwan Rahman presented the keynote paper. He highlighted that light engineering, jute and jute goods, IT & ITES, pharmaceutical, agro & agro-processing, leather & leather goods are some of the promising sectors other than RMG that should be facilitated before entering into the reign of middle income country status. He termed limited access to finance, shortages of skilled human resources, high duty on import of raw materials, non-tariff barriers, lengthy customs and testing processes, lack of certification, low-cost bank loan, required policy reforms, delay in implementing API Park, weak backward linkage network, lesser agricultural productivity and limited negotiation capability are some of the major challenges of these sectors to be more competitive in the international market.

With a view to promote these potential sectors ahead of LDC graduation, especially in this transition period, Rizwan Rahman put forwarded a few recommendations. He suggested to provide bonded warehouse facility like RMG, arrange low cost fund and rationalized land price for the light engineering sector. For the jute and jute goods sector, he proposed for a simplified tax, VAT and port rules, investing in traceable research, replacing old technologies and removing VAT at all stages of manufacturing and selling of jute and jute goods. Rizwan Rahman also emphasized for proper IP valuation guidelines, data security and data privacy for IT & ITES sector. The DCCI President further recommended for a strong negotiation with the WTO to avail exemptions on patient rights for pharmaceuticals for another 12 years under TRIPS agreement. Technology transfer and reducing cost of production will surely boost this sector, he told. Regarding agriculture sector, Rizwan Rahman recommended for bonded warehouse facility, developing backward linkage and investing in post-harvest technology adaptation. He finally urged to create a “Food Industrial Zone” to attract foreign investors.

Shaikh Yusuf Harun, Executive Chairman (Senior Secretary), Bangladesh Economic Zones Authority (BEZA) said after LDC graduation Bangladesh will lose its preferential benefits. But Bangladesh is a country of sustainable economy and with the help of our resilient private sector we will be able to diversify our products base, he said. To diversify products and market Bangladesh need to be engaged with different regional trade group, he suggested. We have a good advantage of demographic dividend, but we have to convert it into a skilled workforce. Corporate tax rate in Bangladesh is comparatively high, we need to balance it, he suggested. BEZA has already signed agreement with 400 investors which would add extra USD 7 million to export earning in next two years. Now we have to give them all trade logistics including utility supports.

Md. Alamgir Hossain, Member (Tax Policy), National Board of Revenue said we need to identify potential products and market. We are providing tax benefits, tax holiday and tax incentives in different sectors to minimize cost of doing business. We have to create a balance between targeted revenue collection and ensuring future of industrialization. To the light engineering sector and training institutes for skill development there is a 10-year tax exemption facility we are giving, he said. Private sector will have to play the leading role in product diversification. In facilitating export diversification what the other countries do that data can be collected to prepare a comparative statement, NBR will surely consider all possible facilitation, he suggested.

Dulal Krishna Saha, Executive Chairman (Secretary), National Skills Development Authority (NSDA) said skill is an important component for all sector. We have 58.2% workable manpower in the county. He suggested to put more emphasis on technical education because its standard is not up to the mark. NSDA is planning to sign mutual recognition agreement with other countries for skill development, he informed.

Dr. Selim Raihan, Executive Director, SANEM said that Bangladesh need to develop its negotiation skills. He emphasized on doing proper homework for identifying impact after LC graduation. There are two types of challenges one is policy induced challenge and the other is supply side challenge and these two are interlinked. He asked why there is an anti export bias in the export eco-system. We have to eradicate this policy level bias for our betterment. Policy reforms should target to be aligned with export and import policies. We have to ensure access to finance, skill development and sector specific overall infrastructure development. Bond facilities are not equally enjoyed by the RMG and leather sector. We need FDI for export diversification in that case EZs will be game changer. We do not need 100 EZs right at this moment, implement at least five EZs now, he said.

Md. Habibur Rahman, Executive Director (Research), Bangladesh Bank said we are successful in policy related initiatives. We need re-orientation of our policy directives focusing to specific sub-sectors. But we have to utilize our demographic dividend. But Bangladesh is lagging behind in the regional block. He therefore suggested to utilize regional forums and bilateral trade negotiations. He said that Bangladesh Bank already reduced all interest rates. At present the liquidity is good, he informed.

Md. Abdur Rahim Khan, Joint Secretary (Export 2), Ministry of Commerce said we have a USD 325-330 billion dollar economy. We have to be more focused on product diversification rather focusing to market diversification. He assured the business community that Ministry of Commerce will sit with the private sector before framing next Export Policy. There are 3 thrust areas identified for next export policy. Our 21 Commercial Wings in 17 countries are working hard to expedite our export. Day by day other export items besides RMG are doing good, he told. Policy reforms could be the game changer, he mentioned.

Andalib Elias, Director General (Multilateral Economic Affairs), Economic Affairs Wing, Ministry of Foreign Affairs said MOFA is constantly working to increase the image of Bangladesh’s branding. He also urged on diversification of branding also. He suggested to increase Bangladesh’s commercial wings in all 78 foreign missions. We must to strengthen our negotiation skills focusing on legal side. The legislative division of Bangladesh can play a vital role, he said.

Dr. Md. Khairuzzaman Mozumder, Additional Secretary, Macroeconomic, Finance Division, Ministry of Finance said that we cannot avoid horizontal, vertical or diagonal diversification as well. For diversification he said technology upgradation is must. We have to overcome the supply side constraints, regulatory weaknesses and lack of capacity. After automation of bonded warehouse facility, there will be no discrimination between RMG and non-RMG sectors. He said if BEZA and BEPZA can jointly take massive plan, FDI will be attracted more. Instead of direct cash incentives, even after graduation we can provide domestic support measures to the export oriented industries like fiscal support, tax holiday, tax incentives and resource mobilisation etc.

Dr. Khandoker Azizul Islam, Additional Secretary (Organizational Support Wing) Information & Communication Technology Division said we have already framed ICT Act, ICT policy, Digital Security Act. As of May 2021, mobile density is 175 million and internet density is 117 million. At present, we are trying to ensure urban facilities reaching to rural communities. He also urged for skill development and industry promotion and quality product manufacturing after 2026. To attract FDI, we need to provide tax benefits to the foreign investors, he mentioned. Presently we have a plan to establish 39 high-tech parks of those, 5 have already in operation, he told. He emphasized more on Research and development activities.

Md. Belayet Hossain Talukdar, Additional Secretary (Development), Secondary and Higher Education Division said that in 2022 new curriculum will be in place with a focus to skill development. Our own market is a large market. Blue economy has got a preference now a days. For industry academia linkage, we are now designing demand based new courses in the universities. Skill mapping is now the demand of time, he urged. Coping with technology is a challenge he said. He also emphasized on exporting skilled, semi skilled and low skilled workers abroad. He also put emphasis on vocational education.

Md. Ariful Hoque, Director, Registration & Incentives-1 (Commercial), BIDA said now it is the time of framing sector specific policy and incentives. We are focusing on policy alignment. Through the OSS we have been able to give 24000 service already. From BIDA we are trying to oversee what kind of policy reforms are needed at this moment. Moreover a lot of development have been done in terms of upgrading Bangladesh’s position in the ease of doing business index.

Published on: 2021-07-11

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