Assignment On

Foreign Trade of Bangladesh

10000

9000

8000

7000

6000

5000
Export
4000 Import
3000

2000

1000

0
1997- 1998- 1999- 2000- 2001-
98 99 02 01 02
 Acknowledgement

At first thanks to our Almighty Who gave us the concentration to prepare this
assignment. Secondly we are thanking our honorable teacher Mohammad
Saiful Islam for his good topics (Export and Import of Bangladesh) that he
given us. We didn’t know what is the present situation of foreign trade of
Bangladesh especially Export and Import but after preparing this assignment
now we know well what the present situation of foreign trade of our country.
Especially thanks to Amir Hossain Mollah (Accountant, Export Promotion
Bureau) who helped us lot.
 Executive Summery

Bangladesh has climbed into a success story from the unbelievably humble beginning
in December 1971.From at that time Bangladesh has made remarkable achievement in
several sectors. It has been able to achieve self sufficient in food to feed a population
of around 130 million. At present economic growth rate is 4.8%. GDP during the year
was US$ 47259 million. Per capital GDP was US$ 355. Total export earning during
the year 2001-2002 was US$ 5986.09 million. Import payment during the year 2001-
2002 was US$ 8600 million and Total deficit during the year decreased to US$ 2614
million. With a view to attaining favorable trade balance and gradual improvement in
reserve situation, a five-year export policy was formulated along with more liberal
five-year import policy framed in 1997-98. In the wake of the terrorist incident of
September 11, 2001 in the USA and the subsequent event of the world, the export
sector of Bangladesh suffered unexpectedly in the beginning of the FY2001-2002. In
spite of the increase of the remittances of the expatriate Bangladeshis, the foreign
currency reserve decrease as the exports suffered severe loss. Against the background,
government adopted pragmatic export and import policies supported by appropriate
fiscal and monitory polices to effectively face this adverse situation. As a result, the
situation gradually improves after January 2002.
 Table of Content

Bangladesh at a glance - - - - -
Objective - - - - -
Introduction - - - - -
Bangladesh Economy - - - - -
Trade policy and reconstructing program - - -
Export policy - - - - -
Import policy - - - - -
Recommendation - - - - -
Conclusion - - - - -
Bibliography - - - - -
Bangladesh at a glance:

Official name: The People’s Republic of Bangladesh

Location & borders: South Asia: Bordered by India on the east, west and
north and by Bay of Bengal on the south and a small
border strip with Myanmar on the southeast.
Government: Parliamentary form of government, headed by the Prime
Minister.
Area/ Land: 147,570 square km/ mostly alluvial fertile plain.
Climate/ Seasons: Sub-tropical monsoon/ Summer, Monsoon, Autumn,
Winter.
Temperature: Varies between 110C to 290C in winter and 21oC to 340C
in summer.
Annual rainfall: Varies from 160 cm to 400 cm at different areas.
Standard time: GMT+ 6 hours.
Population/ Literacy: 133 million/ 65% (15 years +)
Currency exchange rate: Taka (Tk.)/ floating exchange rate hovers round US$
1=Tk. 57.50.
GDP/ rate of growth: US$ 51.90 billion (2002-2003)/ 5.33% (2002-2003).

Sectoral share of GDP: 25% agriculture, 24% industries (including

manufacturing and construction), rest others.

Per capital GDP/ GNI: US$ 389/ US$ 407 (2002-2003)

Annual Export/ Import: Around US$ 6.00 billion/ around US$ 8.5 billion.

Major exports: Readymade garments, frozen food, leather and leather

products, jute and jute products, tea, ceramics, textile
fabrics, home textile, chemical products, light
engineering products including bicycle.

Major imports: Oil, edible oil, petroleum product, wheat, seeds,

fertilizer, yarn, capital goods, machinery, power
generating machinery, scientific and medical
equipments, iron and steel, motor vehicles, raw cotton
and chemical.

Major trading partners: USA, EU countries, China, India, Japan, South Korea,
Australia, Malaysia, Hong Kong, Taiwan, Thailand,
Indonesia, South Arabia and UAE.
Objective:

The objective of this assignment is to know about the present economic situation of
our country. From this assignment we will be able to know the present export and
import situation and the balance of trade. By comparing the Export, import and others
things related with this, we will be able to know which sector performing well and
which sector performing very poor and which steps we have to take for improving our
present economic condition.

Introduction:
Bangladesh is a least-development country. We are steeped in the vicious circle of
poverty. Limited purchasing power in the country stands in the way to increase
production and mercerization. In these circumstances, there is no alternative to
increase in production and employment through export. Bangladesh has climbed into a
success story from the unbelievably humble beginning in December 1971. With the
inheritance of a war-ravaged infrastructure and economy, with an overwhelmingly
large population living line and insufficient access to education, health service and
nitration, Bangladesh has made remarkable achievement in several sectors.
Bangladesh geographical location gives the country an added advantage and
importance.

Bangladesh Economy:
The economy of the country has achieved a growth rate of 4.8% during the year 2001-
2002. GDP during the year was US$ 47259 million compared to US$ 46934 million
during the preceding year. Per capital GDP was US$ 355 which was US$ 357 during
the previous year. Inflation increased to 2.8% during 2001-2002, which was 1.6%
during the previous year.

Agriculture still holds an important position in our national economy in creating

employment and increasing national income. The contribution of this sector in
national income is about 24.6%. Growth in agriculture has decreased to 2.8%. Growth
during the year 2000-2001 was 3.1%.

Fish production has increased by 3%. Growth in the sector during the preceding year
was 8.4% Target for food production during the year 2001-2002 was 28.1 million
tons. Actual production during the time was 26.8 million tons compared to 26.9
million tons in the year 2000-2001.Due to depression in the world economy, growth in
the industry sector during the year 2001-2002 decreased to 6.1% compared to 7.2%
during the previous year.
Gross national savings during the year was 22.8% of GDP compared to 22.3% during
the previous year. Gross fixed investment increased by 7.4% in 2001-2002, compared
to 7.2% in 2000-2001. Total investment during the year 2001-2002 was US$ 1886.83
million. Out of which US$ 1833 million was registered with the board of investment.

Investment made by Bangladesh Small & Cottage Industries Corporation was US$
5.42 million. Investment in the EPZs was US$ 48.41 million compared to US$ 9363
million during the year 2000-2001.

Import expenditure declined by 8.1% due to decrease food grain import. In total
import the contribution of capital goods were 28.3%, raw materials 19.1%, consumer
goods 6.36% and others including EPZ 46.2%.

Total export earning during the year 2001-2002 was US$ 5986.09 million. The
principal are – Woven garments 53%, Knitwear 24%, Frozen food 5%, Jute products
4%, Leather 3%, Raw jute 1%, Chemical products 1%, others 9%.

Total deficit during the year decreased to US$ 2614 million, which was US$ 2895.70
million during the previous year. Remittance from expatriate Bangladeshis was US$
2504 million compared to US$ 1882 during the preceding year registering an increase
of about 33%.

Trade policy and reconstructing programs:

Now a day’s world is going to globalization so the trade is very easy but so much
competitive. So government has been pursuing limited protective policy only in
consideration of certain issues like public health, security and religious bindings. Side
by side, more liberal import and export policies and program have been adopted
including reduction in tariff rates.

Government pursued one-year export and import policies in the eighties and tow-year
policies in the first half of nineties. Now five years export and import policies have
been formulated with the goals and objectives of market economy in conformity with
the agreement under Uruguay round and WHO.

In addition, more dynamic and pragmatic steps have been taken to maintain favorable
balance between import- export supplying quality goods at reasonable price through
removal of restriction imposed on movement of goods and services at international
level as far as possible, creating favorable environment for investment including direct
foreign investment and expansion and to make the policies more pragmatic,
representative of private sector including the federation of Bangladesh Chamber of
Commerce and Industries (FBCCI) have been involved in the process.
Export Policy: Objectives

1. To achieve optimum national growth through increase of export in regional

and international market.
2. To narrow down the gap between export earning and import payment
gradually by achieving the export target.
3. To endeavor for optimum benefit in accessing liberalized and globalize
international trade under the post Uruguay round environment.
4. To develop marketability of exportable through product diversification and
quality improvement.
5. To take steps to establish backward linkage with the export oriented industries
and services sectors, introduction of newer products and export of high value
added items.
6. To simplify export procedure, rationalized and strengthen export incentives.
7. To develop infrastructure for export trade.
8. To create skill manpower in the export sector.
9. To improve the quality and grading of the export items to the internationally
accepted standard.

To achieve the above objectives, following strategies and provisions have been
incorporated in the new export policy:

Among financial facilities:

Export credit guarantee scheme has been simplified and restructured. Beside, facilities
have been provided for converting foreign exchange earned through export for import
purpose and the limit to keep it own account increased to 40% from 20%. For
production of goods, credit procedures have been simplified and repayment period
raised to 270 days from 180 days including lowering of interest rate.

Important fiscal facilities:

Custom duty and import license fee have been waived for import of wet blue leather
and pickled leather used in the leather industry, deduction of tax at source has been
reduced and tax system as well as duty draw-back facility have been simplified;
bonded warehouse facility for all export industries has been simplified. These facilities
will be expanded to all cases of 100% export industries; 100% export oriented
industries outside EPZ have been allowed the facility to import capital machinery
duty-free.
Among other facilities:
Minimum 80% Export oriented industries will enjoy facilities like 100% export
oriented industries; air freight at reduced rate has been allowed for export of all goods
including fruits under crash program beside in special cases facilities have been
provided for import of capital and raw materials for export and export oriented
industries; restriction relating to LC and country of origin have been waived for import
of capital and raw materials for 100% export oriented industries.

Facilities for back-to-back LC and currency conversion have been simplified for
readymade garments and knitting Industries. VAT has been rationalized in the case of
import of samples and gray cloth.

Leather and leather goods industry, high valued new and higher value added agro-
processing sector earmarked as “Thrust Sector” in the new export policy. Higher rate
of financial, fiscal concession and commercial and communication facilities have been
provided to these sector.

Following the September 11 shock and subsequent event of the world, the export of
Bangladesh suffered unexpectedly in the beginning of FY 2001-2002. In spite of the
increase in remittances of the overseas of Bangladeshis, the foreign currency reserve
decreased as the exports sustain sever loss.

Given this adverse situation, government adapted pragmatic trade policies coupled
with appropriate fiscal and monetary policies to overcome the difficulties. As a result,
export situation and external balance gradually improved after January 2002.

Import policy: Objectives

On June 14, 1998, the five years (1997-2002) import policy became effective. In the
new import policy, BEPZA, BACIC and Board of Investment (BOI) have been treated
as sponsors of concerned industries. Additionally industrial and import policies have
been integrated. As a result administrative complexities for obtaining prior approval
for different ministers, a requirement for industrialization and commercialization have
already reduced.

In the new policy, quality control mechanism of imported goods has also been
strengthened. Requirement for declaring country of origin for import of raw materials
has been withdrawn for export oriented industries enjoying bonded warehouse facility.
Consequently raw materials import has been made easier for 100% export industries.
Gold and silver policy has been formulated in keeping with the exchange control
regulations of Bangladesh bank. Under the new import policy expatriate Bangladeshis
and foreign investors, as pert of equity share, will be able to send any quantity of
capital machinery and raw materials.

Import of vehicles with 2/3 stroke engines has gradually been restricted for protection
of environment. In order to infuse dynamism and promote development, procedures
for import of fertilizer, gray cloth, detra-methene cement, ethylene gas, raw materials
for 100% garment industry have been simplified and in special cases requirement of
LC opening has been withdrawn. In addition, some of the directives including in 1995-
96 import policy still hold good in the five-year trade policy.

Consistent with Uruguay Round Accord and Agreement with the WTO program for
tariff reduction continued in 2001-2002. Maximum import duty of 15% in 1992-1993
has been reduced to 75% in 1993-1994. Later on, it has been gradually reduced to
37.5% in 1999-2000.

Beside steps have been taken to rationalized tariff of different commodities and
materials including withdrawal/ reduction of import duty in order to stabilize price of
essential good at normal level. Following this measures the weighted and unweighted
average rate of custom duty have gradually decline to 19.5% and 13.8% respectively
on 1999-2000. In order to protect domestic industries and their development, the tariff
rates and slabs of the previous financial year have been made in respect of certain
commodities. Both unweighted and weighted average rate of import duty have been
presented the bellow table-

Table- Impact of tariff reforms on average rate of customs duty

Financial Year Unweighted Average (%) Import weighted average (%)

1996-97 21.5 18.0
1997-98 20.7 16.0
1998-99 20.3 14.1
1999-00 19.5 13.8
2000-01 18.6 15.1
2001-02 (July- March) 18.0 14.0
Source: ETAC Data Base: National Board of Revenue
Recommendation:

1. As a least development country Bangladesh must try to convince the United

States government to allow duty free and quota free access to export of
Bangladeshi product as provided to Jordan, Sub-Sahara Africa and Caribbean
country.

2. Bangladesh Embassy in Washington need to play a very crucial role treating

the issue as a top priority in its agenda of action as pert of its responsibility
under the policy of economic diplomacy. Continued persuasion should be
made through discussion with the United States trade representative, the state
department and concerned member of the congress. The BGMEA should
continue to mobilized support through its appointed lobbyist and must work in
close contract with Bangladesh embassy in the USA.

3. Bangladesh government should undertake pro-active step to implement the

decision of the WTO ministerial conference and to mobilize support for duty
free and quota free access to Bangladesh.

4. Bangladesh government should create sustainable enabling environment such

as ensuring political stability, development of infrastructures including
telecommunication, power and port facilities etc. These will help to increase
efficiency and reduce cost enabling Bangladeshi exporters to face competition
in foreign market.

5. In order to reduce vulnerability to and absorb external shocks attempts should

be made to broaden the industrial base and diversify products and markets.

6. Organize investor’s forum at home and abroad to attract investors to invest in

Bangladesh.

7. Bangladesh mission in EU, Japan, Middle East and North America and other
important countries must undertake program to organize Bangladesh trade fair
with a view to creating market of Bangladeshi product.
Conclusion:
Although the import situation of Bangladesh is higher than export but export earning
of Bangladesh have grown rapidly over the past decades, the country’s export base has
reminded very narrow and is susceptible to possible sharp variation as a result of
external shocks. Successful export diversification both in product and market coverage
is the prime factors in attaining the over all objectives. The major requirements in this
regard are, to develop competitive backward linkage in RMG sector in order to
increase domestic content of output to withstand possible threat association with the
phasing out after 2004, to develop new export sectors and to strengthen the
implementation of trade development policies and measures.
 Bibliography:

1. Annual Report of Export Promotion Bureau (EPB) 2001-2002

2. Export Statistics (2001-2002)
3. Dhaka International Trade Fair (Journal) 2002
4. Trade Information Journal (July-September 2001)
5. Dhaka International Trade Fair (Journal) 2001
6. Bangladesh Economic Review (2001-2002)