Chapter 1 Introduction Bangladesh is a developing country, and the present government is striving relentlessly to attain rapid economic development in the country. Many programs taken so far have been carried out successfully. Despite a lack of resources faced by the government, development programs in the key sectors have continued. At the same time, considering the importance of the private sector, an all-out support is being provided to initiatives taken in this sector. As a result, a new kind of dynamism is under way in both the public and private sectors.
In this backdrop, it is essential to examine various aspects of industrialization and its impacts on overall economic activities. Today in the environment of global competition, the private sector is playing an important role in the industrialization of the country. Faced with the challenges of the free market economy and globalization, the government has accepted private ownership and management of industrial enterprises as one of the major guiding forces in achieving economic growth.
Besides this, the government has also brought about many constructive and timely reforms in the running of businesses, and liberalized trade so that private entrepreneurs can seize opportunities of establishing and running industrial enterprises profitably and freely. To reduce poverty and generate employment opportunities, more efforts are needed to establish agro-based industries as well as to raise agricultural production.. This will ensure the protection and fair price of agricultural products and employment of a huge number of unemployed people.
In order to create further employment opportunities beyond the agricultural sector, initiatives should be taken to set up small, medium and large industries across the country. If these types of industries are set up in a planned way, then unemployment rates will decline and poverty alleviation will be accelerated. With these objectives in mind, the Industrial Policy has been radically reshaped. In order to provide administrative, institutional and infrastructural acilities in the country’s industrialization, there are organizations such as the Bangladesh Standards and Testing Institution (BSTI), Bangladesh Industrial Technical Assistance Center (BITAC), Bangladesh Institute of Management (BIM), Bangladesh Small and Cottage Industries Corporation (BSCIC), National Productivity Organization (NPO) and the National Institute of Textile Training, Research and Design (NITTRED) Textile Vocational Institutes, Textile Diploma Institute and Bangladesh Silk Research and Training Institutes under the Ministry of Textiles and Jute.
For the leather industry, the Bangladesh College of Leather Technology and different district level polytechnic institutes provide technical education. These institutes also provide assistance for industrialization by providing training on management and quality control of goods, safeguarding consumers’ interests, producing and repairing import substitute spare-parts used in industries, manufacturing new tools necessary for the production of industrial goods that are in demand, and by improving efficiency and overall productivity.
However, many industrial entrepreneurs are not fully aware of the necessary technical and other assistance available for the industrial sector through these institutes. Therefore, extensive publicity is necessary for the proper use of these important institutes and the facilities available there. In order to further strengthen the country’s industrialization process, the government has identified the Small and Medium Enterprises (SMEs) as a priority sector and as the driving force for industrialization. The provisions of all facilities for attracting foreign investments have been envisaged in the Industrial Policy.
The government has taken an initiative to formulate a separate SME policy to provide entrepreneurs with necessary guidance and strategic support in respect of the establishment of SME industries all over the country. These strategic guidelines will be followed in establishing SMEs across the country. Far-reaching changes have occurred in the past decade in economic and social activities across the globe, especially with regard to the participation, contributions and successes of women in industrial activities.
Therefore, the creation of women entrepreneurs and their participation in industrialization have been given considerable prominence in the present Industrial Policy. Necessary steps have been taken to hygienically preserve and market agricultural products of Bangladesh. With this end in view, measures will be taken for the preservation of frozen, pasteurized, canned and dry foods in a modern and hygienic way in order to sell them in local and overseas markets throughout the year.
Steps will be taken to properly utilize the natural and mineral resources of the country such as gas, coal, hard rock, limestone, silicon, monazite, zircon, rutile, oyster, pearl, coral, fossil, seaweeds, etc, available in the country’s long sea beach so that new profitable industries can be set up. Steps will also be taken at the same time to use solar power and municipal refuse to generate electric power in order to minimize power shortage in running small and cottage industries. This is an age of information and communication technology (ICT).
The application of ICT in running industrial enterprises efficiently and profitably can ensure quality development of goods, make production cost-effective and ensure faster customer services. So, providing further importance and incentives to the use of ICT in a number of sectors is one of the notable features of the present Industrial Policy. The industrial sector is likely to grow rapidly over the next decade raising its contribution to the country’s GDP to 30 to 35 percent, and the workforce in this sector is expected to increase to 35 percent of national employment need.
In order to attain this growth in this sector, special importance has been given in the Industrial Policy on agro-based and agro- processing industries and on steps to overcome possible adverse conditions in the export-oriented garment sector. Importance has also been given on considering the SMEs and cottage industries as one of the major driving forces, providing assistance to women entrepreneurs on a priority basis, setting up special economic zones in different parts of the country, improving the quality of industrial products to world standard, marketing of goods at competitive prices, and enhancing productivity in the industrial sector.
In the end, it can be hoped that the guidelines contained in the new Industrial Policy will help expand planned industrialization in the country, bring about sustainable and continuous industrial growth, and overcome the past failures of industrialization to a great extent. As a result, a sound and prospective foundation of economic development will be established. This will help bring about poverty alleviation, create further employment opportunities, reduce unemployment instances, improve living standards of people, and achieve an overall economic growth in the country.
Chapter 2 Objectives 1. One of the foremost objectives of the Industrial Policy 2005 is to set up planned industries considering the real domestic demand, prospect of exporting goods abroad, and discouraging unplanned industries in the light of past experience. 2. Accept private initiatives as the main driving force of economic development and uphold the government’s facilitating role in creating a favourable atmosphere in order to augment private investments in the country’s industrialization, given the background of a free market economy and globalization,. . Arrange for state-owned industrial enterprises to be sold/transferred/leased or administered in any other way by the Privatization Commission or concerned ministries in order to accelerate the privatization process. 4. Take necessary initiatives to set up industries with private entrepreneurships, and where that is feasible, establish industries on state initiative in those sectors that are considered very important and essential ecause of national interest, where private entrepreneurs are not forthcoming. 5. Catering the needs for local and foreign market and also for consumer satisfaction of the local products; measures to be undertaken (a) produce world class quality products, (b) diversification of goods, (c) introduce cost-effective management in the production system, (d) more value addition in the industrial sector, and (e) provide support for enhancing productivity by using continuous, appropriate and advanced technology. 6.
Provide assistance to augment the industrial sector’s contributions to the GDP of the national economy, meet the general demands of local consumers and earn more foreign exchange so that local industrial entrepreneurs can attain further capacity to establish industries, and industrial goods can have access to the overseas market on a competitive basis. 7. Provide inspiration for the speedy expansion of cottage industries and SMEs and for further investment in these sectors so that new employment opportunities are generated, unemployment reduced and poverty alleviation program made in the country. . Prioritize the expansion and development of agro-based and agricultural processing industries, and assist in the expansion of poultry, dairy and goat-sheep industry as agricultural industries. 9. Provide women entrepreneurs with all necessary assistance in establishing industries in various sectors. 10. Increase productivity at enterprise level; produce high-value added products step by step through development and application of appropriate technology and increase of export through export diversification. 11.
Provide all necessary assistance for producing environment-friendly product with the objective for creating a pollution-free environment in the industrial sector. 12. Expand the local market and establish more backward linkage industries in order to accelerate the export of high value-added garments produced in the export-oriented garment industries and other relevant industrial subsectors. 13. Further enrich the industrial sector with the proper utilization of the country’s various natural and mineral resources. Chapter 3 Import Policy Introduction
Government is sincerely committed to fostering a gradual development of free market economy in the light of GATT agreement. In the interest of export promotion & investment in the country it is necessary to have a long term, stable, facultative & liberal Import Policy. With this and in view the present democratic government has taken steps to extend the duration of the Import Policy from two years to five years. Efforts have been made to make the Import Policy easier and more liberal by relaxing or rescinding the regulatory provisions of the previous Import Policy.
Provisions have already been made to allow import of capital machinery and industrial raw materials on consignment basis without the cover of the Letter of Credit. Government has taken steps for quality control in the import of cement, fertilizer etc. In order to protect the interest of the consumers. Steps are afoot to ensure that in future all imported consumer items conform to a specified standard of quality. In the present Import Policy Order second hand/reconditioned machinery are importable subject to fulfillment of certain conditions.
Gradually efforts will be made to classify those machinery under H. S. Code. Objectives The main objectives of the Import Policy are:- (a) To make the Import Policy Compatible with the changes in the world market that have occurred as a result of the introduction of market economy and signing of the GATT Agreement; (b) To simplify the procedures for import of capital machinery and industrial raw materials with a view to promoting export, and (c) To ensure growth of the indigenous industry and availability of high quality goods to the consumers at a reasonable price.
General Provision for Import 1. Regulation of Import – Import of goods under this Order shall be regulated as under: (a) Banned list : Unless otherwise specified, items included in this list can not be imported. List of import banned items has been attached in annexure – I; (b) Restricted list : Any item included in this list shall be importable only on fulfillment of the conditions (b) specified there in against the item.
The list of restricted items has been attached in annexure – I (b); (c) Freely Importable Items : Unless otherwise specified, any item, which does not appear either in banned or in restricted list shall be freely importable; (d) In addition to the conditions mentioned in the Restricted and Banned Lists, the conditions, restrictions and procedures for import of various items mentioned in the text portion of this order, shall as usual apply in case of import of those items; (e) If, while determining the import status of an item mentioned in the Restricted and Banned Lists, the description of goods does not conform to the H. S. ode mentioned against the item or any discrepancy arises between the H. S. Code and the description of goods in that case the description of good shall prevail; (f) Conditions of Ban and Restriction : If the import of an item had been banned at any time before the coming into effect of this Order or if such ban has been made effective by virtue of the placement of the item in the control list annexed to this Order such ban such shall be subject to the following conditions : (i) The concerned sponsoring authority/Tariff commission shall strictly monitor production of the industrial unit which is being afforded protection by the ban.
The ban may be revoked on the recommendation of the concerned sponsoring authority/Tariff Commission if the quality of products deteriorates and the price of the product is not maintained at satisfactory level or if production level fails leaving unutilized capacity. Such of the protected units as are now primarily engaged in assembly type activities shall actively and expeditiously move towards progressive manufacture. (ii) The sponsoring authority concerned and Tariff Commission shall continuously monitor the prices of the items covered by such ban to guard against undue increase of price.
If the price of any item is increased except for factors like rise in the price of raw materials or decline in the rate of exchange or if the increase in the price of the item is disproportionately higher compared ot the rise in the price of the raw material, the ban may be revoked on the recommendation of Tariff Commission/sponsoring authority. (iii) Whoever feels aggrieved by any decision regarding ban or restriction on import of any item can represent his case to the Tariff Commission.
The Tariff Commission will duly examine such a representation and furnish as early as possible its recommendation (s) to the Ministry of Commerce for latter’s consideration. 2. General Conditions of Import of goods – (1) Import Trade Control schedule Numbers. For import purpose, use of new ITC Numbers (H. S. Code) with at least six digits corresponding to the classification of goods as given in the Import Trade Control Schedule 1988, based on the Harmonized Commodity Description and coding System, shall be mandatory.
But in cases where a particular item has been classified under an H. S. Code Number with more than six digits, in those cases it shall be mandatory to use that specific Code Number (having more than six digits). The seven Digit H. S. Code published by Bangladesh Bureau of Statistics may also be mentioned in the L. C. A. From, L/C and other relevant paper within a bracket in addition to normal H. S. Code as mentioned above. No bank shall issue L. C. Authorization from or open L/C without properly mentioning I. T. C. number (H. S. Code) thereon. 2) NOC On the basis of ROR (Right of Refusal) – (a) No Objection Certificate on the basis of Right of Refusal (ROR) from any authority shall not be required for import of nay freely importable item by any Public Sector agency. However, in cases where a public sector agency is required to import banned/restricted items included in the Control List Prior permission of the Ministry of Commerce shall have to be obtained on the basis of ROR issued by the Ministry of Industries or by the Sponsoring Ministry/Division, or by both as the case may be. b) In case of import of banned/restricted items for approved projects financed under foreign aid the concerned Government Department/Agency will approach the Chief Controller of Imports and Exports directly for necessary permission together with a list of items duly certified under proper seal and signature giving description, quantity/number, price and H. S. Code Number against each item required to be imported. The details about the aided project and specific provision of the relevant contract and other necessary information shall also have to be furnished along with the list of items.
The chief Controller shall issue permission/permit on the basis of above documents. (3) Restriction regarding source of procurement of goods : (a) Goods from Israel or goods originating from that country shall not be importable. Goods shall also not be importable in the flag vessels of that country. (b) All kinds of import from and export to Serbia and Montenigro, fragments of former Socialist Republic of Yugoslavia, shall be banned. 4) Pre-shipment inspection : Unless otherwise specified, pre-shipment inspection of imported goods shall not be obligatory in case of import by the private sector importers. (5) Shipment of Bangladesh Flag Vessels : Subject to waiver specified below shipment of goods shall normally be made on Bangladesh flag vessels : (a) Import of goods up to maximum twenty metric tons in case of single individual consignee or up to maximum 100 (on hundred) metric tons in case of group import may be made in non Bangladeshi flag vessels.
However the Director General of Shipping may notify general waivers in the following cases, such as (1) shipment of goods from foreign ports which are not visited by Bangladeshi Vessels, and (2) import of goods on the basis of specific agreements which provide for C & F contract. In all other cases a certificate of waiver shall be obtained from the Director General of Shipping for importation of goods in non-Bangladeshi flag vessels. If there appears to be no possibility of any Bangladeshi flag vessels, Visiting a port within next seven day, waiver shall be given within twenty-four hours of application for waiver.
Otherwise, it will be considered that waiver has been given. However, the preceding condition of compulsory shipment of goods on Bangladeshi flag vessels, or the condition of obtaining certificates of waiver form the Director General of Shipping shall not apply in cases of import under such foreign aids, loans or grants which contain specific provisions regarding shipment of goods. (b) In case of import and export of goods by export oriented industries, shipment may be made in non-Bangladeshi flag vessels. 6) Import at competitive rate : (a) Import shall be made at the most competitive rate and the importers may be required, at any time, to submit documents regarding the price paid or to be paid by them. (b) In case of import under United Commodity Aid in the private sector, goods shall be imported at the most competitive rate by obtaining quotations from a minimum three-suppliers/indentors representing at least two countries abroad. This condition shall, however, not apply for opening of L/C up to TK. One lac. For import at the most competitive rate by he Public sector importers the conditions mentioned at para 27(8) of this Order shall apply. (7) Import on C & F and FOB basis : All imports by sea, air and land route shall be made either on C & F or FOB basis. However in case of import on FOB basis the concerned importer shall have to properly comply with the circular issued by Bangladesh Bank in this regard. Before opening of L/C necessary insurance cover note shall have to be purchased from the Sadharan Bima Corporation or any other Bangladesh insurance company.
Unless there is specific provision in the relevant loan agreement/project agreement concluded with the foreign donors for import on CIF basis, no import shall be allowed on CIF basis without prior approval from the Ministry of Commerce. However, Bangladesh nationals, living abroad, for sending goods against their earned foreign exchange and foreign investors, for sending capital machinery & raw materials against their equity share portion shall be allowed on CIF basis. 8) (a) Import by mentioning “country of origin” – In all cases of import, “country of origin” shall be mentioned clearly on goods package/container. A certificate regarding “country of origin” issued by the concerned Government agency/approved authority/organization of the exporting country must be submitted, along with import documents to the customs Authority at the time of release of gods. However, the provisions of “country or origin” shall not be applicable to coal and export oriented garments industries.
In case of cotton import it shall not be required to mention country of origin on each bale. But “country of origin” shall be mentioned in the photo sanitary certificate. Besides, 100% export oriented industries, which are recognized by the Customs Authority, shall be waived from the restriction of “country of origin” subject to the conditions imposed by the Foreign Exchange Regulation Act. bangladesh Bank and Commercial banks. b) Incase of import of Limestone, in different consignments/lot by the rope-way or by river, as raw materials for Chaotic Cement Factory, “country of origin” certificate from the exporting country’s Government / authority / organization shall be submitted once to the Customs authority at the time of release of goods, instead of each consignment/lot for the quantity mentioned in L/C in case of river way and as per supplied carrying list in case of rope-way. 3. Source of finance – (1) import may be allowed under the ollowing sources of finance : (a) Cash – (i) Cash foreign exchange (balance of the foreign exchange reserve of Bangladesh Bank); (ii) Foreign currency accounts maintained by Bangladeshi nationals working/living abroad; (b) external economic aid (Commodity Aid, Loan, Credit or Grant); (c) Commodity exchange : Barter and special trading arrangement (STA); this source shall be abolished as and when present agreements expire. (2) Commercial importers and industrial consumes may utilize their respective shares under Barter/STA as per basis notified. 3) Import under the Special Trading Arrangements (STA) which are or were concluded with prior approval/permission of the government, shall be subject to the specific procedures laid down by the government in this respect. (4) The provision of this para will remain effective only upto the time of completion of on going agreements. Import procedure – (1) Import License not required : No import License will be necessary for import of any item. (2) Import against LCA From : Unless otherwise specified, all imports transacted through a bank (L/Cs, bank drafts, remittances etc. shall require LCA forms irrespective of the source of finance. (3) Import against L/C : Unless otherwise specified, import shall be made only be opening irrevocable letter of credit (L/C). However, L/C is not required for import of each consignment, by road, of easily perishable item bolded from US$ five thousand to Seven thousand five hundred and for import of capital machinery & raw materials for industrial use without any price limit. Existing conditions regarding import on deferred payment under L/C shall be applicable in this case also and importers shall be required to register with Bangladesh Bank for importation without L/C. 4) Import against LCA Form but without opening of Letter of Credit (L/C) : Import against LCA Form may be allowed without opening of letters of credit in the following cases : (a) Import of books, journals, magazines and periodicals on sight draft or usance bill basis; (b) Import of any permissible item for an amount not exceeding US Dollar Five thousand only during each financial year against remittance made from Bangladesh. However, permissible item valued upto US Dollar Five thousand in a single consignment rom Myanmar shall be importable without opening L/C and in that case above mentioned annual ceiling of US Dollar five thousand shall not be applicable. (c) Import under commodity aid, grant or such other loan for which there are specific procurement procedures for import of goods without opening amy L/C; (d) Import of “International Chemical References “through Bank drafts by recognized pharmaceutical (allopathic) industry on the approval of Director, Drugs Administrators for the purpose of quality control of their products. 5) Import against Import Permits and in special cases against Clearance Permit (for clearance of goods on payment of fine) : In the following cases, neither LCA Form non opening of L/C will be necessary; but Import Permit (IP) or Clearance Permit. (a) Import of books, magazines, journals, periodicals and scientific and laboratory equipment against surrender on UNESCO coupons; (b) Import under pay – As – You – Lean – Scheme in the following cases only on the basis of clearance of the Bangladesh Bank. i) New or not exceeding twelve years old plant and machinery of permissible specification; (ii) New or not exceeding give years old motor cars; (iii) Cargo or passenger vessel of steel or wooden bodies, including refrigerated vessel of any capacity either new or not exceeding fifteen years old; but in case of ocean going ship, old ship, not exceeding twenty years old shall be importable; (iv) Import of plant and machinery for export – oriented industrial units with the clearance of the competent sanctioning authority; wherever necessary; and (v) Trawlers and other fishing vessels, either new or not exceeding twenty years old. For import under this scheme the sanctioning authority of such import shall forward a copy of sanction letter to the Chief Controller and the importers shall apply to the CCI & E along with necessary paper for prior permission. c) Import of item (s) by passengers coming form abroad in excess of the permissible limits as per the relevant baggage rules, provided the import of the item (s) concerned is permissible under the relevant baggage rules; (d) Import of free samples, advertising materials and gift items above the ceiling prescribed as per paragraph 13 of this Order; (e) Import of only drugs and medicines (allopathic) under product bonus system subject to the ondition that it shall be obligatory on the part of the importers concerned to pass on the benefit to the consumers. The Director, Drugs Administration shall devise appropriate mechanism in this behalf; (f) Import of capital machinery as share of capital of the foreign share-holder for an approved joint venture industrial unit already set up or to be set up; (g) Import of any other goods, not specifically exempted from permit. (9) Validity of LCA for shipment: a) Unless, otherwise specified, shipment of goods shall be made within seventeen months in the case of machinery and spare parts and nine months in the case of all other items from the date of issuance of LCA From by bank or registration of L/C Authorization From with Bangladesh Band Registration unit, as the case may be, Shipment of goods under commodity aid/grant, and barter/STA shall be effected within the time limits as may be notified by the Chief Controller. b) In case where shipment could not made within the validity of the LCA Form due to circumstances beyond the control of the importer, the Chief Controller may extend the time limit for shipment of goods on the merit of each case; (10) Restriction on L/C after imposition of ban/restriction: No extension of the date of shipment in any letter of credit or amendment to letter of credit or enhancement of the value or quantity of goods shall be allowed by the nominated bank or by the Import Control Authority after the import of the item or items has been banned or restricted; (11) Document required lo be submitted along with LCA Form: Importer in both public sector and private sector shall submit to their nominated banks the following documents along with the L/C Authorization Form for opening Letter of Credit: (a) L/C application form duly signed by the importer; (b) Indents for goods issued by indentor or a proforma invoice obtained from the foreign supplier, as the case may be; and (c) Insurance cover note. (12) Addition documents to be furnished by public sector importers: In addition to the documents mentioned in sub-paragraph (11) above public sector importers shall submit the attested photocopy of sanction letter from the Administrative Ministry or Division or Authority, wherever applicable; (13) Additional documents to be furnished by private sector importers: In ddition to the documents, mentioned in sub-paragraph (11) above private sector importers will be required to submit the following documents- (a) valid membership certificate from the registered local Chamber of Commerce and Industry or any Trade Association, established on all Bangladesh basis, representing any special trade/business; (b) proof of payment of renewal fees for the Import Registration Certificate for the concerned financial year; (c) a declaration, in triplicate, that the importer has paid income tax or submitted income tax return for the preceding year; (d) proof of having Tax Identification Number (TIN) in all cases of import excepting personal use; (e) insurance cover note either from Shadaran Bima Corporation or from Bangladeshi Insurance Company and stamped insurance policy against this cover note; (f) any such documents as may be required as per this Order or Public Notice, or instruction (6) Import on Deferred Payment Basis or Against Supplier’s Credit : Subject to restriction and prohibitions contained in this order, import on differed payment basis or against Suppliers, Credit may be allowed on the basis of procedure laid down by the Bangladesh Bank in this behalf. (7) Import against direct payment abroad : Only Bangladeshi nationals living abroad may send may importable item irrespective of value ceiling against direct payment abroad in the name of any Bangladeshi living in Bangladesh.
The name and address of the consignee shall be mentioned in the import documents. For such import, no permission or import permit from the Import Control Authority shall be necessary. (8) Time limit for opening of L/C : Unless otherwise specified, for import under cash foreign exchange, letter of credit shall be opened by all importers within one hundred and fifty days from the date of its issue or from the date of its registration. The above time limit may be extended upto such time as deemed fit by the Chief Controller. For import under foreign aid/grant and barter/STA. L/C shall be opened within the time limit as may be notified by the Chief Controller. ssued by Chief Controller, from time to time under this Order; (14) Violation of the requirement of LCA/LC : Shipment effected before authentication of the L/C Authorization Form by the nominated bank and registration with the Bangladesh Bank, wherever necessary, and before opening of L/C or after expiry of the validity of the L/C Authorization Form or L/C shall be treated as import in contravention of this Order. L/C Authorization Form obtained on the basis of false or incorrect particulars or by adopting any fraudulent means shall be treated as invalid and void abinitio. (15) import against indent and pojorma invoice : L/C may be opened against an indent issued by a local registered indentor or against a proforma invoice issued by a foreign manufacturer/seller/supplier. Chapter 4 Export Policy Introduction Increased production and massive expansion of commerce is one of the main means of local resource generation. Employment opportunities can be created in a populous country like ours with the promotion of export.
This employment will pave the way for increased savings and investment, ensure capital flow, solve unemployment problems and eradicate poverty. In the field of commerce the main task of the government is to make Bangladesh economy strong and dynamic enabling it to face the challenges of rapidly changing world trade system. Currently the readymade garments (RMG) sector contributes two thirds of the Bangladesh’s total export earnings. But the market of the readymade garments is limited. The North America and European Union are the main destinations of our export items. Though Japan has a good market of garments, we are yet to actively enter into that market.
There is a possibility of major changes of the role of RMG sector in Bangladesh’s export trading from 2005 or in the post MFA era. We need to undertake necessary measures so that the changes become favorable for Bangladesh. There are scopes of thinking more about the necessity of developing backward linkage industries for a massive change in the RMG sector. But the reality suggests that there are scopes to adopt different means regarding backward linkage industries. In that case we will have to change our strategies in increasing the export of our products. Currently Bangladesh’s export trading depends on two products (75 percent RMG and 6 percent frozen food).
Such dependence is not expected for any country. So we need to produce new products with higher values, develop the designs and find new markets. Continued efforts are underway to create markets for Bangladeshi products since the present government took over. Already duty free access has been availed for the markets in European Union, Canada, Australia and Norway. Though in limited scale, Bangladeshi products already found their access with lower duty in the markets of Thailand, India and Pakistan. Talks are underway with China, Russia, Malaysia and other neighboring countries in this regard. A good result is being expected within a short period.
But duty free access or special facilities are not everything; rather the use of such advantages is the main concern. Only through changes in RMG industry the development of export trading would be an absurd idea, rather it would be difficult even to survive in the present situation. So Bangladesh should proceed in other areas of export trading. Quality of conventional 2-export items has to be developed – along with increasing their production. The list of export items have to be expanded exploring the non-conventional sectors like ICT, light engineering and auto-parts, agro-processing and pharmaceuticals along with finding their appropriate markets.
The product quality too will have to be high and acceptable and any deviation in this regard will weaken our position in export trading. And if the export trading is not expanded, the desired national growth could not be achieved resulting in the economic backwardness, which would bar the overall national progress. In order to promote export, scopes should be there to pay prices both under LC and contractual agreements. Besides the existing VAT and duty structures should be made time befitting and realistic. Moreover new products have to be added in the export basket. Against the above backdrop the Export Policy 2003-2006 has been formulated. Objectives: The principal objectives of this policy are: . To achieve optimum national growth through increase of export in regional and international market. 2. To narrow down the gap between the country’s export earning and import payment through achievement of the export targets; 3. To undertake timely steps for production of exportable goods at a competitive price with a view to exporting and strengthening existing export markets and making dent in new markets; 4. To take the highest advantage of entering into the post Uruguay liberalized and globalizes international market; 5. To make our exportable items more attractive to the market through product diversification and quality improvement; 6.
To establish backward linkage industries and services with a view to using more indigenous raw materials, expand the product base and identify and export higher value added products ; 7. To simplify export procedures and to rationalize and solidify export incentives; 8. To develop and expand infrastructure ; 9. To develop trained human resources in the export sector; 10. To raise the quality and grading of export products to internationally recognized levels. Strategies: The following strategies shall be undertaken to attain the objectives of the export policy 1997 – 2001: 1. Simplifying export procedures, and helping the private sector achieve efficiency. The Govt. esires more and more involvement of the private sector while the govt. will continue to play its facilitating role; 2. Enhancing technological strength and productivity and facilitating reduce cost and attain internationally accepted standard of quality of exportable products and thereby consolidate their competitiveness ; 3. Ensuring maximum use of local raw materials in the production of export goods and encouraging establishment of backward linkage industries; 4. Participation in the international trade fairs, specialized fairs, single country exhibitions abroad and also sending out trade missions, with a view to consolidating our position in the existing market and creating new markets; 5.
Encouraging export of new category high value added readymade garments and also encouraging the concerned trade associations for establishment of a Fashion Institute ; 6. For promotion of high value added leather and leather goods export: providing various facilities including bonded warehouse facilities for import of materials such as raw hides, pickled, wet blue, crushed and finished leather, components and chemicals etc. to 100% export oriented leather industries; 7. For promotion of export of shrimp: Extension and modernization of traditional/semi-intensive method of shrimp cultivation and ensuring quality as per buyer’s requirements ; 8.
For promotion of export of jute and jute goods: Undertaking extensive publicity of jute and jute goods as environment-friendly natural fiber and diversification of the uses of jute products; 9. For promotion of export of tea undertaking programmes for establishing brand name and developing linkage with established blending and distributing agents; 10. For promotion of export of agro-based products: undertaking programmers for raising quality standard and expansion of market; 11. For the promotion of export of electrical and electronic goods ( including computer software and data entry) : Building and ensuring conducive infrastructure; 12. For the promotion of export of engineering consultancy and other services and sub-contracting involving, in a bigger way, Bangladesh missions abroad obtaining contracts; 13.
Organizing regularly international trade fairs and product-specific fairs with the country; 14. Making appropriate development and expansion of infrastructure conducive to export; 15. Making arrangements for necessary technical and practical training for development of skilled manpower in the export sector; 16. Ensuring maximum utilization of financial and other assistance extended by the World Trade Organization to the Least Developed Countries; 17. Ensuring maintenance of ecological balance and pollution-free environment in the production of exportable goods; 18. Extending technical and marketing assistance for development of new products and for finding appropriate marketing strategies; 19.
Taking necessary steps to assist procurement of raw materials by the export-oriented industries at world price Scope and General Provisions : 1. This policy shall apply to the customs areas (excluding Export Processing Zones) of Bangladesh. 2. This policy shall take effect from 01. 07. 1998 and remain in force till 30. 06. 2002. However, the policy shall be considered valid until the next Export Policy is announced. 3. If any provision of this policy is found inconsistent with any provisions of the Imports and Exports ( Control ) Act, 1950, or of the Import Policy Order, the Ministry of Commerce shall be entitled to amend, alter or modify such provision. 4.
The Ministry of Commerce may, as and when necessary, amend, alter or modify any provision of the Export Policy including the export negative/restricted items. 5. Different aspects of the Export Policy shall be reviewed annually. Export Promotion Councils/Committees: 1. A National committee on export has been formed. The highest level committee on export promotion, is headed by the Honorable Prime Minister and consists of the Honorable Ministers for Foreign Affairs, Finance, Commerce and Industries, Planning, Jute and Textile as well as senior government officials and representatives of important trade associations. The committee reviews the export situation, provides necessary directions and readily resolves problems. 2.
For immediate attention and action on export related problem a task force has been formed under the chairmanship of the Honorable Minister for Commerce. 3. With a view to exchanging ideas with Chambers of Commerce and Industries, Exporters’ Associations and private sector organizations in formulating export policy and strategies, and up lamenting policy decisions an export council has been formed. 4. A task force shall also be formed to recommend practical measures for export increase and monitoring the implementation of incentives and facilities of thrust sector and crash programme items. 5. Commodity Councils: Commodity Councils shall be formed for jute, tea, shrimp, readymade garments and leather & leather products. Thrust Sector: 1.
Leather and leather goods industries, high and high value added readymade garments, computer software and agro-processing sectors have been identified as thrust’ sectors in this export policy. Although the leather and leather goods sector has enormous export potential the sector has not been able, till date, to achieve desired results. On the other hand, the readymade garments sector is expected to stage a breakthrough in the export of high-priced, high value added garments of newer categories after having survived successfully the initial phase of exporting low-end garments. Like wise computer software and agro-processing sectors could not record the desired level of export through the sectors offer bright prospects for earning foreign exchange.
These -four sectors have been declared, ‘Thrust Sectors’, in this policy to ensure priority with the following lines of actions : Leather & Leather Goods : 1. Leather manufacturing units shall be modernized in order to enable them to produce increased quality of finished leather out of raw hides. 2. With a view to reducing cost of production, steps shall be taken to establish accessories industries for producing necessary chemicals and other inputs within the country. 3. The existing Leather Technology Institute shall be modernized for use as a ‘Common Facilities Centre’ for the upcountry leather units. 4. Necessary credit facilities shall be extended for setting up of leather goods industries and efforts for marketing the produces shall be strengthened. 5.
Cluster industries comprising small units of leather goods factories shall be set up with a view to generating employment. 6. ’Leather Council’ shall be formed. 7. Industrial units having no bonded warehouse at the same time not interested to avail of duty draw back facilities shall be entitled to cash benefit in lieu of duty drawback. 8. Import of raw hides including wet blue and pickled leather, shall continue with the prevailing customs duty (2. 5%) and import license fee (2. 5%) livable on the importation of raw leather for three years. 9. Uniform policy on bank loan as regards criteria and rate of interest shall be followed for credit to leather sector. 10.
The total credit excluded to the leather sector shall be brought under a single bank and export will also be affected through that designated bank. 11. After careful revision of the overall situation prevailing in the leather industries, the time limit for export of crust leather has been extended upto the year 2000. Facilities for BMRE and other transformation process shall be made available to all tanning units to enable them to switcher by 2000, to processing crust/finished leather from wet blue leather. Readymade Garments: 1. All out efforts would be made and steps taken for production and export of high priced readymade garments in the light of the prevailing market demand. 2.
Immediate steps shall be taken to establish a Fashion Institute pending establishment of the Fashion Institute measures will be taken, under special arrangements, to extend expert services to match the actual demand. 3. Liberal credit may be considered for capacity building and hiring technology for producer of high quality garments. Computer Software: 1. For the development of human resources in the software information of computer science, courses in all universities including B. I. T. and Polytechnic Institute and selected colleges shall be considered similarly for having a pool of skilled and trained instructors basic computer scheme at graduation level may be introduced. 2. An Information Technology Village making multifaceted facilities shall be established as part of infrastructure development for promotion of export in this sector. 3.
As a fillip to effective software marketing appropriate provisions on protection of intellectual imports shall be incorporated in the existing copyright Act. Aero Processing: 1. For the development of the agro-processing industries ‘Hortex Foundation’ has already been established. Development activities of this sector under the Foundations programmes will go on. Export Incentives : In the light of the objectives and strategies of the Export Policy 1997-2002, several new incentives and facilities have been made available to the exporters. Besides, some existing incentives have been modified and improved to make them more workable. The rest of the existing facilities and incentives will remain unchanged. The incentives as offered are enumerated below : 1 Fiscal Incentives: 1. 1.
Restructuring of the Export Credit Guarantee Scheme (ECGS): At present, there are four schemes, namely, the Export Credit Guarantee (Pre-shipment), Export Credit Guarantee (Post-shipment), Export Payment Risk Policy (Comprehensive Guarantee) and Whole Turnover Pre-shipment Finance Guarantee, available under the Export Credit Guarantee Scheme ( ECGS ) covering risks on export credit as well as probable commercial and political risks occurring abroad. These schemes, however , are becoming effective to the desired extent due to existence of various complicacies in realizing their benefits. To strengthen the role of the Export Credit Guarantee the schemes shall be restructured. 1. 2.
Convertibility of Taka : Taka has been made convertible in the current account in lieu with the policy of export-led growth in the liberalized world market. As a result, earning from the trading account shall be freely convertible into foreign exchange for import of goods (barring a few banned items). Under this arrangement, exporters shall be allowed to retain their foreign exchange earnings in their respective foreign exchange accounts gradually at higher proportion. 1. 3. Utilization of Foreign Exchange by Exporters : So long exporters were allowed to retain 20% of their FOB earnings in their respective foreign currency accounts in US dollar or Pound Sterling.
From now on they will be entitled to retain either 40% of such earning or at a rate fixed by the government from time to time on proper review. However, in cases of export products where the import contents used in the manufacture of such items are relatively high ( such as, naphtha, furnace oil, bitumen and other petroleum products, readymade garments and electronic goods ) and in the case of export of services ( legal advice, consultancy and similar professional services ), the exporters concerned will be entitled to retain only 7. 5% of their FOB export earnings. Immediately on realization of export proceeds, the concerned banks will credit the exporters’ foreign currency account in proportion to their respective entitlements. Exporters may tilize this foreign exchange for bonafide business purposes, namely, undertaking business trips abroad, participating in export fairs and seminars, importing raw materials, machineries and spares and even setting up overseas business offices. Foreign exchange may also be kept in the renewable fixed deposit account, which will bear interest. 1. 4. Export Promotion Fund ( EPF ) : The following assistance and support would be provided out of the Export Promotion Fund to producers/exporters of new and non-traditional items including those under the crash programme for product development and product and market diversification: (a) Venture capital on easy terms and low interest rates ; b) Assistance in obtaining foreign technology and consultancy for product development and diversification; (c) Assistance in fielding marketing missions abroad and participating in international fairs for market compatibility of products; (d) Assistance in Establishing Sales and Display Centres abroad and extending warehousing facilities ; (e) Assistance for participation in overseas training programmes on product development and marketing help develop technical skill and marketing expertise ; (f) Assistance in any other activity related to product and market development. 1. 5. Extension of Time-limit for adjustment of Export Credit from 180 days to 270 days. At present export credit is allowed at confessional rate of interest for a maximum period of 180 days. A section of exporters however cannot enjoy the benefit of such concessionary credit facility due to structural characteristics of certain commodities.
Under such circumstances, the time-limit for repayment of export credit has been extended from 180 days to 270 days in case of export of frozen food, tea and leather by way of relaxing the condition of submission of firm contract/L. C. and considering working capital as export credit. The time limit for export credit under the Export Promotion Fund in certain cases shall be extended upto 270 days. 1. 6. Export Financing: (a) Introduction of Credit Card : In view of the risks involved in carrying of cash foreign exchange/travelers cheque while undertaking business trip abroad, the practice of issuing credit cards to exporters against their respective foreign exchange entitlements will continue. b) Limit of Export Credit : Exporters may obtain export credit from commercial banks upto 90% of the value of their irrevocable letter of credit/confirmed contract. (c) Credit to first time applicant : With a view to encouraging the new comers to enter into export trade the commercial banks will consider their credit proposals on a priority basis. (d) Monitoring the Over-all flow of export credit : Bangladesh Bank will take necessary steps to ensure that normal flow of export credit is maintained. The C. C. limit of the exporters will be determined only on the basis of their export performance in the preceding year. This will not be subject to any general credit squeeze measure. Such credit facilities will also be available to new contracts. e) Overdue interest : No overdue interest will be charged by the commercial banks in cases of export against irrevocable letter of credit on sight payment basis. In such cases, however, exporters will be required to submit necessary export documents within the specified time. (f) Export credit cell : As special export cell to supervise and monitor the export financing has been functioning in Bangladesh Bank. Besides, in every commercial bank a special unit has been created for processing exclusive export credit proposals. (g) Export monitoring : A high-powered committee has been functioning to assess the export credit requirement and to review and monitor the flow of export credit to ensure that adequate and timely credit are made available to the exporters. h) Inland back-to-back letter of credit : Authorized dealers may establish inland back-to-back letter of credit in favor of local suppliers of raw materials, against the corresponding master letter of credit. 1. 7. Rebate on insurance premium: Special rebates are allowed on premium covering fire and marine insurance to export-oriented industries (non-traditional items). Such rebates will be available also to the exporters of these items on shipment of goods. 1. 8. Incentives for export of non-traditional industrial products : Incentives will be provided for export of non-traditional/new industrial products, especially where value addition is 50% or more. 1. 9. Similarly, export firms having exceeded the proportionate export target set for that product-sector will be considered for incentives facilities. 2. Fiscal Incentives: 2. 1.
Import facilities of raw materials for export-oriented leather industries: To encourage increase in production export at competitive price of finished leather customs duty and import license fee livable on import of wet blue and pickled leather by export-oriented leather industries will be exempted. 2. 2. Income tax rebate on export earnings : Previously, 50% rebate on taxable income generated from export earning was admissible under the Finance Act every year. From now on 50% of the income tax on any income on export will be exempted through incorporation of a new provision in the Income Tax Ordinance itself rather than as a temporary relief hitherto granted under the Finance Acts on a yearly basis. 2 . 1. Lowering the rate of AIT at source : Tax at source on all export earnings shall be deducted at the rate of 0. 25% 2. 4. Payment of duty drawback through commercial banks :
For quick disbursement of duty drawback with a view to giving a competitive edge to our export in the international market, payments will be made by the commercial banks immediately on receipt of foreign exchange against all exports except the deemed exports, determined on the basis of the principles laid down by the National Board of Revenue. 2. 5. Bonding facilities for export-oriented industries : Bonded warehouse facilities have generated special enthusiasm among the import-led export-oriented industries. To sustain such interest the procedures for providing bonded warehouse facilities to such industries will be further simplified, and will be extended to all industries recognized as 100% export-oriented industries. 2. 6. Duty-free Import of capital machinery by export-oriented industries: Presently, items produced in the Export Processing Zones (EPZ) are entirely exported.
Likewise 100% export-oriented industries located elsewhere in the country are also required to export their produces entirely from this point of view as the objectives and functions of the industries of both locations are identical. Duty free import facility of capital machinery has also been extended to the 100% export oriented industries out side the EPZ. 2. 7. Alternative facilities in lieu of customs bond or duty drawback for export-oriented domestic textile sector and garments industries: During fiscal year 1995-96, the government, in an attempt to give incentive to the domestic textile and garments sector, allowed 25% compensatory assistance to the industries of this sector. In future also, these sectors will continue to receive reasonable facilities.
Such compensatory assistance will also be admissible to a composite unit producing both fabric and garments or to the manufacturer only in case the exporter is not the producer of the local fabric provided no bonded warehouse or duty drawback facilities were availed of for such importation. If, however, the exporter is an intermediary buyer, the facility will go to the original producer of goods. 2. 8. Tax holiday: To encourage a rapid growth and attract entrepreneurs to export oriented industries tax holiday incentive will continue till the year 2000 in consonance with the Industrial Policy. The industrial enterprises enjoying the benefit of tax holiday shall be exempted from deduction of tax at source. After 2000, decision on tax holiday will be taken in the light of the government policy of that period. 2. 9. Duty drawback scheme : (a) Exporters of manufactured products are entitled to draw back after the export is affected.
The amount of duties and taxes paid on importation of raw materials under any of the three systems, namely, actual drawback, notional drawback and flat rate drawback. However, as a simpler mechanism of getting drawback, the flat rate method shall continue to receive greater weight age. (b) The rate of duty drawback payable on export of all traditional and non-traditional items will be renewed at regular intervals and more and more, new products will be brought under the duty drawback system. 2. 10. Value Added Tax (VAT) on packaging materials: Should jute clothes and bags be used in the packing of export goods VAT paid on such products will be refunded. 8. 2. 11. Simplification of the procedure for refund of VAT paid on export support services: To maintain ompetitiveness of export prices, VAT paid on export support services, namely, C & F service, telephone, telex, fax, electricity, insurance premium, shipping agent’s commission/bill will be refunded under a simplified procedure. 2. 11. Permission for sale of goods rejected for exportation: 20% of the rejected goods of the 100% export-oriented industries including leather goods and readymade garments will be admissible for sale in the local market subject to payment of usual duties and taxes. 3. General incentives: 3. 1. Declaring 80% export oriented leather industries as 100% export-oriented industries: Most of the leather industries are able to export at least 80% of their products; rarely they are in a position to export 100 of their product.
In order to bringing about dynamism in the leather sector 80% export oriented leather producing units have been declared 100% export-oriented industries. 3. 2. Other 80% export-oriented industries to get identical incentives available to 100% export-oriented industries : Other 80% export oriented industries (other than leather industries) will be given following incentives with a view to encouraging their export operations: (a) Financial incentives including bank loan as available to 100% export-oriented industries. However, the benefits allowed to the 100% export-oriented industries by the National Board of Revenue in respect of duties and taxes will not be applicable to them. (b) Sale permission upto 20% of their production in the local market on payment of usual duties and taxes. 4.
Reduced airfreight for export of all crash programme items including fruits and vegetable: (a) Airfreight at lower rate will be changed for export of all crash programme items including fruits and vegetables. (b) Withdrawal of royalty from foreign airlines extending cargo services : In order to ensure export of goods by cargo services of foreign airlines and sell export goods at competitive price, the royalty being presently imposed by Biman Bangladesh Airlines may, if necessary, be further reduced or may be withdrawn altogether. 5. Settlement of trade disputes : With the expansion of exports trade disputes are also increasing. In many cases Bangladesh’s image as an exporting country is being tarnished because of such disputes.
On the other hand, Bangladeshi exporters are also incurring financial losses. To remove such difficulties, the Export Promotion Bureau will initiate steps for settlement of trade disputes through conciliation. For this, necessary amendment will be made in the Charter of Export Promotion Bureau to enable them to perform this responsibility effectively. 6. Recognizing small and medium size agricultural farms as Industry: To encourage production of fruits, vegetables, fresh flowers, orchid etc. for export, agricultural farms of a minimum size of 5 acres have been recognized as ‘Industry’ and become eligible for all facilities of export-oriented industries. 7. Research and development:
Marketing of products in the international market is becoming increasingly competitive due to globalization and liberalization of trade. To sustain in the face of such stiff competition, continuous quality improvement and market adaptability have become necessary. For this purpose, industrial enterprises should be equipped with their own Research and Development ( R & D ) facilities . For this duties and taxes on machinery and equipments imported by export units will be gradually lowered. Research institutions on the recommendation by the Export Promotion Bureau will also be entitled to such benefit. Chapter 5 Industrialization policy a. Broadly speaking, industry includes manufacturing and service activities b.
Production, processing and assembling, and rehabilitation and fabrication of manufactured goods are included in industry. c. The services that are received through the use of machinery and durable resources are included in the service industries. The service industries have been enlisted in Annex-2. d. Definitions of industries in the manufacturing sector: 1. “Large Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is above 100 million taka. 2. “Medium Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is between 15 million and 100 million taka. 3. Small Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is under 15 million taka. 4. “Cottage industry” means an industry in which members of a family are engaged part-time or full-time in production and service-oriented activities. a. Definitions of industries in the non-manufacturing sector (trading and other services): 5. “Large Industry” means an industry in which more than 100 workers work. 6. “Medium Industry” means an industry in which 25 to 100 workers work. 7. “Small Industry” means an industry in which fewer than 25 workers work (unlike family members in a cottage industry). 8. Reserved industries: a.
Those industries that are necessary to be kept reserved by the government in the interest of national security and are sensitive have been identified as reserved industries. A list of reserved industries has been given in Annex-3. 9. Thrust sector: a. The thrust sector will mean those industries/industrial sub-sectors which have already been able to successfully contribute to the country’s industrialization and poverty alleviation by increasing GDP, creating employment opportunities and increasing export income. Special incentives and financial facilities such as tax exemptions, exemption from dual taxation, tax holiday, and taxation at a reduced rate or accelerated depreciation (if the tax holiday and tax exemption facilities cannot be provided for new industries in the future) can be considered.
The facilities provided to those industries that are established in EPZ areas including export-oriented industries can also be provided to the thrust sector. The objective will be to use domestic technology, import substitution, adjustment and/or export augmentation. But entrepreneurs under the thrust sector will not receive these facilities automatically. The government will determine the facilities to be received by thrust sector entrepreneurs after analysing and reviewing the performances and contributions of their sub-sectors/industrial enterprises to the national economy. A list of the thrust sector has been given in Annex-1. b. The definitions of the abovementioned industries may change over time and variation of location. • Facilitating Role of Relevant Ministries and
Public Institutions in Industrialization c. The Bangladesh government gives importance to the private sector as a driving force of industrialization, and has brought about constructive and realistic reforms in formulating policies. The government will provide assistance in the following way to play a supporting role through concerned public institutions: 10. Before setting up industries, all foreign investors will register with concerned offices in a measured manner. 11. The Bangladesh Small and Cottage Industries Corporation will allot industrial plots in its own industrial areas and in other industrial areas created with specific objectives.
Similarly, the Bangladesh Export Processing Zones Authority (BEPZA)