Export contributes about 10-12% of the GDP and as per 8th FYP we have opted for a manufactured based export led growth strategy for economic development. In the export policy 2024-27 it targeted for USD 110 billion exportat the marginal year while in the perspective plan( 2021-241) export target set at USD 300 billion. Targets for apparel sector is about USD90bn, achieved USD 43.84 bn (July-May) in 2023-24. Govt has announced a number of policies for supporting export under different schemes. Almost all the countries in the world extend support for export, however it must be taking care of the obligations of Subsidy and Countervailing Measure(SCM) Agreement of WTO.
Some direct subsidies are prohibited as per SCM. Government is providing cash incentives on 43 Export Products which can be treated as a direct subsidy and can not be provided. As preparatory steps, by this time Bangladesh Bank through its circulars reduced cash subsidies in two phases.Because of this, export of almost all sectors have been reduced to a significant proportion, such as; jute(-25.36%), potato( -55.57%), furniture(-15.77%), light engineering( -10.26%), Leather & leather goods(-14.17%), Frozen and live fish(-13.56%) etc. Apparel sector of course maintained a 2.86% growth. Apparel sector enjoys cash incentives at a certain percentage for new markets and new products and at the same time bonded ware house facilities.
Even though it has not been examined whether export fall is because of the reduction of cash subsidies, however private sector believes that cash incentives can continue till 2029 as per the thirteenth Ministerial Conference for graduating LDCs and all technical assistances provided for LDCs anddue restraints in the dispute settlements for the LDCs until 2029.
The almost completed national Export policy has of course taken some preparation which could be allowed for export for supporting export sector even after LDC graduation following SCM of WTO. Some of these are;R&D facilities for circular economyand other associated industries, green energy unit establishment for uninterrupted power supply, subsidy, concessional loans for setting up ETP, Remission of all licensing fees for the remitters,duty reduction in capital machinery import, a special business council has been formed, Setting up Bonded Ware House for the SMEs, improving logistics servicesto reduce production cost, simplification of export process etc. These are all will be helpful for exporters if implemented properly.
The policy has announced for establishing a national steering committee toanalyze export performance, constraints, support for sustainable export growth, recommend on areas directly & indirectly related to exports to cope with the post-LDC graduation challenges. A Monitoring and Evaluation Committee will also be established along with a Technical Committee to support two important Committees - will sit every after three months for implementation of decisions of as specific TOR.
SCM of WTO in its Annex I, included a list of support which will be termed as prohibited . Income tax rebates and currency retention schemes as are included in the SCM Annex I, these will contribute for revenue forgoneand thus can not be continued for the exporters.
On the other hand Duty Drawback, inputs for the E/O industry, VAT exemption for export, VAT exemption for Export support providers, support to EPZ, Back-to-Back L/C, Special BWH will not be treated as subsidy. For progressive production, export to new markets can be given supports( example of India). Bangladesh may face CVD measures under Article 4 (Remedies) of the SCM of the WTO and thus needs to be ready for a clear identification which subsidies are allowed and which are not allowed.
Loans and lands at cheaper rates,tax benefits, WTO green box items, Insurance-( Marine Insurance is not required for RMG when they export at FOB), R&D, Environment protection, research for creation of new markets &products can be some areas to be explored.
Actionable subsidies Member, is not prohibited but subject to challenge, either through multilateral dispute settlement or through countervailing action, in the event that they cause adverse effects to the interests of another Member, can be a cause of complaint, such as: Injury to a domestic industry caused by subsidized imports , serious prejudice usually arises as a result of adverse effects (e.g., export displacement), nullification or impairment of benefits accruing under the GATT 1994.
However, the complaint must be a fact-intensive analysis, a Member may not impose a countervailing measure unless it determines that there are subsidized imports, injury to a domestic industry, and a causal link between the subsidized imports and the injury. Article 25( Notification & Surveillance) of the SCM Agreement 25(Notification) members must notify all specific subsidies (at all levels of govt and covering all goods sectors, including agriculture) to the SCM Committee.
Annex VII of the Agreement of SCM allowed some flexibilities.Countries with a Gross National Income(GNI )below one thousand $1000 (constant 1990 dollars) automatically can be included in the Annex VII list of the SCM Agreement. Bangladesh is not yet included in the list, we need to try our best to be in the list for enjoying the benefits at least for another ten years.
Subsidies in the agriculture production inputs, such as fertilizers, fuelscan be continued, WTO system allows both LDC and non-LDC developing countries to provide domestic supports up to 10% of the value of total agriculture production. Bangladesh's current total Aggregate Measurement of Support (AMS) is 1.33% of the value of total agriculture production.
MC13 and Fisheries subsidies,global volume of marine capture production not exceeding 0.8%(FAO) would need to notify every four years. Overall mapping of coastal fishing status including illegal, unreported, and unregulated (IUU) and overfished stock needs to be identified. In the MC13 Phase II of MTS on Fisheries Subsidies on Overfishing and Over capacity (OCOF) following Doha and Hong Kong Ministerial mandate, SDG 14.6 will come up. In BD 67,700 artisanal Fisheries are not registered.
In view of this a fully automated and reformed Duty Drawback and Exemption Office(DEDO) office has to be established.In order to reduce cost of doing business, delay in releasing consignment because of several documentation processing has to be resolved and trade facilitation agreement for which Bangladesh is a signatory has to be implemented. Bangladesh needs to focus for negotiating more free trade agreement and negotiate for continuation of bilateral DFQF.The licensing system, customs procedures be streamlined and automated to reduce time and cost. Bonded warehouse facilities should be expanded to other exporting sectors apart from the RMG. Partial exporters should get commonbonded ware house facilities if individual bond facilities cannot be extended for some potential sectors such as Furniture, plastic, light engineering, ceramics, artificial leather footwear etc. Over and above we need a Export Development Strategy for sectoral diversification and prepare for the post-LDC transition.
The writer is Chief Executive Officer, Business Initiative Leading Development (BUILD)
