Economy of Bangladesh

How to Strengthen Trade Facilitation Reforms

How to Strengthen Trade Facilitation Reforms

Md. Joynal Abdin

The Financial Express on December 19, 2019

The issue of trade facilitation has come to the fore since the inception of World Trade Organisation (WTO) to promote freer trade globally. As it reduces costs of trade including export and import, and thus enhances socio-economic benefits such as job creation and raising standard of life, Bangladesh needs to take it seriously for future gains. However, various stakeholders often find the issue of trade facilitation as ambiguous and it is important to have clear understanding of trade facilities for acting properly.

The term ‘trade facilitation’ refers to simplification, harmonisation and automation of international trade procedures, particularly import and export procedures, transit requirements and procedures applied by customs and other agencies. Simplification of trade procedures involves both local and international trade and business activities; these could be listed but not limited to the following measures:

  1. Simplification of trade license issuance procedures for a logical cost;
  2. Simplification of company registration process in a reasonable time;
  3. Simplification of tax rules i.e. income tax, VAT, customs, turnover tax, tax holiday, tax rebate etc. registration and payment or receipt procedures;
  4. Easy access to banking and insurance e.g. bank account management, bank loan, venture capital, equity fund, export promotion fund, capital machinery adoption fund etc and services;
  5. Hassle-free access to industrial estates, plot in export processing zones or special economic zone to set up factories;
  6. Harassment-free access to industrial utilities such as electricity, gas, water, telephone, and internet connections;
  7. Simplification and hassle-free access to industry-related services such as easy access to environmental clearance, fire license, approval of city corporation/local government, approval of factory plan, boiler certificate, construction permits etc. and other sector-specific registrations from relevant government agencies;
  8. Getting quick registration of product levels, marks and quality certification from the government’s standard body.
  9. Easy access to export registration certificate, import registration certificate, bonded warehouse facilities, back to back L/C facility etc.;
  10. Congenial legal environment to avail/impose business documentations like implementing contracts, commercial invoice, bill of lading, air ways bill, inspection certificate, quality control certificate etc.

Secondly; harmonisation and automation of international trade procedures refer to the following measures:

  1. Harmonisation of standards between importing and exporting countries and mutual recognition of other standards;
  2. Harmonisation of HS [harmonised system) codes, name, specifications for a specific products or components between trading nations;
  3. iii. Harmonisation of customs formalities and mutual recognition for quicker transit between partner countries;
  4. Simplification of boarder/port procedures and inter agency coordination;
  5. Availability of relevant infrastructures and support services at the border/port;
  6. Easy release/clearance of goods and access to pre-arrival processing, electronic payment, separation of release from final determination and payment of customs duties, taxes, fees and charges;
  7. vii. Automation of total border/port formalities with a time-bound action plan. Digitisation of clearing and forwarding formalities and payment process for lowest hassle and time consumption.

To accomplish trade facilitation tasks, five types of interventions can be taken — Simplification of rules, procedures, and documentation; Inter-agency dialogue, coordination and integration; Strengthening border agencies; Modernisation of border operations; and Investing in border-related infrastructure and logistics.

These issues of trade facilitation require massive infrastructure and drive to raise capacity in countries like Bangladesh. Thus, it demands additional investment in physical infrastructures, process and procedure development and automation and finally capacity building of relevant agencies.

Moreover it requires top-level political decision to avoid bureaucratic complexity for carrying out all trade facilitation measures. But who will initiate it and monitor progress of each of the components? It is difficult to determine the whole process under any particular ministry or agency.

It is the Prime Minister’s Office in Bangladesh that is trying to coordinate all such tasks under the slogan of ‘Ease of Doing Business’ ranking. But the ad hock responsibility of Bangladesh Investment Development Authority (BIDA) or part-time supervision by the Advisor and the Principal Secretary at the Private Sector Development Policy Coordination Committee (PSDPCC) may not bring long-term optimum results.

Therefore, we need a permanent agency or at least a high-powered committee styled National Committee for Trade Facilitation. The government may not be interested in establishing such an independent agency to look after trade facilitation, In such case, it may establish a strong department at the Prime Minister’s Office or BIDA for initiating, coordinating, monitoring and evaluating  all these issues of trade facilitation with relevant government agencies and ministries.

Still, why should the government look after the issues of trade facilitation seriously? According to a study by the World Trade Organisation (WTO), trade facilitation reduces trade costs by an average of 14.3 per cent. It may increase global trade over US$1.0-$3.6 trillion per annum apart from raising GDP growth and state revenue, along with other socio-economic benefits of increased trade such as job creation, poverty reduction, and improved quality of life.

Other benefits of trade facilitation could be reduced time of export and import, reduced cost of international trade, increased amount of trade flow, product diversification, export market diversification, more inflow of foreign direct investment, higher amount of government revenue collection, and reduced trade-related corruption.

Thus trade facilitation could be fruitful tool for attaining prosperity but its implementation remains a question mark. Steps of implementation of trade facilitation could be as follows:

  1. Assessing needs and identification of trade facilitation measures;
  2. Determining agency-specific, time-bound action plan;
  3. Calculating cost of reforms relating to trade facilitation;
  4. Determining coordinating agency;
  5. Monitoring, evaluation and corrective action;
  6. Recording country experience and success and failure stories.

Trade facilitation is a multi-stakeholder task where involvement of local, international, government and private stakeholders is necessary. For example government ministries and agencies relevant to trade facilitation are the Ministry of Commerce, the Ministry If industries, the Ministry of Finance, the Ministry of Foreign Affairs, the BIDA, the office of the Registrar of Joint Stock Companies and Firms, city corporation/local government, the National Board of Revenue, port authorities, airport authorities, road and transport authority, Coast Guard, Post Office, and agencies that deal with sanitary and phytosanitary, standard and environmental issues, namely Bangladesh Standards and Testing Institute (BSTI) and Department of Environment.

Private sector individuals and bodies like importers, exporters, chamber of commerce, business associations, foreign investors, consumers, and civil society organisations are directly involved with trade facilitation reforms. Furthermore international organisations like WTO, UNCTAD and ITC, regional banks and donor countries are also active stakeholders of trade facilitation in a country like Bangladesh. Lacklustre participation of any of the partners concerned may hamper trade facilitation or make it less fruitful. Finally; it is the government which should take initiative and lead the process from the front.

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