Incidents continue coming to light

Regional integration among the South Asian nations is a must for increased trade and investment in order to achieve sustainable growth, said the International Chamber of Commerce Bangladesh (ICCB).

“Regional integration impacts trade facilitation in several ways. It helps in inclusive growth and poverty reduction, reallocating capital and labour toward sectors holding a comparative advantage,” said the local chapter of the Paris-based body in its July-September bulletin released last week.

“Trade facilitation and regional integration are two important factors for achieving the Sustainable Development Goals.”

According to the association, the beneficial link between trade and investment catalyses economic transformation, job creation and skill development.

It said strengthening regional integration for trade facilitation is particularly crucial for three reasons — it can foster economic diversification and transformation, increase resilience to global economic shocks, and generate significant economies of scale through the widening of markets.

The ICCB said trade facilitation has a direct impact on trade costs and an indirect impact on the price of traded goods.

“It increases trade flows and ultimately leads to higher growth. Trade facilitation eases the cross-border movement of goods by cutting costs and simplifying trade procedures.”

Quoting experts, the ICCB editorial said furthering the case for regional approaches, cooperation on many aspects of trade facilitation makes sense from an economic point of view.

Experience from the Association of Southeast Asian Nations suggests that moving forward on a regional basis might be a viable option, through pooling resources, opening markets to private multinational actors, and judicious use of mechanisms like mutual recognition.

The ICCB talked about the low level of trade among South Asian countries.

According to the World Bank, South Asia is one of the most dynamic regions in the world, with a population of 1.67 billion and economic growth of 7.1 percent over the last decade.

But South Asia is one of the least integrated regions. Intra-regional trade accounts for only 5 percent of South Asia’s total trade, compared to 25 percent in the ASEAN.

The main reasons behind the lesser integration in South Asia, according to the WB, are high trade costs, investment restrictions and insufficient policy-relevant analytical work on gains of both trade and investment.

It is expected that with the gradual removal of these barriers, intra-regional trade in South Asia could increase from the current $28 billion to $100 billion, added the ICCB.

Bangladesh’s economy grew 7.28 percent in the last fiscal year, the highest in the country’s history. The development came after the Bangladesh Bureau of Statistics (BBS) updated the final estimate of the gross domestic product growth for 2016-17. In the final count, the GDP growth rose by 4 basis points from the provisional estimate of 7.24 percent, riding on the faster growth of the services sector.  The state-run statistical agency informed the Executive Committee of the National Economic Council about the updated GDP estimate at a meeting yesterday.

After the meeting, Planning Minister AHM Mustafa Kamal said: “A new record has been set. For the first time, GDP growth rose to 7.28 percent.”

He said the country’s economic growth would cross 8 percent in 2018-19.

The government has set a growth target of 7.4 percent for the current fiscal year.

With the updated GDP growth data, the country’s per capita income increased to $1,610, according to the minister.

As per the provisional estimate, GDP grew 7.24 percent in 2016-17 despite a significant fall in agriculture growth.

Yesterday the planning ministry, in a statement, also said the agriculture GDP grew 2.97 percent in the last fiscal year, down from 3.4 percent stated in the provisional estimate. In 2015-16, the agriculture GDP rose 2.79 percent.

The industrial sector grew 10.22 percent in the last fiscal year, again down from 10.50 percent in the provisional estimate. In 2015-16, the sector expanded 11.09 percent.

But the services sector widened 6.69 percent in 2016-17, up from 6.50 percent in the interim estimate. The sector grew 6.25 percent in the previous year.

Development partners, including the World Bank, had projected GDP growth below 7 percent for the last fiscal year.

The WB had said Bangladesh’s GDP would grow 6.8 percent in the last fiscal year. The growth in fiscal 2016-17 was overestimated as the government undercounted the flood-induced losses in agriculture, among others, according to the WB’s Bangladesh Development Update.

Besides, some of the windfalls, such as the large pay increases in the public and related sectors, which boosted the services sector growth in fiscal 2016-17, tapered off, it said. According to the planning minister, Bangladesh’s GDP has more than doubled in a span of a decade: it was $100 billion in 2006-07 and has now risen to $250 billion.

Bangladeshi garment exporters have fallen victim to fraudulence recently, with some 26 companies apparently manufacturing goods worth around Tk 600 crore for a non-existent British company. Two local garment buying houses, Vanguard and ASM Apparels Ltd, placed the work orders on behalf of the “importer”, Y&X, saying that the latter is owned by a Bangladeshi-born British citizen named Manjur Billah.

The duo offered higher prices, on condition that the raw materials have to be bought from select textile factories in China. The deception came to light after the first batch of consignments were left unclaimed for over one month at a UK port. The Daily Star could not reach anyone from the two accused buying houses. “It is a big accident for our company as we never faced such fraudulence in our 20 years’ garment business,” said a general manager of one of the victim export-oriented garment factory.

“We have shipped garment items worth Tk 50 crore,” he told The Daily Star asking not to be named fearing that it would tarnish his company’s reputation.

A few consignments are in the factory and some are on the way to the UK port and some have already reached the UK, he said.

The official also said his company started shipping the goods, such as denim shirts and trousers, in the last week of September and continued to do so in the first week of October.

The company is part of a conglomerate which annually exports $80 million worth garment items.

The group has already filed a case with Badda Police Station 20 days ago. Arrests are yet to be made as the accused are allegedly absconding.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has been trying to find a solution with 26 garment exporters having complained of being cheated by the two buying houses.

Another 22 small Bangladeshi garment exporters suffered a similar fate in 2012 after Indian kidswear retailer Lilliput failed to pay $5 million with the excuse of becoming bankrupt. The goods had been sent without letters of credit (LCs).

“The number of victims might increase further as many of the affected factories are yet to lodge complaints with the BGMEA,” said Mohammed Nasir, vice-president of the garment makers’ platform.

“The BGMEA has already started the initiative to recover the money. We will send letters to the Bangladesh embassy in the UK seeking information about the company and for lobbying with the British government for recovering payments for the exporters,” he said.

If the goods are not received, the exporters will be asked to bring those back and go for stock lot sales in Bangladesh, he said, adding that if the exporters pay the freighters, they would bring the goods back. If the garment exporters do not get their money on time, the Chinese textile millers will also be affected as the garment makers would not be able to pay them, Nasir said.

KI Hossain, president of Bangladesh Garment Buying House Association, said the accused two buying houses were not their members. A total of 8.5 million pieces of garment items were supposed to be shipped in favour of Y&X, he said. Some of the smaller factories affected have already started to feel the brunt of the fraudulence, he said.

Mahmud Hasan Khan, another vice-president of BGMEA, said it was not exporters but importers who usually insured the goods.  In the case of the 26, it is not clear whether the goods were insured. However, the goods were shipped following procedures of LCs.

“If the goods are insured, by any chance, the exporters will get the money from the insurance company. But we have to check further,” said Khan.

If, say, Y&X does exist but has gone into hiding on going bankrupt, the exporters will face further delays as the British court will have to declare the company bankrupt and sell its assets to repay the Bangladeshi exporters, he said. Talking to The Daily Star, an official of state-owned Bangladesh Export Promotion Bureau said none had gone to their office to lodge complaints. “If any exporter comes and complains to us, we will go for finding a solution,” the official said asking not to be named. The UK is the third largest export destinations for Bangladesh after the US and Germany. Bangladesh exported garment goods worth $3.30 billion to the UK in 2016-17, which was $3.52 billion in 2015-16 and $2.9 billion in the fiscal 2014-15, according to Bangladesh Export Promotion Bureau. Garments make up nearly 90 percent of Bangladeshi exports to the UK.

Policies framed with the support of evidence and credible data benefit the economy and the society as a whole, economists said yesterday. They also said decisions taken on populist notions and prescriptions from donors may not bring desired results. The views were shared at the launch of a book—Evidence based policy making in Bangladesh—penned by Sadiq Ahmed, vice-chairman of the Policy Research Institute of Bangladesh.

The book highlights the importance of research and evidence-based policymaking.  If policies are formulated in the framework of informed decision making, they are more likely to work than those that are purely politically motivated with insufficient evidence or analysis, Ahmed said at the event.

“In our experience, we have found that government has limited analytical capacity,” he said, adding that the government addressed the issue in recent years by partnering with think-tanks.

Some efforts are also underway to develop in-house evidence-based policymaking capacity in key line ministries in coordination with the cabinet division.

“These are very good efforts,” Ahmed said. But elaborate policy models using rigorous quantitative methods are unlikely to work in developing countries like Bangladesh owing to insufficient data, limited analytical capabilities, severe time-constraint and short attention span of policymakers.

“Proper communication with top policymakers is crucial for successfully conveying the main focus of the proposed policy decision.”

Evidence needs to be broad-based and easy to understand and conceptualised in the context of Bangladesh and its development challenges.

Organised in nine chapters, the 182-page book sees Ahmed making use of case studies to discuss the regulatory framework for private investment.

He later dealt with issues such as ICT revolution, financial inclusion, Bangladesh’s “Look East policy”, tax structure modernisation, poverty and income distribution, urbanisation and reforms on public enterprises.

Citing his experience as a former finance adviser to a caretaker government, AB Mirza Azizul Islam said he looked for studies on tax holidays in Bangladesh but did not find any.

“Evidence-based policies and the capacity to implement those are important,” he added.

Zakir Ahmed Khan, former secretary to the finance ministry, said the tax ombudsman office was established without a clear idea. “The book is diagnostic as well as prescriptive,” he said.

Mustafa K Mujeri, executive director of the Institute of Microfinance, said policymaking in Bangladesh was not always based on evidence.

“Policymakers need to understand the importance of evidence,” he added. When policies are based on populist notions or anecdotes, they are at best inadequate and at worst lead to more harm than good, and potentially cause long-term damage to the economy and society, said PRI Chairman Zaidi Sattar. Selim Raihan, professor of economics at the University of Dhaka, said there are problems with the quality and consistency of data.

Citing the government’s implementation plan for VAT law 2012 and businesses’ opposition to the law, Wahiduddin Mahmud, a noted economist, said it appeared that both the National Board of Revenue and the businesses were “shadow boxing”. None had information on the number of VAT-eligible entities, he said, adding that the economic survey of the Bangladesh Bureau of Statistics could be instrumental in collecting turnover data. “Not enough was done to explain how VAT works,” said Mashiur Rahman, prime minister’s economic affairs adviser. He also said the export data used by the Export Promotion Bureau, the Bangladesh Bank and the NBR are not uniform. “Of them, BB’s data is the most reliable.” Subsequently, he suggested building up the capacities of agencies such as the Planning Commission and the BBS for reliable data gathering.