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Friday , January 27 2023

Export promotion & role of trade hubs

Trade is commonly referred to as selling and buying of goods and services, at home or abroad. Traders can execute transactions on their own account, as a market- maker. They can as well facilitate transactions between buyers and sellers. But go-betweens like buying houses, entre-port, trade hubs and the like play an important role in a country’s external trade promotion. Bangladesh is an origin of readymade garment exports, being one of the leading exporters of the apparel products on the world market. In Dhaka city, there are many liaison offices of foreign buyers operating. Based on the orders from their headquarters, they negotiate with local industries and place orders. In addition, they follow up production process in person. There is another type of liaison office operating in Bangladesh — they are not buyers on behalf of their parent offices. They facilitate Bangladesh export trade. But in what ways they work as a facilitator is a question. Trade facilitators work for buyers arranging product sources, placement of orders, and follow-up at production stages. We are all well aware of being phased out from barter system to money system. We are buying goods from physical markets or online marketplaces without having knowledge of producers of goods. Swap of goods from producers to ultimate consumers or users is executed by trade activities and their operators. Bangladesh’s export trade is guided by trade regulations of the government and realisation of payments is settled in accordance with regulatory framework issued by the central bank under foreign�exchange regulation act. The payment-settlement framework regarding export seems to be very simple – exporters are to make electronic declaration to customs authorities, transport documents of title are to be issued to the order of exporters’ banks, export proceeds need to be realized within four months from the date of shipment, the proceeds can be received by deductions of trade charges such as foreign agent commission at 5.0 per cent. 

Most of Bangladesh exports are consumer goods for which credit facilities extended up to four months are more than enough. But extra time will be required when Bangladesh will move for export of intermediate and durable goods. Issuance of transport documents favouring banks’ name gives safeguards against mis-delivery of shipments. Last one of commission at 5.0 per cent of export value is nothing but a promotional tool of export. As said earlier, consumers do not know where goods come from. Consumers cannot buy goods from producers or wholesalers, rather they need to depend on physical traders or online traders in retailing. In the same way, it is not easy for exporters to make direct contact with buyers abroad. If it is possible, exporters need to develop such relations with many buyers on one-to-one basis. Practically it is impossible. Insider information shows that a leading European garment buyer works with more than 500 industries in Bangladesh. But individual industry does not have direct connection with foreign buyers, they work with local liaison offices. We are all well aware of indenting agents. They are local agents of foreign suppliers, promoting their business in Bangladesh. Liaison offices are just doing work of same nature for buying goods from Bangladesh. Indenters are in the opposite – facilitating imports. Commodities exchange houses work as matchmakers between sellers and buyers with delivery of goods or non-delivery with hedging of net price-impact settlement. Basically, bulk commodities are traded in exchange houses. The same way, agents work as facilitators for trade. In addition to liaison offices in Bangladesh, there are global trade hubs in operation at different locations such as Hong Kong, Singapore, Dubai, Zurich and so. International trade operators work there. They work for both exporters and importers. In trade, entre-port is a common word. It is a method of trade in case of which imported goods are exported to a third country. As per the Import Policy Order of the country in force, entre-port traders need to execute the deals at a price minimum 5.0 per cent higher. Imported goods cannot be changed in quality, quantity or shape. The said goods cannot be brought outside the port area, but may be carried, with the prior permission of the Ministry of Commerce, from one port to another through any other port for the purpose of export. Operators at trade hubs work in the same way as entre-port trade works. International finance constitutes flows of finance on account of trade, and investment in capital market and money market instruments. Export brings, among others, supporting requirements of outflows like import payments. On the other hand, exporters produce outputs for consumption or use by residents abroad. Export activities are increments in an economy being facilitated with employment. There are different windows for export facilitation like different bilateral, regional and multilateral agreements. These are marco-level facilitations but such will not work at micro-level job for which different promotional activities required. With regard to macro-level considerations, Bangladesh was supposed to lose US market in 2005 with quota phase-out stage under multi-fiber agreement. But the United States (US) market is still number one for our export. What is behind this situation is a question. Different answers are there – low�priced products, operations of buyers’ offices in Bangladesh, export on credit, relations with trade hubs routing orders to Bangladesh and last, but not the least, earlier payment realisation facilities against export on credit terms from banks abroad. Definitely trade agreements bring benefits in export of goods but may result in adverse impacts in case of imbalance in trade – imports greater than exports. Trade agreements, banking arrangements, currency swap and such other tools may work if sanctions prevail for the trade partners. Otherwise such tools bring no fruitful results in promoting exports. For promotion of export, Bangladesh government has issued a rule allowing exporters to invest abroad out of the funds held in their retention-quota accounts in foreign currency. This will support exporters in establishing warehouse-type operations in different free zones of the world to which they can export for routing to ultimate buyers. This will help matured industries operating for long. Other options as well are available to exporters – the opening of offices abroad, expenses which can be made out of retention-quota funds, appointment of agents abroad, and commission for them to be met from retention-quota accounts. Above all, 5.0 per cent of export proceeds are permissible for payment to foreign agents on account of commission. These are all promotional tools for exporters to make tie�up relations with trade hubs.

Bangladesh export basket is becoming bigger with inclusion of agro�processing and light-engineering products. Macro-level supports may work invisibly. But market penetration needs active tools which support a lot. In this case, these tools need to be well- utilised. As a part, exporters should appoint agents at trade hubs, establish own marketing offices at strategic locations. These will work as entre-port traders supporting procurement of orders. At matured stage, warehousing facilities may be established at strategic locations of the world. These will open the markets remaining untapped. Dependence on liaison offices operating in Bangladesh will promote export to readily available markets like North America and Europe. But there are vast markets remaining unexplored in Central Asia, East Europe, Africa, South America. Supports from trade hubs may facilitate moving goods to these markets. Export-trade mode is changed from cash payment to credit payment. No option is available before exporters. Credit sales under contracts are risky. Exporters should, in lieu of letters of credit, go for open�account export against foreign payment guarantees with the help of operators at trade hubs. Bangladesh is graduating out from the Least Developed Country (LDC) status. Export is one of the best tools to go beyond current status, for which the sectors need to be aware of using operational tools, as discussed, to promote export trade.
 

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