Inadequate bonded warehouse benefits cost $8b in exports: IFC

Bangladesh has lost up to $8 billion in exports between fiscal years 2012-13 and 2016-17 due to ineffectual bonded warehouse benefits for products other than apparel, said the International Finance Corporation (IFC).

“Our overall export would have increased further if we could ensure bonded warehouse facility for the non-garment sector,” Nusrat Nahid Babi, private sector specialist of the World Bank (WB) Group, said at a workshop yesterday.

The Economic Reporters’ Forum (ERF) and the IFC, a member of the WB Group, jointly organised the event on tariff modernisation and expansion of bonded warehouse facilities for non-garment exporters.

The bonded warehouse privilege provides entrepreneurs with the opportunity to import raw materials duty-free on the condition that the items manufactured with them would not be sold in the domestic market.

The export of non-garment items ranged $5-$7 billion a year during fiscals 2012-13 and 2016-17 and effective bonded warehouse benefit could have boosted shipment by about $1.5 billion a year.

“But we have lost that opportunity,” she said citing a study of the Policy Research Institute (PRI) of Bangladesh in 2018.

The estimate comes at a time when calls for diversification of the export basket are getting louder.

At present, apparel accounts for more than 80 percent of Bangladesh’s export earnings.

“Export diversification continues to be a challenge,” Babi said, adding that shipment of 900 products fetched less than $1 million in fiscal 2015-16.

Most of the exporters did not use bonded warehouse facilities. “Thus non-garment exports are at a disadvantage compared to apparel.”

While there is provision for bonded warehouse privilege for non-garment exporters, the approval of licence for the access is selective.

Administrative challenge of managing another 4,000 licensees in addition to existing 4,000 is also another factor, she said, while suggesting full automation of the bonded warehouse system so that the revenue authority can monitor properly.

At the event, National Board of Revenue Chairman Md Mosharraf Hossain Bhuiyan said his office considers providing bond facilities to products other than apparel for the sake of diversification of the export basket.

He, however, said bonded warehouse benefits are being abused and the NBR will take drastic action against the abusers.

Customs Bond Commissionerates (CBC) in Dhaka and Chattogram took steps against a total of 59 firms for abuse of the benefit in the last one and a half month, he said.

CBC Dhaka suspended 13 licences and directed 17 companies to explain their non-compliance. Ultimately, all the licences would be cancelled, Bhuiyan said.

The extent of abuse of bonded warehouse benefit will decline if the system is automated, said PRI Chairman Zaidi Sattar, while calling for the privilege be extended to non-apparel exporters too.

CBC Dhaka Joint Commissioner Md Mashiur Rahman, ERF Secretary SM Rashidul Islam and Vice President Shahnewaz Karim also spoke at the programme.

Source: The Daily Star.