Executive Summary

Introduction
Trade is an integral part of the total developmental effort and national growth of all economies including Bangladesh. It particularly plays a central role in the development plan of Bangladesh where foreign exchange scarcity constitutes a critical bottleneck. Export trade can largely meet foreign exchange gap, and export growth would increase the import capacity of the country that, in turn, would increase industrialization, as well as overall economic activities. Foreign trade is of vital importance to the economic development of Bangladesh. In the early years after independence in 1971, Bangladesh embarked on an inward-oriented development strategy. Accordingly, higher tariffs and quota were imposed on imports. This in turn created an anti-export bias within Bangladesh economy. However, since 1980s the policy regime shifted toward export-promotion from import substitution. Tariff rates were reduced and quotas were also abolished gradually. Industrial and trade policy were focused to promote export. Financial incentives are provided, in the form of tax exemption, on exportable commodities. Exclusive Export Processing Zones (EPZ) are established to attract foreign direct investment and export promotion. Foreign firms, investing in EPZs, get special preference and tax exemption facilities. The country has also experienced a change in its export composition- from primary commodities to manufacturing goods (Love and Chandra, 2005). Bangladesh exported more than 50 percent of its total exports to EU in 2002-03 and this regions imports from Bangladesh have been continuously increasing over the years. The American region, Asian region and the Middle East occupy the second, third and fourth positions respectively for the direction of Bangladeshs exports.

Export Policy
For export promotion and development Bangladesh has been pursuing periodic Export Policy from 1980. Ongoing Export Policy is for the period 2009-2012. These policies are consistent with the agreement under Uruguay Round Accord, WTO and the principles of market economy. These are also maintaining favorable balance between exports and imports of the country. The Export Policy 2009-12 has underscored the need for expanding export, increasing the productivity of export-oriented industries and facilitating the overall development of the export sector through capacity building of local export-oriented industries.

Title, Objectives, Strategies, Application and Scope

Objectives

The objectives would be updating and liberalizing the trade regime in accordance with the needs and requirements of the World Trade Organization and globalization. To encourage labor-intensive (especially female labor) export-oriented production. Also to ensure availability of raw materials for manufacturing export goods. It also states the importance of improving the qualities of products, and increase diversity of product. The use of modern, appropriate and environment-friendly technology, producing high-end products, and improving the design of the products also some of the objectives. Beside concentrating on products its also important to Enhance efficiency and dynamism by using e-Commerce and e-Governance. Initiating new strategies for the expansion of the markets for export products, making proper utilization of computer technology and encouraging all modern technologies including e-Commerce. The changes will surely assist the development of necessary infrastructure, particularly for backward and forward linkages in order to encourage the production of exportable goods. Another most important goal will be to assist the development of a skilled labor-force through proper training for managing international trade; and providing adequate guidance to trade bodies, business organizations, business people and related individuals in understanding the changing international trading system, etc.
Strategies

The strategies set by the export policies are to Increase the institutional skills and efficiency of the Export Promotion Bureau (EPB), providing assistance in capacity building of the Customs Authorities, sea and land port authorities, Department of Fisheries, BSTI, Tea Board and different trade bodies. Also to Modernize Bangladesh Foreign Missions abroad by strengthening economic diplomacy and expanding the Product based Business Promotion Council activities through joint initiatives of public and private sectors to encourage the production and export of potential goods. To collect market intelligence information on the demands for commodities abroad, expanding markets, attaining competitive and higher price, etc. the government also help to provide assistance. To facilitate diversification of exports they are going to disseminate latest information and technologies. Even they are going to Create training opportunities and establishing sector-specific training institutes for workers, staff and management personnel to increase productivity. The increased institutional facilities including trading and export houses will also play an important role to increase export. Continuous watch over the trade, will help in identifying the problems related to export and recommending possible remedies by the Export Monitoring Committee headed by the Vice-Chairman of the Export Promotion Bureau and represented by the private sector including FBCCI.

Application and Scope Unless otherwise stated, the Export Policy 2009-12 shall be applicable to exports of all types of goods and services from Bangladesh. The Export Policy 2009-12, which is the latest policy became effective from the date of its publication in the Bangladesh Gazette, and shall remain in

force until June 30, 2012. However, this Export Policy shall remain effective until the next Export Policy is issued. This policies are applicable to all places in Bangladesh except the Export Processing Zones (EPZs). Any tax/ tariff related decision declared in the National Budget or by the National Board of Revenue shall prevail over the Export Policy.Though the policies are set for four years, the Government reviews the Export Policy at least once a year, and has the authority to make any modification, expansion or amendment, if required.

Steps toward Export Diversification

Few major steps toward export diversification are explained in the Export Policy 2009-2012. The diversification also helps in the development in export trade. Formation of Product and Service specific Business Promotion Councils: Ministry of Commerce has formed Several sector/ product and service specific Business Promotion Councils as a joint initiative of the government and the private sector within the scope of the Company Act 1994 for diversifying export, improving and ensuring the quality of products, acquiring appropriate technologies, fulfilling compliance requirements, marketing of products etc. Necessary initiatives will be taken under the Export Policy 2009-12 to strengthen and organize the activities of these Councils as well as to encourage the formation of more such Councils. Classification of Product and Service Sectors Some products sectors will be identified as highest priority sectors while some others will be identified as special development sectors depending on the level of production and supply, potential contribution to the export sector, demand in the international market and above all the capacity to contribute to the socio-economic development. The government will regularly modify this list, and provide special privileges to encourage the export of these products. Highest Priority Sectors Highest priority sectors will refer to those product-sectors which have special export potentials, but such potentials could not be utilized properly due to certain constraints, and more success is attainable if adequate support is rendered to them. These are Agro-products and agro-processed products, Light engineering products (including auto-parts and bicycles), Footwear and leather products, Pharmaceutical products, Software and ICT products, Home textile; The Sea-bound Ship Building Industries and Toiletries Products. Special Development Sectors
Product sectors which have export potentials but whose production, supply and export base are not consolidated will be included in special development sectors to strengthen their export base. These are crushed and finished leather production; frozen fish production and processing; handicrafts; electric

and electronic products; fresh flower and foliage; jute and jute products; hand-woven textiles from hilly areas (pahari taat bostro);uncut diamond; producing herbal plants, medicine and medicinal products; ceramic products and melamine; plastic products; and furniture industries.

Inter-Sector Project for Product Diversification Inter-sector projects are planned to be initiated with an objective to facilitate diversification of products. Under the projects, issues such as bond system, duty draw-back, subsidies etc. will be reviewed to keep export price at a competitive level. Similarly, the project will assess and take necessary steps regarding issues such as product development and market expansion , trade cooperation and infrastructural constraints hindering export trade.

General Export Facilities

Some facilities that the country can gain are explained in the Export Policy 2009-2011. Use of Foreign Exchange Earned from Export Exporters can retain a certain amount of their export earning in their foreign currency account under retention quota, the amount of the retention to be fixed by Bangladesh Bank from time to time. Exporters can use this foreign currency for real business purposes such as businessrelated foreign trips, participation in export fairs and seminars abroad,importing raw materials, equipment or spare parts, and setting up offices abroad.

Export Promotion Fund Export Promotion Fund (EPF) with EPB. Followings are some of the major facilities, which are mentioned to be available from this fund: 1. Providing venture capital at lower interest rates and with soft terms for production of goods 2. Assisting the producers/ exporters to receive foreign technical assistance, service and technology for development and diversification of products; 3. Supporting exporters to send marketing missions abroad and participate in international trade fairs; 4. Assisting exporters, if possible, to set up sales and display centers as well as warehouse facilities abroad; 5. Supporting exporters to participate in training programs abroad on product development and marketing, so as to enable them to improve their technical and marketing skills;

and 6. Providing assistance in other activities related to development and expansion of products and services. Other Financial Facilities 1. The possibility of providing tax exemption and subsidy in service sectors such as electricity, water and gas, instead of cash benefits, will be examined; 2. Initiatives will be taken to develop necessary infrastructure to ensure uninterrupted supply of electricity, gas and water for all export-oriented industries on priority basis; 3. In accordance with the provisions of WTO, cash incentives may be provided to potential export-oriented emerging sectors (i.e. the sectors which are capable of making products having demand in international market). Incentives for Export of Non-traditional Industrial Products: 1. Incentives will be given to the export of non-traditional and new industrial products having at least 40% value addition during the first two years, and at least 50% value addition thenceforth 2. Fire and shipping insurance will be fixed at a concessionary rate for export-oriented industries.

Bond Facilities for Export Oriented Industries:

The National Board of Revenue will consider the possibility of providing bonded warehouse facilities to import-dependent export industries. Especially, the Board will examine whether bonded warehouse facilities can be extended to all export oriented industries. Besides, providing of additional bonded warehouse facilities to trading houses and export houses under certain conditions will be examined. Providing alternative incentives, instead of duty bond or duty draw-back to exportoriented local textiles and readymade garment industries. Government may provide subsidies (cash incentives) as alternative incentives instead of duty bond or duty draw-back to export-oriented local textiles and readymade garment industries the rate of incentive to be decided by the government. This incentive may be extended to other sectors too. Easing VAT return on Export-facilitating Services Simplified procedures will be put in place for the withdrawal of paid VAT on export facilitating services such as C&F services, telephone, telex, fax, electricity, insurance premium and shipping agent commission/ bill.

Encouragement and Facilities for Exports Based on Sub-Contracting: An institution can spend, before acquiring the actual work order, a maximum of US$ 10,000 for communication, sending representatives, traveling abroad, purchase of tender documents etc. An authorization from Bangladesh Bank will be required if more foreign currency expenditure is needed; Permission will be given for establishing offices and recruiting officials abroad. Individual professional guarantee/ insurance will be provided by Saharan Bema Corporation in favor of project specialists. Foreign Trade Related Training Bangladesh Foreign Trade Institute has been established for providing training on foreign trade. Adequate numbers of workshops and seminars will be arranged on different trade related issues, especially on WTO issues through this Institute. Strengthening Export Related Training: The Export Promotion Bureau will organize trainings, seminars and workshops in different parts of the country to inform the exporters of the rules and regulations regarding exports. Shipment of Products: Initiatives will be taken to simplify shipment/ transportation of products. Government will provide necessary support if any exporter wants to charter an aircraft. The best use of modern technology and automation system including one stop service will be ensured in order to expedite customs related services for releasing imports and exports. Establishment of Management Information System (MIS): All officials of the Ministry have already been provided with computers and internet facilities. The Ministry of Commerce has taken initiatives to put in place a National Trade Portal to be connected to all business and trade related websites. Facilities for Deemed Exports: Deemed exporters, like direct exporters, will enjoy all export facilities including duty-drawback. Local raw materials used for producing exports and local raw materials used in industries/ projects funded by foreign investments will be considered as "deemed export.

Export Control and Restriction

Restrictions:
The rules and regulation of imports and exports are controlled by the Ministry of Commerce of the Government of Bangladesh under The Imports and Exports (Control), Act 1950. This at is

followed and controlled by the Chief Controller of Imports & Exports (CCI&E). On the other hand, any tariff/tax related issues are determined by the National Board of Revenue (NBR), an entity under the Ministry of Finance. Bangladesh Customs, a department of NBR, is the enforcement agency of the export Policy. Import: Being an import based Country, Bangladesh has to import lots of things. But even Bangladesh restricts certain product to be imported. There were a number of items that were banned from the import list. Also there was a certain need for import license for goods to be imported. But recently the government has reduced some of the restriction by allowing some of the banned item to be imported and also eliminated the need for import licenses. Nevertheless, some products like certain maps, obscene materials, socially or religiously offensive items, all type of wastes, and substandard or rejected goods are still on the ban list. Also Bangladesh doesnt allow imports from South Africa and Israel. Now Bangladesh has a rule of issuing pass books for import. And it has to be authorized by valid person and time. This pass books are valid for one year only. This is a formality only for commercial items not on the ban or controlled list.

Export: The rules and regulation for exports for Bangladesh same as that of import. But it has a different ban and restricted item list. Like live animal, animal hides, frogs, onion, human skeleton and blood related matters, archeological relics etc are on the ban list. And the controlled items are urea fertilizer produced in any factory except Karnafully Fertilizer Company (KAFCO) and any entertainment, drama, documentary programs that can be exported through audio cassettes, video cassettes, CDs, DVDs etc.

Bangladesh Export and Import: Commodities

Bangladesh Exports: Commodities Here are the major export commodities of Bangladesh:

Garments Frozen fish and seafood Jute and jute goods Leather

Bangladesh Imports: Commodities

Here are the major import commodities of Bangladesh:

Machinery and equipment Chemicals Iron and steel Textiles Foodstuffs Petroleum products Cement

Market Share
Import: Here are 5 major countries Bangladesh imports from. 1. China 2. India 4.632,3(Euro) 2.457,1 1.731,9 1.359,6 942,5 22,9%(share of the total imports) 12,2% 8,6% 6,7% 4,7%

3. EU271

4. 5.

Singapore Malaysia

From the above it is clear that China is our biggest importer having the 22.9% of the share.
1

EU27: European Union-27 countries

Export: The major countries receiving exports from Bangladesh are

1. EU27 2. United States

5.905,3(Euro) 43,8%(share of the total exports) 2.989,3 571,0 554,0 231,1 22,2% 4,2% 4,1% 1,7%

3. Canada 4. Turkey 5. India

As showed above, Europe is the main export receiver country as a whole. But on the other hand USA is the largest importer from Bangladesh as a state whereas EU27 is a union of countries.

Trade:
Below are the overall major trade countries of Bangladesh.
1. EU27

7.637,1(Euro) 4.816,2 3.450,8 2.688,2 1.401,7

22,7%(share of the total trades) 14,3% 10,2% 8,0% 4,2%

2. China
3. United States

4. India
5. Singapore

This is shows these countries have both in and out trade with Bangladesh.

Problems in Bangladesh trade

The biggest problem regarding trade of Bangladesh is the corruption. That is some of the exporter with no principles are taking chance of Bangladeshs liberal trade policy. Some illegal practice like showing the amount more than actually exported is done often. Another problem is paper forgery by certain countries. There are some countries called the Most Favored Nation (MFN) who enjoy the duty benefits and the falsification of documents. It shows the origin that is production of a certain goods is elsewhere rather than the actual place. It means to make the wrong use of the rule of origin.

Again, there are weak infrastructure and limited capacity to enforce IPR regulation and rules on standardization. This standardization is supposed to protect customer from having substandard and/or counterfeit products. Now the problem is the authority does not have enough facility to test either the standard or the origin. Also, our biggest importer china has proven to be selling below standard and health hazardous product to us in some cases. A very recent example is the powder milk for babies. Other problems are tax, inflation, low work ethics, policy instability etc.

Constraints face by the exporters of Bangladesh

1. Lack of finance is identified as a major constraint.

Small and medium sized exporters are found to be more severely affected by this constraint. Infrastructural constraint is perhaps the most serious bottleneck to expansion of export and investment augmenting activities in Bangladesh.

2. Govt. rules and regulations pertaining to exports complicated and too much paper work is needed.

are

Senior managements valuable time is spent with govt. officials over interpretation and changes in laws and regulations.

3. Exporters are required to pay extra money to customs officials for

getting their export consignments checked.

Payment is also to be made to port officials, power personnel, telephone service and airport personnel.

4. Bribe is also required to be paid to other service personnel.

The cost of doing business is very high. Absence of skilled manpower is felt in sectors like RMG, leather, electronics, data entry and information technology.

5. Most of the enterprises in Bangladesh have neither the in-house

capacity to gather necessary trade information nor the networking facility to access information.

Market access issues are becoming increasingly complex and diversified. Bangladeshs access to EU market was jeopardized on ecological and environmental requirements. Environmental conditionality will continue to pose serious problem to our exporters over time.

Export-led Growth in Bangladesh: A Time Series Analysis According to Economics

DATA, METHODOLOGY AND EMPIRICAL RESULTS Unit Root Test Engle-Granger Cointegration Test Error-Correction Model and Granger Causality

CONCLUDING REMARKS In this paper we examine time series evidence of export-led growth in Bangladesh. While the analysis suggests that there is a positive long-run equilibrium relationship between exports and industrial production. Furthermore, the long-run causality seems to run from exports to industrial production. (Ref: Khawaja Abdullah Al Mamun* Hiranya K Nath, research paper,details in attachment)

FIG: GDP growth rate through exports in BD The global recession caused a drop in retail sales in Bangladeshs main export destinations. During the period May-July of FY10, exports of readymade garments to the US and Germany the two largest export markets declined by 4.1% and 7.9% respectively.

Recommendation
Recommendation for New Exporters in Bangladesh:
Anyone with a product or service can export, or at least attempt to export. But success is far from guaranteed. At the best of times exporting can be a complex and challenging process. Yet, when it is approached with careful deliberation, exporting can be a rewarding growth strategy for any business. Here are ten key steps to take export efforts from start to success:

1. Make a commitment to exporting The Bangladesh Foreign Trade Institute (BFTI)(available online) is designed to help exporters assess their strengths, weaknesses, objectives and possible strategies as they explore opportunities in foreign markets. It also helps exporters identify their priorities as they prepare to export.

2. Plan This is a source of direction as one enters into foreign markets. An export plan helps to act rather than react to the challenges and risks encountered in international business. And in addition it helps to implement export strategy, it can also help to obtain financial assistance, investors or other strategic partners required to make ones export venture a success.

An export plan comprises many elements a description of ones company, its market and industry, and business objectives; information on your products or services; an analysis of the target market and industry, including trends and forecasts; an examination of the competition and their strengths and weaknesses in contrast to ones; international marketing strategies, inclu ding customer profiling and

the development of sales and distribution channels; employment and training issues; financial requirements and forecasts; and much more.

3. Conduct research to find the right market. Ultimately, market research saves time, money and effort by reducing exposure to unknowns.

There are two main types of market research.

Secondary market research consists of information collection from published sources

(books, newspapers, market reports, studies, and periodicals) and the Internet. For example, the Exporters section of the Canada Border Services Agency website is one of the best sources of secondary information for exporters
Primary market research helps to fill in the critical gaps through direct contact with

key experts, customers or other sources of information. Primary research frequently involves personal contact techniques such as interviews and consultations.

4. Devise marketing strategies for your target market. The basic marketing formula the four Ps of product, price, promotion and place is just the beginning when it comes to international marketing. The plan will need to address many other factors, such as payment (international transactions and currency exchanges), paperwork (increased documentation), practices (different cultural, social and business styles), partnerships (strategic alliances to strengthen your market presence) and protection (increased risks relating to payment, intellectual property or travel) and many more.

5. Enter the market. When the research is complete and the export and marketing plans have been devised. The next step would be to enter the market. Direct exports, as the name implies, involve direct marketing and selling to the client. In a reasonably accessible market such as the United States, direct exporting of products or services may be a viable option. But in less familiar markets, with different legal and regulatory environments, business practices, customs and preferences, direct exporting may not be an option.

There are as many market entry strategies as there are markets; however, these strategies can be loosely grouped into three categories.

Direct exports, as the name implies, involve direct marketing and selling to the client. In a reasonably accessible market such as the United States, direct exporting of products or services may be a viable option. But in less familiar markets, with different legal and regulatory environments, business practices, customs and preferences, direct exporting may not be an option.

Indirect exporting is frequently used to enter new markets. Businesses selling products enter into an agreement with an agent, distributor or a trading house for the purpose of selling (or marketing and selling) the products in the target market. Due diligence is critical when selecting an agent or distributor for indirect exporting.

The third market entry strategy involves strategic partnerships with other companies or individuals with complementary skills and capabilities. A partner can often provide the insight, contacts and expertise that fills the gap in your export readiness. A strategic alliance with a company selling a complementary product or service can provide more effective market access, resulting in more foreign sales in less time. As with indirect exporting relationships, contractual agreements with partners must be stated in clear terms.

6. Get product or service to market. Product-based businesses with shipping requirements will benefit from developing a relationship with a freight forwarding company and a customs broker.

7. Explore financing options. While there are overnight export success stories, most companies must be prepared to invest both time and financial resources to see the return on their investment and the subsequent success. Consequently, financial stability and a secure cash flow are important during this period. 1. In some cases, businesses can rely on their domestic sales to sustain their early export efforts. If this is not possible, it is a good idea to know what financing options are available.

2. Exporters must develop a financial plan to understand and address the diverse costs associated with exporting, complete with a two- to three-year cash budget to cover expenses and a capital budget.
3. A capital budget is a cost-benefit assessment of your export objectives and serves as

operating plan for measuring expenditures and revenues.

8. Understand the legal and regulatory issues. There are numerous international conventions, treaties and national, regional and municipal rules that can affect exporters ability to operate successfully in foreign markets.

9. Put it into practice. This would be implementing all the steps that were discussed above. Implementing the steps would ensure betterment in export trade of the companies in Bangladesh.

10. Let Bangladesh Foreign Trade Institute (BFTI) help along the way. Bangladesh Foreign Trade Institute (BFTI) is committed to helping businesses across the country thrive in global markets by offering comprehensive export information and services. These tools are designed to help both experienced exporters and potential exporters plan and implement their international business ventures from start to success. Develop export markets for creative goods

Recommendation for Bangladesh government- "The Creative Economy"

Bangladesh classified creative industries into four large groups including heritage, arts, media and Functional creations.

Fifteen creative industries covering arts to the wider fields of science and technology comprise the creative economy, according to John Hawkinss book "The Creative Economy". "Development of brands, new markets and new products all these targets should be well articulated. Specialists should be in charge of quality control for exportable creative products in order to respond to the requirements of major markets," it suggested.

The report cited a number of East Asian countries, which are implementing outward-looking strategy for their domestic creative industries, and that actively target foreign direct investments and export markets in addition to local markets for creative products. Several major Asia Pacific economies including India, Indonesia, Malaysia, Philippines, Republic of Korea, Thailand and Vietnam have much activities related to the creative economy as well as a strategic interest in creative-industry development. Bangladesh can do the same. Apart from the development of export markets, the report identified other critical areas where developing countries like Bangladesh need new policy initiatives to boost their creative economies. These are the provision of infrastructure, the provision of finance and investment, the creation of institutional mechanisms, an appropriate regulatory framework, the establishment of creative clusters and a mechanism for effective data-collection measures and analysis. "As with any other industry, the creative industries need affordable access to appropriate space in which to work and to live, transportation and distribution facilities," it said. Wooden Crafts, handy crafts (made by jute), Handy Crafts &Saree, Jute Crafts, Wooden Craft, Nakshi Katha [hand stitch] embroidery crafts, Bamboo Craft Bangladeshi can be given more importance according to our suggestion. Here are some figures of crafts in BD:

Fig 1: Bamboo crafts

Fig 2: Handi Crafts

Fig 3: Jute crafts

Fig 4:Nakshi Katha

National Crafts Council of Bangladesh has the aim to promote, and develop art of craft making in the Bangladesh region. All the small Craft associations like National Crafts Council of Bangladesh, Bangladesh Craft and Giftware Exporters Association, Bangladesh Handicrafts Manufacturers' & Exporters Association, Bangladesh Jute Association, Bangladesh Jewelry Manufacturers & Exporters Association, Bangladesh Ceramic ware Manufacturers Association can be integrated together under this council to achieve the goal.