Policies ( Trade Policy )

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Investment and Trade Policies

Industrial Policy

Clear and well-defined economic policies have recently been formulated. The basic premise of these policies is to bring about socio-economic emancipation of the masses and self-reliance through involvement of the people in productive activities. The current Industrial Policy has been formulated in conformity with this basic philosophy.

The main aim of the new Industrial Policy is to solve the existing problems of industrial growth. The Industrial Policy bas paved the way for rapid expansion of the existing private sector and for its transformation into a more competitive market economy. For this purpose regulatory complications and controls have been reduced to a minimum. The important features of the new Policy are as follows :

· No approval or permission or no-objection certificate is required for establishing an industry in the free sectors with own sourcc of financing.

· No approval is also required either for credit or for projects involving foreign loan/credit in which down payment is less than 10 percent and repayment period exceeds 7 years.

· There is no limitation in respect of foreign equity holding (i.e. 100% of the equity can be owned by a foreign investor).

· A unit has to register with its sponsoring agencies for the purpose of availing institutional and infrastructure services and for monitoring.

Except the 5 sectors reserved for public undertaking, all other sectors have been kept open for private investment, both local and foreign. These reserve sectors are as follows :

· arms, ammunition and other defence equipment and machinery
· production of nuclear energy
· forest plantation and machanized extraction within the bounds of reserved forests;
· security printing (currency notes) and minting
· air transportation and railways

All sectors except the reserve sectors are open to investment by private entrepreneurs. Air transportation to certain specified areas within Bangladesh has also recently been opened to private investment. To protect environment, public health and national interest the government may frame rules from time to time for certain industries, and such industries can be established in the private sector, subject to these rules.

In the new Industrial Policy, the role of the private sector has been recognized as predominant. Except for 5 reserve sectors, private investment has been kept open without any ceiling, and registration is automatic. Private investment, both local and foreign or based on joint venture between local and foreign or with public sector, is allowed.

One of the major goals of the present Industrial Policy is to increase industrial efficiency and productivity by transferring government owned industries to the private sector. With this end in view, the present process of privatization has been strengthened Recognizing the importance and impact of privatization, the government has constituted a Privatization Board to gradually transfer government owned enterprises to the private sector, and thereby further strengthen and widen its role in the national economy.

Foreign Investment

Private investment from overseas sources is welcome in all areas of the economy with the exception of only reserved industrial sectors mentioned earlier. Such investments can be made either independently or through joint venture on mutually beneficial terms and conditions. In other words, 100 percent foreign investment as well as joint ventures with local private sponsors or with the public sector are allowed. Foreign investment is, however, specially desirable in thc following areas :

· Export-oriented industries

· Industries in the export processing zones

· High technology products which are either import-substitutes or export oriented

· Undertakings in which more diversified use of indigenous natural resources are possible

· Basic industries, depending mainly on local raw materials

· Investment towards improvements in quality and marketing of goods manufactured and or increase of production capacities of existing industries

· Labour intensive/technology intensive/capital intensive industries

Trade Liberalization

The government has steadily liberalized its trade regime and significant progress has been achieved during 1992-93 in reducing non-tariff restrictions on trade, rationalizing tariff rfltes and improving export incentives.

The phased programme of replacing direct control over trade by appropriate tariffs is at the final stage of its implementation. The number of products subject to import ban has been progressively reduced over the past 3 years. In terms of 4 digit Harmonized System Classification, only 93 items remain banned or restricted on security, health, social and religious grounds. Along with removal of non-tariff restrictions on import, procedures have also been streamlined and simplified.

In order to augment the meagre resource-base of domestic industries, low duty rates on import of primary raw materials, moderate rates on intermediate products and high rates on luxury products are being imposed. As a part of the on-going tariff reforms, customs duty rates above 100% have been reduced to 75% or below in most cases. Only a few products have a duty rate of 100% and 4 categories of luxury items attract higher rates than that. The introduction of VAT in the country has also gone a long way in rationalizing the import tariff and domestic tax structure.

The present structure of tariffs and the import policy are being regularly reviewed by the government to identify areas where further actions are called for. A National Tariff Commission was established in November 1992 to examine, inter alia, the various anomalies in customs duty structure. The Tariff Commission is to devise a plan to compress the tariff rates further leading to the evolution of a nominal maximum rate of 50 percent in 1993-94. Along with the programme of rationalization of tariffs that continues to limit or remove anti-export bias, the government has allowed many new incentives and improved the existing wide array of export incentives. In order to boost and co-ordinate export development over the medium term, the government has adopted the Bangladesh Export Development Strategy, 1992-2000.

At present no permission of any agency or passbook is required for import of free list items. For restricted items in the Control List (CL), the sponsors, Board of Investment (BOI), Bangladesh Small and Cottage Industries Corporation (BSCIC) and Bangladesh Export Processing Zones Authority (BEPZA) will be responsible for issuing import entitlements. The passbooks for import of restricted items on the Control List will be issued to the entrepreneurs within 30 days of receiving the applications. Similarly, Import Registration Certificate (IRC) will be issued by the concerned authorities in favour of the industrial enterprises within 30 days of receiving applications.