Entrepreneurs will need to increase their capacity by 10% to cope with the increased pressure of taxes after Bangladesh’s graduation from LDC status
The cost of transporting goods from Dhaka to Chattogram is higher than a comparable distance in any other country in the world. The prices of land, gas and electricity are also higher in Bangladesh compared to its competing countries. Moreover, the tax burden on honest entrepreneurs is high here due to structural inefficiency.
Entrepreneurs feel these issues will emerge as major obstacles to raising the industrial sector's ability to cope with the impact of taxes on exports following Bangladesh's graduation from the list of least developed countries (LDCs).
They mentioned the European Union – the largest market for Bangladeshi products – would impose a 9.9% tariff on 90% of Bangladeshi products after the country's LDC graduation. Meanwhile, Canada will impose a 17%, China a 16.2%, India an 8.61%, and Japan an 8.71% tariff on Bangladeshi goods.
As a result, Bangladesh's export earnings will decrease by 14%, they maintained.
Entrepreneurs will need to increase their capacity by 10% to cope with this pressure, but there is not enough initiative in this regard, they observed.
All these issues came up in a joint webinar organised by the International Business Forum of Bangladesh (IBFB) and Bangladesh Enterprise Institute (BEI) on Saturday.
Salman F Rahman, private industry and investment adviser to the prime minister, was the chief guest at the event titled "LDC Graduation by 2024 and the Readiness of Bangladesh".
Mentioning that Bangladesh lags behind in country branding, he said the government should go for massive publicity through the global media to let the world know about the current investment climate in the country. He also proposed creating a fund of $400 million in this regard and asked the private sector to contribute to this fund.
The country's graduation from the LDC status is a matter of pride for the nation. The graduation will usher in a lot of opportunities but will also bring in some challenges, he pointed out, adding that the government and businesses must prepare to make the best use of the opportunities as well as to overcome the challenges effectively.
"The government is upgrading the infrastructure of the country to cope with the challenges after the country's LDC graduation. The transportation sector is improving with the implementation of some mega projects. Matarbari Deep Seaport will bring revolutionary changes in foreign trade," he said.
Dr MA Razzaque, research director of the Policy Research Institute of Bangladesh (PRI), presented the keynote paper at the event.
He pointed out that losses in trade will be the main concern for Bangladesh after its graduation from LDC status as about 75% of exports from the country are in the markets where it receives LDC facilities.
The European Union (EU) will impose an eight to 9.9% tariff on 91.52% of export products from Bangladesh, he said – adding that countries like Canada, China, India, and Japan also will impose a significant amount of taxes.
Sayed Nasim Manzur, former president of the Metropolitan Chamber of Commerce and Industries (MCCI), said entrepreneurs in Bangladesh's competing countries have access to land, power and energy at a lower cost, whereas infrastructure constraints are reducing the competitiveness of Bangladeshi entrepreneurs.
Referring to the high costs of transportation of goods, high prices of land, power and energy, he said, "How could exporters increase their competitiveness by 10% to cope with post-LDC graduation challenges?"
He also said the government has a provision to ensure reforms in the taxation system and in the exchange rate. Utilising the huge reserves of the foreign currencies, the central bank could devalue the taka without any risk of inflation, he added.
Fazlul Haque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said Bangladesh may lose a huge amount due to lower levels of negotiation.
The garment sector is losing about 5% of its product value due to shortcomings in negotiation.
Dr Monzur Hossain, research director at the Bangladesh Institute of Development Studies (BIDS) said, "After Bangladesh's graduation from the list of LDCs, local industries will face more competition from manufacturers in other countries. We should build internal and external capacity to deal with this challenge."
Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said the government should start negotiations now with other countries and international forums for the continuation of the facilities it is currently enjoying as an LDC.
He also suggested the government start discussions with other countries to sign free trade agreements.
Md Hafizur Rahman, director general of the WTO Cell, the Ministry of Commerce, said the government is very confident that Bangladesh will meet all of the conditions in the next triennial review in 2021.
"As Bangladesh is leading the group of LDCs, we demanded an extension of some selected facilities for 12 years after graduation, and all of the current facilities for 10 years," he added.
Humayun Rashid, president of the IBFB chaired the event while Farooq Sobhan, distinguished fellow at the BEI was the moderator.