Bangladesh should urgently ratify two international compacts to protect the country's external trade interests, according to a latest research recommendation.
The trade-related international agreements are: UN Vienna Convention on Sale of Goods (CISG) and UNIDROIT Principles of International Commercial Contracts (UPICC).
The country is not a signatory and is yet to ratify the pacts, but its major trading partners like the United States, members of the EU, China are the signatory, the research paper pointed out, adding that it may pose risks to the country's external trade.
Bangladesh Institute of Bank Management (BIBM) organised a virtual workshop on Wednesday to share the findings of the draft research titled "Applicability and Legal Enforceability of Sales-Purchase Contract in International Trade Operations in Banks".
A research team led by BIBM Professor (Selection Grade) Dr. Shah Md. Ahsan Habib prepared the paper. A total of 32 banks (4 SCBs, 26 PCBs and 2 FCBs) responded to the questionnaire of a survey conducted under the research.
The paper pointed out that the Covid-19 pandemic has resulted in extensive devastation to the international trade, traders, and trade financing banks of Bangladesh.
It said that the vulnerability associated with the legal enforceability of purchase-sale contract was exposed on several occasions during the pandemic when importers had canceled the orders. As of March 2020, the global clothing brands and retailers canceled import orders worth US$ 1.40 billion from the country as the pandemic hit the businesses badly mostly in European and US markets, it said.
A total of 347 apparel exporters faced order cancellations worth US$ 927 million, and 220 knitwear exporters faced cancellations of work orders worth US$ 480 million.
Bangladesh lost roughly US$ 3.0 billion in export earnings amid cancellations/terminations of contracts/purchase orders that were initially estimated to be US$ 6.0 million.
Non-payment/non-performance and fraud cases are claimed to be relatively higher in case of back-to-back LCs opened against the contracts that have become concerning in the context of the Covid-19 crisis, it said.
According to the research paper, standardisation of sales-purchase contracts in the country's international trade transactions with certain clauses is an immediate necessity. It said that the alternative dispute resolution clauses can assure the parties that their disputes will be resolved through cost-effective and quick processes of arbitration or mediation rather than by litigation.
Ahmed Jamal, Chairman of BIBM Executive Committee and Deputy Governor of Bangladesh Bank, was present at the workshop as the chief guest.
Barkat-e-Khuda, PhD, Dr. Muzzafer Ahmed Chair Professor of BIBM and former Professor of Dhaka University; Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank Limited; Muhammad Qaisar Ali, Additional Managing Director of Islami Bank Bangladesh Limited; Imtiaz Uddin Ahmed, Deputy Managing Director of Shahjalal Islami Bank Limited; and Md. Moinul Huq, Director and Head - Treasury and Trade Solutions, Citibank N.A., Bangladesh took part in the discussion.
