All players on the export front are not getting equal treatment in their access to the indirect incentives, though those regulatory facilities cost the government billions in the form of 'tax exemption.'
The government provides the export-oriented industries the regulatory incentives including bonded warehousing, duty drawback and credit support from the Export Development Fund (EDF) of the central bank at a cheap rate to boost their shipments.
But the people well versed in the discourse told the FE that the incentives given by the government failed to yield the optimum benefit due to lack of a level-playing field for all on the export front.
They said the modern warehousing automation standards and global best practices were not being followed in offering the incentives.
So, the facilities were often being abused or in the process of availing the benefits the exporters were often facing harassment, they observed.
They said the authorities needed to adopt measures to automate warehousing, replicating the world's best practices to ensure efficiency and prompt services.
The bonded warehousing system, launched in 1990s, has been serving as a "golden goose" to the readymade garment (RMG) sector since the inception.
The tax exemption for the bonded warehouse facility is equivalent to around Tk 500 billion (50,000 crore) a year, shows data of the Customs Bond Commissionerate.
It is an opportunity cost for the government, as it is missing out on the above amount of money because of putting the bonded warehouse facility in place.
With the RMG immensely benefited from the facility, now the experts advocate a similar facility for non-RMG products.
They say the bonded warehouse system is easy for the RMG exporters but too difficult for non-RMG manufacturers.
Currently as many as 3,977 active bonded warehouses are in operation in the country.
On the other hand, the Duty Exemption and Drawback Office (DEDO) provides on an average Tk 1.5 billion (150 crore) annually. The amount is reimbursed to the exporters against their payment of different duties including VAT.
The experts said the authorities should focus on faster and simple procedures to ensure quick and efficient management of the bonded warehouse and DEDO services and thus boost exports.
Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), cited the example of how Aqaba, a coastal city of Jordan, changed the investment landscape of the country.
The government turned the entire Aqaba town and its surroundings into a special economic zone with duty-free facilities and one-stop services on offer.
Dr Mansur said the government of Jordan announced it in 2001 and since then its significance as an economic base and tourist destination had grown rapidly.
"The special zone is serving as the catalyst for the recent large-scale expansion in Jordan," said Dr Mansur, who once worked as the "division chief" at the Middle-East office of the International Monetary Fund (IMF).
He said it provided all services through one-stop assistance covering all investment needs.
Dr Mansur suggested, "The government may turn Cox's Bazar into such a facility to ensure a hassle-free business environment which will help attract foreign direct investment (FDI) and boost exports."
When his attention was drawn to the abuse of the warehousing facility, Dr Mansur saw "no alternative but automation fully." "It will help detect everything, even the day's inventory will show….," he said.
China, the second largest economy in the world, also provides a number of direct and indirect incentives, as it has been creating a level-playing field for all market players, particularly since its accession to the World Trade Organisation (WTO).
It was providing cash incentives for innovation programmes to gear up exports, said Professor Liu Baocheng of the Centre for International Business Ethics at the University of International Business and Economics, Beijing, China, when contacted through e-mail.
Mr Baocheng, an economist, also said their government was encouraging formation of industrial clustres, primarily along the Chinese coastal regions, in the forms of Special Economic Zone, Hitech Development Zone and E-commerce Zone and lending support like infrastructure development and land concessions.
When asked for comments, PRI Chairman Dr Zaidi Sattar was critical of the slow trade facilitation programmes of the National Board of Revenue (NBR).
"NBR's over-emphasis on revenue rather than trade facilitation is acting as a severe constraint to export expansion," he commented.
The NBR also took charge of the tariff protection policy, which should be the domain of the Ministry of Commerce (MoC) or the Bangladesh Tariff Commission, he noted.
Dr Sattar said the leakage from bonded warehouses (very limited) occurred because of the unnecessarily high tariffs on textile products for decades.
"In this digital age, making Bonded System completely digitised will ensure proper monitoring of inputs and outputs (exports). Again, DEDO is a dysfunctional system…." Dr Sattar added.
Dr Masrur Reaz, a senior economist at the International Finance Corporation of the World Bank, told the FE that the DEDO was "weak" in terms of its automation.
He said the limited connectivity of its online services was leading to non-transparency of its activities.
It might be misused and the exporters might unnecessarily face hassles, he mentioned.
Dr Masrur favoured a regulatory incentive like the bonded warehouse facility to raise exports from other sectors.
"Look, the bonded warehouse is behind the success story of the RMG and it now stands at more than $30 billion in terms of shipments," he said.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) both are allowed to issue "UD" (utilisation declaration), which has facilitated the clothing industry significantly, he said.
Such a system offers two key benefits for exporters-low capital is required and the production cost is also lower, he mentioned.
Dr Masrur said the bonded warehousing was only theoretically available for the non-RMG sectors.
But practically, "it should be made available for all" to tap the export potentials, he suggested.
He said the bonded warehouse facility was partially automated and the leakage could be minimised by adopting end-to-end automation.
"I don't find any reasoning to discourage it on the back of leakage or misuse. Should I cut off my head, if there is a headache?"
Manzur Ahmed, an expert and former adviser of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) on WTO affairs, said, "We have suggested a single document of export documents to obtain the duty drawback."
Mr Ahmed, who was a member of SAARC Panel of Specialists for Dispute Settlement under SAFTA, said they also proposed a standard format for the DEDO which would be much more helpful for the exporters.
Additional Commissioner at the Customs Bond Commissionerate Dr Abu Nur Rashed Ahmed told the FE they had been working on full automation of the bonded warehouse system. "It will ease the services further."
When asked about the bias in favour of the RMG, Dr Ahmed said it was a matter of the government's policy. "We need policy directions to provide the same facilities to the non-RMG products."
Waheeda Rahman Choudhury, director general at the DEDO, told the FE that there were some incidents of "abuse" of the system partly due to involvement of dishonest employees of the department. She blamed the exporters for some other incidents of abuse.
To combat such abuse of the system, she said, the department was partially automated.
"Whereas the VAT system is not automated, for this reason we cannot automate our system significantly," she added.
