Fiscal Incentives :
Restructuring of the Export Credit Guarantee Scheme (ECGS): At present, there are four schemes, namely, the Export Credit Guarantee (Pre-shipment), Export Credit Guarantee (Post-shipment), Export Payment Risk Policy (Comprehensive Guarantee) and Whole Turnover Pre-shipment Finance Guarantee, available under the Export Credit Guarantee Scheme ( ECGS ) covering risks on export credit as well as probable commercial and political risks occurring abroad. These schemes, however , are becoming effective to the desired extent due to existence of various complications in realizing their benefits. To strengthen the role of the Export Credit Guarantee the schemes shall be restructured.
Convertibility of Taka :
Taka has been made convertible in the current account in lieu with the policy of export-led growth in the liberalized world market. As a result, earning from the trading account shall be freely convertible into foreign exchange for import of goods (barring a few banned items). Under this arrangement, exporters shall be allowed to retain their foreign exchange earnings in their respective foreign exchange accounts gradually at higher proportion.
Utilization of Foreign Exchange by Exporters :
So long exporters were allowed to retain 20% of their FOB earnings in their respective foreign currency accounts in US dollar or Pound Sterling. From now on they will be entitled to retain either 40% of such earning or at a rate fixed by the government from time to time on proper review. However, in cases of export products where the import contents used in the manufacture of such items are relatively high ( such as, naptha,furnace oil, bitumen and other petroleum products, readymade garments and electronic goods ) and in the case of export of services ( legal advice, consultancy and similar professional services ), the exporters concerned will be entitled to retain only 7.5% of their FOB export earnings. Immediately on realization of export proceeds, the concerned banks will credit the exporters' foreign currency account in proportion to their respective entitlements. Exporters may utilize this foreign exchange for bona fide business purposes, namely, undertaking business trips abroad, participating in export fairs and seminars, importing raw materials, machinaries and spares and even setting up overseas business offices. Foreign exchange may also be kept in the renewable fixed deposit account which will bear interest.
Export Promotion Fund ( EPF ) :
The following assistance and support would be provided out of the Export Promotion Fund to producers/exporters of new and non-traditional items including those under the crash programme for product development and product and market diversification:
(a) Venture capital on easy terms and low interest rates ;
(b) Assistance in obtaining foreign technology and consultancy for product development and diversification;
(c) Assistance in fielding marketing missions abroad and participating in international fairs for market compatibility of products;
(d) Assistance in Establishing Sales and Display Centres abroad and extending warehousing facilities ;
(e) Assistance for participation in overseas training programmes on product development and marketing help develop technical skill and marketing expertise ;
(f) Assistance in any other activity related to product and market development.
Extension of Time-limit for adjustment of Export Credit from 180 days to 270 days:
At present export credit is allowed at consessional rate of interest for a maximum period of 180 days. A section of exporters however cannot enjoy the benefit of such concessionary credit facility due to structural characteristics of certain commodities. Under such circumstances, the time-limit for repayment of export credit has been extended from 180 days to 270 days in case of export of frozen food, tea and leather by way of relaxing the condition of submission of firm contract/L.C. and considering working capital as export credit. The time limit for export credit under the Export Promotion Fund in certain cases shall be extended up to 270 days.
Export Financing:
(a) Introduction of Credit Card : In view of the risks involved in carrying of cash foreign exchange/traveller's cheque while undertaking business trip abroad, the practice of issuing credit cards to exporters against their respective foreign exchange entitlements will continue.
(b) Limit of Export Credit : Exporters may obtain export credit from commercial banks upto 90% of the value of their irrevocable letter of credit/confirmed contract.
(c) Credit to first time applicant : With a view to encouraging the new comers to enter into export trade the commercial banks will consider their credit proposals on a priority basis.
(d) Monitoring the Over-all flow of export credit :
Bangladesh Bank will take necessary steps to ensure that normal flow of export credit is maintained. The C.C. limit of the exporters will be determined only on the basis of their export performance in the preceding year. This will not be subject to any general credit squeeze measure. Such credit facilities will also be available to new contracts.
(e) Overdue interest : No overdue interest will be charged by the commercial banks in cases of export against irrevocable letter of credit on sight payment basis. In such cases, however, exporters will be required to submit necessary export documents within the specified time.
(f) Export credit cell : As special export cell to supervise and monitor the export financing has been functioning in Bangladesh Bank. Besides, in every commercial bank a special unit has been created for processing exclusive export credit proposals.
(g) Export monitoring : A high-powered committee has been functioning to assess the export credit requirement and to review and monitor the flow of export credit to ensure that adequate and timely credit are made available to the exporters.
(h) Inland back-to-back letter of credit : Authorised dealers may establish inland back-to-back letter of credit in favour of local suppliers of raw materials, against the corresponding master letter of credit.
Rebate on insurance premium:
Special rebates are allowed on premium covering fire and marine insurance to export-oriented industries (non-traditional items). Such rebates will be available also to the exporters of these items on shipment of goods.
Incentives for export of non-traditional industrial products :
Incentives will be provided for export of non-traditional/new industrial products, especially where value addition is 50% or more.
Similarly, export firms having exceeded the proportionate export target set for that product-sector will be considered for incentives facilities.
Import facilities of raw materials for export-oriented leather industries:
To encourage increase in productional export at competitive price of finished leather customs duty and import licence fee leviable on import of wet blue and pickled leather by export-oriented leather industries will be exempted.
Income tax rebate on export earnings :
Previously, 50% rebate on taxable income generated from export earning was admissible under the Finance Act every year. From now on 50% of the income tax on any income on export will be exempted through incorporation of a new provision in the Income Tax Ordinance itself rather than as a temporary relief hitherto granted under the Finance Acts on a yearly basis.
Lowering the rate of AIT at source :
Tax at source on all export earnings shall be deducted at the rate of 0.25%
Payment of duty drawback through commercial banks :
For quick disbursement of duty drawback with a view to giving a competitive edge to our export in the international market, payments will be made by the commercial banks immediately on receipt of foreign exchange against all exports except the deemed exports, determined on the basis of the principles laid down by the National Board of Revenue.
Bonding facilities for export-oriented industries :
Bonded warehouse facilities have generated special enthusiasm among the import-led export-oriented industries. To sustain such interest the procedures for providing bonded warehouse facilities to such industries will be further simplified, and will be extended to all industries recognised as 100% export-oriented industries.
Duty-free Import of capital machinery by export-oriented industries:
Presently, items produced in the Export Processing Zones (EPZ) are entirely exported. Likewise 100% export-oriented industries located elsewhere in the country are also required to export their produces entirely from this point of view as the objectives and functions of the industries of both locations are identical. Duty free import facility of capital machinery has also been extended to the 100% export oriented industies out side the EPZ.
Alternative facilities in lieu of customs bond or duty drawback for export-oriented domestic textile sector and garments industries:
During fiscal year 1995-96, the government, in an attempt to give incentive to the domestic textile and garments sector, allowed 25% compensatory assistance to the industries of this sector. In future also, these sectors will continue to receive reasonable facilities. Such compensatory assistance will also be admissible to a composite unit producing both fabric and garments or to the manufacturer only in case the exporter is not the producer of the local fabric provided no bonded warehouse or duty drawback facilities were availed of for such importation. If, however, the exporter is an intermediary buyer, the facility will go to the original producer of goods.
Tax holiday:
To encourage a rapid growth and attract entrepreneurs to export oriented industries tax holiday incentive will continue till the year 2000 in consonance with the Industrial Policy. The industrial enterprises enjoying the benefit of tax holiday shall be exempted from deduction of tax at source. After 2000, decision on tax holiday will be taken in the light of the government policy of that period.
Duty drawback scheme :
(a) Exporters of manufactured products are entitled to draw back after the export is effected. The amount of duties and taxes paid on importation of raw materials under any of the three systems, namely, actual drawback, notional drawback and flat rate drawback. However, as a simpler mechanism of getting drawback, the flat rate method shall continue to receive greater weightage.
(b) The rate of duty drawback payable on export of all traditional and non-traditional items will be renewed at regular intervals and more and more, new products will be brought under the duty drawback system.
Value Added Tax (VAT) on packaging materials:
Should jute clothes and bags be used in the packing of export goods VAT paid on such products will be refunded.
Simplification of the procedure for refund of VAT paid on export support services:
To maintain competitiveness of export prices, VAT paid on export support services, namely, C & F service, telephone, telex,fax, electricity, insurance premium, shipping agent's commission/bill will be refunded under a simplified procedure.
Permission for sale of goods rejected for exportation:
20% of the rejected goods of the 100% export-oriented industries including leather goods and readymade garments will be admissible for sale in the local market subject to payment of usual duties and taxes.