EPB has identified five reasons
The Export Promotion Bureau (EPB) has identified at least five factors, including the classification of local sales by factories in export processing zones as exports, as potential explanations for the $12 billion mismatch between reported export proceeds and actual shipments in the last fiscal year.
According to rules, factories located in export zones can sell goods as raw materials to others with bonded warehouse facilities, and such transactions are considered deemed exports.
The other reasons include differing dollar rates at Sonali Bank and the Bangladesh Bank, short shipments, discounts imposed by buyers, foreign bank charges, and not excluding goods returned by buyers from the export portion.
A short shipment describes the absence, non-delivery, or incomplete fulfilment of cargo on a shipping list.
Not excluding products from the customs database after inclusion, especially when they are not actually exported, and the double counting of the goods are among the identified factors. Additionally, the inclusion of raw materials sent free of charge by buyers in export calculations is also assigned as a reason behind the difference in export data.
According to sources at EPB, these reasons have already been identified and forwarded to the commerce ministry. Based on this information, the ministry will prepare and publish a report.
EPB Vice Chairman AHM Ahsan told “We have tried to identify some of the reasons behind the non-repatriation of export proceeds which are being reported in various media.”
“If these calculations are considered, we believe that this significant gap will be substantially reduced,” he added.
Abdur Rahim Khan, additional secretary of the commerce ministry, said a committee was formed three months ago to investigate the reasons for the significant gap in exports and the repatriation of proceeds.
When asked about the EPB report on Sunday, he said, “We expect to complete the work of our committee within this week.”
According to EPB calculations, Bangladesh’s export of goods and services in the fiscal 2022-23 was $63 billion. However, according to the Bangladesh Bank’s report, the country received only $50.97 billion as export proceeds.
There is extensive discussion about the reasons behind such a substantial gap.
Some economists believe that exporters have smuggled a significant portion of the remaining proceeds or are deliberately withholding them, anticipating a higher rate in the local currency, especially as the dollar continues to appreciate.
It is especially owing to the foreign exchange reserve crisis in the country that economists view the substantial amount of export income not reaching the country as a major obstacle to easing the reserve crisis. According to Bangladesh Bank’s data from 18 December, the country’s total reserves, according to the IMF’s benchmark known as BPMA6, are $20 billion. However, a year ago, the figure stood at $34 billion, and in August 2021, it was $48 billion.
Sources at EPB said a meeting was held with exporters on 20 December to explore the reasons for such a significant gap in export proceeds. During the meeting, exporters requested EPB, the National Board of Revenue, Bangladesh Bank, and the commerce ministry to jointly investigate the underlying reasons.
Asked whether exporters are delaying proceeds in the hope of getting a higher dollar rate, an EPB official told, “We have not found any truth in such allegations.”
In the export letter of credit, it is specified within how many days the export proceeds should be brought back. Once that deadline passes, the Bangladesh Bank can easily identify any exceptions,” he explained.
Moreover, he disagreed with the allegations regarding the creation of such a gap due to money laundering in the name of exports, saying, “If someone wants to launder money, they will export under invoice. That account is not supposed to be included in the export.”
“As a result, there should not be a gap,” he continued.
Munir Hossain, vice president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), who also attended the meeting, told TBS, “Exporters are being blamed for the export proceeds gap, which is not correct. We have asked the EPB to investigate the exact cause and reveal it.
“If there is liability on the part of the exporter, it should be disclosed,” he added.
He said the major reason for the gap is that goods sold from inside EPZs to outside factories are paid within the country, yet they are counted as exports.
He said this amount could be as much as $5 billion. However, according to EPB’s calculations, in the fiscal 2022-23, the amount is $1.7 billion. Nevertheless, other sources at EPB said the gap’s total amount has not been calculated yet due to various reasons.