EXTERNAL trade costs, the costs incurred in trading in goods and services internationally in addition to the price for which producers sell the goods and services, are significantly high. They are also higher than such costs in India, Malaysia, Vietnam and Singapore. Such high costs of external trade — which cover the cost of transport, taxes, infrastructure, communications, foreign exchange, insurance, customs clearance and trade documentation — work as a curb on import and export. A former Trade and Tariff Commission member, who delivered the keynote speech at a seminar on ‘reforms in customs, income tax and value-added tax management to address LDC graduation challenges’ that the Economic Relations Division organised in the National Economic Council conference room in Dhaka on January 27, blamed delayed customs clearance, lack of competence and improper logistic services and poor trade and transport infrastructure for the high external trade costs, noting that the overall export could increase by 7.4 per cent if the time needed for customs clearance would be cut by a day and the easing of customs procedures could boost the competitive domestic products by at least 5 per cent. The finance adviser who attended the seminar as chief guest, therefore, calls for an increased competitiveness of domestic trade before the graduation of Bangladesh from one of the least developed countries to a developing country in November 2026.
The graduation will come without duty- and quota-free access to some major export markets, which is why it is imperative to increase the efficiency of all the agencies involved to cut down on the high external trade costs as a leverage against the loss of entitlements. The government would also need to phase out subsidy on export products. All this makes reforms in tax measures, value-added tax management and customs procedures imperative. Representatives from the private sector who attended the seminar put out a call for the deferral of the graduation by a few more years so that the country gets some time to prepare for the challenges that would be forthcoming. They, perhaps, believe that the graduation, for which Bangladesh qualified for in 2021 and was initially set to take place in 2024 but was deferred by two years on a government request, could be further deferred to prepare to fully reap the benefits of the graduation. A further deferral could hardly be an option as it would mean the deferral of the graduation entitlements. And, it would also mean that Bangladesh has not made the preparation all these years. The adviser calls for an increase in the competitiveness of the local business before the graduation by also maintaining labour and environmental compliance, putting out a call for the private sector to be proactive along with the government in meeting the graduation challenges and effectively implementing the transition strategy adopted in November 2024, which could also be reviewed in the changed political context.
It is already time that the government, along with the private sector, took steps to reduce the high external trade cost to stay competitive after Bangladesh, in effect, graduates to a developing country in 2026.