Agricultural Trade Facilitation for Bangladesh and Findings from Business Process Analysis (BPA) Study

Transcription

1 Agricultural Trade Facilitation for Bangladesh and Findings from Business Process Analysis (BPA) Study Khan Salehin Trade and Investment Division, ESCAP Dhaka, 7 April 2014

2 OUTLINE Agriculture trade in Asia-Pacific and Bangladesh What is Trade Facilitation for Agriculture and Food Products? Main challenges for facilitating trade in agro-food products Findings from Business Process Analysis (BPA) study for Bangladesh s export of Jute hessian bags and import of wheat

3 Agriculture trade in Asia Pacific Agriculture accounts for a quarter of the gross domestic product (GDP) of Asia Pacific s developing countries and employs about 60% of the region s working population (ESCAP 2008). Improving agricultural productivity could pull 218 million people out of poverty in this region (ESCAP 2008). It can bring investment opportunities for the private sector, and be a driver for boosting agriculture related industries. The World Bank estimates that GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture.

4 Agricultural Trade in Asia-Pacific Source: FAO % Source: FAO

5 Agricultural Import Growth - Stronger in Asia-Pacific Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the Pacific, Studies in Trade and Investment No. 74 5

6 Asia-Pacific Agro-Exports share by Major Destinations Intra-Regional Trade in the Asia-Pacific Region Source: COMTRADE

7 Key Drivers of Agricultural Trade

8 Trade Facilitation What is Trade Facilitation? Any measure that reduce barriers to the movement of goods between buyers and sellers throughout the international supply chains (ESCAP 2010) Simply any measure that facilitate and simplify movement of goods and information along the supply chains - i.e. TF reduces time, cost and complexity of trade transactions What is agricultural trade facilitation? - Trade facilitation of agricultural products - For example, facilitating development of product standards; improving certification procedures, improving storage facilities, reducing paperwork for agro trade

9 Comprehensive Trade Costs (excluding tariff) for Agricultural Goods with Japan ( , ) 800 Tariff-equivalent trade costs (percent) Agriculture ( ) Agriculture ( ) Manufact uring ( ) Rep. of Korea United States Thailand Vietnam China New Zealand Australia Philippines Indonesia United Kingdom Germany Malaysia Sri Lanka India Russian Federation France Turkey Fiji Maldives Iran (Islamic Rep. of) Pakistan Nepal Bangladesh Lao PDR Cambodia Source: ESCAP-World Bank Trade Cost Database, updated August 2013

10 Benefits of Trade Facilitation GDP gains from 25% reduction in time to export/import, GMS and China Source: Strutt, Stone, and Minor (2008) simulations

11 Why Facilitating Agricultural Trade is Crucial? Long Term Impact of Agricultural Trade Facilitation : - Poverty Reduction and Food Security - Improves overall environment for agro-trade (domestic too) - Opportunity for integration of smallholders into agri supply chains - Upgrading of small farmers in terms of production practices or capacities Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the Pacific, Studies in Trade and Investment No

12 Trade Facilitation for Agro food Products What is so unique about it? Perishability time and temperature sensitive Product and Process Standards, Technical Regulation (SPS, private standards) Logistics (warehousing) and infrastructure special requirements Financing is difficult Cost of trading is higher than manufactured goods

13 Trade Facilitation for Agro-food Goods: Challenges 13

14 Trade Procedures: A Generic Agricultural Product Supply Chain Structure Information, documents, procedures Information, documents, procedures Information, documents, procedures Information, documents, procedures Producer Wholesalers Exporter Regulatory Agencies Export Customs Bank Transport Consumer Retailers Importer Import Customs Import Agent Source: Sirimanne

15 Product Standards Ensuring product standards for international trade of agricultural products is a complex topic and It encompasses: vinstitutions. vinfrastructure. vlogistics. vadministrative Issues. 15

16 Trade Logistics Poor Trade Related Infrastructure and Transportation System Share of Transport Costs as percentage of transaction cost in Central Asia Transport and Handling Cost as percentage of transaction cost in South Asia Source: ADB 2006 Source: Business Process Analysis Studies ESCAP

17 Trade Logistics (contd.) Spoilage during Post-harvest Handling: Absence of warehousing facility, inappropriate goods vehicles or trucks, long distance from nearby railways or inland waterways stations and so on. v FAO (1994): Total loss of agro-products during storage and transport could be as high as 16%. v World Bank in India shows that the lack of adequate storage and marketing infrastructure can be as high as % of the total production (ESCAP 2009). v IFC estimated the wastage caused by poor transportation and logistics system at $13 billion per year there (2010). v Thai fresh produce exports of fruits and vegetables, producers and exporters lose 2.92 billion baht (about $96.4 million) a year due to spoilage and poor storage. 17

18 Trade Finance is It is the most difficult bottleneck to overcome for agricultural trade Reasons for not increasing lending in this sector Inability of producers to meet the big collateral guarantees Lenders Lack of Understanding Knowledge Gap of SMEs/producers Stringent terms of trade 18

19 Business Process Analysis (BPA) of Bangladesh s Export of Jute Bags and Import of Wheat

20 Why conduct a Business Process Analysis? Business Process Analysis is a practical study o to understand attributes of business processes, and their relationships Who involved Procedures and Documents required Related Rules and Regulations Some quantitative indicators 20

21 Use Case: Export of Jute from Bangladesh 3. Ship Local Supplier 3.1) Prepare Consignment CCI&E DAE 1. Buy 3.2) Prepare Export Documents Jute Goods Laboratory 1.1 Conclude Sales Contract 3.3) Arrange Transport EPB MCCI Importer 2. Pay 2.1 Receive Payment through CAD Exporter (or Representative) 3.4) Arrange for Customs Declaration Transport Company Importer s Bank Exporter s Bank 3.5) Get Customs Inspection & Clearance C&F Agent Bangladesh Customs 3.6) Arrange for Border Crossing Indian Land Port Authority Benapole Land Port Authority

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23 Time Chart: Export of Jute Hessian Bags from Bangladesh by land Process Time required (in Days) 1.1 Conclude Sales Contract Receive Payment through CAD Prepare Consignment Prepare Export Documents 3.3 Arrange Transport Arrange for Customs Declaration Get Customs Inspection & Clearance Arrange Border Crossing 0.075

24 Documents Required Sl. Processes Documents Required Details Documents List 1.1 Conclude Sales Contract 3 Proforma Invoice, Purchase Order, Sales Contract 2.1 Receive Payment through CAD 4 Application for CAD, Proforma Invoice, Sales Contract, Hard copy of CAD 3.1 Prepare Consignment 2 Sales Contract, Requisition Slip for Raw Materials 3.2 Prepare Export Documents 15 Application Form, Trade License, Membership Documents of Business Chamber, Original Chalan, Copy of Registration Fee, ERC, Undertaking Letter, Association Membership Letter, Proforma Invoice, Packing List, Copy of CAD,SAPTA Certificate, COO, Organization Request Letter, Oil Content Certificate, Phytosanitary Certificate 3.3 Arrange Transport 1 Commercial Invoice 3.4 Arrange for Customs Declaration 6 Bill of Entry Form, Certificate of Origin, Invoice of Transportation, Copy of Sales Contract, Packing List, Chalan Receipt Copy 3.5 Get Customs Inspection & Clearance 6 Declaration Rejection, Attested Documents same as Arrange Border Crossing 6 Attested Documents same as 3.4,Gate Pass

25 Use Case: Import of Wheat from India

26 Time Chart: Import of Wheat in Bangladesh by Sea Process Time required (in Days) 1.1 Conclude Sales Contract Prepare Documents Open L/C 2.3 Get Berthing Permission Obtain Quarantine Certificate 2.5 Transship the Consignment Arrange for Customs Declaration Get Customs Clearance Get Port Clearance 2.9 Arrange Transport to Importer s Premises Negotiate Concession on Price Arrange Payment

27 Process Costs (Documents) for Import of Wheat from India by Sea Sl. Procedures Total 1.1 Conclude Sales Contract Nil 2.1 Prepare Documents US$ (Tk.2000) 2.2 Open L/C US$ (Tk.1500) 2.3 Get Berthing Permission Bulk Cargo (River Dues) US$ 0.44 Tk %VAT Per Metric Ton Literage Costs US$ 3.20 (Tk. 250) Per Metric Ton Literage Labor Costs US$ 2.82 (Tk. 220) Per Metric Ton 2.4 Obtain Quarantine Certificate US$ (Tk. 2000) 2.5 Transship the Consignment Dockyard Labor (Bulk) Tk Per Metric Ton Dockyard Labor (Container) 20 ft TEU/40 ft TEU US$ (Tk. 1580)/ US$ (Tk.2000) Weight Charges US$ 1.15 (Tk. 90) Per Metric Ton 2.6 Arrange for Customs Declaration US$ 0.08 (Tk.7.00) Per Metric Ton 2.7 Get Customs Clearance US$ (Tk.1030) 2.8 Get Port Clearance Port Security Guard US$ (Tk.4500) 2.9 Transport to Importer s Premises US$ (Tk. 3000) 3.1 Negotiate Concession on Price 3.2 Arrange Payment

28 Specific Recommendations for Simplifying Export of Jute Hessian Bags The use and acceptance of hard copy of the CAD should be abolished. Instead, the traders and the associated bankers can use scanned copy of the CAD or wire transfer in the financial transaction. Currently the copies of the ERC and the CAD are required by the EPB and the MCCI to obtain the SAPTA and COO respectively. Similarly, copy of the COO is required by the DAE to issue the phytosanitary certificate. At least these documentary requirements need to be removed for ease of transaction. The preferred and bold step would be to remove the COO as the SAPTA certificate serves the same purpose. If the suggested reductions of documents are successful, a total of 1.5 days could be saved with little change in the costs. Since ASYCUDA++ exists at the Benapole land Port, electronic transmission of documents and information should be introduced for ease of transaction.

29 Specific Recommendations for Simplifying Import of Wheat Currently hard copy of the L/C details and IRC are required in opening L/C. The process can be simplified if scanned copies of the details are accepted by the banks. Business Process Analysis: Export of Jute Hessian Bags and Import of Wheat in Bangladesh Further, banks should ask for the IP but not the IRC as the former is product specific whereas the latter is general. Currently a copy of the IRC is required is obtaining a quarantine certificate. This is redundant information in issuing quarantine certificate and hence needs to be removed. The use of the insurance is required between the traders and the shippers. Thus, this documentary requirement needs to be removed from the Customs declaration process. If the suggested reductions of documents are successful, a total of 0.5 days could be saved with little change in the costs.

30 Business (trade) process analysis findings among South/Southeast Asian Countries Number of days Cambodia (Maize/Ca ssava export to China)* Cost USD Number of actors involved Lao PDR (Maize export to Thailand) * Myanmar (Rice export via Yangon port)* Bangladesh (Jute bag export to India)* Bangladesh (shrimp export to Japan)** 19/ Thailand (rice export to Europe)*** USD 735 USD 425 USD 500 USD * source: ESCAP BPA Study Reports , available at: ** source: *** source:

31 Obtaining Phyto Sanitary Certificates for agro-food products in South and Southeast Asian Countries Number of Days Required Documents Required Bangladesh Cambodia Lao PDR Myanmar Nepal 4 days 2-5 days At least 2 days 1-2 days 0.5 day (i) Proforma invoice (ii) packing list, (iii) oil content certificate, (iv) COO (i) Phyto sanitary certificate application (ii) Commercial invoice (iii) Packing lists (iv) Release container, (v) Fumigation certificate (i) Packing list, (ii) Import license, (iii) Commercial contract among importer and exporter; (iv) Request for import of animal feed; (v) Pro-forma invoice; (i) Shipping instructions (ii) National Registration Card (iii) Sealed case file from Customs head office o Export Declaration o Export License o Invoice o Packing list (i) Letter from Customs to Food Quarantine Office (ii) Commercial Invoice (iii) Packing List (iv) Customs Declaration Form (v) Sample Stakeholders Involved Exporter (or representative) Department of Agricultural Extension (DAE) Clearing and Forwarding (C&F) Agent Exporter MAFF/GDA Exporter or representative Vientiane Capital Agriculture Division - Agriculture Quarantine Section Ministry of agriculture Exporter Clearing agent Food Quarantine Office Customs Office

32 TF Measures by Cambodia Rice Export Policy: Enhancing trade facilitation, reducing informal fees and eliminating check points Measure 1: MEF/General Department of Customs and Excise (GDCE), MAFF and MoC/General Department of CAMCONTROL and relevant agencies shall: develop a specific strategy to identify and streamline export processing procedures including inspection, documentation requirements, fees and time required to process export applications; define clear and publicly transparent division of responsibilities among export regulating ministries/agencies; consider milled rice export as a top priority in order to reduce to a minimum informal payments and time required to export by extending special treatment similar to the garment sector.

33 Measures by Cambodia (Contd.) Measure 2: Implement a single-stop service for export processing: MEF/GDCE, MAFF and MoC/ CAMCONTROL and relevant agencies shall set up a Single Stop Service for export processing and issuing certificates for SPS, fumigation, grading and quality, quantity and weight, and customs declaration.

34 Business Process Analysis (BPA) Studies for Five Countries in South and Southeast Asia Bangladesh Cambodia Business (Trade) Process Analysis (BPA) for Export of Jute Bags to India and Import of Wheat from India BPA for Export of Maize and Cassava to China Lao PDR Myanmar Nepal BPA for Export of Maize to Thailand and Import of Animal Feed from Thailand BPA for Export of Mango and Rice to China, Import of Palm Oil from Malaysia BPA for Export of Cardamom to India and Import of Rice from India Available at:

35 Publication Facilitating Agricultural Trade in Asia and the Pacific - Overview, TF issues, Good practices Available at: ions/detail.asp?id=1480

36 THANK YOU!