Open-account credit-conditional shipments will help exporters access the appropriate financing and the consequential payment would be settled upon receipt of the final payment when due, ICC-B President Mahbubur Rahman said.
The open account credit policy is a modified version of factoring and supply chain financing to exporters against their export with an external payment commitment.
The Bangladesh Bank circular issued on June 30 last year on “Conditional Open Account Transactions” is a good move, Rahman said.
However, introduction alone cannot guarantee the benefits. All stakeholders must work to maximize the benefits, said the president of the Bangladesh International Chamber of Commerce (ICC-B).
The facility offered under the change policy has been in operation for seven months. “I understand that exporters always prefer to export through letters of credit instead of an open account,” said Rahman.
“We all know that the Covid-19 epidemic, which still continues, has shocked international trade. As a result, the severe challenges of international trade transactions translate into the disruption and shrinking of trade finance; the main engine of economic development. “
Rahman made the comments in his written speech during a webinar on “Global Awareness of Open Accounts, Export Transactions and Recent Policy Changes in Bangladesh” on March 18.
Traders, exporters and importers face difficulties in preparing, shipping and receiving goods; make and receive payments; cancellation of orders and breaches of commitments; huge liquidity shortage and failure to meet the obligations of credit institutions, he said.
In this changing and increasingly uncertain environment, banks, traders and policymakers have become anxious and skeptical about interpretations of “certain breaches of commitments” in regulatory frameworks and guidelines.
According to the ICC Global Trade Finance Survey 2020, global trade flows tripled from $ 6.2 trillion to $ 18.1 trillion at the end of 2019, a growth now widely recognized as having been made possible by finance. Trade.
Trade finance is the oxygen that keeps trade flows alive, especially for emerging markets like Bangladesh.
According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), due to the Covid shutdown, international buyers canceled or suspended $ 3.16 billion in shipments involving 1,142 factories affecting 2.26 million workers.
In fiscal year 2019-2020, export earnings fell sharply by nearly 17% to $ 33.67 billion due to the cancellation and / or reduction of export orders clothing, which accounts for 84% of total national exports and 14% of gross domestic product.
In the July-February period of the current fiscal year, export earnings fell 1.45% year-on-year to $ 25.86 billion as the outbreak of the Covid pandemic continues to ravage Requirement.
With the celebration of 50 years of independence, Bangladesh has embarked on a new journey by qualifying to become a developing country of a least developed country (LDC).
Until 2026, the country will continue to enjoy trade advantages as an LDC.
However, after graduation, Bangladesh will lose the benefits for LDCs, such as soft loans and export facilities.
About 70 percent of Bangladesh’s exports are made under preferences granted by certain developed and developing countries according to LDC criteria. Diversification of export markets will be a major challenge for Bangladesh after the LDC era, experts say.
Simplicity and lower costs are among the many benefits of open account trading, but there are risks if things don’t go well, said Syed Nasim Manzur, former chairman of the Metropolitan Chamber of Commerce and Industry (MCCI ).
The export credit guarantee system must be developed to reduce costs, he said.
Steven Beck, trade finance and supply chain manager of the Asian Development Bank, said the AfDB continues to work with the central bank and ICC-B during the transition period from LC to LC. ‘account opening.
Prashanta Banerjee, Professor and Director of the Bangladesh Institute of Bank Management, gave an introductory presentation on “Bangladesh banking policy on open account export transactions and its impact on exporters from July 2020 to February 2021.
Rubana Huq, president of BGMEA, said it was necessary to underwrite the risks of Bangladeshi manufacturers at this time given Covid-19.
“So we are faced with two aspects here, one, we welcome open accounts for the sale of credit. On the other hand, we expose ourselves to other vulnerabilities.”
She said they will offer a credit rating to buyers in order to balance the two parties.
Huq also said that Bangladesh currently has $ 8 billion to receive.
Muhammad A (Rumee) Ali, Chairman of ICC Bangladesh Banking Commission and CEO of Bangladesh International Arbitration Center, and Md Fazlul Hoque, Former Chairman of Bangladesh Knitwear Manufacturers and Exporters Association, also spoke. .