Tariff policy in the making to protect industries, attract investment

The government is formulating a national tariff policy to protect domestic industries, attract new investment, and make the government's policy support long lasting and business-friendly, sources familiar with the development have said.

The commerce ministry had recently directed the Bangladesh Trade and Tariff Commission (BTTC) to formulate the policy with long-term guidelines for all types of tariff-related policies, the sources said.

A 14-member committee headed by BTTC Chairman Munshi Shahabuddin Ahmed is working on a concept note of the National Tariff Policy of Bangladesh.

The International Finance Corporation (IFC) is providing the commission with technical assistance in this regard.

Bangladesh has two types of tariffs – tariff duty and tariff price.

Tariff duty is imposed to protect selective local industries and is withdrawn to provide comfort to consumers for a certain period, and the tariff price is fixed for imported goods to make a balance in the rates of products.

The National Board of Revenue (NBR) is the implementing agency of tariffs.

Members of the committee said all countries in the world including India, Pakistan and Vietnam have their own national tariff policies.

BTTC Chairman Munshi Shahabuddin Ahmed told The Business Standard, "Tariff commissions set tariff policies in all countries. Bangladesh was an exception, as there was no national tariff policy. That is why the work of making the policy has started."

Every year during the budget, tariffs change according to the type and importance of different sectors. Because of these changes, investors are often hesitant to make decisions.

Long-term policy support will be provided in the tariff to alleviate the hesitation of the investors and to make it easier for them to calculate the return on investment. These issues are being emphasised in the concept note of the tariff policy.

People concerned said there are plans to provide similar tariff support for a period of five years or more to encourage private sector investments. If the policy can be formulated in this way with the stakeholders of different sectors, it will be able to make a sector grow faster. A tariff structure with a longer period of time will also increase the amount of investment.

Ali Ahmad, the immediate past chief operating officer of the Bangladesh Foreign Trade Institute (BFTI), said, "Protection for any industries helps boost domestic industrialisation, GDP growth and revenue realisations."

The NBR has been maintaining a tariff duty structure, but it was distorted by the various types of duty like development charge or surcharge responding to business community's demands.

The revenue authority has to impose those types of additional duty to fulfil its revenue targets, said its former member Ali Ahmad, adding that "customs duty should not be the target of revenue realisations instead of using it as industry protection measures."

The tariff duty rates should be fixed considering the potentials of industries and not in response to the demand by business groups.

The Trade and Tariff Commission has to carry out field level study on every sector to understand its potentials, and it should continue such surveys round the year, he added.

"We are working to prepare a framework to develop a policy, which will help create a better ecosystem for all industries," said Dr Mostafa Abid Khan, who is also a member of the concept note formulating committee.

"We aim to develop a policy framework by December, through consultation with stakeholders. Then it will be reviewed by different studies and the outcomes will be accommodated in the policy."

The absence of a holistic policy, every year the authorities have to change tariff rules based on the demand of a group, while it might put pressure on other groups of the same industry or its backward or forward industry,  added Abid Khan, also an immediate past member of the BTTC.

"The tariff policy will help realise more revenue and provide protection to the domestic industries," he said adding it will help boost industries efficiency, which will help them to face the challenges in a competitive market.

Dhaka Chamber of Commerce and Industry (DCCI) President Rizwan Rahman said the government is going to formulate a policy, but "we are still in the dark". 

He suggested a tariff policy should be formulated in consultations with all chambers and trade bodies to make this move effective. 

The Business Initiative Leading Development (BUILD) Chairman Abul Kasem Khan said this policy must be sustainable with maintaining consistency, otherwise it would be similar to other policies.

A long term forecasting policy can encourage investors from home and abroad to invest more, he added.

This policy will be more investment and business friendly, hoped Kasen khan, also a former president of DCCI.