Traders want alternatives to LC to keep imports normal

Business leaders have urged the commerce ministry to consider setting up trade credit and currency swap systems as alternatives to letters of credit (LCs) for importing goods as they have been facing problems in this regard recently.

"We need to explore the potential of alternatives to LCs. Systems like trade credit or buyer's credit, deferred payment, usance LC and currency swap may be preferred," said Md Sameer Sattar, president of the Dhaka Chamber of Commerce and Industry (DCCI), at a meeting with the commerce minister at the secretariat yesterday.

In a written statement given to the commerce minister, he said, "Bangladesh is undergoing the most challenging time in our recent economic history."

The DCCI president told TBS, "Any innovative initiative that is necessary in the interest of the economy or businesses should be taken during the challenging times."

The difficulties in opening LCs due to the dwindling dollar reserves in the country have been widely discussed for the last few months. Traders alleged that they have been facing problems with LCs for importing essential commodities for Ramadan.

The DCCI president urged the government to ensure the supply of essential commodities during the Ramadan at an affordable price amid the current inflationary stress.

He also said in order to keep prices of essential commodities affordable and inflation under control during the Ramadan period, NBR should consider giving certain tax benefits to the importers.

In a discussion with traders at the end of last month, Senior Commerce Secretary Tapan Kanti Ghosh said the ministry will take initiatives for alternative means besides LCs for imports.

Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said trade credit, buyer's credit, usance LC, or deferred payment are similar.

"In case of difficulties in opening LCs, goods can be imported with a credit period of six months to two years if both the suppliers and the buyers agree, which is known as buyer's credit. It can solve the problem temporarily," Mohammad Hatem told TBS.

Sharing his experience, the BKMEA executive president said banks have been refusing to open a LC even with 100% cash margin for importing a car. Other traders have been suffering from similar complications related to LCs for importing machinery or other goods.

Transition Strategy needed for smooth LDC graduation

During yesterday's discussion at the commerce ministry, the DCCI president said after graduating from the category of least developed countries (LDC), Bangladesh will lose the preferential market access as a developing country and face 8-16% export tariff in different export markets.

To overcome export loss, he urged the authorities to formulate a transition strategy with the participation of private sector investors to address the issues of the post-LDC era.

He also said Bangladesh needs to sign free trade agreements (FTAs) with more potential countries and important economic blocs to offset the loss of preferential market access.

Currently, the country's exports are largely confined to the EU and the US markets. New markets in Southeast Asia and Africa need to be prioritised along with product diversification, he said.

"Moreover, we can negotiate with other countries to increase duty-free and quota-free access for Bangladesh after the LDC graduation," he added.

The DCCI president also underscored the importance of reducing the country's existing import tariff rate which is relatively higher compared to other countries in the region, because it will need a competitive and open tariff to compete in the international market after 2026.

Commerce Minister Tipu Munshi said, "To avail international support measures even after LDC graduation, we need to enhance our negotiation skills."

DCCI Senior Vice President SM Golam Faruk Alamgir Arman, Vice President Md Junaed Ibna Ali and members of its board of directors were also present at the meeting.