Publication: Export Diversification through Bonded Warehouse Reforms
Loading...
Published
2018-09-19
ISSN
Date
2018-10-11
Author(s)
Editor(s)
Abstract
Benefits and rules of bonded manufacturing are often discretionary. Bonded manufacturing is a form of temporary admission, which is equivalent to suspended import duty. The term used varies from country to country: Special Bonded Warehouses (SBW) in Bangladesh, Export Only Units in India, Bonded Manufacturing Warehouses in Malaysia, etc. The rules under which they operate also vary substantially from country to country and have changed over time. Bonded manufacturing status allows firms to bring imported goods into their warehouses without paying import duty, use the goods in their production, and export the output. The firms can usually also import machinery and replacement parts and other supplies duty-free, and buy from domestic suppliers free of domestic excise, sales and other taxes. The participating factories operate under the supervision of Customs authorities, who check the import and export containers going to and from the bonded factory, or, in some cases, rely on spot checks of the factory's inventories. The benefits and rules are at the discretion of the governments. The success of the bonded warehouse facility is not equitable and inclusive in Bangladesh. Bangladesh’s customs bonded warehouse regime permits licensed manufacturers to import duty-free parts and materials required for their export production purposes. The regime is most heavily used by RMG producers and to a lesser extent by leather goods, footwear, and shipbuilding industries. Enterprises can use the Special Bonded Warehouse (SBW) facility for importing all inputs duty-free along with imports of inputs under back-to-back LC (letters of credit), a facility to pay for imported inputs from export proceeds. This policy works to negate both the effect of relatively high import tariffs and the difficulty in claiming duty drawback on the export of duty-paid imported raw materials. It ensures competitive pricing by exporters for their manufactured goods as they compete in regional (and global) markets. However, these schemes allowing the duty-free import of inputs are not available equally to other sector exporters, who must pay duties on imported inputs upfront and rely on a dysfunctional duty drawback system that involves transaction costs. Therefore, for non-RMG sectors, a tariff on imports becomes a tax on exports on two counts: (a) the higher cost of imported inputs and (b) the higher tariff-induced profitability of Import Substitute Industries that divert resources away from exports.
Link to Data Set
Citation
“World Bank. 2018. Export Diversification through Bonded Warehouse Reforms. Bangladesh Policy Notes;. © World Bank. http://hdl.handle.net/10986/30551 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Russian Federation - Export Diversification through Competition and Innovation : A Policy Agenda(Washington, DC, 2011-07)Russia's exports became further dominated by petroleum and natural gas over the last decade. The sector experienced double-digit annual export growth in the last decade and represented almost 65 percent of Russia's exports value in 2009 a product of higher commodity prices and higher export volumes. Export growth rates of the non-oil and gas sector were also notable. Such industries as machinery, electronics, transportation equipment and chemicals reached a combined growth rate in export value of 10 percent in the last decade. This more positive comparison, however, hides relevant structural limitations in Russia's trade performance. Moreover, Russia's revealed comparative advantage seems concentrated in the 'periphery' of the product-space map, which may limit the potential for export diversification. This includes industries such as raw materials (26 products) and forestry (11 products) out of a total of 97 identified products. (At the center of the product-space are industries such as metallurgy, vehicles, machinery, etc, in which Russia does not show comparative advantages). Such specialization is sometimes considered problematic because the capabilities developed in those sectors are not easily redeployed to other industries, hindering the process of economic diversification. Yet, several resource-rich countries have managed to expand their comparative advantages beyond the traditional, natural resource-intensive products. Russian firms are, on average, larger than the average firm in the ECA region but too few firms export. It is a well documented fact that only a minority of firms in an economy export. Economic modernization and export diversification are priorities in the Russian economic policy agenda, with several measures being undertaken in recent years to promote growth in the non-oil and gas sectors. Yet the reason why some firms succeed in breaking into foreign markets while others do not is far from fully understood. In this note, the author tries to identify the binding constraints to export diversification in Russia. Using firm-level data, the author identify which investment climate factors are affecting Russian firm's propensity of engaging in export activities. Results show that lack of competition and entrepreneurial innovation are relevant obstacles to the emergence of new, potentially exportable products.Publication Unlocking Central America's Export Potential(Washington, DC, 2012-10)The Central America region is a small market. The region contains around 43 million inhabitants (0.6 percent of total world population) who generate around 0.25 percent of the world's Gross Domestic Product (GDP). While the region has successfully embarked on a regional integration agenda and has strong commercial links with the US, extra-regional trade-mainly with large fast-growing emerging economies-remains a challenge. Export performance is analyzed along three dimensions that, together, give a fairly comprehensive picture of competitiveness: 1) the composition, orientation and growth of the export basket; 2) the degree of export diversification across products and markets; and 3) the level of sophistication and quality of their main exports. This analysis allows exports dynamics at the different margins of trade (intensive, extensive, and quality) to be evaluated and individual countries' to be benchmarked with peers in the Central American region. The results of this report allow policy makers to identify key areas to explore in the overall discussion of export competitiveness in the Central American region. This paper relates to the literature on challenges and opportunities that trade liberalization can bring to the Central American region. Much of the recent literature focuses on the role of the free trade agreement negotiated by Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, with the US.Publication Deepening Trade Reforms in Syria for Improving Competitiveness and Promoting Non-Oil Exports(Washington, DC, 2010-09)Syria made promotion of non-oil exports one of the main objectives of its development strategy to counter the emerging twin balance of payments and fiscal deficits resulting from secular decline of oil production and exports. To realize this objective, the Government has implemented a number of trade policy reforms and took complementary measures in other policy areas during the 10th five-year plan to improve competitiveness of Syrian products in international markets. Non-oil exports responded strongly to the policy improvements. There is now a wide recognition of the need for further reforms to maintain this momentum. This paper tried to assess the achievement so far, identify the remaining gaps in the trade regime, and recommend follow up measures for broadening and deepening the trade reforms. The principal recommendations are presented in the attached policy matrix. The objective of export incentives is to reduce the costs of exported products with policy instruments consistent with World Trade Organization (WTO) rules.Publication Domestic Constraints, Firm Characteristics, and Geographical Diversification of Firm-Level Manufacturing Exports in Africa(World Bank, Washington, DC, 2008-03)Using firm-level data on manufacturing sectors in Africa, this paper addresses how domestic supply constraints and other firm characteristics explain the geographical orientation of firms' exports and the overall market diversification of African manufacturing exports. The degree of market diversification, measured by the number of export destinations, is highly correlated with export intensity at the firm level, and both embody strong scale effects. Technological factors, such as new vintage capital and Internet access, which improve production efficiency and lower export costs, show strong effects on the firm-level export intensity. Some qualitative differences exist between Africa's regional exports and exports to the global markets. Foreign ownership is a significant factor in characterizing the intensity of global exports but not regional exports. The technological factors are significant in both cases, but more so in global exports. Public infrastructure constraints, such as inferior power services and customs delays, seem to have more immediate impacts on regional exports in general, implying the relevance of addressing behind-the-border constraints in fostering regional integration in Africa. Customs efficiency does matter for textile exports to the global markets, underscoring the importance of improving trade facilitation in Africa for competitive participation of African producers in global supply chain industries.Publication Russian Federation - Export Diversification through Competition and Innovation : A Policy Agenda(World Bank, Washington, DC, 2013-04)Economic modernization and export diversification are priorities in the Russian economic policy agenda, with several measures undertaken in recent years to promote growth in the nonoil and gas sector. Russia's export base has narrowed substantially over the past decade. Lack of diversification cannot be pinned down to a single cause. Competition and innovation are examined in this study as key drivers of export diversification. After presenting our findings we identify some key trade policy measures that could help firms enter foreign markets and sustain current trade relationships. A comprehensive competition policy will help establish a level playing field, facilitate entry of more efficient firms, and encourage orderly exit of less efficient firms, thereby contributing to increased productivity and export propensity. The government's current initiatives to foster innovation could be strengthened through a number of specific measures focusing on commercialization of public research and development and adequate research funding. This study is organized as follows. Section two scrutinizes various dimensions of Russia's trade performance, including export diversification, sophistication, and survival. A detailed analysis of the role of exports, innovation, productivity, and competition on firm performance is presented in section three. Section four analyzes the competition environment in Russia, by presenting analyses of price-cost margins, state ownership, and regional and sectorial characteristics of competition, while Section five provides an overview of Russia's innovation system and measures to increase the impact of research and development on the economy. Section six concludes and presents policy options.
Users also downloaded
Showing related downloaded files
Publication Customs Modernization Handbook(Washington, DC: World Bank, 2005)This handbook aims to make a positive contribution to the efforts that many countries are undertaking to modernize their customs administrations. The handbook views a competent and well-organized customs service as one that successfully balances its various responsibilities to ensure a high level of compliance with revenue objectives and regulatory requirements while at the same time intervening as little as possible in the legitimate movement of goods and people across borders. The handbook recognizes that conditions differ greatly across countries, so that each customs administration will need to tailor its modernization efforts to national objectives, implementation capacities, and resource availability.Publication Commodity Markets Outlook, April 2025(Washington, DC: World Bank, 2025-04-29)Commodity prices are set to fall sharply this year, by about 12 percent overall, as weakening global economic growth weighs on demand. In 2026, commodity prices are projected to reach a six-year low. Oil prices are expected to exert substantial downward pressure on the aggregate commodity index in 2025, as a marked slowdown in global oil consumption coincides with expanding supply. The anticipated commodity price softening is broad-based, however, with more than half of the commodities in the forecast set to decrease this year, many by more than 10 percent. The latest shocks to hit commodity markets extend a so far tumultuous decade, marked by the highest level of commodity price volatility in at least half a century. Between 2020 and 2024, commodity price swings were frequent and sharp, with knock-on consequences for economic activity and inflation. In the next two years, commodity prices are expected to put downward pressure on global inflation. Risks to the commodity price projections are tilted to the downside. A sharper-than-expected slowdown in global growth—driven by worsening trade relations or a prolonged tightening of financial conditions—could further depress commodity demand, especially for industrial products. In addition, if OPEC+ fully unwinds its voluntary supply cuts, oil production will far exceed projected consumption. There are also important upside risks to commodity prices—for instance, if geopolitical tensions worsen, threatening oil and gas supplies, or if extreme weather events lead to agricultural and energy price spikes.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication Expanding Post-Harvest Finance Through Warehouse Receipts and Related Instruments(World Bank, Washington, DC, 2006-03)Warehouse receipt financing and similar types of collateralized lending provide an alternative to traditional lending requirements of banks and other financiers and could provide opportunities to expand this lending in emerging economies for agricultural trade. The main contents include: what is warehouse receipt financing; what is the value of warehouse receipt financing; other collateral lending mechanisms; tradable receipt financing -- the example of cedula de produto rural in Brazil; and the use of reverse factoring -- the example of nafin in Mexico. The paper concludes that through innovative approaches in different emerging markets both warehouse receipts and innovative collateralized lending mechanisms could provide opportunities to expand the levels of post-harvest financing being provided to producers, traders, processors, and other agribusinesses.