The European Union has proposed increasing off-dock customs facilities for all imported cargo, removing idle containers quickly and introducing round use of containers to facilitate its trade with Bangladesh.
In a letter to the foreign minister, the EU has also sought approval for interchange of empty containers between Dhaka's rail and river terminals.
Currently, only 37 inbound goods enjoy the customs clearance through off-docks, while for all other commodities, which is 75% of the total import volume, it happens inside port premises, according to the letter sent by EU Ambassador to Bangladesh Charles Whiteley to Foreign Minister AK Abdul Momen on 1 February.
Besides, several thousand import containers sit idle for years occupying port premises, leading to congestion in the ports. All other countries, including India, permit empty containers from importers to be used by exporters for exports, the letter said elaborating the current situation.
Besides, the EU demanded that the share of foreign companies in the logistics sector be allowed to increase to 100% from the existing 49% with a view to increasing EU investment in the sector.
Citing an example, Charles Whiteley said 100% foreign ownership in inland container depots or off-docks or warehousing are permitted in almost all countries, including India and Vietnam.
The commerce ministry and Bangladesh Investment Development Authority and the National Board of Revenue (NBR) will conduct a study on whether the logistic sector can be made 100% open to foreign investors, a commerce ministry official told The Business Standard.
The bloc of 27 countries also proposed allowing licence validity for 10 years as the existing four-year validity makes it difficult for companies to plan ahead and make major investments.
For complying with the globally-practised cost plus model in shipping and logistics, the EU proposed revising agency commission. "If an agent books, the agent gets 5% of net freight. If principal books, then the agent gets 2.5% of net freight. Fluctuations in net freight affects agency commission," the letter said.
Calling for streamlining all logistics related services, the EU said a major challenge in shipping and logistics is the involvement of multiple ministries and agencies that play roles in setting policies, rules and regulations, planning, operating infrastructure, and providing services.
This leads to fragmented governance of the logistics sector and aggravates the coordination problem within agencies and ministries and overall development of this sector, it added.
To improve the ease of doing business through digitisation of logistics and port operations, the EU suggested ensuring electric delivery order, paperless bill of lading (blockchain) and haulage ecosystem.
India has already started a paperless cargo delivery system, while Vietnam offers electronic bills of lading, the EU noted.
The EU also proposed introducing a system for faster clearance of goods with minimum information or documentation and simplifying the process. Besides, it demanded duty-free clearance for the shipments below an invoice of Tk2,000.
In the letter, Charles Whiteley said, "The EU delegation together with the EU Member states' diplomatic missions in Dhaka have conducted a Business Climate Dialogue since 2016, chaired by Commerce Minister, with the goal of improving our trade and investment relations and addressing the challenges that companies face in doing business; in short to energetically project Bangladesh as an attractive place for commerce.
"We would like to present for your consideration a non-exhaustive list of trade and investment difficulties that hamper the ease of doing business of existing EU economic operators, impede their business expansion plans, and undermine the prospects for more European Investment to Bangladesh," the letter read.
To achieve concrete results, the EU focused on only three priority fields, which seemed most relevant to them: Shipping and logistics, customs clearance and tax policy.
AK Abdul Momen told Business Standard, "We have a lot of bottlenecks. Foreign investors feel annoyed when they come here to invest as they have to take 43 permissions for doing business in this country. "
"The NBR harasses investors a lot. If the government says one, the NBR does the other. The EU is keen to increase trade and investment in Bangladesh, which is why it has requested us to solve the issues," he added.
There is a lot to be done to improve the business environment inside Bangladesh. The government is creating 100 economic zones, which require a lot of foreign investment. But foreigners are going back with grief. Less than 10% of the investment proposals that Bangladesh gets are actualised.
"Our arbitration is very slow," he said, adding, "It is the responsibility of the commerce ministry to appoint arbitrators, but the officers there work so slowly that foreign investors are left to fend for themselves. It is usual that there will be problems in doing business, but there must be an easy way to solve those, which is not available in our country."
"We [the foreign ministry] can contact and invite good investors from abroad to Bangladesh. But it is the responsibility of other ministries to create a conducive business environment for those investors, the foreign minister noted.
Abdul Momen said Bangladesh has benefited from the Business Climate Dialogue with the EU since 2016. Even after the country's LDC graduation in 2026, the EU has agreed to continue the duty-free facility for Bangladesh under the Everything but Arms (EBA) initiative until 2029 and technology support until 2033.
"We have sought the EBA facility till 2038, if not agreed to it, we have requested the EU to give us GSP Plus facility. The final decision has not come yet," the foreign minister said.
Syed Ershad Ahmed, country manager and managing director, at Expeditors (Bangladesh) Ltd, told TBS that the government is setting up 100 economic zones, where there will be many industries. As a result, import-export activities will also increase in future.
"We cannot attract foreign investments and diversify exports without focusing on the shipping and logistics sector," he said.
The government is building a lot of infrastructure, but its management is not very good. Bangladesh ranks 45th out of 50 countries in the Global Logistics Index, which is very bad. India, Pakistan and Vietnam are in a much better position, he noted.
"Therefore, first of all, we need to formulate a national logistics policy to develop this sector," Ershad said.
There are only 19 off-docks for customs clearance and the number has to be increased. The off-dock facilities are needed at Dhaka airport too, he pointed out.
"Logistics companies around the world are now IT-based, while the companies in our country are still operating manually. If 100% foreign investment is allowed, our companies will also have to increase fresh investment," he continued.
Major European brands, such as Mother Care and H&M, have announced that they will not import products without green logistics after 2050. "In this context, we need to speed up work on setting up inland container depots," he added.
Ershad said the EU wants to increase its business in Bangladesh. That is why they have been negotiating with the government for several years to improve the business environment in various fields. The American Chamber of Commerce has also made five recommendations to the Prime Minister's Office for the development of the logistics sector.
The Customs Act of Bangladesh is almost obsolete in the present context. So, it is very important to automate the customs, he added.
For ensuring fair and equitable treatment when it comes to tax, the EU suggested creating standardised guidelines to ensure fair tax assessments, and adhering to these guidelines.
Companies experience that the tax authority makes unfair assessment of their taxation, with arbitrary adjustments to sales and profits, disregards audited financial statements completed by reputed firms in accordance with accounting principles, and does not accept the submission of valid supportive documents to the authorities (invoice, vouchers, tax payment evidence duly corroborated by banking records), and backdated documents which makes it hard to submit proper material during the process.
The EU proposed the removal of the tax provision that restricts companies from spending on promotional expenses more than 0.5% of companies' turnover.
The EU ambassador said the current restriction on companies from spending on promotional expenses is hampering business growth. Globally, standard promotional expenses are between 5% and 10%.