60 second interview: Ataur Rahman

Face to face | 19 May 2017
Ataur-Rahman

Ataur Rahman, secretary general of
the International Chamber of Commerce in Bangladesh, talks to Katharine Morton
about the development of trade and
banking in Bangladesh

You have a reputation as a nurturer of the banking system in Bangladesh. You used to work for a World Bank-funded institution called the Bangladesh Silk Foundation. How has that informed your work?

I worked there for six or seven years. We did a project on how to promote sericulture, the making of silk. You have to nurture the silk worm like your own child. You have to feed it different types of leaves. When they're born, you have to give them new, smaller leaves. As they grow up, they can move on to bigger ones.

That's a great analogy for the development of the Bangladeshi banking sector. You then joined the ICC Bangladesh in 2005?

We are a small outfit, we bring out a quarterly magazine, conduct seminars and workshops, and we also try to [inform] the government on key global issues related to promotion of trade and investment as ICC is global. Whatever policy that comes in from outside, we have to disseminate it.

So, I joined in January, then I suggested to our executive board that we could do something on capital markets because they were in a very initial state. Our president agreed to it, so I started making phone calls around the world. By September, we had 15 countries that were participating in the [event], stock market houses and the regulators. The President of Bangladesh came to that event, and we had nearly 400 participants, including all the leading stock holders and the regulators.

We brought in banking experts from different countries because our bankers needed to be exposed to modern rules and tools so they can use them for trade finance, because Bangladesh is a growing country. When we became independent [from Pakistan in 1971], our import-export was only US$300 million [mainly products
such as jute]. So, we started living in a humble way.

Today, our exports total over US$30bn. We're the second largest exporter of garments now, after China. We're growing quickly in pharmaceuticals, ship-building, leather, tea. Migrant workers bring US$14-15bn a year to the country. During the [pre-independence] times, they used to say that Bengalis were good for nothing. There were only two or three Bangladeshi industries at that time. Now, there is an entrepreneur on every corner. All of this happened in just about 40 years.

What are the biggest problems facing exporters in Bangladesh?

The biggest challenge is, of course, the market. This US [trade] policy will have an effect. I saw the news that H&M, Gap, Walmart, etc, are thinking of closing some of their stores in the US, which might
affect Bangladesh.

Do you export mostly to the US?

Our biggest export of ready-made garments (RMG) is Europe, and then it's the US. We had a quota, but in the US, we don't have that anymore. Still, our exports to the US are growing. Also, our garment sector is diversifying. It's opening up to new markets, to Japan, Australia and to India.

We used to have a lot of barriers with India. India is our biggest business partner, but it's mostly one-way traffic. Imports are more from India, more from China. But, informal business transactions between India and Bangladesh are very high. We have been trying to get the trade barriers removed to allow us to invest. India invests in Bangladesh a lot, but not the other
way around.

In the RMG sector, we have spinning mills. We have developed them because Bangladesh started as an exporter of garments in the early 1980s. We used to import everything, as nothing was produced in Bangladesh. Now, we produce almost 100% locally for knitwear and also trying to reach the same level for oven products.

There are a lot of spinning mills for
that, and factories are now capable of exporting their garments, fabrics and accessories to neighbouring countries
if necessary.

In terms of trade finance products, is it principally letters of credit?

As of now, yes. Some big companies also use a sort of 'stand-by' LC. They receive orders from the buyers, the order comes in and they produce because they have a good understanding [confidence]. Shipment is made, then the LC is matured. We are trying to convince the central bank to introduce factoring to coexist with LCs. Import and export banks can join together and become members of FCI [Factors Chain International]. So, the parties get a guarantee of receiving payment.

How far off is that?

It's currently sitting with the central bank. We have an import-export policy, where at our suggestion international factoring has been included along with LC as the payment method. Now it has gone to the central bank, and regulators take time. Bangladesh has signed the WTO Trade Facilitation Agreement recently, so we
have to keep pace with the new trend
to be competitive.

Infrastructure is a big problem for us. China, Japan and India have invested, but mainly China. Altogether, the private and public sectors amount to over US$50bn, which is going to be invested. The first will be Padma Bridge (the longest bridge with rail connection), a nuclear power plant and the metro for Dhaka city. Then, a deep sea port, LNG terminals and a tunnel. Also, due to the location of Bangladesh, there is a good prospect of serving the Seven-Sisters of India and Myanmar. China plans a linkage through Bangladesh to India, to Europe.
So, the Chinese are thinking of building
a railroad.

Are you part of China's One Belt One Road (OBOR) policy then?

Yes, that is supposed to be happening [at some point]. The good thing is that we have energetic and innovative private sector entrepreneurs and they are the main engine of growth. I sometimes joke that they [the administration] should give policy guidelines and should go to sleep, and allow the private sector to run the country.

In 2010 we arranged a seminar on energy in Dhaka, which was attended by more than 500 delegates from home and abroad, and energy experts from some 15 countries deliberated. We gave the example of solving the energy crisis by Fidel Ramos when he was President of the Philippines. He said, we won't turn down anyone, anyone can set up a power plant wherever they want. So, our suggestion was to do the same to [the government and investors], and they accepted that recommendation. In 2010, we were producing only 3,500 MW of electricity. Today, we are producing 14,000 to 15,000 MW. So, things are changing.

We also have some political stability now. Last year, GDP grew by 7.1%, and this year it is expected to be 7.2% [according to the Bangladesh Finance Ministry]. Our aim is to reach double digits. As far as foreign investment is concerned, the door is open
to anyone.

Maybe you hear negative things about Bangladesh, like the weather can be adverse and that there is a lot of poverty. But, despite these things, once you're in Dhaka, you receive support, make money and don't want to return. You're investing. That is the situation in Bangladesh. When an investor comes, there is a lot of bureaucracy, but once somebody is there, they don't want to leave, because they're making more money.

How are exports diversifying?

In terms of the shipping industry, we supply ships to Denmark, to Germany, the Netherlands. Four or five countries are taking ships from us. Another area is pharmaceuticals. That industry used to be non-existent. Now, we export to more than 80 countries including US, UK, Canada, EU and a number of Asian countries, because we have clearance now.

Are these generic drugs?

Under WTO rules, I think we're cleared until 20301. So, we're growing. Several foreign [generic pharmaceutical licenses] have been purchased by local entrepreneurs, who have quadrupled their businesses. Consumer expenditure is also increasing and our per capita income is now about US$1,400, so we have upgraded to the low-middle income group. Our target is, by 2030, to reach the middle-income group of countries.

[Former US Secretary of State Henry] Kissinger once said Bangladesh is a bottomless basket. Well, from the bottomless basket, we are now overflowing. We have many female entrepreneurs. Almost 80% of workers are women, so female empowerment has come. And, transactions to mobile have become so popular and it has created so many entrepreneurs at the grass roots level.

How about developing
the banking sector?

We are trying to help the bankers in their skill development. Before 2008, we only had one CDCS (Certificate for Documentary Credit Specialists). The IFS (now The London Institute of Banking and Finance) didn't think of having the examination centre in Dhaka, so this gentleman went to Hong Kong once. He couldn't pass the examination. He came back, then he went to Delhi. In 2008, we approached the IFS and they allowed us to have the examinations in Dhaka. We had 12 candidates in 2008. Out of 12, 10 passed the CDCS examinations. This year, in April, examinations will be held in Dhaka. We have 221 candidates, and all of them are bankers. So far, we have some 670 documentary specialists.

That shows how bankers are very hungry for knowledge. Of course, we still have a lot of compliance requirements for the banks, which the banks are trying to implement. The reason for our bringing these 48 bankers [to the ICC Banking Commission in Jakarta] is for them to know what happens in the outside world.

We have been organising workshops and seminars on international trade finance, mainly for bankers from Bangladesh, in various countries since 2014. So far such events have been organised in Kuala Lumpur (April, 2014), in Colombo (February 2015), in Kunming (August 2015), in Yangon (November 2015), and in Hanoi (February 2016). In May, we are taking a delegation of some 48 bankers to ICC headquarters and to ICC Austria to attend the International Trade Finance Week.

It's the largest single delegation to the ICC Banking Commission event outside of the Indonesian delegation

Yes, so far. China has the second biggest. That shows that our banks are also allowing their officials to go outside and learn and see the world so that when they come back, their mindset will change. It's not how much you're learning here, it's how much you're listening to people and making connections.

Ataur Rahman is secretary general of the ICC in Bangladesh. This interview was conducted at the 2017 ICC Banking Commission annual meeting in Jakarta

References: 

1. Export.gov article: http://bit.ly/2oGYh3D

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