Discuss the problems or limitations of foreign trade or International in Bangladesh.
Answer: Smooth foreign trade operation is essential for businesses to expand and flourish. It has a huge impact on a country’s economy. Unfortunately, Bangladesh lacks in several areas to make foreign trade easy for businesses to expand. This article gives you a glimpse of the limitations of foreign trade in Bangladesh, which you should keep in mind when carrying out a foreign trade operation.
LEGAL CONSTRAINTS
The first and the
foremost problems in foreign trade operations arise due to legal constraints.
Foreign trade indicates the exchange of goods and services between two countries.
However, each country has its own laws, rules,the and regulations, which are
different from other countries. So, problems arise in foreign trade operations.
Suppose, an exporter of Bangladesh receives an L/C from the importer of
England, in which the goods are to be shipped via an American ship and
delivered to China. However, according to which country’s law the dispute, if
arise, should be settled, is a problem.
GEOGRAPHICAL LOCATION
From the geographical
viewpoint, Bangladesh is not located in such a place to trade vigorously. India
encompasses Bangladesh from three sides. Also, India enjoys a strong industrial
base compared to Bangladesh. Due to economy of scale, India can produce the
same quality products at a cheaper price. This is a problem in Bangladesh’s foreign
trade operation.
LIMITED SKILLED
MANPOWER
Foreign trade-related jobs involve proper communication with clients, as well as with local and
foreign banks. Performing foreign exchange activities is a sensitive and
difficult job by nature. A single error can cost thousands of dollars.
Bangladesh lacks an adequately skilled workforce who fully understand and are well
capable to handle foreign trade dealings.
LIMITED EXPORT BASE
Bangladesh has a very
limited export base. It does not have the sufficient supply of raw materials
needed to use in the production process. Unfortunately, the country has to
import the raw materials required in various production processes. As a result,
production cost increases and consumers have to spend more to avail that particular
product.
LACK OF STABLE POLICY
Policy and structure
are an integral part of any kind of operation. It suggests how to perform the
operations properly. It is not easy to plan and perform foreign trade
operations properly, if the policy continues to change frequently. Change of
Government in Bangladesh often comes with new policies, which is very difficult
to cope with. Business organizations and businessmen find it difficult to
settle their businesses. Change in policy make them deviate from the old track
and run after the new track.
POLITICAL INSTABILITY
Political stability is
essential for smooth foreign trade operations. Instability in politics has been
a major problem to conduct foreign trade business in Bangladesh.
PROBLEMS IN UCPDC
GUIDELINES
According to the
Article 4 of the Uniform Customs and Practices for Documentary Credit (UCPDC),
all parties concerned with L/C must deal with documents not with goods. This
may cause problem, as the bank must have to make payment after the
presentations of necessary documents, whether or not the goods are delivered to
the importer.
ABSENCE OF POLICY,
RULES AND REGULATIONS OF FOREIGN EXCHANGE OPERATIONS AS PER ISLAMIC SHARIAH
There is no
international Policy, Rules and Regulations of Islamic Banking regarding Foreign
Exchange Operations, so the Islami Banks has to face problems in foreign
exchange operations.
Other Problem
Whenever an importer
comes to the bank to issue a L/C in his favor, he has to deposit a certain
amount, known as “L/C margin”. After receiving the export documents from the
exporter, the importer pays the rest amount. But till this point in time, this
L/C margin amount is kept by the bank without giving any return to the
importer, so it is a loss for the client. He could invest this money elsewhere
to earn some return. Consequently, the importer adds this loss to production
cost so the product price goes up, which has to borne by the ultimate
customers.
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