Professional Documents
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Type of insurance policy that protects an exporter against non-payment (default) by an importer.
Offered generally by a country's export promotion agency, it provides the insurance cover on an
ad valorem fee that takes creditworthiness of the importer and country risk into consideration.
Some agencies, such as export import banks, also offer discounting of the exporter's invoices.
A guarantee of payment made by an export credit agency (ECA). ECAs are government or semi
government agencies that provide guarantees and insurance for exports, and occasionally for imports as
well. An export credit guarantee ensures that an exporter receives payment for goods shipped overseas
in the event the customer defaults, reducing the risk to the exporter's business and allowing it to keep its
prices competitive. The use of export credit guarantees is controversial; critics allege that their existence
negatively impacts international development, as developing countries cannot compete with such insured
exports. Proponents argue that they enable developing countries to import products they otherwise
would not be able to afford.
Sadharan Bima Corporation introduced. Export credit guarantee scheme with effect from 01.01.78
through its Export Credit Guarantee Wing as per order of the Government of the People’s Republic of
Bangladesh in order to promote national exports. The primary objective of Export credit department is to
boost up and strengthen the export promotion drive in Bangladesh by offering guarantees to banks and
financial institutions to enable exporters to obtain easily better loan facilities from them both at the pre-
shipment & post-shipment stage.
INTRODUCTIONS:
Economic development of a country largely on depended on its export earnings. To reduce the
import-export gap it has become imperative to make a break through in the field of export trade in
Bangladesh. We must boost up exports to rehabilitate our economy on a sound footing. The
government have placed great importance to it.
To assist the exporters to get bank finance without any difficulty and to realize the export proceeds
in time, the government have introduced Export Credit Guarantee Schemes to deal with credit risks
associated with the export trade. Sadharan Bima Corporation has been entrusted with the
responsibility of administrating the scheme by the government of Bangladesh.
For purchasing/ procuring raw material finished product of packing materials for
paying charges and wages for export purpose, most of the exporters in Bangladesh
require pre-shipment credits/ back-to-back L/C facilities from commercial Banks.
But bankers always hesitate to provide pre- shipment credit facilities to new
exporters and small ones if they are not capable enough to offer sufficient collateral.
Many exporter fail to execute export orders for shortage of fund. This export credit
Guarantee Scheme has been introduced for issue to bankers guaranteeing them
indemnification against losses due to non-payment by the loanee.
RISK COVERED :
Any losses incurred by banks or financial institutions the following risks are covered
:
i) Insolvency of the exporter or
ii) Protected default of the exporter, i.e. failure of the exporter to repay the loan within
four months after the due date of payment.
This scheme provides for payment to the bank of financing institutions to the extent of 75%.
PERIOD OF GUARANTEE:
This guarantee is issued for a period of one year renewable for further period.
PREMIUM:
The premium is at the rate of 10 paisa per Taka 100 per month or part thereof on the
highest amount of outstanding in any time in each calendar month.
To replace their working capital and to continue their export activities exporters need
financial assistance from commercial Banks at the Post- shipment stage. To tide over
difficulties and to make easy flow of post shipment credit, particularly to the
exporters of non traditional items, the post shipment credit guarantee has been
introduced to protect Commercial Banks in Bangladesh from losses that may be
sustained by then in respect of advances to exporters by way of discount /Purchase /
negotiation of export bills or advances.
RISK COVERED:
The policy issued to the loan giving bank covers to the extent of 75% of the total
loan suffered by the bank.
PERIOD OF GUARANTEE:
This guarantee is normally issued for a period of one year, renewable for further
period at the request of the bank
Premium: The rate of premium is only 0.05% on the height amount of outstanding
dues at any time in each calendar month.
This guarantee is issued in the name of the Head Office of a Commercial Bank
covering the risk of all pre shipment credits to provided by head office as well as by
its branches throughout Bangladesh.
ADVANCE COVERED:
RISK COVERED:
PERIOD OF GUARANTEE:
Whole Turnover Pre-shipment Finance Guarantee is issued for a financial year.
PREMIUM:
Premium is payable by the bank at the rate of 0.075% per month on the only average amount
outstanding calculated on daily product basic.
Sale of goods on credit is always risky, particularly in the international market where
buyers and sellers do not know each other and resides in different countries.
An out - break of war or civil war may block payment for goods exported. Economic difficulties
or Balance of Payment problems may lead a country to impose restrictions on either import of
certain goods or on transfer of payments for goods exported.
The loss of a large payment may spell disaster for any exporter. The Export Credit
Guarantee issued to strengthen the confidence of the exporters for the consequences
of the payment risks. This policy covers both the commercial and political risks .
RISK COVERED:
The policy covers losses incurred due to either of the following causes where shipment under
irrevocable L/C. Political risk are covered .
a. COMMERCIAL RISKS:
i. Insolvency of the oversees buyer
ii. Protected default of the buyer to pay for the goods accepted by him within 4 months
after due date of payment.
iii. Failure or refusal on the port of the buyer to accept the goods for no fault of the
exporter subject to fulfillment of certain conditions.
b. POLITICAL RISKS:
v. any other cause of loss occurring outside Bangladesh beyond the control of the exporter or the buyer.
The important feature of this policy is that it can be assigned to banks and is
considered as a useful collateral . An exporter may, therefore, authorize his bank to
receive the benefits of the policy.
This policy covers 85% of the loss caused by commercial risks and 95% of loss
caused by political risks.
PERIOD OF GUARANTEE:
This policy is generally issued for one year, renewable of the option of the insured.
Premium:
Premium rate varies from o. 125% to o. 65% for exports made against L/C and
o.40% to 2.00% for transaction under contracts.
Comparisons
0.40%-2.00%
against contract
Default party Exporter’s failure Exporter’s failure Exporter’s failure Buyer’s failure
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Export Development Fund (EDF)
The main objectives of creating an Export Development Fund (EDF) at the Bangladesh
Bank is assure a continued availability of foreign exchange to meet the import
requirements of non-traditional manufactured items. This facility is available to the
non-traditional exporters, particularly new exporters, exporters diversifying into
higher value exports and exporters diversifying into new markets. An exporter identify
above is eligible to avail of EDF facilities on the conditions stated below:
Purposes of EDF:
(i) To make the payment of import bill against Back to Back sight L/Cs. For export
of goods Bangladesh Bank arrange pre shipment credit by EDF.
(ii) To increase the working capacity of Export administration and financial
institutions.
(iii) To encourage the motive of the foreign supplier. Foreign guarantee conferring
institutions and foreign commercial banks who provide short time loan to the
Bangladeshi exporters.
Unlike a spot contract, a forward contract is a contract that involves an agreement of contract terms
on the current date with the delivery and payment at a specified future date. Contrary to a spot rate,
a forward rate is used to quote a financial transaction that takes place on a future date and is the
settlement price of a forward contract. However, depending on the security being traded, the
forward rate can be calculated using the spot rate.
For example, say a Chinese electronic manufacturer has a large order to be shipped to America in
one year. The Chinese manufacturer engages in a currency forward and sells $20 million in
exchange for Chinese yuan at a forward rate of $0.80 per Chinese yuan. Therefore, the Chinese
electronic manufacturer is obligated to deliver 20 million dollars at the specified rate on the
specified date, six months from the current date, regardless of fluctuating currency spot rates.
Buying rate: Also known as the purchase price, it is the price used by the foreign exchange bank to buy
foreign currency from the customer. In general, the exchange rate where the foreign currency is converted
to a smaller number of domestic currencies is the buying rate, which indicates how much the country's
currency is required to buy a certain amount of foreign exchange.
Selling rate: Also known as the foreign exchange selling price, it refers to the exchange rate used by the
bank to sell foreign exchange to customers. It indicates how much the country’s currency needs to be
recovered if the bank sells a certain amount of foreign exchange. (3)Middle rate:It is the average of the
bid price and the ask price. Commonly used in newspapers, magazines or economic analysis.
banks or large financial institutions charge each other when trading significant amounts of foreign
currency. In the business, this is sometimes referred to as a ‘spot rate’. It is not the tourist rate and
you cannot buy currency at this rate, as you are buying relatively small amounts of foreign
currency. In everyday life it is the same as the difference between wholesale and retail prices. The
rates shown in financial newspapers and in broadcast media are usually the interbank rates.
Spread – This is the difference between the buy and sell rates offered by a foreign-exchange
provider such as us.
Cross rate – This is the rate we give to customers who want to exchange currencies that do not
involve the local currency. For example, if you want to exchange Australian dollars into US
dollars.
Commission – This is a common fee that foreign-exchange providers charge for exchanging one
currency to another.
Currency convertibility means that a particular currency can be easily and readily
changed into another currency.
Let us first explain what is exactly meant by currency convertibility. By convertibility of a currency
we mean currency of a country can be freely converted into foreign exchange at market determined
rate of exchange that is, exchange rate as determined by demand for and supply of a currency.
For example, convertibility of rupee means that those who have foreign exchange (e.g. US dollars,
Pound Sterlings etc.) can get them converted into rupees and vice-versa at the market determined
rate of exchange. Under convertibility of a currency there are authorised dealers of foreign
exchange which constitute foreign exchange market.
SWIFT
Currency Devaluation
Devaluation of a currency is a deliberate lowering of an official exchange rate of a country and
setting a new fixed rate with respect to a reference of foreign currency such as the USD.
For instance, a country whose 10 units of its currency is equivalent to one dollar may decide to
devalue its currency by fixing 20 units to be equal to one dollar. By doing so, the home country
would be half as expensive as the dollar.
Currency Revaluation
Revaluation is a significant rise in a county’s official exchange rates in relation to a foreign
currency. The process of revaluation can only be done by the central bank of the revaluing
country.
For instance, if a countries currency trades at 10 units to 1 US dollar, to revalue it, the said
country can change to using 5 units of its currency to be equivalent to 1 dollar in order to make it
twice expensive compared to the dollar.
Why do countries devalue their currency? The reasons for a devaluation could vary either the economy is
underperforming or to boost exports. A week domestic currency makes a nation’s export more
competitive in global markets which enhances economic growth. Hence governments prefer to artificially
lower the exchange rate/decouple from the exchange rate to defend export industries that would be
priced out of global markets.
WHY CURRENCY DEVALUATION IS SOME TIME GOOD FOR COUNTRY
That’s like asking, “Is emergency heart surgery good?” What is good is for a country to maintain a stable
and competitive real exchange rate. A currency devaluation is sometimes necessary to restore a country’s
external competitiveness, in situations where its real exchange rate has become overvalued. In this
context, that means that production costs in its export-producing industries--mainly labor costs--have
risen to exceed those prevailing in other countries that produce a similar range of export items, when
costs are compared at the prevailing exchange rate. That causes the country’s export industries— and its
import competing industries— to lose competitiveness, in the sense that their production costs are too
high relative to the prices of the goods they export (or alternatively, the prices of the imports they’re
competing against), which are generally determined on world markets. In most cases, countries that suffer
such a loss of competitiveness do so as a result of loose monetary and fiscal policies.
In this situation, a devaluation is generally the most practical way to restore competitiveness, by realigning
wages and other production costs with export and import prices.
Effects of a devaluation
1. Exports cheaper. A devaluation of the exchange rate will make exports more competitive
and appear cheaper to foreigners. This will increase demand for exports
2. Imports more expensive. A devaluation means imports will become more expensive. This
will reduce demand for imports.
3. Increased AD. A devaluation could cause higher economic growth. Part of AD is (X-M)
therefore higher exports and lower imports should increase AD (assuming demand is
relatively elastic). Higher AD is likely to cause higher Real GDP and inflation.
4. Inflation is likely to occur because:
5. Imports are more expensive causing cost push inflation.
6. AD is increasing causing demand pull inflation
7. With exports becoming cheaper manufacturers may have less incentive to cut costs and
become more efficient. Therefore over time, costs may increase.
8. Improvement in the current account. With exports more competitive and imports more
expensive, we should see higher exports and lower imports, which will reduce the current
account deficit.
Hedge
A foreign exchange hedge (also called a FOREX hedge) is a method used by companies to eliminate or
"hedge" their foreign exchange risk resulting from transactions in foreign currencies (see foreign exchange
derivative). This is done using either the cash flow hedge or the fair value method.
When companies conduct business across borders, they must deal in foreign currencies. Companies must
exchange foreign currencies for home currencies when dealing with receivables, and vice versa for
payables. This is done at the current exchange rate between the two countries. Foreign exchange risk is
the risk that the exchange rate will change unfavorably before payment is made or received in the
currency . For example, if a United States company doing business in Japan is compensated in yen, that
company has risk associated with fluctuations in the value of the yen versus the United States dollar
Derivatives: A derivative is an instrument whose value is derived from the value of one or more
basic variables called bases (underlying asset, index, or reference rate) in a contractual manner.
The underlying asset can be equity, commodity, forex or any other asset. The major financial
derivative products are Forwards, Futures, Options and Swaps. We will start with the concept of a
Forward contract and then move on to understand Future and Option contracts.
Forward Contracts:
A forward contract is an agreement to buy or sell an asset on a specified date for a specified
price. The main features of this definition are
Future Contracts:
A future contract is effectively a forward contract which is standardized in nature and is
exchange traded. Future contracts remove the lacunas of forward contracts as they are not
exposed to counterparty risk and are also much more liquid. The standardization of the contract
is with respect to
Quality of underlying
Quantity of underlying
Term of the contract
Option Contracts:
An option contract is a contract which gives one party the right to buy or sell the underlying asset on a
future date at a pre-determined price. The other party has the obligation to sell/buy the underlying
asset at this pre-determined price (called the strike price). The option which gives the right to buy is
called the CALL option while the option which gives the right to sell is called the PUT option
Swaps:
A swap is a derivative in which two counterparties agree to exchange one stream of cash flows against
another stream. Swaps can be used to hedge interest rate risks or to speculate on changes in the
underlying prices. Since swaps are not used in equity markets in India, we would not go into further
details of swaps.
Duty drawback
A refund that can be obtained when an import fee has already been paid for a good, but the good
is then subsequently exported. In order to obtain a duty drawback, a business does not have to
have paid the import duty, nor do they have had to perform the product's exportation, they only
need to be assigned the drawback from those to whom it would typically be due.
Bangladesh needs a deep sea port
Bangladesh needs a deep sea port. The country has one of world’s fastest growing economies,
which is expected to rise at a 7.1 percent clip this year. It is on Goldman Sachs’s list of the “Next
11” emerging economic powerhouses of the 21st century. On the strength of the second-most
dynamic textile industry on the planet, Bangladesh’s export sector is booming, and is expected to
eclipse $50 billion per year in value by 2021. This is all in a country without adequate maritime
infrastructure.
In its 45-year history as an independent state, Bangladesh has never built a new port. While $60
billion of annual trade currently pours through the country’s two existing seaports, Chittagong and
Mongla, both are too shallow for large container ships and require costly load transfers to smaller
vessels to get cargo in and out — an added step that can cost an additional $15,000 per day and
severely decreases the ports’ global competitiveness.
However, finding solutions to this problem has proven problematic for Bangladesh. But this isn’t
because of a lack of options, a deficit of investors, or even a dearth of international support, but
exactly the opposite: too many powerful players are pushing for too many contending plans. This
has left Bangladesh geopolitically stalemated, making and breaking deals, going with one project
and then changing position and going with another. Ultimately, this plethora of options has pitted
China, Japan, and India in direct competition with each other to build Bangladesh’s first deep sea
port.
The two main Bangladeshi ports — Chittagong and Mongla — now can handle vessels with a
draft of just 8.5 meters, necessitating the use of tiny feeder vessels, which leads to higher costs in
addition to longer transits.
The deep-draft vessels cannot enter into the Chittagong Port as well as the Mongla Port and are
lightered at the outer anchorage in the Bay that causes higher freight rates and low productivity of our
sea-borne trade. Hence, it is essential to establish a deep sea port for handling vessels with deeper draft
and longer length to reduce freight cost and discharge time.
Moreover, in the absence of appropriate deep sea port and inaccessibility of large vessels to either
Chittagong or Mongla port, all exports and imports are carried out through transshipment from the
Singapore port incurring high transportation cost and delayed shipment
There is no alternative but to have a deep-sea port to help attain [a] $50 billion apparel export
target by 2021. Presently, we need nearly a month to send a consignment to Europe transiting in
Singapore or Colombo since mother vessels can’t come to [the] Bangladesh water area. If a deep-sea
port is built in Bangladesh and mother vessels can come here, lead time will go down significantly, If we
can cut lead time, buyers will get confidence on us and place more orders.
Establishment of a deep sea port (DSP) has become strategically very critical for Bangladesh considering
its potential impact on the accelerated development and economic growth of the country. Such a port
will allow the country to reap the benefit of connectivity that China's One Belt, One Road (OBOR)
initiative offers
BLUE ECONOMY:
Bangladesh has indeed been maintaining commendably a high growth rate of GDP in the range of
6-7 per cent annually almost for two decades. It is currently one of the emerging economies of the
world, advancing based mainly on three sectors: readymade garment industry, agriculture and
remittances.
But Bangladesh, being a country of having more than 160 million people, can add another sector
to the list if it can exploit the vast potentials of blue economy.
After the two verdicts of International Tribunal for the Law of the Sea (ITLOS) regarding the
settlement of maritime dispute initially with Myanmar in march 2012 and then with India in July
2014, Bangladesh obtained its absolute maritime territory of 1,18,813 square kilometers, 200
nautical mile Exclusive Economic Zone (EEZ) and an additional area of continental shelf (sea bed)
from the coast. The total area falling under the sovereign rights of Bangladesh makes up 81% of
the mainland of Bangladesh. It is like that we have got another Bangladesh in the Bay of Bengal
as the whole area has nearly doubled trough it.
The delimitation of sea boundary with Myanmar and India has indeed opened up a new window
of opportunities in terms of harnessing resources and enhancing existing external trade. The ocean
is one of Earth’s valuable natural resources. It provides food in terms fish and shellfish. It is used
as a prime mode of transportation – both shipping and travel. It is mined for minerals (salt, sand,
gravel, copper, cobalt etc can be found in the deep sea) and drilled for crude oil and gas. These
elements together constitute what we call “Blue Economy”. Now the question arises what type of
potentials actually we have regarding blue economy. Are we prepared enough to exploit this
advantage? After fifty months of achieving our full maritime area what initiatives the government
has taken so far to extract these untapped resources related to blue economy? Let’s try to find out
the answers of these queries.
Bangladesh, a unique delta, has been blessed with nice sea outlet but the potentials in the Bay of
Bengal have never been properly exploited. Thus, it remains untapped which have many things to
offer. The Bay of Bengal and coastal areas can be powerhouse of our national economy. A
sustainable marine economy extending close to the coast can bridge shore and off-shore divide.
The Bay of Bengal itself is the largest one among 64 bays in the world and 1.4 billion people live
along its coastline in Bangladesh, India, Myanmar and Thailand. At least twenty six maritime
activities can be generated here which include fishery, shipping, maritime trade, energy, seabed
tourism etc.
Fishery is one of the most important sectors of blue economy. Fish makes up 15.7 per cent of
animal protein consumed globally and the value of fish traded by developing countries is estimated
at USD 25 billion. There are about 475 species of fish found in Bangladesh EEZ compared to 250
species on land. Marine fish contributes at least 20 per cent of total fish production in the country
and as many as half a million of people are directly dependent on this sector. Whereas about 80
million metric tons fishes are caught every year in the Bay of Bengal, Bangaladeshi fishermen can
reap only 7 million tonnes and the bulk of it is taken by the fishermen of India, Myanmar,
Thailand and other countries. This why Bangladesh, at present, is not in the list of top
twenty marine fish producers of the world to which India, Myanmar and Thailand are advancing
in the ranking every year. Improved, faster and eco-friendly fishing trawlers are the demand of the
hour to harvest our marine fish resource.
Shipping and port facilities are considered as the backbone of blue economy. Eighty per cent of
global trade by volume and over 70 per cent by value are carried by sea and handled by ports.
World seaborne trade is growing by 4 per cent and is projected to triple by 2030. Bangladesh as a
coastal state needs to stand out prominently in terms of port facilities and capacities to keep pace
with the growing trade. Considering the average global import export growth rate of 11 and 10.50
per cent respectively (calculated on last ten years figure), the projected freight value would be
around USD 435 billion. In order to have some portion of share of this amount Bangladesh must
enhance the handling capacity of its ports and develop deep sea port equipped with modern
handling equipments. Around 600 ships anchor in Chittagong and Mongla port per year. Certainly,
the number can be substantially increased and Bangladesh can earn a hefty amount of money as
port duties with the opening out of blue economy.
Bangladesh has so far discovered 26 gas fields by which we had 27.12 trillion cubic feet (Tcf) gas.
But we have already exhausted well over 14 Tcf. According to Petrobangla, the remaining reserve
of gas in the country is estimated around at 13 Tcf. In the face of ever-increasing demand of gas
in the country this reserve would run within 10 to 12 years. And there is no real probability of
finding more gas fields in the near future. What will happen after that? Under such circumstances,
there is no option left for Bangladesh other than exploring gas blocks in the Bay of Bengal.
A recent survey jointly conducted by Petrobangla and the United States Geological survey (USGS)
has indicated we have a huge amount of gas reserve in the Bangladesh’s maritime area of the Bay
of Bengal. Exploration activities in the offshore today are going on slowly with only 3 blocks being
active by International Oil Company (IOC) under production sharing contract (PSC). There has
been no offshore drilling in the last seven years and success in negotiation is not visible enough.
Yet, on the other side of maritime boundary Myanmar has already stepped up its exploration
activities. The most recent gas discovery, the Thanin gas field, as it is named, took place in January
2016. It is located in the Myanmar offshore block A-7, very adjacent to one of the offshore blocks
of Bangladesh. Peter Colman, chief executive of the Australian based Woodside Oil Company –
which has discovered this gas field – has said this discovery testifies the high gas potentials around
the surrounding blocks. To sum up, we may agree with the geologist’s belief that a large delta like
Bangladesh should form a very rich gas province.
In today’s world there is nothing more significant than a sustainable economy. Blue economy has
become a part and parcel of Bangladesh’s post 2015 development agenda. The goal no. 14 of the
Sustainable Development Goals (SDGs) says, “Conserve and sustainably use the oceans and seas
and marine resources for sustainable development”. The present Bangladesh government is
advancing with some per-fixed development visions of aiming at making Bangladesh a middle
income country by 2021 and developed one by 2041. If we want to achieve SDGs and materialise
this vision, there is no alternative other than focusing on blue economy. We must have to devise a
master plan encompassing the potentials of entire coastal belt. We need a combination of political
leaderships, efficient bureaucracy with entrepreneurial spirit to materialise that plan.
If we do this, only then we can cash in on blue economy and transform the country sustainably.
CONVERTIBILITY OF TAKA
Bangladesh Bank declared Taka convertible on 24th March 1994 for current Account
transactions interms of Article viii of the IMF article of agreement. The declaration symbolized a
turning point in the country’s exchange management and exchange rate systems.
Convertible means the ability of the residents to convert Local Currency into foreign
currencies at the ruling exchange rates for paying their external obligations. In other words,
Convertibility means free floating of the Taka with least intervention from the Govt. and the central
bank in the fixation of exchange rate and making foreign exchange freely available for all
transactions.
Convertibility of the Taka implies a process of strengthening the Taka to the status of an
International Liquidity to create more confidence in the domestic and par value of Taka for its easy
acceptability both in national and international economic transactions. The ideas of freeing the
Taka had been prompted by the continuous stability in Macro-economic management, especially
the maintenance of monetary stability and reduction of budgetary deficits through effective fiscal
measures.
A currency is said to be convertible when it may be fully exchanged for another currency.
Convertibility of currency is not meant for domestic transactions propose. It is also required for
international transactions.
1. CURRENT ACCOUNT
2. CAPITAL ACCOUNT
3. OFFICIAL RESERVE ACCOUNT
CURRENT ACCOUNT :
The account that includes trade in goods (visible exports & imports) services and unilateral
transfers.
CAPITAL ACCOUNT:
The account shows the change in the nation’s assets abroad and foreign assets in the nation.
It includes direct investments, the purchase and sale of foreign securities and nation’s bank and
non-bank claims on and liabilities to foreigners.
The account shows the change in a nation’s official reserve assets and change in the foreign
official assets in the nation. (It is not related with convertibility of currencies).
Balance of payments
The balance of payments is the record of all international financial transactions made by a country's
residents. A country's balance of payments tells you whether it saves enough to pay for its imports. It
also reveals whether the country produces enough economic output to pay for its growth. The BOP is
reported for a quarter or a year.
A balance of payments deficit means the country imports more goods, services and capital than it exports.
A balance of payments surplus means the country exports more than it imports. Its government and
residents are savers.
MOTHER VESSEL
Mother vessel is big in size compared to feeder vessel. Mother vessels only serve between major
big ports. Mother vessels have the capacity to carry thousands of containers. Mother vessel calls
only main ports. The mother vessel covers large distance compared to feeder vessel.
Average capacity of a Mother Vessel is 10000 TEUs (Twenty foot Equipment Units). In
1960s, vessel capacity was maximum of 500 - 800 TEUs. Mother vessel with a capacity
of 15000 TEUs are available now.
FEEDER VESSEL
Feeder vessel is normally small in size compared to Mother vessel. Feeder vessels serves between
smaller ports and major ports. In other words, feeder vessels feeds cargo to mother vessel from
smaller ports to large ports for exports and from major main ports to smaller ports for imports.
Compared to mother vessel, feeder vessel is slow.
Average capacity of a feeder vessel is 300 to 500 TEUs (20’ containers). Feeder vessel serves
short distance, either between smaller ports, or between smaller ports and major ports.
Value Date Definition. A Value Date, or maturity date is the date on which counterparties to a financial
transaction agree to settle their respective obligations by exchanging payments and ownership rights
Causes of Disequilibrium!
Overall account of BOP is always in equilibrium. This balance or equilibrium is only in accounting
sense because deficit or surplus is restored with the help of capital account.
In fact, when we talk of disequilibrium, it refers to current account of balance of payment. If
autonomous receipts are less than autonomous payments, the balance of payment is in deficit
reflecting disequilibrium in balance of payment.
There are several factors which cause disequilibrium in the BOP indicating either surplus or deficit.
(a) Imbalance between exports and imports. (It is the main cause of disequilibrium in BOR), (b)
Large scale development expenditure which causes large imports, (c) High domestic prices which
lead to imports, (d) Cyclical fluctuations (like recession or depression) in general business activity,
(e) New sources of supply and new substitutes.
Political Factors:
Experience shows that political instability and disturbances cause large capital outflows and hinder
Inflows of foreign capital.
(a) Changes in fashions, tastes and preferences of the people bring disequilibrium in BOP by
influencing imports and exports; (b) High population growth in poor countries adversely affects
their BOP because it increases the needs of the countries for imports and decreases their capacity
to export.