Implications of Foreign Trade Policy and Facilitation of Foreign Trade

S.R.Rao Chief General Manager Export-Import Bank of India

A Presentation

Where Does India Stand Globally?

Exim India

International rade o Sele t Countries in 2003

Country Ex orts
(US$ bn.)

orts

GD
(US$ bn.)

rade as % o GD 61.7 57.5 53.7 48.7 46.0 32.8 24.7 22.3

(US$ bn.)

Korea 197.6 175.5 China 438.3 393.6 Mexico 165.4 171.0 Russia 135.9 75.4 South Africa 38.7 35.0 Argentina 29.4 13.1 Brazil 73.1 48.3 India 57.0 74.3 Source: Economist Intelligence Unit

605.0 1446.9 626.1 433.5 160.1 129.7 492.1 588.8

 Indias share in global merchandise e ports: .8 (

)
2

Indias
India's
70000 60000 50000 US$ million 40000 30000 20000 10000 0 1999-2000 29751

port Performance
Exim India

port Performance 1999-

to

- 4

52856 44147 36760 43976

63623 47742

2000-01

2001-02 Years

2002-03

2003-04

All Commodities Ores & minerals Petroleum & crude products

Agricultural & allied products Manufactured goods

Source: DGCIS, MOC&I

3

"  "   

 

India s Import Performance

Indias Import Performance

ommodities

e r Petro e m cr de & prod cts

to

Non POL items

"

Source: DGCIS, MOC&I

!
S

Exim India

4
  
o

Trade Policies in India

Exim India

im Policies
 S re  L ber  Thru

e e

e roce ure or re e o

o ex or or e

Medi m Term
 1% h re

port Strategy, ob ex or by

Foreign Trade Policy

 To oub e I

h re

ob

erch

e r

by

Role of Instit tions

Exim India

 Instit tions

dedicated

for

promoting

foreign trade have played an important role towards enhancing the process of internationalisation of Indian companies, viz.

 

port Import Bank of India, port redit G arantee orporation,

 Indian Instit te of Foreign Trade

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Exim Bank
Exim India

 Se

u by Se e ber, 1981 e ce o er

o e

r o I

 Who y ow e  Co  Estab she

by Gover o

rch, 1982

for providing financial assistance to exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the countrys international trade
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Foreign Trade Policy

Exim India

Quantum Jump in Merchandise Exports Required:



Enhance exports of major export commodities

 

Identify potential export commodities Diversify export destinations

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Foreign Trade Policy

Exim India

Exim Bank Study Strategy for Quantum Jump in Exports: Focus on Africa, Latin America and China
India

could aim to achieve:  US$ 18 billion in Africas Imports by 2007 from US$ 3.8 bn in 2003-04  US$ 4 bn in Chinas imports by 2007 (in 64 identified groups) from US$ 0.86 bn in 2000  US$ 1.8 bn in LACs imports by 2007 (in 100 identified groups) from US$ 0.6 bn in 2000

Share in Indias Exports in 2003-04: Africa (6%); Latin America (1.8%); China (4.7)
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Lines of redit
Exim India

 Overseas Gover

e ts encies

 arastatal Or anisations/ Govt.  Co

ercial Banks

 Re ional Financial Institutions  Particularly relevant or SMEs  Eligible ite s all ite s er issible under Exim Policy  Engineering Goods  Consumer Durables  Commodities
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LOCs Extended by Exim Bank

Exim India

AFRICA
ALGERIA PTA BANK covering GHANA BURUNDI KENYA COMOROS MALAWI DJIBOUTI MAURITIUS ERITREA, EGYPT NAMIBIA ETHIOPIA SEYCHELLES KENYA SOUTH AFRICA MALAWI SUDAN MAURITIUS TANZANIA RWANDA TUNISIA SOMALIA UGANDA SUDAN ZAMBIA TANZANIA UGANDA BOAD covering ZAMBIA BENIN ZIMBABWE BURKINA FASO COTE DIVOIRE MALI EADB covering NIGER KENYA SENEGAL TANZANIA TOGO UGANDA

ASIA

EUROPE

BANGLADESH INDONESIA KAZAKHSTAN IRAN , IRAQ BULGARIA SRI LANKA RUSSIA KOREA ROMANIA MALAYSIA HUNGARY THAILAND POLAND VIETNAM PHILIPPINES

LATIN AMERICA & CARIB.

BRAZIL JAMAICA MEXICO COLOMBIA VENEZUELA BCIE covering COSTA RICA EL SALVADOR GUATEMALA HONDURAS NICARAGUA 11

CAF covering BOLIVIA COLOMBIA ECUADOR PERU VENEZUELA

Foreign Trade Policy

Exim India

Simplifying procedures and bringing down transaction costs  Transaction costs are incurred at the pre and postproduction stages, and arise out from several procedural complexities associated with administrative processes, availability of finance and transportation problems.  For enhancing the growth of exports it is important to reduce the transaction costs involved.  Exim Bank Study on Transaction Costs of Indian Exports
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Foreign Trade Policy

Exim India

Findings of Exim Banks St dy

Sector No. of Firms Transaction costs as % of export revenue (2003 Survey) 3-10 <5
e8

Transaction costs as % of export revenue (1998 Survey) 15 10 10 14 10 7-8.5 -

Textile/Garments Engineering goods Pharmaceuticals Chemicals Computer software Agro-Industries Electronic & Electrical machinery Plastic components Paper Industry Others

23 18 9 7 9 2 3 2 2 7

<5 1-5 1-2 5 5-10 5-7 1-2

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Foreign Trade Policy

Exim India

Transaction Costs: International Experience



Simplified and less stringent bureaucratic procedures like single window clearance and business friendly approach Better technology due to higher levels of foreign investment, faster loading/unloading methods Flexible labour laws Cheap availability of power and raw materials, Freight incentives by the Government, Lower ocean freight rates due to greater availability of vessels
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Foreign Trade Policy

Exim India

Special package for agriculture



Duty free imports of capital goods

 Will lower production cost and hence improve profitability

Exports of medicinal plants & herbal products facilitated

 Global imports of medicinal plants: US$ 1 bn (2001)  India second largest exporter after China  Potential to increase export to Rs. 1750 crore by 2006-07 and more than Rs. 2500 crore by 200910.  Global market for Herbal products: US$ 80 bn  Indias exports of Herbal products: US$ 280 mn (2002-03)
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Foreign Trade Policy

Exim India

Textile sector incentives



Duty free entitlement for garments & handicrafts increased from 3% to 5%  Will help exporters to move up the value chain  However, further incentives required to consolidate Indias position in the postMFA era Handicraft Special Economic Zone to be established  Will contribute to strong growth in handicraft exports  Will generate employment opportunities
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Foreign Trade Policy

Exim India

Export Promotion Schemes



Target Plus scheme introduced

 Will further boost exports from the successful exporters

Vishesh Krishi Upaj Yojana to boost horticulture exports

 Global trade in horticulture: US$ 79 bn (1999)  Indias exports: US$ Rs. 1830 cr (1999-2000)  Success of AEZs for horticulture depend on the ability of the states to overcome existing shortcomings in infrastructure, institutional mechanism and policy and programme support to achieve desired export orientation
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Foreign Trade Policy

Exim India

Export Promotion Schemes



Services Export Promotion Council to be set up

Served from India scheme: Service providers who earn forex of at least Rs. 5 lakhs will be eligible for duty credit entitlement
 Will help small scale service providers  Will

enhance

Indias

share

in

global

exports of services (1.4% in 2003)

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Exim Bank as a ons ltant

Exim India

Sharing Instit tional B ilding apabilities World wide



Feasibility study for establishment of an export credit and guarantee facility for Gulf Cooperation Council countries

  

Regional cooperation in export finance and export credit guarantees for ESCAP Study on promotion of international competitiveness and exports of manufactured goods for ESCAP

 

Setting up the Afrexim Bank Designing of Export Financing Programmes Turkey

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Exim Bank as a ons ltant

Exim India

Sharing Instit tional B ilding apabilities World wide

    

Setting up an Exim Bank in Malaysia Design of Export Marketing Seminars for SMEs in Vietnam Export Development Project : Ukraine Enterprise Support Fund : Armenia Establishing an Export Credit Guarantee Company in Zimbabwe Advisory services to Industrial Development Corporation of South Africa for international finance products Mauritius Study on Projecting Mauritius as an Investment Hub for Indian Firms
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Promoting Indian ons ltancy

Exim India

Tie p with
 International Finance Corporation, Washington D.C.
      
 


Africa Project Development Facility Africa Enterprise Fund Mekong Project Development Facility South-East Europe Enterprise Development Facility Private Enterprise Partnership (CIS Countries) China Project Development Facility South Asia Enterprise Development Facility

Eastern & Southern African Trade & Development Bank (PTA Bank) African Management Services Company (AMSCO)
Exim sponsors consultants under GoI AfDB cooperation Agreement
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Advisory Services
Information and support services to Indian companies to help improve their prospects for securing business in multilateral agencies funded projects.  Dissemination of business opportunities in funded projects  Providing detailed information on projects of interest

Exim India

Multilateral Agencies Funded Projects verseas (MFP )

 Information on Procurement Guidelines, Policies, Practices of  Multilateral Agencies  Assistance for Registration with Multilateral Agencies  Advising Indian companies on preparation of Expression of Interest, Capability Profile  Bid Intervention
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Foreign Trade Policy

Exim India

Export Oriented Units

 

Exemption from service tax EOUs permitted to retain 100% of export earnings in EEFC accounts

Income tax benefits to DTA units which convert to EOUs

 All these should considerably increase

export growth from the EOUs

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Exim Bank: Financing of Export riented ompanies

Exim India

Term Loans
Project Finance Equipment Finance Working Capital
Short Term < 1 year Term Loans for 1-2 years Long Term upto 5 years

Overseas Other Investment Finance Programmes

Loans to Indian companies for Equity Investment in their ventures overseas Loans to Indian companies to olden to their overseas ventures Direct Equity stake
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EOU Projects & TUFS Software Training Institutes Minor Ports Technology Parks

Export Marketing Finance Export Product Development Finance for R&D

Institutional Linkages
Exim India

Multilateral Agencies
 World Bank

Asian Development Bank  African Development Bank  European Bank for Reconstruction Development  Multilateral Investment Guarantee Agency (MIGA)  International Finance orporation (IF )  U ID Industrial Promotion ffices  Afrexim Bank  Eastern Southern African Trade  Development Bank (PTA Bank)

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Institutional Linkages
Exim India

Trade


Investment Promotion Agencies

Board of Investment of Sri Lanka Hatton ational Bank, Sri Lanka hina ational Technical Import Export orporation Polish Agency for Foreign Investment (PAIZ). Hungarian Investment and Trade Development Agency U ID Industrial ooperation Investment Promotion Service,

          

Poland Economic Development Board, Bahrain Investment Trade Promotion entre, Vietnam

entero Estero Vineto, Italy entro Estero amere ommercio Piemontesi, Italy. etherlands ouncil for Trade Promotion. Board of Investment of Mauritius
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Institutional Linkages
Exim India

Export redit Agencies

       

The Export Import Bank of hina. roatian Bank for Reconstruction and Development. zech Export Bank. Hungarian Export Import Bank Ltd. Uzbekinvest ational Export Import Insurance ompany. Exim Bank of Romania. Export Import Bank of the Russian Federation. Forum of Asian ECAs
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Institutional Linkages
Exim India

Trade


Investment Promotion Agencies

Board of Investment of Sri Lanka Hatton ational Bank, Sri Lanka China ational Technical Import Export Corporation Polish Agency for Foreign Investment (PAIZ). Hungarian Investment and Trade Development Agency U ID Industrial Cooperation Investment Promotion Service,

          

Poland Economic Development Board, Bahrain Investment Trade Promotion Centre, Vietnam

Centero Estero Vineto, Italy Centro Estero Camere Commercio Piemontesi, Italy. etherlands Council for Trade Promotion. Board of Investment of Mauritius
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Exim Bank : Partner in Globalisation

Exim India

Technology Capital (Foreign Investment) Raw Materials Capital Goods

I

Final Products Capital Goods Capital (Overseas Ventures)

Product Development Production Marketing Pre shipment Post shipment

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Foreign Trade Policy

Exim India

Final Observations
 Import of second hand capital goods allowed without age restrictions  No outdated imported

technology

should

be

 Special Focus Initiatives  Could be extended to other sectors of high export orientation like chemicals & pharmaceuticals  Export orientation of FDI should be increased
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FDI and Exports

Exim India

Low share of FDI in major export sectors Sector Transportation industry Computer software industry Chemicals & pharmaceuticals Textiles Leather & leather goods Services (incl. Hotels & Tourism)
Source: SIA, MOC&I
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Share in FDI ( ) .50 .46 5.70 1.20 0.20 8.37

Exim India

THANK YOU
www.eximbankindia.com

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