Sourcing Digest: Doing Business in South Asia… Australia’s Industry Plan
The South Asian nations of India, Pakistan, Bangladesh and Sri Lanka - all vibrant textile and apparel traders - are plagued by high costs ranging from setting up a business to conducting cross-border trade and need to push ahead with more reforms, a...
DOING BUSINESS IN SOUTH ASIA: The South Asian nations of India, Pakistan, Bangladesh and Sri Lanka — all vibrant textile and apparel traders — are plagued by high costs ranging from setting up a business to conducting cross-border trade and need to push ahead with more reforms, a report by the World Bank said.
But the report noted that business costs also varied widely within each country and among business centers and transport and logistics hubs for clearing exports and imports. "Doing Business in South Asia 2007" concluded, for example, that in India, exporting of merchandise takes an average of 27 days and 10 documents to complete procedures. While this is a marked improvement over last year's average time of 36 days, it still lags behind neighboring China's 18-day average.
The fastest location in India from which to export is Chennai's port, with an average time of 17 days; Calcutta is close behind with 18 days and Mumbai is the slowest, with 27 days needed, the report said. Chennai, formerly known as Madras, is also singled out as among the cheapest Indian cities for trade transactions, with businesses paying a fee of $580 to export a 20-foot container; Calcutta is the lowest, with a cost of $505.
In Pakistan, exporting goods takes an average 24 days and eight documents, down from 33 days last year, and Karachi is "the cheapest and quickest" city. In Bangladesh, exporters on average require 35 days to export goods and seven documents. However, for the country's key export sector, apparel, which accounts for 75 percent of its merchandise exports, shipments can clear much faster. The cheapest Bangladeshi port for exports is Chittagong, where businesses pay $553 per container, and the costliest is Dhaka, at $607.
In Sri Lanka, it takes an average of 25 days and eight documents to export goods.
In 2005, India's exports of apparel were valued at $8.2 billion, up 25 percent from the previous year; Pakistan's reached $3.6 billion, up 19 percent; Bangladesh's rose 13 percent, to $6.4 billion, and Sri Lanka's edged upward by 4 percent, to $2.8 billion, according to World Trade Organization data.
India and Pakistan are also major exporters of textiles and in the same year posted double-digit gains. Exports from India were up by 12 percent, to $7.8 billion, and Pakistan's shipments rose 16 percent, to $7 billion.The report, which drew on information from more than 5,000 business experts, consultants and government officials worldwide, said South Asian nations had a long way to go improve their trade performance compared with top places like Singapore, where it takes just six days for exports and container shipments to clear at substantially lower costs.
As for imports, the report said on average it takes 16 documents and 57 days to complete procedures in Bangladesh, 15 documents and 41 days in India, 13 documents and 27 days in Sri Lanka, and 12 documents and 19 days in Pakistan.
Fees for importing goods in 20-foot containers via Hyderabad and Chennai in India cost businesses $850 and $892, respectively, but $1,244 through Mumbai. In Pakistan, it costs $1,005 per container; in Bangladesh, $1,287, and in Sri Lanka, $789, the study said. In Bangladesh, the cheapest port to import through is Dhaka, at $829 per container, and the costliest is Bogra, at $979.
In South Asia, procedures are still quite cumbersome for starting a business and dealing with licenses, and vary among countries, and as do the norms for protecting investors, registering property and enforcing commercial contracts.
Out of 175 economies ranked worldwide on business friendly regulations, Pakistan was ranked 74th, Bangladesh was 88th, Sri Lanka was 89th and India was 134th.
AUSTRALIA'S INDUSTRY PLAN: Australian trade officials hope a multimillion-dollar assistance package will help the country's troubled textiles, apparel, footwear and leather industries to adjust to the country's reduced tariff plan.
A WTO report on Australia's trade regime said employment in the affected industry fell to 54,000 in 2006 from 64,000 in 2002.
On Jan. 1, 2005, Australia reduced its applied tariffs for apparel and certain textiles to 17.5 percent from 25 percent, and on cotton sheeting, woven fabrics, footwear and carpets, to 10 percent from 15 percent. Import duties were lowered to 7.5 percent from 10 percent for sleeping bags, table linen and footwear parts.
The post-2005 assistance package includes the allocation of $366 million over a 10-year period for new plants and building expenditures, and for research and development.
Christopher Langman, first assistant secretary at Australia's department of foreign affairs and trade, said the package of actions "aims to help firms through the transition from higher levels of tariffs to lower tariffs." He said tariffs for apparel and certain finished textiles would decline further to around 10 percent by 2010, and drop to 5 percent by 2015.The assistance plan also includes an expanded foreign assembly provision under which importers of textiles, apparel and footwear products that are assembled from mainly Australian fabric and/or leather are required "to pay tariff on the cost of the overseas processing and content only," the report said. To qualify, an importer must also be an exporter of the fabric or leather used in the assembly.
In 2005, Australia's exports of textiles were valued at $329 million, and imports reached $1.7 billion. In the same year, Australian apparel imports reached $3.1 billion, according to WTO statistics.
Overall, Australia's applied industrial tariffs averaged 4.2 percent in 2006 and agriculture tariffs average 1.4 percent, giving the country an overall average of 3.8 percent, the report noted.
"Australia is one of the most dynamic and open economies in the world, and a dedicated proponent of free trade," David Shark, deputy U.S. chief of mission to the WTO, said during a recent two-day review.
He said, based on preliminary data for 2006, bilateral goods trade between the U.S. and Australia totaled $26 billion, up 33 percent since 2002, and added that bilateral direct investment exceeded $150 billion.
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