Implications of Foreign Trade

Policy and
Facilitation of Foreign Trade
A Presentation
S.R.Rao
Chief General Manager
Export-Import Bank of India
2
Exim India
Where Does India Stand Globally?
International Trade of Select Countries in 2003
Country Exports Imports GDP Trade as % of GDP
(US$ bn.) (US$ bn.) (US$ bn.)
Korea 197.6 175.5 605.0 61.7
China 438.3 393.6 1446.9 57.5
Mexico 165.4 171.0 626.1 53.7
Russia 135.9 75.4 433.5 48.7
South Africa 38.7 35.0 160.1 46.0
Argentina 29.4 13.1 129.7 32.8
Brazil 73.1 48.3 492.1 24.7
India 57.0 74.3 588.8 22.3
Source: Economist Intelligence Unit
Indias share in global merchandise exports: 0.8% (2003)
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Exim India
Indias Export Performance
Source: DGCIS, MOC&I
India's Export Performance (1999-2000 to 2003-04)
63623
47742
52856
43976
44147
36760
29751
0
10000
20000
30000
40000
50000
60000
70000
1999-2000 2000-01 2001-02 2002-03 2003-04
Years
U
S
$

m
i
l
l
i
o
n
All Commodities Agricultural & allied products
Ores & minerals Manufactured goods
Petroleum & crude products
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Exim India
Indias Import Performance
Source: DGCIS, MOC&I
India's Import Performance (1999-2000 to 2003-04)
77237
56613
51588
50056
61572
49799
37172
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
1999-2000 2000-01 2001-02 2002-03 2003-04
Years
U
S
$

m
i
l
l
i
o
n
All Commodities Petroleum crude & products Non-POL items
5
Exim India
Trade Policies in India
Exim Policies
Streamlined trade procedures
Liberalised import regime
Thrust on export orientation
Medium Term Export Strategy, 2002
1% share in global exports by 2007
Foreign Trade Policy 2004-2009
To double Indias share in global merchandise trade
by 2009
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Exim India
Role of Institutions
Institutions dedicated for promoting
foreign trade have played an important
role towards enhancing the process of
internationalisation of Indian companies,
viz.
Export-Import Bank of India,
Export Credit Guarantee Corporation,
Indian Institute of Foreign Trade
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Exim India
Exim Bank
Set up by an act of parliament in
September, 1981
Wholly owned by Government of India
Commenced operations in march, 1982
Established 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
8
Exim India
Foreign Trade Policy 2004-09
Quantum Jump in Merchandise Exports
Required:
Enhance exports of major export
commodities
Identify potential export commodities
Diversify export destinations
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Exim India
Foreign Trade Policy 2004-09
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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Exim India
Lines of Credit
Overseas Governments
Parastatal Organisations/ Govt. Agencies
Commercial Banks
Regional Financial Institutions
Particularly relevant for SMEs
Eligible items all items permissible under Exim Policy
Engineering Goods
Consumer Durables
Commodities
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Exim India
AFRI CA ASI A EUROPE

ALGERIA PTA BANK covering BANGLADESH
GHANA BURUNDI INDONESIA KAZAKHSTAN
KENYA COMOROS IRAN , IRAQ BULGARIA
MALAWI DJIBOUTI SRI LANKA RUSSIA
MAURITIUS ERITREA, EGYPT KOREA ROMANIA
NAMIBIA ETHIOPIA MALAYSIA HUNGARY
SEYCHELLES KENYA THAILAND POLAND
SOUTH AFRICA MALAWI VIETNAM
SUDAN MAURITIUS PHILIPPINES
TANZANIA RWANDA
TUNISIA SOMALIA
UGANDA SUDAN LATI N AMERI CA & CARI B.
ZAMBIA TANZANIA
UGANDA BRAZIL MEXICO COLOMBIA
BOAD covering ZAMBIA JAMAICA VENEZUELA
BENIN ZIMBABWE
BURKINA FASO CAF covering BCI E covering
COTE DIVOIRE BOLIVIA COSTA RICA
MALI EADB covering COLOMBIA EL SALVADOR
NIGER KENYA ECUADOR GUATEMALA
SENEGAL TANZANIA PERU HONDURAS
TOGO UGANDA VENEZUELA NICARAGUA
LOCs Extended by Exim Bank
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Exim India
Foreign Trade Policy 2004-09
Simplifying procedures and bringing down
transaction costs
Transaction costs are incurred at the pre and post-
production 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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Exim India
Foreign Trade Policy 2004-09
Sector

No. of
Firms

Transaction costs as %
of export revenue (2003
Survey)

Transaction costs as
% of export revenue
(1998 Survey)


Textile/Garments

23

3-10

15

Engineering goods

18

< 5

10

Pharmaceuticals

9

8

10

Chemicals

7

< 5

14

Computer software

9

1-5

10

Agro-Industries

2

1-2

7-8.5

Electronic & Electrical
machinery

3

5

-

Plastic components

2

5-10

-

Paper Industry

2

5-7

-

Others

7

1-2



Findings of Exim Banks Study
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Exim India
Foreign Trade Policy 2004-09
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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Exim India
Foreign Trade Policy 2004-09
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 2009-
10.
Global market for Herbal products: US$ 80 bn
Indias exports of Herbal products: US$ 280 mn
(2002-03)
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Exim India
Foreign Trade Policy 2004-09
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 post-
MFA era
Handicraft Special Economic Zone to be
established
Will contribute to strong growth in
handicraft exports
Will generate employment opportunities
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Exim India
Foreign Trade Policy 2004-09
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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Exim India
Foreign Trade Policy 2004-09
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 India
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

Exim Bank as a Consultant
Sharing Institutional Building Capabilities World wide
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Exim India
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
Sharing Institutional Building Capabilities World wide
Exim Bank as a Consultant
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Exim India
Tie-up 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
Promoting Indian Consultancy
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Exim India
Advisory Services

Multilateral Agencies Funded Projects Overseas (MFPO)
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
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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Exim India
Foreign Trade Policy 2004-09
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 India


Software Training
Institutes

Minor Ports

Technology Parks
EOU Projects &
TUFS
Exim Bank:
Financing of Export-Oriented Companies
Term Loans
Project
Finance
Equipment
Finance
Working
Capital
Overseas
Investment Finance
Long Term
upto 5 years
Term Loans
for 1-2 years
Loans to Indian
companies for Equity
Investment in their
ventures overseas
Loans to Indian
companies to olden to
their overseas
ventures
Other
Programmes
Export
Marketing
Finance
Export Product
Development
Finance for
R&D
Short Term
< 1 year
Direct Equity stake
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Exim India
Multilateral Agencies

World Bank
Asian Development Bank
African Development Bank
European Bank for Reconstruction & Development
Multilateral Investment Guarantee Agency (MIGA)
International Finance Corporation (IFC)
UNIDO - Industrial Promotion Offices
Afrexim Bank
Eastern & Southern African Trade &
Development Bank (PTA Bank)
Institutional Linkages
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Exim India

Board of Investment of Sri Lanka

Hatton National Bank, Sri Lanka

China National Technical Import & Export Corporation

Polish Agency for Foreign Investment (PAIZ).

Hungarian Investment and Trade Development Agency

UNIDO 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.

Netherlands Council for Trade Promotion.

Board of Investment of Mauritius

Institutional Linkages
Trade & Investment Promotion Agencies
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Exim India

Export Credit Agencies

The Export-Import Bank of China.

Croatian Bank for Reconstruction and Development.

Czech Export Bank.

Hungarian Export-Import Bank Ltd.

Uzbekinvest National Export-Import Insurance Company.

Exim Bank of Romania.

Export-Import Bank of the Russian Federation.

Forum of Asian ECAs

Institutional Linkages
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Exim India

Board of Investment of Sri Lanka

Hatton National Bank, Sri Lanka

China National Technical Import & Export Corporation

Polish Agency for Foreign Investment (PAIZ).

Hungarian Investment and Trade Development Agency

UNIDO 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.

Netherlands Council for Trade Promotion.

Board of Investment of Mauritius

Institutional Linkages
Trade & Investment Promotion Agencies
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Exim India
Exim Bank : Partner in Globalisation
Technology
Capital (Foreign
Investment)
Raw Materials
Capital Goods
Final Products
Capital Goods
Capital
(Overseas
Ventures)
Product
Development
Production
Marketing
Pre shipment
Post shipment
I
T
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Exim India
Foreign Trade Policy 2004-09
Final Observations
Import of second hand capital goods allowed
without age restrictions
No outdated technology should be
imported
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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Exim India
FDI and Exports
Sector Share in FDI (%)
Transportation industry 7.50
Computer software industry 6.46
Chemicals & pharmaceuticals 5.70
Textiles 1.20
Leather & leather goods 0.20
Services (incl. Hotels & Tourism) 8.37
Source: SIA, MOC&I
Low share of FDI in major export sectors
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Exim India
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