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Implications of Foreign Trade

Policy andFacilitation of Foreign Trade

A PresentationS.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 24.7India 57.0 74.3 588.8 22.3

Source: Economist Intelligence Unit

India·s share in global merchandise exports: 0.8% (2003)



3

Exim India

India·s Export Performance

Source: DGCIS, MOC&I

India's Export Performance (1999-2000 to 2003-04)

63623

47742

52856

439764414736760

29751

0

10000

20000

30000

4000050000

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 productsOres & minerals Manufactured goodsPetroleum & crude products



4

Exim India

India·s Import Performance

Source: DGCIS, MOC&I

India's Import Performance (1999-2000 to 2003-04)

77237

566135158850056

61572

49799

37172

010000

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 India·s share in global merchandise trade

by 2009



6

Exim India

R ole 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



7

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 institutionsengaged in financing export and import of goods

and services with a view to promoting the

country·s international trade«µ



8

Exim India


Q uantum Jump in Merchandise Exports

Required:

Enhance exports of major export

commodities

Identify potential export commodities

Diversify export destinations



9

Exim India


Exim Bank Study ´Strategy for Q uantum Jump in Exports:Focus on Africa, Latin America and Chinaµ

India could aim to achieve:

US$ 18 billion in Africa·s Imports by 2007

from US$ 3.8 bn in 2003-04

US$ 4 bn in China·s imports by 2007 (in 64

identified groups) from US$ 0.86 bn in 2000

US$ 1.8 bn in LAC·s imports by 2007 (in 100

identified groups) from US$ 0.6 bn in 2000

Share in India·s Exports in 2003-04: Africa (6%); Latin

America (1.8%); China (4.7)



10

Exim India

Lines of Credit

Overseas Governments

Parastatal Organisations/ Govt. Agencies

Commercial Banks

Regional Financial Institutions

Particularly relevant for SMEs

Eligible items ² all items permissible under Exim Policy

Engineering Goods

Consumer Durables

Commodities



11

Exim India

AFRICA ASIA 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 RWANDATUNISIA SOMALIA

UGANDA SUDAN LATIN AMERICA & CARIB.

ZAMBIA TANZANIAUGANDA BRAZIL MEXICO COLOMBIA

BOAD covering ZAMBIA JAMAICA VENEZUELA BENIN ZIMBABWE

BURKINA FASO CAF covering BCIE covering

COTE D¶IVOIRE 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


Simplifying procedures and bringing downtransaction costs

Transaction costs are incurred at the pre and post-

production stages, and arise out from several procedural complexities associated withadministrative processes, availability of financeand transportation problems.

For enhancing the growth of exports it isimportant to reduce the transaction costs involved.

Exim Bank Study on Transaction Costs of IndianExports



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Exim India


Sector No. ofFirms

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 e 8 10

Chemicals 7 < 5 14

Computer software 9 1-5 10

Agro-Industries 2 1-2 7-8.5

Electronic & Electricalmachinery

3 5 -

Plastic components 2 5-10 -

Paper Industry 2 5-7 -

Others 7 1-2

Findings of Exim Bank·s Study



14

Exim India


T ransaction 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



15

Exim India


S pecial 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

India·s exports of Herbal products: US$ 280 mn(2002-03 )



16

Exim India


T extile 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 toconsolidate India·s position in the post- MF A era

Handicraft S pecial Economic Zone to beestablished

Will contribute to strong growth inhandicraft exports

Will generate employment opportunities



17

Exim India


Export Promotion Schemes T arget Plus scheme introduced

Will further boost exports from the successful

exporters

Vishesh Krishi U paj Yojana to boost horticulture

exports

Global trade in horticulture: US$ 79 bn (1999 )

India·s exports: US$ Rs. 1830 cr (1999-2000 )

Success of AEZs for horticulture depend on´the ability of the states to overcome existingshortcomings in infrastructure, institutionalmechanism and policy and programme support

to achieve desired export orientationµ



18

Exim India


Export Promotion Schemes

´Services Export Promotion Councilµ to be set

up

´Served from Indiaµ 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 India·s share in global

exports of services (1.4% in 2003 )



19

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 E SCAP

Study on promotion of international competitiveness and

exports of manufactured goods for E SCAP

Setting up the Afrexim Bank

Designing of Export Financing Programmes - T urkey

Exim Bank as a Consultant

Sharing Institutional Building Capabilities World wide



20

Exim India

Setting up an Exim Bank in Malaysia

Design of Export Marketing Seminars for SMEs in Vietnam

Export Development Project : U kraine

Enterprise Support Fund : Armenia

Establishing an Export Credit Guarantee Company inZimbabwe

Advisory services to Industrial Development Corporation ofSouth Africa for international finance products

Mauritius ² Study on Projecting Mauritius as an Investment

Hub for Indian Firms

Sharing Institutional Building Capabilities

World wide

Exim Bank as a Consultant



21

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



22

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



23

Exim India


Export Oriented U nits

Exemption from service tax

EOU s permitted to retain 100% of exportearnings in EE F C accounts

Income tax benefits to DT A units which

convert to EOU s All these should considerably increase

export growth from the EOU s



24

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 Indiancompanies 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



25

Exim India

M

ultilateral Agencies World Bank

Asian Development Bank

African Development Bank

European Bank for R econstruction & 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



26

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


Trade & Investment Promotion Agencies



27

Exim India

Export Credit Agencies

The Export-Import Bank of China.

Croatian Bank for R econstruction and Development.

Czech Export Bank.

Hungarian Export-Import Bank Ltd.

Uzbekinvest ² National Export-Import Insurance Company.

Exim Bank of R omania.

Export-Import Bank of the R ussian Federation.

Forum of Asian ECAs




28

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


Trade & Investment Promotion Agencies





30

Exim India


F inal Observations Import of second hand capital goods allowed

without age restrictions

No outdated technology should beimported

´S pecial F ocus Initiativesµ

Could be extended to other sectors of high

export orientation like chemicals &

pharmaceuticals

Export orientation of F DI should be increased



31

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



32

Exim India

THANK YOUTHANK YOU

www.eximbankindia.com

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