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Back to Back LC’s Impact on Export Business of Bangladesh
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Transcript of Back to Back LC’s Impact on Export Business of Bangladesh
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Banking Principles & Practices
Back to Back LC’s Impact on Export Business of
Bangladesh
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Economy of Bangladesh
• More than 5% average growth during last five years
• GDP of the country stood up at US$ 68 billions.
• The manufacturing sector recorded more than 11% growth
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Export performance
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Export Performance
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Product Wise Export in FY 2009-2010
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Export Trends of Bangladesh
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Annual and monthly trends in Exports
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BANGLADESH'S RMG EXPORTS TO WORLD AT A GLANCE
Month
Total Mn US$Growth %
2009 2010
Jul 1173.60 1469.94 25.25
Aug 1042.55 1435.45 37.69
Sep 814.39 1066.13 30.91
Oct 748.22 1266.02 69.20
Nov 927.05 1179.81 27.26
Dec 884.76 1531.63 73.11
Total 5590.57 7948.98 42.19
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Back To Back LC:
• Two letters of credit (LCs) used together to help a seller finance the purchase of equipment or services from a subcontractor
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Back to Back LC’s Impact on business compare to other
2004-05 2005-06 2006-07 2007-08 2008-09 Description Imports
million $
Share %
Imports in million $
Share in %
Imports million $
Share in %
Imports million $
Share in %
Imports million $
Share in %
Imports from World Basic Raw Materials 758 11.5 903 10.8 852 9.1 1,015 10.7 1,409 12.8 Intermediate Goods: DomesticConsumption
1,936 29.3 2,082 24.9 2,169 23.3 2,445 25.8 2,702 24.5
Intermediate Goods: Back-to-Back-L/C & EPZ Imports
1,696 25.7 2,874 34.4 2,592 27.8 2,795 29.5 3,197 29.0
Capital Goods 1,165 17.6 1,463 17.5 2,555 27.4 1,447 15.3 2,016 18.3 Final Consumer Goods: Total
1,057 16.0 1,036 12.4 1,151 12.3 1,775 18.7 1,720 15.6
Imports from India Basic Raw Materials 117 11.1 84 10.4 126 13.0 135 11.2 218 16.8 Intermediate Goods: Domestic Consumption
276 26.3 227 28.2 264 27.1 340 28.1 336 25.9
Intermediate Goods: Back-to-Back-L/C
165 15.8 178 22.0 136 13.9 95 7.9 112 8.6
Capital Goods 125 11.9 115 14.3 176 18.1 156 12.9 178 13.7
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Impact of Back to Back LC on Export
• Problem of working capital was greatly solved with the introduction of back-to-back letter of credit
• About 90% of woven fabrics and 60% of knit fabrics are imported to make garments for export
• Bangladeshi apparel exporters import fabrics at international prices using back-to-back letter of credit
• Bangladesh imports about 90% of the machinery from Japan to run the apparel industry through LC.
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Conclusion
• Important tool used in international trade
• helps to the exporters to run their business and keep the momentum of the economy as well.