First-ever gold policy coming soon

FT ONLINE

The government is going to introduce a gold policy to make import and export of the precious metal easy, and ensure transparency and accountability in its trade inside the country.

The commerce ministry has already sent the draft policy to the Cabinet Division for approval.

The existing rules allow import of gold, subject to permission from Bangladesh Bank. But in reality, gold has never been imported through legal channels since the country's independence.

The draft says the country's annual demand for gold hovers between 20 and 40 tonnes. Almost 80 percent of the demand is met with smuggled gold and the rest from recycled gold, depriving the government of a huge amount of tax. This also creates scopes for money laundering and accumulation of black money.

Many countries, including India, earn billions of dollars by exporting gold ornaments, but Bangladesh's export earning in this sector is abysmally low.

In 2016, the total export of gold ornaments was $638 billion across the globe. Of the amount, India's export amounted to around $42 billion. During the period, Bangladesh exported gold ornaments worth only $672.

The draft policy proposes giving various incentives to exporters of gold ornaments.

EASING GOLD IMPORT

To ease gold import, 11 measures have been laid out in the draft policy.

The BB will appoint dealers for importing gold bars to meet the country's requirement.

The dealer may be an authorised bank or an individual-owned firm, a joint venture or a limited company. The BB will formulate a guideline for the dealers who will directly import gold bars.

Local manufacturers of gold ornaments will not be able to buy gold from others except for these dealers.

The dealers will be allowed to import gold through bonds, but for that they will have to get bond licences in line with the existing law.

They will also have to inform the BB about their requirement of foreign currency for importing gold and have to obtain no-objection certificate (NOC) from the BB.

The central bank will issue NOC within 15 days upon receipt of a dealer's application.

Jewellers will inform the dealers of their demand and pay them 5 percent of the price in advance which will be adjusted during the final settlement.

ENSURING TRANSPARENCY, ACCOUNTABILITY

Electronic cash register, electronic transfer system and VAT challan or receipt will be introduced in trade of gold, diamond, silver and other valuable metals.

Within six months of the introduction of the policy, jewellers will have to submit statements on their existing stocks to the National Board of Revenue and then they will have to submit stock reports every month.

In case of purchase of recycled gold from a customer, the trader has to preserve a copy of the national identity card or passport, and address of the customer.

BOOSTING EXPORT OF ORNAMENTS

The draft policy proposes several incentives for increasing export of gold ornaments. Those include tax benefit for gold ornaments, especially handmade ones.

Gold ornament manufacturers will also be given cash subsidy for exporting gold items, both handmade or machine-made.

If gold bars are imported only for manufacture and export of gold ornaments, duty draw back benefit will be given to the exporters.

Besides, land will be allotted to gold exporters for setting up factories in special economic zones.

OTHER PROVISIONS

The BB will set up a central information bureau that will keep information on the annual demand for gold, its local trade, import and export, revenue collection, seizure of gold and its sale on auction, and all other relevant data.

Since the country's independence to early 2015, 2.2 tonnes of seized illegal gold worth $90 million had been added to the foreign currency reserves.

In recent times, gold smuggling has gone up remarkably with Bangladesh becoming a transit point for international smuggling rackets.

Big hauls of the precious metal make headlines quite often. But most of the smuggled gold enters and exits the country quite safely.

It is like a cobweb -- extremely complex and intricately designed. The way gold is smuggled in from abroad is so ingeniously planned that it often outclasses Hollywood crime thrillers.

A consignment changes several hands in its journey from the source to the destination, but there are stages when a carrier doesn't even know who takes over from him. So, even if someone is caught with a shipment, most of the time it's impossible to trace back to the gang leaders.

The transaction for smuggled gold is usually done through hundi.

Against this backdrop, the finance ministry last year requested the Transparency International Bangladesh (TIB) to come up with recommendations for formulating a gold policy.

Later, the finance ministry sent the recommendations to the commerce ministry that formed a nine-member committee with representatives from the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the TIB, gold traders, and related ministries and agencies.

The committee then formulated the draft policy.