BANGLADESH COMMERCE MINISTER PROMISES NOT TO

C O N F I D E N T I A L DHAKA 000285

SIPDIS

E.O. 12958: DECL: 03/22/2019
TAGS: PREL PGOV ETRD ECON BG
SUBJECT: BANGLADESH COMMERCE MINISTER PROMISES NOT TO
RESTRICT FOREIGN SHIPPING

REF: DHAKA 263

Classified By: Ambassador James F. Moriarty. Reasons: 1.4 (b) and (d)

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SUMMARY
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1. (C) Commerce Minister Faruq Khan promised Ambassador
Moriarty that international shipping would not face
restrictions in Bangladesh despite concerns the government
was taking steps favoring domestic shippers. The minister
also noted the Government of Bangladesh was considering
several measures to help the economy weather the global
economic storm. These steps included increasing subsidies for
hard-hit industries and helping banks lower their interest
rates.

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KEEPING SHIPPING BUSINESS OPEN IN BANGLADESH
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2. (C) Ambassador Moriarty on 3/19 told Commerce Minister
Faruq Khan the USG was concerned about pending decisions that
would disadvantage foreign shippers. The Ambassador noted
that, for more than a decade, Danish, American, French and
Korean shipping companies had run wholly-owned subsidiaries
in Bangladesh. One proposal would require these wholly-owned
foreign shipping agencies to sell a majority interest to
Bangladeshi nationals; the other would require 40 percent of
Bangladesh's exports to be shipped on Bangladesh-flagged
vessels. The Ambassador had expressed similar concerns in a
meeting a week earlier with Prime Minister Sheikh Hasina, who
clearly understood that added shipping restrictions would
bump up costs and make Bangladesh's exports less competitive.
The Commerce Minister agreed, saying Bangladesh did not want
to create any barriers to trade.


3. (C) Khan assured the Ambassador that any shipping line
could move goods in or out of Bangladesh. He said exporters
would not need to pay fees to get waivers to ship their goods
on non-Bangladesh-flagged vessels. "Any shipping line can
compete," he said. Further, the Minister said he knew of no
law that required foreign shipping companies to enter into
minority joint ventures with Bangladeshi shipping firms. He
promised to follow up, particularly with the National Board
of Revenue, which has been at the forefront of promoting the
joint ventures. (Note: U.S. shipping firm APL already
operates independently in Bangladesh. End note.)

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BANGLADESH CONSIDERS STIMULUS MEASURES
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4. (C) In response to a query from the Ambassador, Khan
confirmed formation of a task force under the Finance
Ministry to propose measures to ward off the deleterious
effects of the global economic crisis. One possibility would
be to increase subsidies to the hardest-hit export sectors,
such as shrimp and jute. Another possibility would be to
bring down bank interest rates, perhaps by lowering banks'
capital reserve requirements. He said the government would
like to see interest rates decline from 14-15 percent to
about 12 percent.


5. (SBU) Khan said Bangladeshi exports appeared to be
weathering the global downturn and were up 4 percent in
February from a year earlier. A decline in jute and shrimp
exports was offset by a rise in ready-made garments, which is
Bangladesh's most important export. He attributed the strong
garment sector to consumers moving from high-end clothing to
the cheaper goods churned out by Bangladeshi factories.

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COMMENT
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6. (C) While Bangladesh's garment exports held firm during
the first two months of 2009, industry sources warn that
sales are dropping quickly now; these sources predict exports
over the next few months will be down 15 percent from a year
earlier. In this context, proposals that would make shipping
from Bangladesh more expensive are particularly ill-timed.
MORIARTY