Open accounts to make int’l trade easier for exporters
Adoption of open accounts in international trade will help local exporters easily receive payments as traditional letters of credit (LC) are time-consuming and cumbersome, experts said.
Bangladesh Bank will assist local exporters in making transactions in the newly introduced open accounts system, said Humayun Kabir, executive director of Bangladesh Bank.
Kabir spoke while explaining the open accounts system in a virtual meeting on 'Open account export transactions and recent policy changes in Bangladesh'.
The International Chamber of Commerce Bangladesh (ICC-B) and Asian Development Bank (ADB) jointly organised the meeting on Friday.
In the open account system, goods are shipped and delivered before payment is made with a specific timeframe.
Bangladesh Bank already issued a circular regarding the introduction of open accounts in international trade in June this year.
Introduction of open accounts in international trade is a radical change in Bangladesh as traditional LCs have been practiced here for years, he said.
"Trade finance is the oxygen in business," said Rokia Afzal Rahman, vice president of ICC-B, adding that Vietnam and China have been taking advantage of open accounts in international trade.
She also said some $3.16 billion worth of garment work orders were either cancelled or suspended by the international retailers and brands due to the Covid-19 fallout.
Mahbub-ul-Alam, managing director of Islami Bank Bangladesh, said about 85 per cent of all transactions made through his bank for international trade is done in LCs.
Muhammad A (Rumee) Ali, chairman of the ICC-B Banking Commission and CEO of Bangladesh International Arbitration Centre, recommended for keeping an option of alternative dispute resolution so that the transactions can be negotiated in case of any disputes.
Having a warm relationship with buyers is of paramount importance under open accounts system, said Naser Ezaz Bijoy, CEO of Standard Chartered.
Md Mahbub Ur Rahman, CEO of HSBC Bank, said if international retailers and brands make 120 days deferred payments to local suppliers, the amount stands at $11 billion but if they make it in 90 days, the amount stands at $8 billion amid the pandemic.
Vincent O'Brien, member of the executive board of the ICC Banking Commission, Paris, moderated the virtual meeting.