Discussion Brief for the Export Strategy-Maker
The Matching Grant Facility Programme
1. Introduction
The Matching Grant Facility (MGF) Programme
is a component of the Bangladesh Export Diversification Project (BDXDP)
of the Ministry of Commerce, GOB, with IDA/ World Bank credit. The
project is being jointly implemented under the contract by Trade
Development Institute of Ireland Limited, Dublin and Transnational
Consultants Limited (TCL) of Bangladesh. The concept of MGF has been
developed in the Ireland and has been implemented in 15 countries. In
Bangladesh, the project was launched on 1 August 1999.
2. Salient Features of
the MGF Programme
2.1 Matching Grants
Facility (MGF)
The Matching Grants Facility (MGF), is
an innovative 50% matching grant facility, aimed to stimulate
exporters to undertake appropriate export diversification and
development plans whereby they may reach a higher level of
competitiveness and acceptance in export markets. The focal point of
MGF is to induce exporters to purchase consultant and other services
that help them to diversify and expand their products lines and their
export markets. The MGF also encourages the growth of professionalism
among service providers to offer better services to the exporters of
Bangladesh.
2.2 Objectives of
the MGF
The main objective of MGF is to lead
the private sector of Bangladesh to greater and more diversified
exports by assisting firms to become more competitive through the use
of quality external business development services and through planned,
intensive, foreign market exploration.
2.3 Purpose of the
MGF Programme
The main purpose of MGF is to
"support the Government’s objective of diversifying exports, by
encouraging private firms to make fullest possible use of external
business development services (local and foreign) and of travel, in
order to enhance their ability to compete in export markets."
2.4 Duration of the
MGF Programme
The MGF was scheduled to operate from 1
August 1 1999 through 31 July 2002, although an independent mid-term
review has recommended its extension until 31 January 2003.
2.5 Benefits of MGF
Programme
- Exporters becoming more competent
competitive in the export market.
- Service providers will benefit by
enhancing their existing services and creating new services that
are purchased by export firm.
- Both exporters and service providers
will benefit by free MGF "hand-holding" assistance to :
- choose the best direction and
use of business development services to build their product and
managerial competitiveness for and in export markets,
- refine their export service
development plans, and
- execute the approved plans
The MGF encourages prospective clients
to grow by becoming more market-reactive, proactive and competitive by
agreeing to reimburse them up to 50% of eligible costs in an approved
export diversification/ development plan or service development plan.
2.6 Eligibility of
the Beneficiary>
Prospective clients eligible for
participation in Exporter grants are:
- Private firm currently exports,
deemed exporters and threshold exporters representing all sectors
except traditional jute goods sector
- Providers of inputs to exporters
products on the threshold of exporting
- Commercial wing of NGOs.
Prospective clients eligible for
participation in service development grants are:
- Private firm providing services to
the exporters
- Non-governmental bodies (e.g.
chambers & trade associations) and
- Professional firms providing support
services to the exporters.
2.7 Eligible
Activities
Eligible activities are:
2.7.1 Company Development
- Quality assurance and certificates
like ISO , HACCP, etc.
- Development of Management Information
System (MIS)
- Management consulting services
- Corporate brochure designing
- Web site design and hosting
- Training and human resources
development, etc.
2.7.2 Market Development
- International trade fair participation
- Market and buyer visits
- Inward buyer’s visit
- Market research abroad
- Marketing consulting services
- Training on export marketing
- Opening overseas marketing office
2.7.3 Product Development
- Technology sourcing and technical
assistance
- Development of prototype product
sample
- Hiring product designers and experts
- Product brochures and catalogue
designing
- All types of consulting services for
product development
Ineligible expenses for MGF cost
sharing are isolated activities (versus integrated plans) capital
costs, working capital, recurrent costs, maintenance costs, etc.
2.8 Total Available
Funds and Maximum Reimbursements
Export diversification/development
clients have US$ 10 million of available funding while service
development clients have US$ 2 million. No single sub-sector
may access more than 10% ($1.2 million). No single company or group of
companies can receivel more than US$ 200,000. The MGF may
reimburse up to a total cumulative equivalent of US$ 200,000 per
company or holding group of companies. Under service development plans
a maximum of US$ 50,000 may be reimbursed to private consulting
firms or US$ 200,000 to eligible exporters’ chambers and
associations during the Programme period. The clients are encouraged
to get second grants within the limit.
2.9 Mode of Payment
Payment of 50% grant is by
reimbursement only, coming after the MGF client has paid the entire
cost and submitted proof of activity completion (The
"deliverables") and evidence of payment of approved costs.
The other 50% of costs must be borne by the exporters/recipients
without any additional subsidy from other sources.
2.10 Management and
Operation
The management unit reports to a mixed
private/public board, comprising five representatives of leading
chambers and sector associations and two representatives of
Government; one from the Ministry of Finance and BDXDP Project
Director, who is an Additional Secretary in the Ministry of Commerce.
The MGF team is led by a resident
expatriate Manager and is supported by a Bangladeshi Deputy Manager
and an expatriate Financial Controller. Reporting to the Deputy
Programme Manager, three senior Bangladeshi export development
advisors (EDAs) make up the formal marketing team, but in order to
improve productivity, the contractors also recruited four young
professionals to support the Marketing Team.
3.0 Operational
Performance of the MGF Programme
3.1 Approval of
Grants
Approvals of grants, i.e. the value of
funds committed to the grantee; are generated by the promotional
activity unit, supported by advisory services and validated by the MGF
unit for the board’s decision. By 31 July 2001, gross value of
approvals amounted to over US$ 9,400,000 committed to some 402
projects.
3.2 Disbursement of
Grants
In the Matching Grant Programme,
disbursements lag behind approvals to a considerable extent, the
nature of the lag being determined by the types of activities being
supported. By 31July 2001, the value of payment orders
issued amounted to over US$ 1,520,000 and the trend is strongly
upwards. Reasons for this lag are many non-availability of visas in
time, non-availability for foreign exchange in time, and target dates
for completion of activities stretching up to nine months from the
disbursement.
The value of projects approved so far
(78% of the total availability of funds) indicate a demand for MGF
services that is constrained only by the availability of funds to meet
it. Experience however suggests that firms only undertake about 60% of
the approved activities (by value). In addition, experience in
disbursements shows that only 70% of the amounts approved for
activities that are completed and claimed for is actually disbursed,
due to savings against budget and also, failure to meet the policy
requirements of the MGF Board. It is clear by now that the real value
of approvals lies somewhat in the region of US$ 5.5 million,
leaving a further US$ 6.5 million to be committed.
3.3 Deployment of
Sector-wise Specialists and their contribution
The Programme has provision for
deployment of Sector Specialists: technical and /or marketing in key
sectors to advise firms on future development directions. 10 Sector
Specialists have been contracted and the sectors covered are
diversified jute products, frozen foods (fish, shrimps), furniture and
handicrafts, knitwear, leather and leather goods, pharmaceuticals,
processed agricultural products, ready made garments, software and
data entry, special textiles and household linens.
4.0 Contribution of the
MGF Programme
MGF is the first and only Programme in
Bangladesh of this nature directly assisting the private sector by
promoting existing and potential exporters of all sectors (except
traditional jute). Exporters said the Programme is the only
donor-funded programme that really assists them taking the perspective
and orientation of exporters and providing a cash subsidy.
Specifically, the contribution of MGF Programme is:
- The Programme has introduced a
planning culture among the exporters.
- Exporters have become quality
conscious, as evidenced by the fact that quality assurance
certification is one of the major activities undertaken by the MGF
clients with long-term impact on the company.
- International-standard
export-quality brochure catalogues and web sites have been
introduced as a tool for promoting exports.
- International trade fair
participation and market visits that were otherwise not possible
were undertaken by beneficiaries with great success in terms of
- Exposure to greater number of
markets and clients
- True appreciation of products,
product design, quality and pricing required to enter export
markets. This knowledge and contacts give the
clients an edge they never had before.
- Many of the clients have already
increased their export sales through the the MGF Programme.
5.0 Strengths and
Weaknesses of MGF Programme
5.1 Strengths of
the MGF Programme are:
- Its innovative approach stimulates the
local exporters.
- Its past operational experience helps
better implementation in Bangladesh.
- Its emphasis on different export
sectors strengthens total capacity.
- Exporters are encouraged to initiate
new marketing efforts.
- Exporters share their annual marketing
plan with MGF professionals, and thus fine-tune them.
- MGF helps sector and trade
associations to strengthen their service delivery-capacity.
- Assessment by the expatriate sector
specialist and experts benefit the sector and the country, which in
turn also helps overcoming weaknesses.
- MGF assistance benefits the local
exporter in both the short and long term.
- A larger number of clients are served
with a limited amount of funds.
5.1 Weaknesses of
the Programme are:
- Short Life: The Programme runs for a
total of 3 years commencing from 1 August 1999 and ending on 1
July 2002, after which date no amount of grants will be available.
So, MGF can only point the way towards promoting exports for
future programmes.
- Limited activities: Allowable
activities under MGF do not cover all the multi-faceted
requirements of an exporter. The Programme does not offer total
help. MGF recommends payment based on payment evidence, but
reimbursement to clients is in the hands of the Ministry of
Commerce and Bangladesh Bank, where delays occur due to the
bureaucratic process.
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Posted
18 August 2010