Retaining export growth

Above 41 per cent exports growth in January gives a genuine boost to our reviving economy which has been struggling for over two years as a consequence of the ravaging effects of the coronavirus. This record growth in exports reflects the strong economic recovery of Western developed countries, and the increased capacity of our manufacturing sector, particularly garment industries. Weakened economic activities have long subdued the demand for goods in Western economies due to the prolonged effects of the pandemic. Pent-up demand from sourcing countries coupled with trade diversions from China, Vietnam, and Myanmar helped propel the wheel of local export earnings to a staggering $4.85 billion in January. The export growth in the July-January period of the current 2021-2022 fiscal year was 30.34 per cent to $29.54 billion from $22.67 billion in the same period of the last financial year.

It is to be noted that pent-up demand in destination countries will not last for long and thus staggering jumps in export earnings will not occur frequently. The exporters now have to retain new buyers with utmost quality, enhanced productivity, and competitive prices. Without adopting the latest technology in our manufacturing sector, export growth will not be sustainable. Commenting on export sustainability, a former lead economist at the World Bank Dhaka office Zahid Hussain said, “Export earnings have increased, but we cannot predict how long Bangladesh will be able to sustain it. But the export sector has indeed turned around, and it is a good sign for our economy. The pandemic’s impacts and political crisis in our competitor countries have helped us achieve this growth.”

Bangladesh lags far behind its peer countries in adopting technology in manufacturing industries, particularly in export-focused factories. Despite having a competitive edge over many competing countries regarding low-cost labour, it is feared that Bangladesh might lose its market share in export destinations. Our export-oriented industry now needs to reorganize its production outline to develop product quality and diversity in the manufacturing sector with slow penetration of modern technology coupled with inadequate research programmes to develop product quality and diversity in the manufacturing sector. According to the Centre for Policy Dialogue (CPD), Bangladesh has the most negligible proportion of high technology in manufacturing export products. A news item published in this daily recently states that only 0.61 per cent of local manufacturers use high technology, which is 40.94 per cent in Vietnam, 12.44 per cent in India and 35.22 per cent in China. The report that quoted the findings of the CPD said the production of goods here is mostly based on low technology accounting for 95.14 per cent, which is the highest in the world, followed by Vietnam 30.70 per cent, India 19.57 per cent and China 27.55 per cent.

Besides apparel products, agriculture product exports recorded a 26.63 per cent growth to $749 million against $591 million in the same period of the last fiscal year. Among such products, vegetables earned $60 million and tobacco $77 million. Leather and leather product earnings showed a 29.66 per cent growth to $683 million, which was $527 million last FY. Leather product exports rose by 37.41 per cent to $183 million, followed by leather footwear by 25.79 per cent to $414.52 million.

Both exporters and policymakers have to realize that the current export basket, heavily tilted to apparel items, must be diversified. Potentials in our agriculture and leather sectors have to be tapped with policy supports and capacity enhancement.

Hence, we urge our exporters to become aware of the latest technology for their industrial units. The technology will help reduce production costs and increase productivity to a large extent. It is obvious that extra investment will be required for this to happen. The exporters must be ready to bear the costs. At the same time, the government has a responsibility to make the mechanization less expensive through fiscal and financial tools for the sake of retaining the current pace of export earnings.