Bangladesh becomes proud member of the $ 50 billion exporters’ club

Bangladesh is now one of the fastest-growing economies in the world. And much of Bangladesh’s impressive growth is export-driven with the RMG sector leading the way. As a testament to the country’s remarkable economic progress, Bangladesh has managed to join the $50 billion exporters’ club in FY23, according to a report published in The Business Post yesterday.

Joining the $50 billion exporters club is indeed a landmark achievement. Bangladesh’s export sector was on shaky grounds when the country won its independence in 1971. The war destroyed the infrastructure and the economy was in shambles. Many international experts expressed doubts about Bangladesh’s viability as a sovereign and independent nation. The disparaging remark of Bangladesh being a basket case still rings bells in the ears of Bangladeshis.

Be that as it may, the experts had reasons to be sceptic.  In 1972 the export base was minuscule. However, defying all odds Bangladesh has managed to expand its export basket in the last five decades. Currently, the country exports more than 300 products with the potential for further expansion of the export basket on the horizon.     

The Business Post Report states that increased contribution of the non-apparel sectors, mostly agriculture, leather, engineering products and pharmaceuticals, and robust price-pushed growth of the clothing sector have played major roles in driving the export growth to cross the milestone of $50 billion.

There is no doubt that Bangladesh relies heavily on ready-made garments (RMG) for fuelling its export growth accounting for around 81 per cent of merchandise exports. The solid growth in the RMG sector has been made possible by an ample supply of comparatively cheap labour and duty-free access to its major markets. Bangladesh has one of the most competitive wage rates in the world which has helped to expand the RMG industry to its current state. It is the strong performance of the RMG sector that has made Bangladesh well-positioned to diversify its exports and move up the value chain.

The non-apparel sectors are becoming more prominent in their contribution to Bangladesh’s export earnings. In a positive sign, the non-apparel sector has contributed $10 billion of the total export earnings of $52 billion. Of course, there is a need to rely less on the RMG sector but the statistics show that things are moving in the right direction. Pharmaceuticals, electronic products, bicycle, furniture, non-leather footwear, dry foods and plastic goods are gradually increasing their contributions to national exports.

While becoming a member of the $50 billion exporters club is indeed a remarkable achievement, complacency must not creep in. We wholeheartedly appreciate the achievement of the export sector but we do not want the people to get carried away. Economists suggest it may not be all smooth sailing in the future. Zahid Hussain, the former lead economist at World Bank’s Dhaka office, told The Business Post, “The outlook is weak [due to the Russia-Ukraine war and rising inflation]. The exporters won’t be able to do anything if external demands drop. The government will have to keep providing policy support to the exporters to continue the growth.” Hussain also stressed stabilizing the foreign exchange rate to ensure further export growth. 

Even after joining the $50 billion club, Bangladesh remains an export-dependent economy. The export to GDP ratio is still quite low. The pitfalls of the export-dependent economy were exposed during the pandemic and particularly during the Ukraine-Russia war.

Bangladesh’s export sector does enjoy the advantages of lower wages, yet suffers from very poor productivity. Experts say that cheap labour in many instances can turn out to be very expensive labour when adjusted for productivity. Total factor productivity (TFP) is still dismal. With such a low level of productivity, the long-term growth of export income remains a stumbling block to the country's ability to gain an increased competitive edge in the global market.  The country’s business environment is cumbersome and infrastructural deficits cause long delays in the movement of goods to and from the ports. The authorities concerned must address these issues.

In addition to diversifying the export basket, Bangladesh should also focus on exploring new export destinations. The lack of readily available industrial land has forced Bangladesh to turn down export-oriented Foreign Direct Investment. By developing more economic zones, Bangladesh can offer much-needed serviced land with adequate infrastructure to investors.