Declining export earnings

In an ominous development Bangladesh’s export earnings have declined sharply for two consecutive months. According to a recent report, alluding to the Export Promotion Bureau, published in this newspaper export earnings in October dropped by 7.85 per cent to $4.36 billion when compared year-on-year.

The report further states that in September, Bangladesh’s export earnings had dropped by 6.25 per cent to $3.9 billion, compared to the same month last year. Remittance inflow – another key source foreign currency – dipped by 7.35 per cent to $1.52 billion in October year-on-year. The latter is particularly worrisome as Bangladesh’s economy is heavily dependent on remittance inflow. Over reliance on remittance earning should end and Bangladesh needs to increase production alongside diversifying the goods to increase its export basket and explore new markets. 

To add to the economic woes is the fact that foreign exchange reserves are depleting steadily in the recent months. Bangladesh’s falling forex reserve is a cause for serious concern. While we do not want to ring alarm bells at the moment, we do urge the authorities to take up precautionary measures to protect the reserves.

There should be initiatives to achieve a leapfrog in export earnings. And for that to happen export product diversification is essential. Bangladesh has been for years mainly dependent on the RMG sector for its export earnings. Leather and footwear, pharmaceuticals, ceramics, IT and software, jute goods, light engineering products, assembling industry, handicrafts, frozen foods, agro-based items and a few more products have the potential to boost forex earning. We have to comprehend why the government's thrust sectors have not flourished up to the expected level and what kind of support the entrepreneurs operating in these sectors need.

To reap the demographic dividend Bangladesh needs to go for long-term planning. The country has to develop the skill sets of the vast youth population. The youth has to be imbued with entrepreneurial zeal. Entrepreneurs can come up with innovative ideas and create job opportunities for millions of others. This notion is backed up by the government as stated by the prime minister.

It is simple economics that when inflation is high people resort to austerity and adopt a frugal way of living. As several major EU nations are experiencing an alarming rise in inflation, consumers will move to become more conservative in their spending habits.

This means decreasing orders for Bangladesh and a fall in export earnings. The USA, another major market for RMG made in Bangladesh, has seen record inflation with several leading economists predicting a recession.

We have seen in 2008-9, when the US housing market bubble burst and the subprime crisis spilled over, that a slowdown severely hampers import plus buyers’ mood.

It is widely seen that when consumers are happy they spend; however, with the war appearing to show signs of a long drawn-out affair, the upbeat mood may not come back too soon.

In assessing the war’s impact on global trade it cannot be forgotten that this is not any run-of-the-mill conflict but one which has created two sharply defined sides among top nations. If the conflict had not involved the major powers then it would not be so damaging.

In the current condition, Bangladesh needs to have a strategic approach which will aim to expand the market beyond the current comfort zone. For too long we have focused on Europe and the USA; it’s time to aggressively seek out new territories which are least affected by the war. Just recently, Argentina expressed interest to open an embassy and explore trade opportunities with Bangladesh which is indeed a favourable development. Reaching out to African states, especially the ones with relatively strong economies like Ghana, Algeria and Morocco can be pursued along with exploring other South American nations.