‘Bangladesh can learn from Vietnam’s policy reform’

Bangladesh can take lessons from Vietnam’s policy reform which helped the country become one of the leading exporters in the world.

Policy Research Institute (PRI) identified three components of policy reform.

Firstly, a sharp reduction in the degree of protection and anti-export bias in the domestic market. Secondly, the strategy to court export-seeking Foreign Direct Investment (FDI) without condition. Thirdly, the thirst for entering into regional and bilateral Foreign Trade Agreements (FTAs) to open up duty-free access.

On Friday, PRI disclosed the research findings titled “Vietnam’s Superb Export performance: What lessons might there be for Bangladesh” in a virtual webinar.

This policy reform brought Vietnam’s average tariffs close to the world average of 5 per cent when Bangladesh’s average nominal tariffs hovered around 27 per cent.

To attract FDI, Vietnam invested in human capital and infrastructure. It spends 12 per cent of GDP on human development, where Bangladesh spends only 3.4 per cent.

In 2019, Vietnam became one of the largest producers and exporters of mobile phones, second largest in electronics export and third largest in RMG (just behind Bangladesh).

Open door FDI policy helped Vietnam attract export-oriented investment in the production and export of high technology products which account for 40 per cent of exports.

Vietnam is relatively a newcomer to the development field. Even in late 1990s, Vietnam was an impoverished country characterised by a per capita gross national income (GNI) of only $130 and a poverty incidence of 52 per cent as measured by the World Bank’s international poverty line of $1.90/day.

But in less than 30 years, Vietnam turned around its development performance in truly remarkable ways. In 2019, per capita GNI soared to $2,590, expending at a hefty pace of 10.7 per cent, poverty fell below 2 per cent.

In the mid-1990s, both Bangladesh and Vietnam exported just above $5 billion worth of goods and services. Now Vietnam is the 25th largest exporter in the world while Bangladesh ranks 56th.

Bangladesh’s total export volume was $40.5 billion in 2019 with a growth rate of 11.5 per cent from 1990. The same year, Vietnam’s export was $279.7 billion with a growth rate of 17.7 per cent from 1990.

Vietnam’s RMG export was just $0.4 billion in 2019 but it has soared to $29.9 billion. The country exports $18.9 billion in footwear.

In Vietnam, the top 25 products earned 59 per cent of export earnings but Bangladesh’s top 25 products earned 70 per cent. They also diversified the market.

“Bangladesh can take lessons of export basket diversity and local industry development,” said Rizwan Rahman, the DCCI president.

Centre for Policy Dialogue (CPD) Chairman Dr Rehman Sobhan said Bangladesh had all the opportunities but failed to utilise them.

PRI Vice-Chairman Sadiq Ahmed presented the keynote while Chairman Zaidi Sattar presided over and moderated the webinar.