Home ›› 07 Jul 2022 ›› Front
Bangladesh’s export earnings crossed the $50 billion milestone for the first time in FY22, but this rosy situation will not last, as economists point out that exporters will face an uphill battle to maintain this positive trend in the current FY23 amid the global economic and political crises.
Experts and industry leaders recommend diversifying Bangladesh’s export basket and creating a strong marketing chain to tackle the difficult challenges that lie ahead.
Bangladesh earned $52.08 billion through exports with a 34.38 per cent year-on-year growth in FY22, shows data from the Export Promotion Bureau (EPB), adding that the majority of this earning came from the USA and European Union (EU) markets.
Explaining the issue, Research and Policy Integration for Development (RAPID) Chairman MA Razzaq said, “Due to the high inflation in those regions, the USA and EU will face negative economic growth this fiscal year.
“This in turn will force consumers from those markets to reduce their purchase volume. These factors will cause Bangladesh’s export growth to shrink this fiscal year. If the USA and EU fail to recover their economy, a global recession will follow.
“Such a chain of events will likely put Bangladesh’s exporters in hot water.”
Centre for Policy Dialogue’s (CPD) Distinguished Fellow Professor Mustafizur Rahman said, “We achieved $52 billion in export earnings last FY with a 34.38 per cent growth rate, but such a rate may not come again.
“A very tough situation is waiting for the exporters.”
He added, “The majority of export earnings came through the ready-made garment (RMG) sector. But when people lose their purchasing capacity, they focus on buying only essential commodities. This issue is sure to put pressure on Bangladesh’s exporters.”
Global economy in crisis mode
Economists and industry leaders said the global economy has been navigating through a crisis ever since the Covid-19 pandemic struck worldwide, as the resulting supply chain disruption created inflation.
Amid the pandemic, governments around the world – especially western ones – disbursed incentive packages to their respective business sectors and vulnerable communities. Just when the global economy began to recover from the Covid shock, Russia invaded Ukraine.
The price of crude oil and almost all commodities skyrocketed due to the war. This also exacerbated the supply chain disruption previously triggered by the Covid-19 pandemic, driving raw material prices as well.
Both the USA and EU are currently facing over 8 per cent inflation, and to reduce it, their respective governments have increased the interest of loans. Economists point out that the decision will further reduce the purchasing power of consumers living in those regions.
Taking the global economic crisis into consideration, Bangladesh’s finance ministry projected 20 per cent export growth in FY23. However, stakeholders say it will be very difficult to achieve this target if the Russia-Ukraine war gets prolonged, resulting in a global recession.
Echoing the same, RAPID Chairman MA Razzaq said, “If Bangladesh manages to achieve 10 per cent to 20 per cent export growth in FY23, it should be enough considering the current circumstances.
“But to achieve this, exporters and the government will have to work together. The devaluation of local currency against the American greenback will help exporters be more competitive, but their priority should be the diversification of export goods.”
FY22 went well for apparel sector
The apparel sector is responsible for around 82 per cent of Bangladesh’s export earnings in FY22. During this period, the apparel sector earned $42.61 billion, a sharp 35.47 per cent growth compared to 31.45 billion recorded in FY21.
In the just concluded FY, the home textile sector earned $1.62 billion, posting a 42.28 per cent growth, while the specialised textile sector recorded a staggering 140 per cent growth reaching $315 million, shows the EPB data.
Industry insiders claimed that due to the Russia-Ukraine war, they lost some of the Russian market, which was an emerging market for Bangladesh. The overall order volume has already dropped by 25 per cent to 30 per cent due to the war and high inflation.
However, they are optimistic that Bangladesh could receive more orders this FY due to the economic crisis in Sri Lanka, political crisis in Myanmar, and the trade conflict between China and western nations.
Speaking to The Business Post, Team Group Managing Director Abdullah Hil Rakib said, “The recent global inflation will hit our growth, but we are focusing on attracting new buyers to boost the number of orders.
“Our apparel industry has shown huge improvements, and we are also manufacturing value added products. We are lagging behind in the production of manmade fibre-based clothes, but this is increasing as well. We will try to get more buyers and orders to tackle the crisis.”
Leather and leather goods
Export earnings from leather and leather goods, which previously suffered setbacks due to environmental compliance issues, increased by 32.23 per cent to $1.25 billion in FY22, shows EPB data. The figure was $942 million in FY21.
Of the total earnings posted in the just concluded FY, leather footwear contributed $756 million, leather products $337 million and crushed leather $151 million.
Bangladesh Tanners Association’s General Secretary Md Shakawat Ullah said, “Our export performance has slowed down in the last three months due to inflation. We have started exporting our goods to EU countries and expect that our earnings will increase further.”
Jute and jute goods
Bangladesh’s jute and jute goods sector posted earnings of $1.16 billion in FY21, but the figure declined by 2.91 per cent to $1.13 billion in FY22. Its exporters voiced serious concerns over the impacts the global crises is putting on this sector.
Esrat Jahan Chowdhury, a director of the Bangladesh Jute Goods Exporters Association, said, “We cannot export to Russia due to the war, one of our largest export destinations Turkey is facing an economic crisis, and the western market is grappling with high inflation.”
“China, Japan and Korea can become emerging markets for us, but the government should take adequate initiatives to turn this sector around.”
RAPID’s MA Razzaq urged the government and exporters to put more emphasis on capturing regional markets to lessen the impacts of global issues, and tap into other promising sectors such as pharmaceuticals.
“In the Asian market, there is a big demand for leather, jute, pharmaceuticals, software and other products. Besides, the Asian apparel market is still untapped, while the gulf region alone is importing over ten billion clothes annually. We have to focus on these markets,” he added.
