Diversifying Bangladesh’s export basket

Bangladesh, a South Asian nation, has been trying her best to push made-in-Bangladesh products into demand-driven countries as exportable products. In order to be emerged as a true export-oriented economy, the Bangladesh government is making multiple efforts including looking for new export destinations along with making diversification of exportable products.

High-level government delegations are highlighting the quality of Bangladeshi products to importing countries. Moreover, talks are proceeding with a dozen countries for the enhancement of trade relations under free trade deal.

Presently, around 190 countries are importing made-in-Bangladesh products. But Bangladesh’s export volume is not impressive enough compared to her peer economies. Despite exporting about two thousand products, Bangladesh is clearly lagging behind her competitors. The causes behind this abysmal performance in terms of fetching export earnings are manifold. It is important to note that export earnings bring foreign currency that helps considerably in making import payment in a timely manner. It is mention-worthy that foreign currency reserve represents economic strength of an economy. Hence, the importance of discovering export destinations is immense and therefore cannot be brushed aside.

Surprisingly, Bangladesh’s export to GDP ratio has, in the meantime, recorded at 15.32 per cent- lowest compared to her peer countries- The World Bank report said. Two fastest growing economies- Vietnam and Cambodia are considered as potential competitors of Bangladesh in terms of macroeconomics index. The trade to GDP ratio of Vietnam and Cambodia has been registered at 106.80 per cent and 61.09 per cent respectively.  According to World Development Indicators (WDI)-2019, about 34.01 per cent trade to GPD ratio has been recorded in Bhutan, 23.12 per cent in Sri Lanka, 65.22 per cent in Malaysia, 69.02 per cent in Maldives, 18.50 per cent in China, 18.41 per cent in India and a whopping 173.52 per cent in Singapore.

Hence, it is evident that the current sorry figure of trade to GDP ratio as low as 15.32 percent, portrays a negative aspect of Bangladesh’s economic vitality. It has already been learnt that Bangladesh will likely face trade related challenges following post-LDC graduation. As a result of not experiencing expected or estimated export growth, a good number of time-bound steps can be recommended to remedy these shortcomings. There are only five countries that imports most of the exportable goods from Bangladesh. The US tops the list with around 19.35 per cent of the total export. Germany comes next with 14.73 per cent followed by 11.03 per cent in the UK, 5.82 per cent in Spain and 5.53 per cent in France. Approximately 93.41 per cent exported goods are essentially consumers’ goods while the rest are raw materials, intermediate goods, and capital goods.

The Logistic Performance Index (LPI) published recently by the World Bank reveals  that Bangladesh scored  2.60 out of 5.00, China 3.60, India 3.2, Vietnam 3.3, Indonesia 3.15, Cambodia 2.60. Bangladesh also scored 2.48 in logistic competence whereas China scored 3.59, and Vietnam scored 3.40. The book titled  “Ease of Doing Business ease of Economic Development” authored by MS Siddiqui stated that the Logistic Performance Index (LPI) is the weighted average of the country’s scores on the six key dimensions: (1) efficiency of the clearance process by border control agencies including customs (2) Quality of trade and transport- related infrastructure (3) Ease of arranging competitively priced shipments (4) Competence and quality of logistic services (5) ability to track and trace consignments (6) timeliness of shipments in reaching the destination within the scheduled time. The studies on logistic performance by World Bank (WB) observed that high-income countries came up as world leaders on logistics. The LPI score of high-income countries is 48 per cent higher, on average, than that of low-income countries. The book noted that for developing countries, getting logistic right means improving their infrastructure, customs, skills and regulations. Possibility is there to enhance export by 19 per cent if its logistics cost can be reduced by 26 per cent- a newspaper report noted. 

Starting a business in Bangladesh requires 19.5 days (higher than South Asian average: 14.5 days) while it is just 9.2 days in the high-income OECD countries. A construction permit in Dhaka requires 281 days (higher than South Asian average: nearly 150 days) and 152 days in OECD countries. Property registry in Dhaka requires 264 days (higher than South Asian average: 108 days) and nearly 24 days in OECD countries. Getting electricity requires 115 days in Dhaka (South Asian average: 86 days) and nearly 75 days in OECD countries. It requires around US $250 in various charges on an average to ship a container from the Shenzhen port in China while it costs US $800 at Chattogram port in Bangladesh. In case of some businesses, it requires acquiring 28 licenses from several government institutions.

In light of above stated scenario, Bangladesh’s ranking in terms of ease of doing business index does not stand out as being satisfactory among 190 countries. Nevertheless, with outdated logistics related policy and guidelines, achieving satisfactory level of trade to GDP ratio very soon is no way a cakewalk. With a view to compete with the competitors, the need for enhancing trade volume must be stressed considering current situation. In order for the exportable goods to be produced at an expected level, inoperative plants of ready-made garments must be brought under full-fledged operation. According to a most-read newspaper, currently 1,140 factories are not connected with export business because they have remained closed for long, which is why BGMEA is considering canceling their memberships. If BGMEA’s registered 4,500 member factories remain operational, there is possibility of seeing increased volume of export earnings. The RMG sector watchdog ought to take the issue into consideration in view of current export to GDP ratio. The watchdog has to extend cooperation and meet the owners of inoperative factories, if need be, for discussions aimed at resumption of export operation. The country’s small and medium sized enterprises have to be supported with adequate facilities. Their roles in GDP and in keeping the wheels of economy afloat are remarkable. When it comes to issue of compliance, Bangladesh’s deplorable condition is manifest. After Rana plaza collapse, the US was obliged to stop TICFA facilities enjoyed by Bangladesh. It is good to know that some US fashion companies will be sourcing made-in-Bangladesh products more in the days to come, mostly over the next two years- The United States Fashion Industry Association (USFIA) in its study said. With around 6.09 per cent export market penetration rate, Bangladesh economy might not reach goals set in 2nd Perspective Plan 2021-2041. It is worthy to mention that China’s export market penetration rate is 48.12 per cent, in India 26.78 per cent, in Vietnam 13.20 per cent, in Malaysia 65.22 per cent. Bangladesh Economic Zones Authority (BEZA) and Bangladesh Investment Development Authority have to play an instrumental role in boosting export to GDP ratio. A collective effort is a must in this respect. Hopefully, Bangladesh will be able to earn significant amount of foreign currency by exporting more in future given that a decent and conducive business climate has been ensured.  

The writer is an economic affairs analyst