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Bangladesh must improve trade sustainability

Md Mazadul Hoque
27 Nov 2022 00:00:00 | Update: 26 Nov 2022 22:51:40
Bangladesh must improve trade sustainability

Bangladesh’s position is not praiseworthy in business because of the need for a healthy business environment. In 2020 Bangladesh was ranked 168th out of 190 countries in the Ease of Doing Business study done by the World Bank.

Businesspeople at home and abroad are frustrated over the business climate in Bangladesh. Trading across borders, time for documentary compliance cost to export, and cost and time to import could be more favorable in expanding trade volume. As a result of bottlenecks in starting and doing business, Bangladesh is yet to show outstanding performances in attracting the expected foreign direct investment. Regarding enabling trade index, trade freedom and openness, Bangladesh lags far behind compared to its competitor, Vietnam.

Since its birth, Bangladesh has been carrying the status of least-developed country (LDC). Because of being an LDC, Bangladesh became a member of the World Trade Organization (WTO) in 1995. Before moving for WTO membership, Bangladesh originally joined the General Agreement on Tariffs and Trade (GATT) in 1972, the antecedent of the WTO. It is essential to know that the WTO is the highest global trade rule-making body. The blessings of the WTO on Bangladesh’s economy beggar description. Generally, the WTO extends its benefit to its member countries in trade and business affairs. The organization helped Bangladesh to expand its footprint in the global economic arena. In its study, a German-based think tank, Bertelsmann Stiftung, said that Bangladesh gained around 2.47 per cent of GDP because of being a WTO member. According to the study, Bangladesh saw a 13 per cent rise in exports for the same reason.

Bangladesh already took many initiatives regarding economic expansion through a recently-developed trade policy. The country is set to change its LDC status in 2026. The LDC graduation issue involves many unforeseen challenges related to international trade.

Bangladesh has set visionary goals to achieve upper middle-income country and high-income country status by 2031 and by 2041, respectively. Many issues are involved regarding attaining these goals. Among others, creating a business-friendly environment has become a significant demand for achieving the status of a high-income country. Still, Bangladesh lags far behind in attracting foreign capital because of bureaucratic complexities, among other problems.

Bangladesh’s economy heavily depends on its export earnings–the first and foremost source of foreign currency. Bangladesh exports more to European Union (EU) countries and the USA. EU countries provide duty-free access, but the USA does not allow duty-free to Bangladeshi products. Everything but Arms (EBA) facilities in EU countries will automatically be withdrawn in 2026 after Bangladesh steps into the stairs of a developing country. Bangladesh will face economic difficulties after losing duty-free facilities in EU Markets. The way to address the upcoming challenges is to improve the trade sustainability index. Bangladesh lags in securing scores in trade sustainability compared to the same category economies.

Asia-based organization the Hinrich Foundation has been publishing the Sustainable Trade Index (STI) since 2016. It is published every two years. The latest STI was revealed jointly - by the Hinrich Foundation and the Switzerland-based Institute for Management Development (IMD). A total of 30 economies have been included in the latest study. The Hinrich-IMD Sustainable Trade Index is measuring 30 economies’ readiness and capacity to participate in the global trading system in a manner that supports the long-term goals of economic growth, environmental protection, and societal development.

A total of 70 indicators are used for publishing the index. STI is made up of an economic pillar, societal, and environmental pillar. The economic pillar measures an economy’s ability to ensure and promote economic growth through international trade. Societal pillar captures factors that influence public support for trade expansion. These include income inequality, political stability, goods produced by forced and child labor, and the government’s response to human trafficking. The environmental pillar measures the extent to which an economy’s trade supports sustainable resources.

According to Sustainable Trade Index 2022, Bangladesh ranked 24th out of 30 economies, scoring 27.4 out of 100. Simultaneously, the economic, societal and environmental pillars achieved scores of 23.5, 32.4, and 56, a combination of STI. According to a study report, there are reasons to be proud about Bangladesh because of worst performances done by India, Pakistan, Myanmar, Sri Lanka. But, Bangladesh is conscious enough to see other nations’ performances in this study. Laos, Vietnam, Sri Lanka, Cambodia, Indonesia, Philippines are well ahead of Bangladesh though being peer economies. New Zealand, the United Kingdom, Hong Kong, Japan, and Singapore are the best performers in the study disclosed recently.

Apart from the sustainable trade index, Bangladesh’s performance in the emerging markets Index 2022 could be more praiseworthy. The assessment of the emerging markets Index is based on four pillars- domestic logistic opportunities, international logistic opportunities, and business fundamentals. Emerging markets Index 2022 puts Bangladesh in 39 out of 50 countries. India ranked 2nd, Indonesia 5th, Vietnam 11th, Pakistan 27th, Sri Lanka 33th. In the competitive business world, terms of trade (ToT) are considered an important issue. ToT is a ratio of import prices to export prices. Recently, Bangladesh started to see a sharp fall in ToT value. Between 1980 and 2019, the average value of ToT for Bangladesh with the base year 2000 stands at 99.91 per cent with a minimum of 57.47 per cent in 2011 and a maximum of 162.26 per cent in 1985 (information taken from a published article). In 2016, ToT value was recorded as only 65.4 per cent. If any economy emphasizes quantity rather than quality while exporting, ToT value is decreased.

A newspaper reported that 39 government agencies are involved in issuing certificates, licenses, and approvals for making a debut trade in Bangladesh. It is alleged that around 35 per cent of products get damaged in ports for port infrastructure deficiency. Sustainability in trade has to be confirmed to achieve Sustainable Development Goals (SDGs) by 2030. Close to one third goals in SDGs are related to sustainable trade. The government and the Bangladesh’s Garment Manufacturers and Exporters Association (BGMEA) have separately set export targets in line with economic demand. Trade-to-GDP ratio at significant level is important to be sustained economically. Unless Bangladesh ensures sustainability in trade, the country has to give demurrage.


The writer is an economic affairs analyst. He can be reached at [email protected]