[🇧🇩] Bangladesh Export Industries

[Saif]

Challenges in export diversification

To sustain the upward trajectory of exports, expanding the range of products in our export basket is essential. The country's foreign exchange reserves are under significant pressure due to inconsistencies in export earnings, which have a ripple effect on import payments and broader macroeconomic f

thefinancialexpress.com.bd

Challenges in export diversification
Abu Mukhles Alamgir Hossain
Published :
Oct 24, 2024 21:27
Updated :
Oct 24, 2024 21:27

To sustain the upward trajectory of exports, expanding the range of products in our export basket is essential. The country's foreign exchange reserves are under significant pressure due to inconsistencies in export earnings, which have a ripple effect on import payments and broader macroeconomic factors. Over the years, leading economists, think-tanks and industry experts have consistently emphasised the need for export diversification to ensure sustainable international trade. However, little progress has been made on this much-discussed issue. The reasons behind the lack of diversification are well-known.

DEPENDENCY ON A SINGLE SECTOR: Bangladesh's export trade is heavily dependent on the apparel sector, which contributes 84 per cent of the country's export earnings. This sector receives substantial support from the government, including cash incentives, bonded warehouse facilities, easy bank financing, and policy interventions during times of difficulty. The ready-made garments (RMG) sector benefits from lower production costs and large-scale employment, creating a disincentive for exploring and developing other sectors. The sector's contribution over the last five years is as follows:

EXPORT DESTINATIONS VULNERABILITY: The United States and the European Union are the two primary export destinations for Bangladeshi products. Collectively, the EU represents the largest export market, followed by the USA as the second largest. These two destinations account for 44 per cent and 17 per cent of Bangladesh's total exports, respectively, while the rest of the world makes up 39.02 per cent. The following graph highlight the concern:

Bangladesh's excessive dependence on the USA and EU makes its exports highly vulnerable. To reduce this over-reliance, it is crucial to explore and expand into new markets, such as Southeast Asia, the Middle East, Africa, Eastern Europe, Latin America, and other regions of North America.

POTENTIAL SECTORS NOT RECEIVING THE SAME SUPPORT AS RMG: Other potential sectors, such as Leather and Leather Goods, Jute and Jute Goods, Agricultural and Processed Products, Handicrafts, Pharmaceuticals, ICT and ICT-enabled services, and Light Engineering Products do not receive the same level of support as the RMG sector. Sector-specific policy papers are needed to evaluate the pros and cons of their impact on the economy, while also considering the approaches of competing countries. The export performance of the Non-RMG products are as follows:

POLICY-INDUCED ANTI-EXPORT BIAS: Domestic manufacturers enjoy government-imposed protectionism through higher import duties, which diminishes the competitiveness of local industries against foreign products. Due to the domestic market's convenience, manufacturers are often disincentivised to export as they avoid the compliance and standards required for the global market. Dependency on import tariffs for revenue collection is another crucial factor hindering export diversification. Bangladesh is going to be graduating in November 2026 to a middle-income country, so to sustain growth and expand export destinations, there is the crucial need to liberalise international trade by considering the signing of Economic Partnership Agreements (EPA) or Free Trade Agreements (FTA) with potential countries and economic blocs.

LOW TECHNOLOGICAL ADVANCEMENT: Limited technological know-how and poor integration of technology hinder the growth of high-tech industries. Bangladesh's reliance on labour-intensive manufacturing restricts its ability to compete in technology-driven sectors, such as electronics. To diversify exports into the high-tech industry, Bangladesh must invest in ICT (bridging the digital divide), skill upgrading, STEM (Science, Technology, Engineering, and Mathematics) education, innovation hubs, and intellectual property protection. A prompt action plan should be formulated by relevant authorities, with a focus on timely implementation to maximise benefits.

INCONSISTENT TRADE POLICIES: Trade policies are often inconsistent and overly complex, creating a challenging environment for businesses to invest in new sectors. Delays in implementing reforms and a lack of long-term policy support for non-RMG sectors discourage investment.

ENVIRONMENTAL AND COMPLIANCE ISSUES: Sustainable production and compliance with global environmental standards are becoming increasingly important, especially in sectors like textiles, leather, and agriculture products. The lack of compliance makes it harder for Bangladesh to tap into eco-friendly markets or export to countries with strict regulations. Despite its significant potential, the leather sector in Bangladesh faces challenges hindering its growth. The CETP in the Saver Leather Industrial Park is not operating effectively, hindering environmental sustainability. LWG certification, essential for attracting reputable buyers, is difficult to obtain due to the park's environmental issues. Sourcing rawhide from slaughterhouses is another challenge, as the skin is often handled by unskilled or semiskilled butchers. The plastic sector also struggles to meet global standards for recycling. Despite its vast potential, it faces limitations in capturing a substantial share of the world market. Similarly, the agriculture and textile sectors encounter obstacles in tapping into international markets due to compliance challenges.

SKILL SHORTAGES: Diversifying exports requires a workforce with specialised skills in various industries. Leather, Jute, Handicrafts, Home décor, Cosmetics, Light Engineering, and ICT sectors need skills and expertise in which we are struggling. Investing in training and development programmes is crucial to equip the workforce with the necessary skills.

LIMITED INNOVATION AND RESEARCH & DEVELOPMENT (R&D): There is a limited focus on R&D, which is crucial for product and process innovation in non-traditional export sectors. Investment in innovation is low, and there is little collaboration between the private sector, academic institutions, and government bodies which needs to be enhanced. High Tech Industry needs Research and Development (R&D) with the utmost priority. To overcome these challenges, Bangladesh must increase investment in R&D, fortify intellectual property protection, invest in human capital development, streamline regulatory processes, and improve market access. By fostering a more supportive environment for innovation, Bangladesh can diversify its exports and become a more competitive player in the global economy.

LACK OF LOGISTICS: Insufficient facilities across the three modes of export shipments-air, sea, and land-are lagging compared to other competing countries. Ports in Bangladesh face issues such as inefficient cargo handling, insufficient Explosive Detection Scanners (EDS), fluctuating spot air freight prices, inadequate warehouse and cargo village facilities, and a shortage of skilled and semi-skilled manpower. As a result, exporters are unable to fully capitalise on opportunities to diversify their exports.

GLOBAL COMPETITION: Bangladesh faces stiff competition from countries like Vietnam, India, and Cambodia in diversified sectors such as electronics, leather goods, and IT services. Low brand recognition and a lack of quality standards make it hard for Bangladeshi products to penetrate new international markets. In addition, after graduating to a middle-income country in 2026, Bangladesh will no longer be able to utilise unilateral preferential market access facilities, which will further weaken our competitiveness.

LIMITED ACCESS TO FINANCE SMALL AND MEDIUM-SIZED ENTERPRISES (SMES): SMEs often face difficulties in accessing affordable credit. High interest rates, lack of required collateral discourage entrepreneurs from expanding into new sectors. As the lifeblood of the economy, SMEs must be prioritised if Bangladesh is determined to diversify its export basket. In this case, Japan's lesson/success story can be followed by Bangladesh.

Export diversification cannot happen overnight, and there is no shortcut to achieving it. Long-term strategies, sector-specific policies, business-friendly customs procedures, and efficient logistics must be ensured to diversify our export sector.

Abu Mukhles Alamgir Hossain, Director (Policy and Planning), Export Promotion Bureau (EPB).​

 

[Saif]

Looking beyond RMG-diversifying exports

Bangladesh's economy has seen remarkable growth over recent decades, largely driven by the ready-made garment (RMG) industry. This sector alone accounts for well over 80 per cent of the country's export earnings, employs millions, and has established Bangladesh as a global manufacturing hub. Howev

thefinancialexpress.com.bd

Looking beyond RMG-diversifying exports
Matiur Rahman
Published :
Oct 31, 2024 21:43
Updated :
Oct 31, 2024 21:43

Workers at a RMG unit in Dhaka Photo : FE File

Bangladesh's economy has seen remarkable growth over recent decades, largely driven by the ready-made garment (RMG) industry. This sector alone accounts for well over 80 per cent of the country's export earnings, employs millions, and has established Bangladesh as a global manufacturing hub.

However, Bangladesh's heavy reliance on RMG poses several risks, including fluctuations in global demand, increased competition from other low-cost producers, and pressure to improve labour conditions and environmental standards. For sustained growth and resilience, Bangladesh must look beyond RMG and explore diversification strategies that open new export and economic expansion avenues.

The RMG sector has undeniably played a central role in Bangladesh's development. It has provided significant employment opportunities, especially for women, lifted millions of families out of poverty, and contributed to improved social indicators across the country. However, the overwhelming reliance on a single industry has also created vulnerabilities. Bangladesh's economy remains exposed to global economic shifts, as seen during the COVID-19 pandemic when demand for apparel plummeted, and many factories faced closures.

Additionally, increased automation and technological advancements in garment manufacturing pose challenges as developed countries and competitors like Vietnam and Cambodia continue to invest in robotics, artificial intelligence, and more efficient manufacturing technologies. These advancements could diminish Bangladesh's cost advantage in the coming years, pushing the country to rethink its economic strategy.

To reduce its dependence on the RMG industry, Bangladesh must diversify its export basket and explore other sectors that can drive future economic growth. One potential area is the information technology and digital services sector, which holds considerable promise.

The IT sector, including software development, business process outsourcing (BPO), and freelancing has already demonstrated its growth potential, with annual revenue increasing steadily. Expanding and investing in IT and digital services could create high-paying jobs, bring in valuable foreign exchange, and reduce the economy's vulnerability to fluctuations in global manufacturing demand.

Another promising sector for Bangladesh is agriculture and agro-processing. Although agriculture has historically been one of the country's primary industries, it has yet to fully exploit its potential in the international market. Agricultural products like jute, fish, vegetables, and spices are in substantial demand globally. Bangladesh can expand its export base in this sector by investing in modern farming techniques, ensuring product quality, and promoting agro-processing industries.

Additionally, increased focus on organic and sustainable farming could attract new markets, especially in Europe and North America, where consumers are increasingly drawn to sustainable and ethically sourced products. Developing the agro-processing industry would diversify exports, create jobs, especially in rural areas, and enhance food security.

The pharmaceutical industry in Bangladesh is another sector that shows significant potential. Bangladesh's well-established pharmaceutical industry already meets most of the domestic drug demand and has begun exporting to various countries. With the impending patent expirations on a range of drugs globally, Bangladeshi pharmaceutical companies can capture a larger share of the global market by producing generic medicines.

Investments in research and development, quality control, and regulatory compliance are essential to seize this opportunity. If developed effectively, the pharmaceutical sector could become a significant economic growth and export revenue driver, further decreasing reliance on RMG.

The electronics and light engineering sectors could also be crucial in diversifying Bangladesh's export base. The local demand for electronics, such as smartphones, televisions, and home appliances, has surged in recent years, leading to the establishment of several domestic electronics manufacturers. With sufficient investment, these companies could also target export markets. Bangladesh could emerge as a regional electronics and light engineering player by focusing on quality improvement, branding, and cost competitiveness. Furthermore, establishing a robust supply chain within the country would reduce dependency on imported raw materials and support domestic industries.

Bangladesh's geographic location also presents opportunities to establish itself as a regional trade and logistics hub. Positioned between India and China, with access to the Bay of Bengal, Bangladesh is ideally situated for trade with South and Southeast Asia.

Investing in ports, airports, and road infrastructure could turn Bangladesh into a critical logistics and transhipment centre, facilitating regional and global trade. Enhanced trade connectivity would promote export diversification, support local businesses, and foster regional economic integration.

Bangladesh will need a strategic policy shift to achieve export diversification and sustainable growth. Government support in the form of incentives, subsidies, and regulatory reforms will be crucial to encouraging investment in new sectors. Educational reforms that align with the needs of emerging industries are also essential. This will ensure a skilled workforce that adapts to and supports a diversified economy. Building strong public-private partnerships, encouraging foreign direct investment, and streamlining bureaucratic processes will be necessary to create a conducive environment for new industries.

Environmental considerations must also guide future economic development. Industries like RMG have had significant ecological impacts, including pollution and high water usage.

Moving forward, Bangladesh should prioritise sustainable practices and invest in green technologies to reduce environmental damage and enhance the appeal of its products in environmentally conscious markets. Integrating sustainability into the diversification strategy will protect natural resources and align Bangladesh's economy with global trends toward sustainable development.

This transition will require economic investment and social and environmental commitments that reflect a sustainable and inclusive growth model. A diversified export sector will reduce the country's exposure to global market shifts, create new employment opportunities, and improve citizens' overall quality of life. With the right approach, Bangladesh can look forward to a future not defined by one industry but recognised for its innovation, sustainability, and economic resilience.

Dr Matiur Rahman is a researcher and development worker.​

 

[Saif]

US election: What is at stake for Bangladesh’s exports

As millions of Americans head to the polls on November 5 to vote for either Democratic Vice President Kamala Harris or her Republican rival Donald Trump, apparel business communities in Bangladesh, more than 13,119 kilometres away from Washington, will be watching the results of the presidential...

www.thedailystar.net

US election: What is at stake for Bangladesh’s export

As millions of Americans head to the polls on November 5 to vote for either Democratic Vice President Kamala Harris or her Republican rival Donald Trump, apparel business communities in Bangladesh, more than 13,119 kilometres away from Washington, will be watching the results of the presidential election closely.

The reason is largely related to trade, as the US is the single largest buyer of ready-made garments made in Bangladesh -- the world's second-largest apparel manufacturer after China.

Local RMG makers believe US trade policy toward China, a major competitor in the global apparel market, will be crucial for their business in the coming years.

Besides, the role of the World Trade Organization (WTO) and other global trade organisations will be important as Bangladesh transitions to a developing country in 2026.

Apparel exporters say Republican Candidate Trump's plan to impose higher tariffs on imports from China could boost Bangladesh's garment exports.

But, they fear that a Trump presidency could also lead to challenges for multilateral trading institutions like the WTO and intensified global export competition.

Last year, Bangladesh exported $8.27 billion worth of garment items to the US, facing a 15.62 percent tariff.

Under both Democratic and Republican administrations, garment exports from Bangladesh to the US have remained relatively stable.

During Trump's presidency from 2017 to 2021, Bangladesh's share of garment exports to the US fluctuated between 17 percent and 18.90 percent, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Under Democratic President Joe Biden, the share has not increased too much, varying between 21.15 percent and 18.12 percent.

Asking not to be named, a renowned garment exporter to the USA from Bangladesh said Trump's anti-China move could eventually benefit Bangladesh. If he imposes more tariffs on Chinese products, there is a possibility of work orders shifting to Bangladesh.

Khandoker Rafiqul Islam, immediate president of the BGMEA, said Trump's additional tariff on Chinese goods plan has already prompted many US-based clothing retailers and brands to look for alternative sourcing destinations such as Bangladesh and Vietnam.

"If Harris is elected, it is expected that the existing US tariff will continue for China. In this case, Bangladesh's business may not be affected negatively but the possibility of an export jump is thin," he said.

However, Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID), a private research organisation, said there could be a significant change in approaches between Trump and Harris.

For instance, if Trump is elected, multilateral institutions and organisations like the WTO may face challenges.

"Trump may adopt a more anti-China policy and impose more tariffs on import of Chinese goods to the USA," Razzaque said, "In this case, Bangladesh may be benefited indirectly as there is a possibility of shifting of work orders from China to Bangladesh."

However, an identified geo-political rivalry and undermining the fundamental multilateral trading system may result in a demand slump, he said.

The RAPID chairman said demand for garment items has been declining over the past three to four years and most G-20 countries, including the US, have adopted protectionist trade policies.

He said Bangladesh may face additional challenges when it graduates from a Least Developed Country (LDC) to a developing nation in 2026. Rules-based trade may be affected.

According to Razzaque, a Democratic administration could lead to less intense geopolitical tensions, possibly benefiting Bangladesh through the maintenance of the multilateral trading system.

However, he reminded that the US's main interest remains containing China.

Masrur Reaz, chairman of the Policy Exchange Bangladesh, echoed Razzaque's views.

Reaz said Donald Trump was aggressive in imposing tariffs on Chinese imports during his previous term. If re-elected, he may adopt an even more aggressive stance toward Chinese imports.

Bangladesh should also restart negotiations with the US to revive the Generalized System of Preferences (GSP) for US markets, as the relationship between the two countries is improving, said Reaz.

Since the expiration of the Multi-Fibre Arrangement in 2004, Bangladesh has not enjoyed any tariff preferences on garment exports to the US.

Before the Trump administration imposed a 25 percent tariff on Chinese goods in January 2018, Chinese exporters faced a 3.08 percent duty on garment exports to the US.

According to the Hong Kong Ministerial Declaration of the World Trade Organization (WTO), the US was supposed to provide duty-free market access for all products from LDCs. However, the US government granted duty-free access to only 97 percent of products.

As an LDC, Bangladesh's garment exports were expected to be included in the 97 percent duty-free category, but apparel products were excluded from this package.​

 

[Bilal9]

US election: What is at stake for Bangladesh’s exports

As millions of Americans head to the polls on November 5 to vote for either Democratic Vice President Kamala Harris or her Republican rival Donald Trump, apparel business communities in Bangladesh, more than 13,119 kilometres away from Washington, will be watching the results of the presidential...

www.thedailystar.net

US election: What is at stake for Bangladesh’s export

View attachment 10233

As millions of Americans head to the polls on November 5 to vote for either Democratic Vice President Kamala Harris or her Republican rival Donald Trump, apparel business communities in Bangladesh, more than 13,119 kilometres away from Washington, will be watching the results of the presidential election closely.

The reason is largely related to trade, as the US is the single largest buyer of ready-made garments made in Bangladesh -- the world's second-largest apparel manufacturer after China.

Local RMG makers believe US trade policy toward China, a major competitor in the global apparel market, will be crucial for their business in the coming years.

Besides, the role of the World Trade Organization (WTO) and other global trade organisations will be important as Bangladesh transitions to a developing country in 2026.

Apparel exporters say Republican Candidate Trump's plan to impose higher tariffs on imports from China could boost Bangladesh's garment exports.

But, they fear that a Trump presidency could also lead to challenges for multilateral trading institutions like the WTO and intensified global export competition.

Last year, Bangladesh exported $8.27 billion worth of garment items to the US, facing a 15.62 percent tariff.

Under both Democratic and Republican administrations, garment exports from Bangladesh to the US have remained relatively stable.

During Trump's presidency from 2017 to 2021, Bangladesh's share of garment exports to the US fluctuated between 17 percent and 18.90 percent, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Under Democratic President Joe Biden, the share has not increased too much, varying between 21.15 percent and 18.12 percent.

Asking not to be named, a renowned garment exporter to the USA from Bangladesh said Trump's anti-China move could eventually benefit Bangladesh. If he imposes more tariffs on Chinese products, there is a possibility of work orders shifting to Bangladesh.

Khandoker Rafiqul Islam, immediate president of the BGMEA, said Trump's additional tariff on Chinese goods plan has already prompted many US-based clothing retailers and brands to look for alternative sourcing destinations such as Bangladesh and Vietnam.

"If Harris is elected, it is expected that the existing US tariff will continue for China. In this case, Bangladesh's business may not be affected negatively but the possibility of an export jump is thin," he said.

However, Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID), a private research organisation, said there could be a significant change in approaches between Trump and Harris.

For instance, if Trump is elected, multilateral institutions and organisations like the WTO may face challenges.

"Trump may adopt a more anti-China policy and impose more tariffs on import of Chinese goods to the USA," Razzaque said, "In this case, Bangladesh may be benefited indirectly as there is a possibility of shifting of work orders from China to Bangladesh."

However, an identified geo-political rivalry and undermining the fundamental multilateral trading system may result in a demand slump, he said.

The RAPID chairman said demand for garment items has been declining over the past three to four years and most G-20 countries, including the US, have adopted protectionist trade policies.

He said Bangladesh may face additional challenges when it graduates from a Least Developed Country (LDC) to a developing nation in 2026. Rules-based trade may be affected.

According to Razzaque, a Democratic administration could lead to less intense geopolitical tensions, possibly benefiting Bangladesh through the maintenance of the multilateral trading system.

However, he reminded that the US's main interest remains containing China.

Masrur Reaz, chairman of the Policy Exchange Bangladesh, echoed Razzaque's views.

Reaz said Donald Trump was aggressive in imposing tariffs on Chinese imports during his previous term. If re-elected, he may adopt an even more aggressive stance toward Chinese imports.

Bangladesh should also restart negotiations with the US to revive the Generalized System of Preferences (GSP) for US markets, as the relationship between the two countries is improving, said Reaz.

Since the expiration of the Multi-Fibre Arrangement in 2004, Bangladesh has not enjoyed any tariff preferences on garment exports to the US.

Before the Trump administration imposed a 25 percent tariff on Chinese goods in January 2018, Chinese exporters faced a 3.08 percent duty on garment exports to the US.

According to the Hong Kong Ministerial Declaration of the World Trade Organization (WTO), the US was supposed to provide duty-free market access for all products from LDCs. However, the US government granted duty-free access to only 97 percent of products.

As an LDC, Bangladesh's garment exports were expected to be included in the 97 percent duty-free category, but apparel products were excluded from this package.​

Trump was importing Bangladesh-made dress shirts through one of his companies sometime ago, he mentioned this during a visit to the Letterman Show on one occasion. He was quite impressed with the quality.

But we should negotiate GSP privileges with whichever administration comes to power.

 

[Bilal9]

Exports see 19pc growth in October​

Many exporters could not ship goods on time in July-September due to quota reform movement, political changeover in the student-led uprising and unrest in industrial areas. Many of these stalled goods were shipped last month.

Staff Correspondent
Dhaka

Published: 06 Nov 2024, 20: 15

Workers are seen handling a container at Chattogram sea port . Prothom Alo file photo

After major shocks in the production sector of the country in July-August, the exports have started to bounce back rapidly. In October, the country saw 18.5 per cent growth in exports.

Exports rose 16 per cent in the previous month, September, as well. The export growths were around 3 and 5.5 per cent in July and August respectively, the first two months of the current fiscal year.

National Board of Revenue (NBR) data shows that Bangladesh exported goods worth USD 4.13 billion in October, posting an 18.68 per cent (USD 650 million) year-on-year rise.

Bangladesh exported USD 3.82 billion, 4.07 billion and 3.86 billion respectively in July, August and September.

NBR's account of exports of these commodities also includes information on Export Processing Zone’s (EPZ) deemed exports and sample exports. However, the amount is not much.

Several exporters said many exporters could not ship goods on time in July-September due to quota reform movement, political changeover in the student-led uprising and unrest in industrial areas. Many of these stalled goods were shipped last month. Apart from this, exports are increasing as shipment of goods increases ahead of winter and Christmas.

According to the NBR data, goods worth USD 15.88 billion were exported in the first four months of the current fiscal year, which is USD 1.51 billion more than the corresponding period of the previous year. Besides the amount of money exports have also increased in terms of quantity.

The quantity of export was 530 million kilogram in last July, 570 kilogram in August and 580 million kilogram in September. The exports rose to 590 million in October. In total, 2.23 billion kilograms of goods were exported in the first four months of the current fiscal year, which was 2.19 billion in the same period the previous year.

Bangladesh Bank released the balance of payments data on the basis of actual commodity exports last July resulting in disclosure of a huge discrepancy in the exports.

At that time, the central Bank stated that Export Promotion Bureau (EPB) had been publishing export data for a long time, but the income was not coming to the country.

This discrepancy raised questions among local and foreign organizations. An assessment found that the export data was shown inflated. A decision was made to prepare export data based on actual earnings.

Following the revelation of significant discrepancies, EPB paused publishing the data. Last month, the EPB revealed that goods worth USD 11.37 billion were exported from the country in the first three months of the current fiscal year while the amount was USD 10.82 in the corresponding period of the last year.
https://news.google.com/publications/CAAqBwgKMOC2lwsw09-uAw?hl=en-US&gl=US&ceid=US:en

 

[Saif]

Strategising export diversification

Export diversification has long figured prominently in discussions about the country's export strategy, driven primarily by the overwhelming reliance on ready-made garments (RMG). The push for diversification stems from the need to strengthen the overall export sector by reducing dependence on a si

thefinancialexpress.com.bd

Strategising export diversification
Wasi Ahmed
Published :
Nov 19, 2024 22:36
Updated :
Nov 19, 2024 22:36

Export diversification has long figured prominently in discussions about the country's export strategy, driven primarily by the overwhelming reliance on ready-made garments (RMG). The push for diversification stems from the need to strengthen the overall export sector by reducing dependence on a single product and enhancing the performance of other products in the export basket. The underlying argument here is: the export basket has hundreds of products but as most of them suffer from poor performance, diversifying the basket means adding vigour and strength to the products so that the export sector can rid itself of over-reliance on a single product. Keeping this in view, the government has been framing policies from time to time with special emphasis on prospective products by way of various incentives and supports. To say that these have not at all worked is not true, but there is no visible momentum in exports, except in respect of only a few core products, including the RMG. Actually, diversifying is a package comprising scores of issues from product development, product adaptation, quality assurance, market demand, compliance, competitive pricing and so on.

So, when one speaks about diversification, it must not be seen as a remedy readily available. It has to be worked on, in a planned manner taking into account all relevant factors as a package. In the past the Export Promotion Bureau undertook many foreign aided export development projects. However, as many of the projects approached the aforementioned package only partially, the outcome was far from satisfactory.

Recently, it has been reported that a multi-donor funded export diversification project of the government is languishing with very little works done so far. No doubt a pathetic case, it needs to be brought under the scanner to see if the project had been completed in due time, could we say its goal was accomplished? Unfortunately, No. This is because such projects can at best disseminate information on various relevant issues including training the manpower with required knowledge. But there is a lot more to the job, and these can only be taken up by a comprehensive medium-term plan with sufficient fund allocation and required infrastructural facilities.

The reason diversification figures so prominently in public discussions on export is because of its many tangible benefits.

Diversifying the export composition protects a country from the risk of an unpredictable declining trend in international prices of exportable commodities that, in turn, leads to unstable export earnings. Export diversification could, therefore, help out to stabilise export earnings in the long run.

Due to the absence of export diversification in developing countries, decline and fluctuations in export earnings have negatively influenced income, investment, and employment. Diversification provides the opportunities to extend investment risks over a wider portfolio of the economic sector which eventually increases income. Diversification can also be seen as an input factor that has the effect of increasing the productivity of sub-sectors or what is called backward linkage industries. Furthermore, economic growth and structural change depend upon the type of products that are being traded. Thus export diversification allows an economy to achieve some of its macroeconomic objectives namely sustainable economic growth, satisfactory balance of payment situation, employment, and redistribution of income.

There are different strategies adopted by different countries, depending on the country-specific situations. In the Asian region, Thailand is a good example of pursuing diversification in keeping with the resources and infrastructure the country could make use of. It was a two-pronged strategy involving thrust on natural and agricultural resources on the one hand, and on the other, upgrading labour-intensive manufacturing. China, along with some East Asian countries, benefited from the rise in regional economic integration through the development of cross-country production networks courtesy of vertical integration of production chains.

Strategising is what really matters most, and to do that, intensive research is required to identify which model to stick to. Also this would require product and market-specific studies to be able to tell the strengths and weaknesses in respective areas. However, considering the trends of Bangladesh's exports, it is not too difficult to identify some potential and prospective products, and although there are provisions of fiscal and other incentives for them, the fact remains these supports are of little use in the absence of a medium-to-long term strategy to stimulate the products with a robust supply chain. That is to say, facilitation does not mean incentives alone but drawing up and working on a roadmap for product development and putting in place institutional and infrastructural support in a smart manner.

For quite sometime, Bangladesh's export basket comprises a core group of products besides RMG, the number one product. These include: jute and jute goods, leather and leather goods, frozen foods including shrimp, agro-processed foods, cement, pharmaceuticals etc. In around a decade or so, a handful of other products have demonstrated great potential, such as-- shipbuilding, ICT, light engineering, plastic. The government does recognise the importance of the emerging items, but whatever facilities they received remained confined to fiscal incentives.

No doubt, confronting the post-LDC challenges requires a robust export sector reinforced by policy reforms in order to provide impetus to diversification. Strategising a proper roadmap must be at the focal point to move in that direction.​

 

[Bilal9]

Jute product makers may see good time ahead with government policy​

BTJ Desk Report
12/10/202406
SHARE

Bangladesh’s jute and jute goods exports have been declining as buyers increasingly turn to synthetic and regenerated cotton yarn due to high domestic jute prices. The country, the second-largest jute producer globally, heavily depends on exports since domestic demand is insufficient. Export earnings from jute fell 6% year-on-year to $925 million in FY24, continuing a downward trend from $1.16 billion in FY22. In the first quarter of FY25, jute exports dropped by 20% to $178 million, with raw jute exports declining by 31% and jute yarn by 20%.

Several factors contribute to this decline. Rising local jute prices, unhealthy competition among millers, and increased demand for alternatives like polypropylene yarn and regenerated cotton in the global market are key issues. The price surge, driven by reduced jute production (down 18% in FY25) and stoker buying up supplies, has made it difficult for jute mills to remain competitive. Additionally, freight costs and limited domestic jute use further hamper the sector.

Industry stakeholders are urging the government to implement mandatory jute sack usage laws to protect the sector, which employs around four crore people. Many mills have scaled back or halted production due to rising costs and stagnant international prices.