Economic Policy Paper on
Export Diversification Tools
Diversification of
export is a high priority area in the govt’s development strategy. It is
increasingly recognized that accelerated development and diversification of
country’s exports is needed for easing the pressure on balance of payment
situation and for the growth of more viable and efficient agricultural and
industrial sectors for balanced development. Bangladesh has a sizable burden of
foreign debt and is in urgent of foreign exchange resources for debt servicing
and financing of expanded development projects. Employment opportunities need to be created through expansion
of exports for alleviation of poverty. This will encourage savings and broaden
the scope for investment.
In spite of heavy
odds, Bangladesh has done fairly well in its export development efforts. Export
earnings of Bangladesh have increased substantially over the years.
The govt. has recognized
that there is a critical need to fully support and invest in export development
and diversification.
Export
diversification is crucial for effective participation in the global trading
system. Expanding the country’s supply base is central to any export strategy.
While removal of constraints and improvements in the incentive structure will
enhance export performance of the country in the short to medium term, expansion
of production across industries along with adaptation and development and
diversification of products to compete in the overseas markets constitutes a
medium to long term priority. The strategy intends to turn the ‘drive for
export led growth’ into an economic movement. The export sector has to be
dynamic to meet the needs of increased foreign exchange earnings.
In 1994/95, export
earnings registered a phenomenal growth rate of 37. 04%. At that time the govt.
redirected trade policy towards a competitive export oriented economy by
liberalizing the trade regime. Taka was made convertible.
Trade facilitation was made the centre piece of the reform agenda. Around
this time there was a significant shift from jute centric export to RMG centric
export. Gradually non-traditional items became more dominant as against
traditional and primary commodities. Incremental export earnings have come
mostly from the RMG sector in recent years. Concentration of export
market is also quite visible with EU and USA accounting for almost 80% of
Bangladesh’s total exports. Our external sector was under considerable strain
in1998-99 when export growth decelerated to 2. 9%, the lowest since 1990s. The
devastating flood of 1998 and a slump in the prices of our commodities
contributed to this decline. In the aftermath of 9/11, export earnings came down
by 7.44% during 2000-2001. A positive development in the structure of export
growth, which has important policy implications, relates to performance of the
knit RMG sector. This sector has
been able to demonstrate robust growth performance over the recent years.
Constraints faced by exporters in Bangladesh are multifarious. Lack of finance is identified as a major constraint. Small and medium sized exporters are found to be more severely affected by this constraint. Infrastructural constraint is perhaps the most serious bottleneck to expansion of export and investment augmenting activities in Bangladesh. Govt. rules and regulations pertaining to exports are complicated and too much paper work is needed. Senior management’s valuable time is spent with govt. officials over interpretations and changes in laws and regulations. Exporters are required to pay extra money to customs officials for getting their export consignments checked. Payment is also to be made to port officials, power personnel, telephone service and airport personnel. Bribe is also required to be paid to other service personnel. The cost of doing business is very high. Absence of skilled manpower is felt in sectors like RMG, leather, electronics, data entry and information technology.
Most of the enterprises in Bangladesh have neither the inhouse capacity
to gather necessary trade information nor the networking facility to access
information. Market access issues are becoming increasingly complex and
diversified. Bangladesh’s access to EU market was jeopardized on ecological
and environmental requirements. Environmental conditionalities will continue to
pose serious problem to our exporters over time. In Bangladesh the export base
has remained narrow and no breakthrough is visible in expanding the export
basket With the removal of quotas, a process of restructuring of the global RMG
sector is expected to evolve when price competitiveness and quality aspects will
predominantly dictate the market behaviour. A comprehensive strategy is needed
to deal with the RMG sector in the post-MFA era. The rising importance of knit
RMG needs to be given special attention. Backward linkage activities need to be
strengthened further. Strong political commitment will be needed to pursue a
proactive export policy.
Labour intensive
agro-process based export oriented activities should be used in the production
of shrimp, processed foods and jute products. Pharmaceuticals are emerging as a
prospective sector. As a least developed country, Bangladesh is authorized to
produce patented grugs upto 2016. This has given us an enormous opportunity of
producing any kind of patented drugs which will help boost export in a big way .
Movement along value addition in RMG , leather and shrimp may bring rich
dividend for Bangladesh. A number of products such as processed vegetables,
toys, jewellery, cane furniture, fragrant rice, electronics, soft ware, data
transmission, etc have good potential for export.
The export policy of 2003-2006 has
been formulated with the objective of improving institutional capacity,
diversification of products, encouraging value addition, promoting new
exporters, developing skilled manpower, proper utilization of information
technology and making all concerned aware of the international trading system.
Many new incentives have been made available to exporters.
Some existing incentives have been modified and improved to make them
more workable. A number of new strategies have been adopted for facilitating exports.
Institutional facilities will be provided to trading and export houses.
Producers will be assisted in the application of modern technology in respect of
design and output. Exporters will
be assisted with market intelligence and in organizing trade fairs abroad.
Subsidies play an important role in promoting exports. Textile products,
agricultural products , fruits and
vegetables, frozen food, jute products, non-traditional items. handicrafts, etc
are enjoying different rates of subsidy. Other countries also subsidise their
exports. Subsidy policy has to be consistent with WTO rules. Bangladesh has to
be alert about anti-dumping duties imposed by other countries.
Brazil, India and USA have
imposed anti-dumping duty on Bangladesh products.
There is unconfirmed reports about dumping of certain products in
Bangladesh. The Tariff Commission
may conduct investigation into the possible dumping of products. We can think of
imposing countervailing duty measures. The business community has to be aware of
the rules of anti-dumping and countervailing duty. Their interest may be
affected by the unfair price practices of producers and exporters in other
countries.
Regional co-operation in our region is yet to take off. South Asian free
trade agreement is under negotiation. Bay of Bengal Initiative for multisectoral,
technical and economic co-operation (BIMSTEC) is still in its infancy. It will
take time to make progress in export
diversification through regional co-operation. Free trade agreements with India,
Pakistan and Sri Lanka are at different stages of negotiation.
Asian Development Bank projected
slump in exports during 04-05 because of floods and the abolition of textile
quota . But this has not happened. Exports amounted to dollar7. 79 billion
during July-May(05) as against dollar 7. 6 billion in 03-04. This is an increase
of 2. 3 percent in eleven months. A target of dollar 9. 6billion of export has
been fixed for 05-06. The GDP growth
rate rose by5. 4 per cent in 04-05 against an earlier projection of 6 per cent.
The soaring oil price has come as a boon for
Bangladesh jute sector. Because of high oil price, the prices of synthetics are
rising. International buyers of raw
jute and jute goods are offering higher prices
Bangladesh’s woven exports increased by only 1. 93 per cent and knit
wear export increased by 34. 58 per cent during the eleven months(July- May). of
the last fiscal year. Anyway it
will take some time before the
full impact of quota phase-out is realized.
Garment exports to the US market have declined in recent years.
As Bangladeshi garments witness continuous market loss in the US , local
garment exporters continue lobbying to get duty-free access to the US market.
A bill has been placed in US Congress
for allowing the least developed countries
to get duty- free access to the US market. The garment leaders from
Bangladesh while meeting the US policy makers explained that Bangladesh and
other LDCs will have to compete with China, India and Pakistan and it will be
difficult for them to survive in the quota-free regime. To get the Congressional
approval is tough but it is not impossible.
Diversification of export can be achieved through a number of mechanisms.
Knitwear sector has to establish its supremacy. The potential of agro-
processed products has to be exploited, given the incentive of 30% subsidy.
The acquisition of a cargo plane will facilitate the export of fruits and
vegetables. The exotic leather products should get a share of the steadily
growing demand in the international market The outlook for shrimp export is
quite strong. We should take advantage of the growing seafood market. Export of
electronic components is considered to be of potential importance to Bangladesh.
The IT could be another lucrative export-oriented sector. Soft ware/data
transmission export has a possibility to grow fast . Bangladesh has comparative
advantage in horticulture products A number of other products are believed to
have high export potential
The capability of
the private sector has been amply demonstrated in the growth of exports. Exports
are mainly led by the private sector. Therefore, some of the regulatory
functions may be delegated to the private sector. Govt.
has to complement the efforts of the private sector.
FBCCI, MCCI and DCCI may explore the possibility of posting their own
representatives in important locations abroad for strengthening the operations
of the commercial wings of the Bangladesh missions abroad. Market survey and
research and development will be the key components for export diversification.
Free trade agreements will be useful instruments for export diversification.
A good number of
recommendations have been made for supporting export diversification. Necessary
resources and infrastructure facilities are to be made available to the
exporters. The export sector of the country has demonstrated promising growth
pattern. If good governance can be put in place, an enabling environment will be
created for robust growth in export. Implementation of the recommendations is
the key issue. We have to either
export or perish. This should be our slogan.
i)
Financing facilities for export oriented industries are to be made
available on a priority basis. Lack of adequate finance is one of the major
constraints for diversification of export. Small and medium exporters are
affected more by this constraint. Therefore,
providing financial support is a top priority.
ii)
Private commercial banks may be persuaded to give loans to exporters at
rates of interest fixed by the govt.
iii)
Existing subsidy for export should be continued. New items in the
priority list may be considered for granting subsidy.
iv)
As indicated in the current export policy, an export development fund may
be created for providing venture capital, fees for foreign experts, marketing
missions abroad and other export related activity.
v)
Delivery time in shipment has to be cut down particularly for RMG. Govt
may reconsider their decision for setting up of a central bonded warehouse.
World Bank has recommended the establishment of a central bonded warehouse for
textiles.
vi)
Gas and power supply need to be ensured for export oriented industries.
vii)
Trade information centre of EPB must be upgraded immediately.
viii)
A cargo plane may be purchased for facilitating export of fruits and
vegetables. Finance Minister was pleased to say this recently.
ix)
Govt. may allow duty free
import of capital goods for all export oriented industries. This is followed in
many other countries.
x)
In view of the demonstrated capability of the private sector, some
regulatory functions may be delegated to
the private sector.
xi)
Free trade agreements may be implemented expeditiously for boosting
exports.
i)
Private sector should take full advantage of the incentives offered by
the govt. These incentives should be utilized for the benefit of the exporters.
Govt. may ensure full
implementation of the incentive structure.
ii)
Both the public and private sector should work as partners in promoting
export diversification. Implementation of govt. policies for export
diversification must be given priority.
iii)
Although there are numerous constraints to export diversification and
can not be resolved all at a time, efforts should be made to remove them
in a time bound manner.
iv)
The recommendations of the National Coordination Council on RMG sector
should be approved and implemented as soon as possible. NCC’s suggestions are
aimed at improving the competitiveness of the textile sector. The matter brooks
no more delay.
v)
Vigorous efforts should be made for expansion and diversification of
manpower export. More and better training facilities are to be organized for
upgrading the skill of our workers.
vi)
We have to convince the US govt. to grant duty and quota free access to
our products as good number of other countries have done this. We must have some
space in the aftermath of quota phase-out.
vii)
Potential investors from outside should be encouraged to invest in export
oriented industries. In this context Tata proposals
to invest in steel , power and fertilizer sectors are very timely. We
should process these proposals expeditiously and in a positive manner.
viii)
There is serious lack of research and development in the industrial
sector. Industrial enterprises should develop their own capacity
for research and development with assistance from the govt. Govt has to
provide adequate support for this purpose.
ix)
Major trade bodies like FBCCI, MCCI and DCCI may undertake research and
development and survey work particularly for the benefit of the small exporters.
x)
Investigation has to be conducted for possible anti-dumping action.
Tariff Commission as the authority for such action should keep all concerned
informed about their action programme.
xi)
Private sector may appoint their own representatives in key locations
outside Bangladesh for facilitating export diversification.
xii) In order to deal with WTO matters more effectively, DCCI may set up a full fledged WTO cell.
xiii)
We must create an enabling environment. Good governance well facilitate
creation of an enabling environment.
xiv)
Incentives provided to the exporters have to be comparable to
neighbouring countries. It is proposed that a study may be undertaken by DCCI on
this subject.
In 1994-95, export registered a phenomenal growth
rate of37. 04%. Exports continued to rise thereafter. At this time the govt
redirected trade policy towards a competitive export oriented economy by further
liberalizing the trade regime. Taka was made convertible. Trade facilitation was
made the centre piece of the reform agenda. Foreign exchange resources rose
steadily. Inspite of the robust performance by the export sector, it faced with
risks and problems originating from domestic supply side constraints and market
access challenges. Export diversification and market diversification continue to
remain major challenges confronting the export sector. Bangladesh has been
facing deteriorating terms of trade. Efficient management of export incentives
is critical in ensuring success of export promotion. Inadequate infrastructure
has raised cost of export business and reduced competitiveness. Trade
facilitation needs to be further strengthened.
A trade cadre is to be developed to address the challenges of
globalization.
During the last
decade there was a significant shift from the erstwhile jute centric exports to
RMG centric one with consequent dominance of the non-traditional and
manufactured commodities as against traditional and primary commodities. The
structural shift in the export sector was underwritten by the faster growth in
the RMG exports. Leather, raw jute and jute goods, frozen food and shrimp are
the other major commodities in the export bundle of Bangladesh. Almost 90%of
export earnings are originating from the RMG sector. Concentration of the export
market is also quite visible, with EU and USA accounting for almost 80% of total
exports. Fiscal and financial incentives and strengthening of institutional
support services have made a significant contribution to the removal of
anti-export bias and provided a
conducive environment for the rapid growth of export oriented industries.
Trade liberalization was
also helpful for rapid growth of exports.
Bangladesh’s external sector was under considerable strain in 1998-99.
Export growth decelerated to 2. 9%, lowest for the 1990s. The devastating flood
of 1998 and a slump in the price of our commodities in the global market
contributed to this deceleration. In 2001-02, export earnings dropped by7. 44%
in the aftermath of 9/11 mainly due to fall in demand in the US market. This is
for the first time that Bangladesh exports registered a decline. However,
exports picked up thereafter. A positive development in the structure of export
growth relates to performance of the knit RMG sector. Between1994 and 2004,
export of knit-RMG more than quadrupled but
garment export to US market has declined in recent years. The robust
growth performance of the knit sector has important policy implications . ADB
estimated that in the last fiscal year GDP and exports would come down
because of floods and phase-out of the MFA. but IMF thought that there might be
no fall in exports and GDP could be only
slightly lower. Fortunately , exports increased substantially during the last
fiscal year. .
MFA-phaseout from first of January, 2005 is a matter of serious concern
for Bangladesh. It will take some
time to fully assess the impact of quota-phase out . Protection of the RMG
sector is needed for maintaining export earnings as well as for avoiding
unfavourable impact on the employment situation of the large number of women
workers. All out efforts are, therefore, needed
for the survival of this sector.
In recent years the
incremental growth in exports is originating from changes in the volume index as
compared to that of the price index. This trend is a cause for concern. This
would imply that the weak growth in prices of our exports in the international
market has to be compensated by an increasing volume of exports. The price trend
reflects deterioration in our terms of trade. This is the outcome of
globalization.
A statement showing
year-wise export from 1994-95 is given below:
Year-wise export (in million dollar)
Year
Export
earnings
Percentage increase
1994-95
3472. 56
37. 04
1995-96
3882. 42
11. 80
1996-97
4418. 28
13. 80
1997-98
5161. 20
16. 81
1998-99
5312. 90
2. 94
1999-00
5752. 20
8. 30
2000-01
6467. 30
12. 43
2001-02
5986. 09
-7. 44
2002-03
6548. 44
9. 39
2003-04
7602. 99
16. 10
It will appear from
the above table that growth rate of exports was highest in 1994-95. Growth rates
declined thereafter although absolute quantity of exports was increasing. The
year 2001-02 was an exception when export went down following the terrorist
attack in the USA. Commodity-wise
export earnings are indicated below:
Structure of Exports(in million dollar)
Item
94-95 95-96
96-97 97-98
98-99 99-00
00-01 01-02
02-03 03-04
Raw jute
79.5 90.7
116.3 107.8
71.8 71.6
67.18 61.13
82.46 79.07
Tea
32.8 33.1
38.1 47.5
38.6 17.7
21.5 17.38
15.47 15.81
Frozen food 305.6 313.7 320, 7
293.8 274.3
343.8 363.23
276.11 321.81 390.25
Jute goods 318.8 328.9 317.9
281.5 303.9
265.9 230.36
276.11 321.81
246.45
Leather
202.1 211.7
195.5 190.3
168.3 195.1
253.93 207.33
191.23 211.41
RMG 1835.09 1948.81
2237.95 2843.3 2984.9 3082.6 3363.89 3124.56 3258.2735.38.
Knit
393.26 598.32 763.3
940.3 1035.4
1269.8 1496.23 1459.24
1653.83 2148.02
Chemical 107.62 105.56 108.48 74.3
79.3 93.5
97.18 66.57
100.49 121.46
Total 3472.56
3882.42 4418.28 5161.2 5312.9 5752.26467.30
5986.09 6548.44 7602.99
(all products)
.
It will appear from
the above table that export of tea is declining.
There is fluctuation in the export of jute goods.
Currently prices of raw jute
and jute foods are rising because of higher prices of synthetics caused by
soaring oil prices. Although woven RMG is showing some decline ,
knit RMG has shown faster growth. Frozen food export is more or less at
the same level. Chemical products are also maintaining the existing level.
Constraints faced by
exporters in Bangladesh are multifarious. Their nature, origin and consequences
are different. Some of the constraints may overlap with one another. Although
Bangladesh’s export sector has registered commendable success, she had not yet
been able to utilize her full potential because of under performance in many
areas. An analysis of the problems will enable us to understand the difficulties
and guide us for taking corrective actions. Performance will have to improve in
most of the areas.
Lack of adequate
export finance is identified as a major constraint. Small and medium exporters
are found to be more severely affected by this constraint. Most of the exporters
are facing the problem of obtaining export finance. High rate of interest on
bank capital is also a constraint. Exporters say that rate of interest is higher
in Bangladesh as compared to other countries with whom Bangladesh is competing.
Export credit is provided at a subsidized rate but there are difficulties with
formalities. Decisions are highly centralized. Senior management has to spend a
sizable amount of its time on negotiations with banks. Firms outside Dhaka spend
more time on bank negotiations. Abilities of local managers are limited. Most of
the loans are required to be approved by the head office for which the parties
have to wait, sometimes for six months. Another banking issue which plagues the
exporter is the need to pay extra money at every stage of approving a loan.
Lack of Adequate Infrastructure
Efficient
infrastructure is the pre-condition for good export performance. Infrastructural
constraint is perhaps the single most difficult bottleneck to expansion of
export and investment augmenting activities in Bangladesh. Problems continue to
remain in spite of the govt. efforts to streamline a number of stumbling blocks.
In adequate telecommunication is a major impediment. Transport and freight
constitute yet other major bottlenecks. Congestion is common in Chittagong and
Mongla ports due to shortage of equipment, inadequate containerization at the
ports and lack of transportation facilities for the containers. There is only
one container depot in Dhaka.
Inadequate functioning of infrastructure may adversely affect enterprises
in many ways. It hampers production activities, delays movement of goods and
passengers, leading to delay in the delivery of goods. It adds to business
uncertainty and risk and imposes additional costs. The cost has come to be even
more unbearable as profit margins are being squeezed as a result of
liberalization. Delay in delivery may result in the cancellation of contracts
and the loss markets forever and may demolish the goodwill of the firm as well
as of the country. The busy schedule of the port is aggravated by frequent
strikes and hartals called by trade unions and political parties. At the Mongla
port, feeder vessels are used to bring shipments from mother vessels due to
shallow depth of the port channel, making handling charges higher. The port
container charge for shrimps is higher at Mongla than that in Chittagong port by
$300-500.
Electric power is a leading infrastructure constraint.
Load shedding/power failure is a common feature. Power break-down is
experienced several times a day. In order to maintain production during power
failure, almost all exporters have to buy generators, but cist of generation is
estimated to be two to three times higher. Firms must buy generators,
employ operators and buy fuels and other accessories, as well as maintain
and repair the equipment. Inspite of the failure of electricity, exporters have
to pay extra money t o public sector electricity suppliers. They must pay for
power connections and transformers required for the transmission of electricity
to their factories and offices.
Exporters are of the
opinion that govt. rules and regulations relating to exports are complicated and
too much paper work is needed. Considerable amount of senior management’s
valuable time is spent with govt. officials
over interpretation and changes in laws and regulations.
Firms engaged in export business have to appoint officers for sorting out
matters with the govt. and agencies. Since small and medium size firms are more
affected by complications of law and regulations, they are found to be more
critical about govt. services.
Customs service has been mentioned as the third greatest problem.
Delays and corruption are the two most serious forms of worsening customs
service. Most of the exporters are required to pay extra money to the customs
officials for getting their export consignment checked.
The govt. has made the
decision to introduce a computerized system of customs clearance.
This system promises to speed up the clearance process and remove some of
the discretionary powers from the customs officials. Exporters have difficulties
in obtaining import licenses, opening L/Cs and getting bonded warehouse
facilities. RMG exporters appear to face more difficulties than exporters in
other sectors. The challenges the exporters encounter in obtaining regulatory
services include extra time and extra cost, making the exports less competitive.
Paucity of
Investible Resources
A fundamental problem of export diversification is the lack of adequate investment in the country, both domestic and foreign. Bangladesh has been following a private sector led growth since 1980s. Capital formation is low in Bangladesh. Inflow of foreign capital is sluggish although it has shown upward movement recently. Tata’s $2 billion investment plan in Bangladesh has generated lot of enthusiasm. The reason that Bangladesh has not been able to attract sufficient foreign investment is not because of lack of incentives offered by the country. A comprehensive incentive package that includes fiscal, financial and institutional support , guarantee by the govt. not to nationalize foreign enterprises. Generous scope of repatriation of profits and other earnings have been designed and put in place. The Board of Investment has explicit mandate to deal with investment proposals expeditiously. In case of investment in EPZs, the investor is offered customized buildings and on-line utilities. Potential investors appreciate the incentives offered by Bangladesh. But they are unhappy about bureaucratic and administrative hassle, political instability, hartal and low quality of utility services which have discouraged them to invest in Bangladesh. Lack of foreign investment is halting diversification in Bangladesh. An enabling environment can lure investors to Bangladesh. But such an environment cannot be created without political consensus which is the responsibility of the politicians.
Most of the
enterprises in Bangladesh have neither the inhouse capacity to gather necessary
trade information nor the networking facility to access information. The Export
Promotion Bureau(EPB) provides the entrepreneurs with business information and
market intelligence but their capacity is limited. It has assisted the exporters
by organizing trade fairs and furnishing required information. It helps in
formulating export friendly policies. The promotional activities of EPB can not
match the increasing demand of the entrepreneurs. There is need for capacity
building in EPB. Resources are to be provided to EPB to procure training
equipment and trade related publications. Most
of the chambers and trade bodies lack capacity to provide training in trade
laws, procedures, documentation and in giving assistance to their membership in
accessing relevant information on export markets, import sourcing, indenting and
investment. Businessmen are constantly in need of business information. DCCI is
well equipped to render services to the business community.
They organize workshops and training courses on regular basis. Other
major chambers should develop capacity in line with DCCI work programme.
Internet offers excellent opportunities to gain information. Members of the
business community may be assisted in learning to use the internet. This will
minimize the cost of collecting information.
Market access issues
are becoming complex diversified. The major market access problems relate to i)
non-tariff and para-tariff barriers, ii) stringent quality and standard
requirements, iii) stringent rules of origin, iv) labour and environmental
standards. Bangladesh is facing market access problems in USA (quota, labour
standard, quality requirement like HACCP for frozen food and eco-labelling for
RMG) as well as in EU (rules of origin, quality and standard requirement and
eco-labelling). Similar problems are being faced in Japan, Australia and New
Zealand. Bangladesh is also encountering non-tariff barriers in the Indian
market in exporting battery and cement. US Trade and Development Act 2000 has
been adversely affecting the market access of the Asian LDCs.
There has been a shift of order in textiles from Asian LDCs to sub-saharan
African and Carribean countries . Market access is the most important issue for
the trade negotiators. All
countries big or small are continuously looking for
better market access in other
countries. Tariff and non-tariff
barriers obstruct market access. Experienced
officials are needed to deal with
market access problems.
Absence of skilled
manpower is felt in sectors like RMG , leather, electronics, data entry,
information technology and in many other areas. Although the country has
abundant supply of cheap labour, there is a tremendous dearth of skilled labour.
Technical and vocational institutions need to be strengthened.
Lack of skilled manpower has resulted in under utilization of potential
export of services through manpower export as they are catering to only
unskilled and semi-skilled needs. A concerted policy on technology assessment,
technology acquisition, adoption, adaptation and development and technology
diffusion is still lacking. Such a policy would require an effective interaction
among research organizations, entrepreneurs and policy makers. Allocation to
social sectors need to be adequately addressed.
Skill development training should not be the sole responsibility of the
govt. The private sector can also
play a vital role in this sector. Private
organizations should be encouraged in providing development training and
formulation of labour and manpower policies. The country’s development will
continue to depend on the effective use of human resources and their continued
upgradation and enrichment through education, skill formation, improved health,
sanitation, nutrition and other means.
The role of govt. in
promoting export is crucial. Various
govt. agencies are
responsible for different activities related to
export. These are:the Export Promotion Bureau, the Board of Investment
and Bangladesh missions abroad. The main functions of EPB are to
the govt. to formulate and
implement export policy, assist and
advise the exporters on product diversification, product development,
dissemination of export related information and organization of marketing
missions and buyer-seller meets. As far as problems faced in receiving services
from the EPB, unjustified delays and corruption are the main complaints of the
exporters. BOI is assisting the foreign investors and some of them are connected
with exports. The one stop service of BOI needs to be made more effective.
Bangladesh missions abroad can play an important role in promoting export. Types
of assistance exporters request in
clued trade information, trade fairs, technical training, managerial training,
linkage with foreign chambers or associations , management and technical
services. It is alleged that exporters receive very little assistance from our
missions in foreign countries. Inadequate response
from public infrastructure services are hampering export performance.
Environmental
requirements can obstruct market access. Bangladesh’s access to EU market was
jeopardized on ecological/environmental conditionalities. EU has stringent rules
regarding quality of imported
frozen food. Exports of shrimp and frozen food came under sanctions because of
non- compliance with EU hygienic and environmental standards. EU has also strict
eco–lebelling requirements ror oven and knit garments. However, these problems
have been resolved. Environmental conditionalities are a kind of new
protectionism. Developed countries will be using new tools of protectionism.
Bangladesh will have to watch such developments and secure our export market.
External Constraints
The leading external
constraints faced by the exporters are lack of trade
information and market intelligence. There are difficulties in accessing
marketing/distribution channels or networks. WTO is required to assist the LDCs
to diversify products and improve quality. But such assistance is hardly
available . Major importing
countries have to apply their rules in a flexible and supportive manner of LDCs
according to the WTO agreement.
They must open their
markers to our products liberally. Instead, they are blocking our manpower
export. This is a serious
constraint. Human rights issues are creating problems for our export. The
provisions of special and differential treatment have not been implemented by
the rich countries. This is a priority issue for the LDCs in the Doha Round.
Bangladesh should pursue this agenda with other LDCs for successful resolution
of these issues. Special and differential treatment is the result of negotiation
during the Uruguay Round and it is not a gift from the rich countries. LDCs must
get a concrete outcome of these provisions in terms of greater market access,
technical assistance and preferential treatment in the context of the global
trading system. Globalisation should not bypass the poor countries.
One of the ways of
increasing the wealth of the nation is through increased production and
expansion of trade. Increased export earnings could lead to creation of
employment opportunities which will encourage savings and facilitate investment
resulting in the alleviation of poverty. Govt
objective is to strengthen the economy and make it vibrant. Govt is
thinking to bring the post-MFA situation in our favour.
There is scope for enhancing backward linkage in the textile sector.
Bangladesh will have to go for value addition, product diversification and new
markets. Duty free access has already been obtained in EU, , Canada, Australia ,
Norway , Newzealand and Japan. Under the Bangkok Agreement China gave
tariff concessions to about 700 products of Bangladesh. Thailand and Indonesia
have recently announced their offer of tariff concession to Bangladesh in great
numbers. . New markets will have to be explored for non-traditional items. Taxes
and duties will have to be rationalized
for assisting the growth of exports. It is in this context the export
policy for2003-04 has been formulated. The principal objectives of export policy
are as follows:
Reorganization and
capacity building in export related agencies such as EPB, Customs Department,
Sea and Land Ports, Department of Fisheries, BSTI, Tea Board and trade bodies.
Upgrading design and
quality of products and production
of value added items
To adopt new
strategy for expanding markets, to use computer technology and e-commerce
To build up backward
and forward linkage for maximizing
production of exportables
To create business
friendly atmosphere and provide assistance to existing exporters
and induct new exporters
To develop skilled
manpower in business
To create awareness
in trade bodies, businessmen and concerned persons about the global trading
system
Govt.
has formulated strategies for implementation of the objectives of export
policy which are given below:
To assist in the
production of exportables by creating product development councils
To provide
assistance to producers and exporters in respect of market intelligence and
value addition
To encourage export
development by providing institutional
support to trade and export houses
To assist in setting
up seal of quality organization and similar institutions to ensure quality
To assist in setting
up of international arbitration centre and similar institutions for settlement
of trade disputes within a short time
To help the
producers to use modern technology in the process of design and production
To familiarize the
exporters with the work programme of the successful exporting countries
To provide
assistance to the exporters in organizing single country fair and
to participate in international fairs for introduction and marketing of
products
Previously some
items were included under thrust sector and crash programme. These
classifications have been replaced . Some items have been categorized as high
priority and some other items will be shown under special development sector.
High priority items are soft ware and ICT, ago-products, light engineering
products, leather products and high value added RMG. Items in the special
category are pharmaceuticals, toiletries, luggage , electronics , cards and
calendar, stationery, silk cloth ,
handicrafts and herbal products.
In the light of the objectives and strategies, many incentives and
facilities have been made available to the exporters. Some of the major
incentives are discussed here. Loans will be provided at reduced rate of
interest. There will be an export development fund at EPB. Under duty drawback
scheme, 100% loan will be made available. According to income tax laws, 50%of
income of the exporters will be exempt from taxes. Bonded warehouse facilities
will be provided. Tax holiday will be given for export oriented industries.
Leather technology institute will be modernized. Permission will be given for
opening offices in other countries. Foreign Trade Institute has been set up to
offer training on international trade. An international business centre will be
established. Management information system will be set up. VAT will be
rationalized. Sick tea gardens will be rehabilitated. Efforts will be made to
increase productivity of jute industry. Contract farming will be encouraged for
production of vegetables. Steps will be taken to set up an IT village. Product
specific incentives have also been declared.
The incentives
declared need to be implemented expeditiously. Exporters have to take advantage
of these incentives. Where necessary, incentives may be further streamlined.
There is no denying
that the incentives provided in the export sector have contributed substantially
to the export sector performance. The export sector of the country has
demonstrated promising growth pattern.
Private sector has
played a commendable role in the development of exports from Bangladesh. Their
contribution is more than 90% of total export earnings.
Govt. support services and
incentives have facilitated the expansion of exports led by the private sector.
The gradual implementation of export strategy backed by export policy support
appears to have salutary effect on the growth of export. Despite many
difficulties, Bangladesh’s export performance over the years has been quite
impressive. The momentum in the export sector must be consolidated. More intense
and specialized efforts are needed in the fields of product development,
diversification, market promotion and expansion.
Private sector-led
growth in a market economy which is the enunciated development strategy of
Bangladesh is inescapable in the context of both momentous global transformation
and realities and imperatives of growth in Bangladesh. It is encouraging to note
that a consensus seems to be emerging among all concerned including major
political parties that the nation’s economic development requires a dominant
role of the private sector in a market economy. A global consensus seems to have
emerged that public sector’s r should be limited to what it can do well in
respect of maintenance of law and order, provision of the public services,
investment in human capital, provision of physical infrastructure and the
protection of the environment. The economic areas such as production, trade and
marketing which can propel sustainable growth is to be the business of the
private sector.
It appears quite
logical to ask whether the private sector in Bangladesh has the requisite
potential and efficiency to perform
the onerous task put on its shoulder. Though relatively new and inexperienced,
the private sector has already demonstrated its capability and buoyancy in the
economy. A new generation of private sector entrepreneurs has emerged in
Bangladesh who are well educated, hard working, capable and eager to face the
challenges of the global competitive market. They have proven their mettle in
all sectors where they had opportunities to work with freedom and where the
govt. played the role more of a
facilitator than a controller. The booming industries in ready-made garments,
knit wear, shrimps, leather, ceramics, etc are indicators of the latent
capabilities of the private sector and they also act as pointers to what the
govt. should do in capturing these potentials. Now that the capability of the
private sector has been amply demonstrated, some regulatory functions may be
delegated to the private sector.
Much has been
achieved but much more remains to be done. The private sector needs an enabling
environment to survive and thrive. Giving a greater role to the private sector
does not mean marginalizing the public sector. Public and private sector should
work hand in glove. There has to be
an effective partnership between the state and the private sector. The gap
between announced policies and implementation needs to be bridged.
A product will be
considered as dumped if the export
price of the product is less than the comparable price of the like product in
the exporting country. Because of progressive liberalization in Bangladesh,
domestic products are facing serious competition from imported goods. There is
unconfirmed report that, among others, ceramic, glass, bicycle, medicine,
toiletries, dry cell battery, detergent and electrical products are being dumped
into Bangladesh by other countries. Preliminary investigation may be carried out
in respect of these products. There are two aspects of countervailing duty.
One is to see if subsidized goods are imported into the country. In that
case countervailing duty can be imposed after proper investigation. Secondly, we
should find out if other countries are imposing countervailing duty on our
products. It mar be mentioned that smuggled goods are outside the scope of
anti-dumping and countervailing duties. Bangladesh was subjected to anti-dumping
d by US, Brazil and India. But we could not establish any case of dumping
in our country.
For the business
community, knowledge of the rules regarding anti-dumping and countervailing
duties are essential in their capacities as exporters
and producers. Their
interest may be affected by the unfair price practices of producers in other
countries. The affected exporters
have the right to petition the
national investigation authorities for the levy of anti-dumping and
countervailing duties after the due process of enquiry.
Market access is the
most important issue for the trade negotiators . The whole WTO mechanism
revolves round market access All countries big or small are continuously looking
for better market access in other countries. Market access is to be secured
through negotiation. No country is
prepared to allow the import of products from other countries if it can afford
to do so Tariff and non-tariff barriers obstruct market access. Market access
disputes are ultimately referred to WTO Dispute Settlement mechanism. if
bilateral solution is not found. Trade official should be familiar with market
access problems and possible solutions. Experienced
officials should be engaged to deal with market access negotiations.
Countries have the
right to take sanitary and for
the protection of human, animal and plant life. Phytosanitary (SPM) measures.
Such measures should be applied in a transparent manner only to the extent
necessary to achieve their objective and be consistent with recognized and
equivalent scientific evidence. . These
measures shall not be applied in such a way as to create arbitrary, disguised or
unjustifiable barriers to international trade. It is provided that sanitary and
phytosanitary measures should be harmonized on the basis of international
standards. It is necessary that a country should be fully aware of such
standards and should have the machinery to implement them.
Technical barriers
to trade (TBT) refer to application of technical standards.
Such standards should not create greater obstacles to international trade
than the domestically produced products. These
measures should be based on international standards. WTO calls for greater use
of science for food safety so that
arbitrary measures are not used as non-tariff barriers to trade.
Environmental, human
rights and labour standards may create barriers to trade.
Developed countries are most likely to use these tools to protect their
industries. Developing countries will have to negotiate these issues with their
counterparts in the rich countries. Market access negotiations are a continuous
process.
Govt.
is providing subsidy to encourage exports of a number of products.
Subsidies have played an important role in boosting exports.
There have been allegations of corruption in running the system and
delayed or no disbursement of the incentives.
The system has to be streamlined to make it truly efficient Subsidy
policy of the govt. should be made
transparent. Subsidy rules have to
be consistent with WTO provisions. WTO is to be kept informed about our subsidy
system. Although export subsidies are allowed to LDCs the importing countries
have the right to use safeguard measures against subsidized export from LDCs if
there is material injury to their domestic industry. Product-wise cash incentive
facilities are given below:
Local Fabrics(2003-2004)
10%
Local Fabrics(2004-2005)
5%
Agro-processing
30%
Leather Products
15%
Vegetables
25%
Fruits
25%
Handicrafts
10to15%
Frozen Food
10%
Bicycle
15%
Jute Products
5%
Tobacco
10%
Potato
15%
Regional economic
cooperation has been adopted as a means of expediting the process of economic
development by many countries, both developed and developing,
across the world. European
Union is the most far-reaching regional cooperation arrangement among sovereign
states. The main objective of EU
is free movement of goods, services, labour and capital.
A common policy has also been established for agriculture. The EU has
negotiated a large number of preferential agreements with third countries.
It took the EU thirty years to agree to accept the formulation if a
common market.
It has been
suggested that regional initiatives are sometimes pursued due to frustration
with lack of progress in the multilateral setting. Over 40 per cent of world
trade currently occur within regional cooperation arrangement. Theoretically, it
is possible for a cooperation arrangement to be structured in such a way as to
create gains for the member countries without harming any non-members. Regional
cooperation is taking place through NAFTA, EU, APEC, ASEAN, SAARC and BIMSTEC.
Bangladesh is associated with SAARC and BIMSTEC. BIMSTEC which is still in the
formative stage.
It will be
worthwhile to discuss about progress in SAARC. The bulk of export of SAARC
countries is directed to industrialized countries. Intra-SAARC trade is only 4%.
Persistence of trade deficits in some countries
vis-à-vis a large country is generally construed as benefiting only the
large country. It is often noticed that SAARC countries are not always aware of
the benefits of cooperation as well as the costs of non-cooperation. Trade
liberalization under SAPTA has made progress.
An agreement has been signed for putting in place South Asian Free Trade
Arrangement (SAFTA). Preparatory work is going on for implementation
of SAFTA.
The issue of trade imbalance between SAARC countries has emerged as a
major impediment to further trade expansion. Trade flows are often a corollary
of investment flows. Trade creating joint ventures assume special significance.
Lower imports from smaller countries has created a real problem.
Smaller countries feel that the largest partner India must buy more from
the smaller neighbours. The existing rules of origin under SAPTA is being viewed
as one of the major factors responsible for hampering trade flows within the
region. This is now under discussion.
BIMSTEC includes Bangladesh, India, Sri Lanka, Thailand, Myanmar, Nepal
and Bhutan. Technology, energy, transportation and communication, tourism and
fisheries are the core areas of cooperation. Air-transportation and pipeline for
natural gas are also under discussion.
EU has permitted an important derogation of the rules of origin by
granting regional cumulation to SAARC countries. This allows Bangladesh to claim
GSP from EU if she uses inputs sourced from other countries of SAARC.
BGMEA is of the view that Bangladesh is losing market access in EU market
by refusing to utilize regional cumulation. Govt has not permitted importers to
take advantage of this facility.
NAFTA has produced a win –win situation. There was steady growth in
trade among the NAFTA countries. Mexico’s export to Canada shot upto 105 per
cent. Net job creation had been positive in all the three member states.
Bangladesh can learn how Mexico strengthened its position to enter into a free
trade agreement with the US and Canada.
Tata proposal for investment of $2 billion on steel, power and fertilizer
has created lot of enthusiasm in Bangladesh.
These proposals are now being examined by Bangladesh side. If implemented
, these projects have the real potential for augmenting our exports to India.
Tata representative said that they have come to Bangladesh motivated by good
investment prospects . The World Bank has already offered technical support for
implementation of the Tata proposals. The donor agencies viewed the biggest investment proposal
from India positively and committed to provide support in making the proposals a
reality. These proposals have to be taken up seriously and should not be allowed
to slip. This is for the first time that some concrete proposals have been
received from India for enhancing cooperation between the two countries. The
Indian investment will attract other potential investors to explore
possibilities of locating their projects in Bangladesh.
Technical
Assistance
Technical
assistance from donors/international agencies is normally received as grant.
Experts /equipment/training facilities are provided under technical assistance.
Appropriate technical support is needed in Bangladesh for promotion and
diversification of export. EPB
received technical assistance from ITC in different projects and utilized it for
implementation of these projects. Technical assistance has also been used for
holding seminars and workshops. Technical cooperation is an area of WTO work
that is devoted to helping developing countries to operate successfully in the
multilateral trading system. The objective is to help build institutions and to
train officials. There is plenty of references of technical assistance in the
various WTO agreements. In fact the
major players offered the carrot of liberal technical assistance to poor
countries to agree to Uruguay Round agreements. In reality technical assistance
is not so readily available.
A few years back Bangladesh
prepared proposals for trade related technical assistance and sought to enhance
her competitive strength. These proposals were designed for boosting export
diversification and capacity building in trade related areas. Project profiles
were carefully prepared by CPD but there was hardly any commitment from the
donor community. In any case we have to continue to mobilize technical
assistance to enable us to access global market. Domestic support is also needed
for capacity building and skill development. For this purpose, allocation to
social sectors needs to be adequately increased. The private sector can also
play a vital role in this sector.
Export
diversification tools refer to the mechanisms through which the problems of
diversification can be addressed and solutions
found. In Bangladesh the
export base has continued to remain narrow. The lack of diversification of
exports has led to a situation where the fortune of Bangladesh’s export
sectors has become dependent on RMG. As quotas will disappear by the end of
2004, a process of restructuring of
the RMG sector is expected to evolve. Under quota free regime,
China, India, Pakistan, Turkey, and
Egypt will be penetrating Bangladesh’s traditional markets. A comprehensive
strategy to stimulate backward linkage activities ought to be designed and
implemented on an urgent basis. Central bonded ware house is needed to reduce
the lead time in making delivery although the govt.
has not approved this for protecting the local textile mills. There are
views that the RMG sector can hold in the post-MFA period. Bangladesh may try to
reach some kind of agreement with China, Pakistan
and India for collecting fabrics
directly. The industry should broaden its product and market range
by introducing new products and by targeting the niche market. Bangladesh
needs massive preparations to conduct garment exports in the changed situation.
BGMEA is working with the govt. for reducing bank interest, insurance
premium, port charges. Govt. has
already withdrawn VAT from exports.
Bangladesh has the
prospect of entering the quota-free post-MFA regime with a changed export
pattern as the knitwear , with an estimated 75 per cent local value addition, is
set to take the lead in exports by superseding the import dependent woven
sector. The knitwear sector has already exceeded the woven garments in export
volume although it is behind the
woven sector in terms of export earnings. In course of time this sector will
establish its supremacy, given the high growth rate it ensured consistently over
the past years. In 2003-04 the knit wear export was$2, 148 million compared to
s3, 538 million of the woven sector. This was possible due to self-sufficiency
in fabric-knitting but we are not self-sufficient in yarn production . Around
80% of the yarns, used in knit manufacturing, are produced locally. Knit wear
export may be able to make up the possible short- fall of the woven RMG.
Analysis shows that
agro-based products have great potential as a foreign exchange earner. The EU
policy of importing ‘every thing but arms’ could open up significant market
opportunities for agro-processed products from Bangladesh. Initiatives need to
be taken to support this sector. There
is a firm demand in Europe and the Middle East for fruits and vegetables and
there is ample supply on a seasonal basis.
Govt. will give 30% cash
subsidy to 15 non-traditional items. It has been announced that the govt would
buy a cargo plane to ease the cargo space problem and facilitate export of
fruits and vegetables.
Govt has stressed on
diversification of exports to tackle the post-MFAsituatuon and for that emphasis
should be put on export of non-traditional items. Export of vegetables, fruits
and allied products may slide this year because of floods Traders urged the
govt. to release cash subsidy for
fruits and vegetables. Rules and regulations of Bangladesh Bank were reportedly
delaying release of cash subsidy. The system of subsidy has to be streamlined to
make it truly efficient
Hides and skins and
leather products represent a significant proportion of the value of world trade
in agricultural commodities. New technologies create opportunities for the
sector to improve competitiveness. Product
innovation can improve consumer satisfaction and customer benefit. The most popular exotic leather products are boots followed
by purses, belts, wallets, gloves, clothes and shoes. The market for these
products has seen steady growth over the past two decades. Bangladesh has
prospect of exporting intermediary level finished leather products. If the
athletic shoe exporters in Bangladesh can follow the trends(growing female
market, growing younger market and
baby boomer market) and use their ability to keep costs down and quality up,
the US market can become more interesting and realistic for them in
future than it has been in the past. Consideration should be given to addressing
concerns about unfair trading practices by China.
Inspite of some
setbacks, the outlook for the shrimp industry appears to be quite strong. The US
is the largest consumer of shrimp, followed by Japan, Singapore and Canada.
These countries import between 30 and 60 per cent of all
their seafood and the market of shrimp and other seafood continues to
grow. The world demand for shrimp
atands at 2. 1 million tons per
year while output reaches only 800, 000 tons, leaving 60 per cent of the demand
unfulfilled. These factors show great market potential for Bangladesh shrimp
industry over the next few years. A focus on shrimp farming techniques will help
the global competitiveness of Bangladesh exporter. The long-term success of the
industry also depends on higher value added, such as ‘ready to eat’ that is
tising in popularity in major markets. Improved marketing efforts, especially in
establishing Bangladeshi brands would further benefit the industry. The demand
for seafood is increasing both in developed and developing countries. Bangladesh
should take advantage of the expanding seafood market.
Assembly of
electronic components is considered to be of potential importance to Bangladesh
because it has typically been the next stage in export growth after garments.
The industry is similar to RMG in that it depends on imported components, is
labour intensive, requires minimal capital investment and does not require
active product development. The
situation has changed in recent years with increased automation and use of
robots, but certain prod and
processes continue to be dependent on a high level of manual labour.
The IT sector could be another lucrative export –oriented sector.
Software/data transmission export has a possibility to grow fast. Bangladesh has
comparative advantage in horticultural products. Toys, jewellery, luggage items,
diamond cutting and polishing and artificial flower are believed to have high
export potential. Based on natural gas, an export- oriented petro chemical
industry may emerge. Tata proposal for investment of $2 billion in power,
steel and fertilizer sectors supports this optimism. Pharmaceutical
products offers a good opportunity for export. It is reported that 60 countries
of the world are importing pharmaceutical products from Bangladesh.
Export earnings or this s stood at TK 502 crores in the first 10 months
of this fiscal year. Export oriented joint ventures may be invited because of
lack of capital and management skill in Bangladesh.
Matching
grant facility is provided to the exporters for exploring foreign markets,
receiving foreign training and utilizing consultant services.
Half of exporter’s expenditures are eligible to be covered by this
grant facility. This facility should be continued for the benefit of the
exporters.
Export market of
Bangladesh is mainly concentrated in USA Europe. Therefore,
other markets need to be explored on priority basis. . Duty-free market
access has been obtained in the markers of EU, Canada, Australia, Norway,
Newzealand and Japan. Thailand, India, and Pakistan. have also extended duty free export of selected items.
Currently, efforts are under way to get duty-free access to US market.
This is of crucial importance for Bangladesh. Similar negotiations are
also in progress with countries like Russia and Malaysia.
The presence of a
large contingent of Bangladesh nationals in the Middle East, western Europe and
North America has created demand for various non-traditional items. We must
cater to their needs. They will constitute a good market segment for consumption
of our exports and there will be a spill over effect on others.
Bangladesh is
committed to a policy of economic liberalization and export-led growth.
Therefore, market diversification and product diversification efforts have to
continue on regular and priority basis.
Export policy provides a plethora of incentives to the exporters. It is
necessary to examine how far these incentives have been effective It is also
desirable to find out how these incentives compare to the facilities provided by
India, Pakistan, Sri Lanka, Thailand, Vietnam and countries in the similar
situation. In this regard a study
may be undertaken by DCCI for the benefit of the exporters.
Govt. will be in a position
to take decisions on the findings of the study.
Free Trade Agreements (FTAs) are quite popular these days. Many countries
are negotiating such agreements. Bangladesh is also negotiating free trade deals
with India, Pakistan and Sri Lanka. Free trade agreements can certainly boost
exports provided
the agreements are
negotiated properly. It is necessary to build up a pool of efficient
negotiators.
Research and
development and market survey are extremely important for facilitating exports.
There is need for sustained research and development. Major trade bodies and
large enterprises should develop such capacities. Small enterprises can benefit
from research and development undertaken by trade bodies. Upto date survey work
has to be undertaken to provide market information to the enterprises.
While Bangladesh missions abroad should assist our exporters in all
possible ways, FBCCI, MCCI and DCCI may consider posting their own
representatives in important locations to strengthen the operational efficiency
of the embassies. Bangladesh should participate in trade fairs on regular basis
to explore markets for our products. Where necessary consultancy and counselling
services should be utilized to augment the capacity of the exporters.
Huge trade imbalance with India is a matter of concern for Bangladesh. It
has recently been reported in the media that the Commerce Minister of India
assured his Bangladesh counterpart during
the latter’s visit to India that trade barriers will be removed prior
to his planned visit to Bangladesh in February, 2005. The bottom line is that
Bangladesh needs a larger market excess to India.
Increased exports to India will mean diversification of our market.
The overall export
growth last year was forecast to
slump considerably from the previous year. . This projection was made by the
Asian Development Bank(ADB) because of floods
in July and August. 2004. . In its outlook for FY2005, the ADB also said
that the abolition of textile quota was likely to reduce output and employment.
Quota phase-out was likely to affect many of the around 1. 8 million
workers in the textile and clothing industry, mostly poor women representing 40%
of the manufacturing employment. This may also displace workers linked to the
sector. The GDP growth was expected to come down to5 per cent
but it is now 5. 4%. . Industrial growth was adversely affected because
of the severe flood damage to the small and medium enterprises including the
export oriented garment industry. The overall export growth
increased by 2. 3 percent in eleven months(July-May). . According to ADB,
global economy would experience a slowdown in 04-05 and Bangladesh will not be
an exception. Recovering from the flood losses and macroeconomic management will
be the major challenges for Bangladesh.
Raw jute and jute goods prices were increasing
in the international market because of higher prices of synthetics caused
by soaring oil prices.
During the last 30
years, success in manufactured
exports has been nearly synonymous with rapid economic development. With only a
few exceptions, the countries that have achieved the most rapid gains in income
per capita have also recorded the fastest growth in exports. The best known
examples are the East Asian countries. on the
back of labour-intensive exports. Outside of
East Asia, Mauritius, Ireland and Tunisia have achieved both rapid export
growth and rapid economic growth over sustained periods.
A great deal has
been written about the advantages of export-led growth and the possible
connection between exports and growth. There is widespread consensus that
exports accelerate economic growth. There is also widespread agreement on some
of the basic policies needed to encourage growth in exports, including prudent
macro-economic management, duty free import of capital goods and
rawmaterials, political stability and reliable infrastructure. Export-led growth
in developing countries relied heavily on bonded warehouse, export processing
zones, special economic zones and duty drawback system.
The basic idea
behind an export enclave is to
create an atmosphere where the problem of poor trade policies, weak
infrastructure and inconsistent rule of law that plague the rest of the economy.
are at least partially eliminated so that firms can become more competitive and
more fully integrated into the global economy. Korea, Taiwan, Malaysia, Thailand
and Indonesia have introduced similar facilities. Export platform(enclave) facilities in Egypt, Colombia, Kenya
and Senegal have achieved relatively
little success.
Almost all
developing countries that have recorded rapid growth in exports have also
experienced rapid economic growth. A large and growing body of empirical
research has consistently found strong positive linkages between more open trade
policies , exports and economic growth. Tariffand quota protection on imported
capital goods were essentially zero in Korea, Taiwan, Hongkong and Singapore. in
the early 1960s. This was true of Mauritius and Tunisia. Success in exporting
has important spill over effects on other sectors of the economy. The successful
exporting countries recognized that they could not realistically solve all
problems at once, so they created innovative programmes and institutions to
support exporters. China relied almost exclusively on special economic zones.
One of the most
common problems cited by exporting firms in almost all developing countries is
customs clearance. Customs procedures can be time consuming, unpredictable,
frustrating and expensive. A number
of countries that recorded rapid growth in export also recorded increase in
wages . Women tend to make up a large share of the labour force in garment
factories and a lower share in electronics and machinery activities.
Several
countries(Mauritius, Tunnisia , Indonesia and Dominican Republic) have had
trouble shifting from garments to electronics. Electronics is a higher skill
production and need reliable infrastructure.
The transition is not automatic. The extent of backward linkage varies by
the type of export activity. It is
very high in Malaysia for rubber and food products. It is also high for
furniture exporters in Indonesia but much lower for electronics and lower for
textile. Close proximity helps but it is not absolutely necessary.
Asian exporters were not particularly close to their major markets.
Landlocked countries face prohibitive shipping
costs.
Exports from China
surged in recent years accompanied by high GDP growth rate. The transition
economies of Central and Eastern Europe showed strong export performance and
output growth.
