By Md Mazadul Hoque
Bangladesh is actively working to boost its exports, aiming to become an export-oriented economy. The government is focusing on finding new markets and diversifying its products to increase export earnings. The country currently exports to around 190 nations and is in talks for free trade agreements with a dozen others. However, despite exporting a wide range of products, Bangladesh’s overall export volume is not as significant as its competitors, and it faces several challenges in increasing its foreign currency earnings. These earnings are crucial for paying for imports and strengthening the national economy, as a healthy foreign currency reserve is a sign of economic stability.
There is no alternative ways but to discover export destinations. It is surprising that Bangladesh’s export to GDP ratio has, in the meantime, recorded close to 13 per cent- lowest compared to her peer countries. Two fastest growing economies- Vietnam and Cambodia are considered as competitors of Bangladesh in terms of macroeconomics index. Vietnam’s trade to GDP ratio has been registered at 106.80 per cent where Cambodia 61.09 per cent.
According to World Development Indicators (WDI)-2019, about 34.01 per cent trade to GPD ratio in Bhutan, 23.12 per cent in Sri Lanka, 65.22 per cent in Malaysia, 69.02 per cent in Maldives, 18.50 per cent in China, 18.41 per cent in India and historic record 173.52 per cent in Singapore. So, it can be said that with current trade to GDP ratio, economically advancement would be tough for Bangladesh. It has already been learnt that Bangladesh is set to face trade challenges following post-LDC graduation issue. As a result of not seeing expected export growth as estimated, a good number of time-bound steps might have been taken in hand. There are only five countries that imports majority share of exportable goods being exported from Bangladesh.
Among top-most export partners of Bangladesh, of total export, around 19.35 per cent is exported to the USA, 14.73 per cent in Germany, 11.03 per cent in the UK, 5.82 per cent in Spain and 5.53 per cent in France. Approximately 93.41 per cent consumers’ goods are exported. The rest are raw materials, intermediate goods, capital goods. The Logistic Performance Index (LPI) revealed recently by the World Bank shows that Bangladesh scored 2.60 out of 5.00, China 3.60, India 3.2, Vietnam 3.3, Indonesia 3.15, Cambodia 2.60. Bangladesh also scored 2.48 in logistic competence where China showed 3.59, Vietnam 3.40.
The book titled “Ease of Doing Business ease of Economic Development” authored by MS Siddiqui said that the logistic performance ( LPI) is the weighted average of the country scores on the six key dimensions: (1) efficiency of the clearance process by border control agencies including customs (2) Quality of trade and transport- related infrastructure (3) Ease of arranging competitively priced shipments (4) Competence and quality of logistic services (5) ability to track and trace consignments (6) timeliness of shipments in reaching the destination within the scheduled time. The studies on logistic performance by World Bank (WB) observed that high-income countries emerged as world leaders on logistics.
The LPI score of high -income countries is 48 per cent higher, on average than in low -income countries. The book noted that for developing countries, getting logistic right means improving their infrastructure, customs, skills and regulations. There is possibility to enhance export by 19 per cent if its logistics cost might have been reduced by 26 per cent- a newspaper report noted. Starting a business in Bangladesh needs 19.5 days, whereas the same in South Asia requires 14.5 days and just 9.2 days in the high-income OECD countries. A construction permit in Dhaka requires 281 days while it is nearly 150 days in South Asia and 152 days in OECD countries.
Property registry in Dhaka requires 264 days while it needs 108 days in South Asia and nearly 24 days in OECD countries. Getting electricity requires 115 days in Dhaka, 86 days in South Asia and nearly 75 days in OECD countries. It requires around $ 250 in various charges on an average to ship a container from the Shenzhen port in China while it costs $ 800 at Chattogram port in Bangladesh. In the case of some businesses, it requires acquiring 28 licenses from several government institutions.
In light of above stated scenario, Bangladesh’s rankings in terms of ease of doing business index is not up to the mark out of 190 countries. Nevertheless, with outdated logistics related policy and guidelines. It is not possible to see satisfactory level of trade to GDP ratio within shortest possible time. With a view to compete with competitors, the need for enhancing trade volume is a must considering current situation. In the aim of producing exportable goods, inoperative plants of ready-made garments must be brought under full-fledged operation.
The RMG sector watchdog might take the issue into consideration in view of current export to GDP ratio. The watchdog has to sit with the owners of inoperative factories centering reopening of export operation. The country’s small and medium sized enterprises have to be lifted with providing required facilities. Their role in GDP and in keeping the wheels of economy afloat is remarkable. Bangladesh is in poor state in compliance issue, no doubt.
After Rana Plaza collapse, the US was obliged to stop TICFA facilities enjoyed by Bangladesh. It is good news that some US fashion companies will be sourcing made-in- Bangladesh products more in the days to come, mostly over the next two years- The United States Fashion Industry Association (USFIA) in its study said. With around 6.09 per cent export market penetration rate, Bangladesh economy might not reach goals set in 2nd Perspective Plan 2021-2041. It should be mentioned here that China’s export market penetration rate is 48.12 per cent, in India 26.78 per cent, in Vietnam 13.20 per cent, in Malaysia 65.22 per cent.
Bangladesh Economic Zones Authority (BEZA) and Bangladesh Investment Development Authority have to play an instrumental role in boosting export to GDP ratio. Trade policy in Bangladesh must be relaxed. Hopefully, Bangladesh is set to earn significant volume of foreign currency more than expectations by exporting more if a decent business climate is made sure. LPI index, now lowest in South Asia, must be improved. There is no alternative to expand export markets and exportable products in sustaining competitive markets.
Md Mazadul Hoque is an economic affairs analyst & public policy commentator.