Bracing for a rebound in export growth

Dhaka,  Sat,  23 September 2017
Published : 15 Jul 2017, 18:53:37

Bracing for a rebound in export growth

Bangladesh needs to continue to grow its exports by improving the mix and quality of its apparel products, as well as diversify into new labour- and skill-intensive industries,  such as footwear, light engineering and electronics, writes Shahiduzzaman Khan
Bangladesh's exports in the last fiscal witnessed the slowest growth in 15 years. It rose by only 1.7 per cent from the previous year. Total exports in the outgoing year stood at $34.8 billion, or 5.85 per cent below the target of $37 billion, according to data available from the Export Promotion Bureau (EPB).

Exporters blame the lacklustre growth on a number of factors, including sluggish demand in the key markets, structural reforms in the garment sector, a weak euro and appreciation of local currency against the US dollar. Garment sales posted only 0.2 per cent growth in the year. Previously, the buyers used to increase orders for apparels every year. Now they are decreasing the number of orders.

The annual percentage gain was the smallest since 2001-2002 fiscal year when exports contracted as there was a downturn in the global economy. Readymade garments (RMG), comprising knitwear and woven items, earned $28.15 billion last fiscal. This means it is 7.34 per cent below the target.

It may be mentioned that RMG is a key foreign-exchange earner for Bangladesh. Low wages and duty-free access to Western markets have helped make it the world's second largest apparel exporter after China. But the industry, which supplies many Western brands, came under scrutiny after a string of fatal factory accidents, including a 2013 building collapse that killed more than 1,130 people.

During the last fiscal year, RMG export decreased due apparently to the Brexit issue, the impact of the US election and Taka gaining against dollars. Stakeholders say the low growth in export earning has triggered a note of caution. It would be difficult to increase export in the future unless capacity for competition is raised, they observed. Around 4.0 million people work in the RMG sector, contributing to 80 per cent of export earnings.

Bangladesh earned $28.15 billion by exporting readymade garments last fiscal while it was $28.09 billion in 2015-16. The growth stands at 0.20 per cent, a sharp decline from 10.14 per cent recorded in 2016-15. The country earned $14.39 billion from woven apparel and $13.75 billion from knitwear apparel. During this period, knitwear export increased by 3.0 per cent while woven export decreased by 2.35 per cent.

In fact, the country's overall exports to major destinations including the USA, Canada and some other European countries marked a downward trend in the last fiscal year. The factors like currency fluctuation and sluggish demand and ongoing safety issues in the ready-made garment sector were attributed to poor performance of the sector.

About 60 per cent of the country's total exports are destined for the European Union (EU) while Germany, the United Kingdom, Spain, France, Italy, the Netherlands, Belgium, Poland and Denmark are the big markets in the region. Of them, export earnings fell in the UK and Belgium by 6.31 per cent and 9.50 per cent respectively while export growth slowed in Spain, France, Italy and Denmark where earnings rose by 1.28 per cent, 2.18 per cent, 5.58 per cent and 5.24 per cent respectively last year compared to the corresponding period of the FY 2015-16.

The global consumption of apparels has declined by 5.0 per cent. The Bangladesh currency against US dollar remains unchanged while currencies in competitor countries were devaluated. Brexit had a negative impact on local garment export. Analysts see these as major reasons for losing competitiveness in the global market.

Moreover, due to the ongoing safety activities carried out by the Western retailers' platforms - Accord and Alliance - many factories were shut down while a good number of units are in the process of relocation. Gas crisis and other infrastructure problems are also affecting the sector.

The commerce ministry should conduct a study to explore the product-wise demands that are increasing in the traditional markets. Entrepreneurs need also to increase their networking with the buyers so that they can increase their orders in the country and with those who are currently sourcing from other competitor countries. The government should offer incentives to help increase orders in non-traditional markets.  

There are, in fact, better opportunities in the comparatively new markets. But for lack of proper knowledge and efforts -- both from the local businesses and the government -- those have so far remained unexplored. It has been found that importers of African countries, Russia and some other countries are eager to import items like RMG, leather products and jute goods from Bangladesh.

According to a World Bank (WB) report, Bangladesh should deepen reforms to improve the capabilities of its firms to participate in global value chains, which will require making it much easier for exporters to import what they need, gradually reducing tariff, while improving trade logistics.

With support from the government, local firms can improve their productivity and competitiveness by investing more on training of their workers and managers and innovating new products and processes, the report added. 

To realise absolute competitiveness potential, the country needs to start by focusing on improving its trade policy regime and the business environment, and address the acute shortage of industrial land. With the right set of policies and an enabling environment, there is no reason why Bangladesh cannot become the next Asian export powerhouse, said the WB report.

Bangladesh needs to continue to grow its exports by improving the mix and quality of its apparel products, as well as diversify into new labour- and skill-intensive industries, such as footwear, light engineering and electronics. 

There is no denying that export and import are demand-driven. The government should scrutinise the reasons for export fall in major markets to do the needful. The government should come forward with a plan of action to raise competitiveness of the local products and explore the untapped markets across the world. The plan should also consider the country's present energy situation and low infrastructure facilities.

There is a need for manufacturing value-added high-end garment items for sustainable business. It is certain that the export growth might bounce back in the current fiscal year provided that relocated units go into full operation along with the government's policy supports.

Editor : A.H.M Moazzem Hossain
Published by the Editor for International Publications Limited from Tropicana Tower (4th floor), 45, Topkhana Road, GPO Box : 2526 Dhaka- 1000 and printed by him from City Publishing House Ltd., 1 RK Mission Road, Dhaka-1000.
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