Diversifying export basket, destinations

Dhaka,  Tue,  26 September 2017
Published : 20 Aug 2017, 21:41:05

Diversifying export basket, destinations

There are many measures that are considered obstacles to smooth operations of all industries, including the export-oriented ones. So, there has to be a well-coordinated approach as far as helping the export-oriented industries is concerned, writes Shamsul Huq Zahid
The country's exports recorded a lacklustre growth, only 1.35 per cent, the lowest in one and a half decades, in the last fiscal year (2016-17). 

The main reason for poor performance was the nominal growth in the export of the country's principal export item-readymade garment (RMG). The demand for Bangladesh apparels from their major destinations and the non-traditional ones was highly inadequate. The fact remains that the export growth of apparels has been rather slow in recent years. 

Industrial accidents and entry of efficient competitors, producing low-end garments at competitive prices, such as Vietnam, Cambodia and some other African countries have largely contributed to the slow growth of Bangladesh's principal export item. 

More than 85 per cent of the country's export revenue comes from apparels. This, no doubt, speaks of the achievement that Bangladesh has made over last four decades in the global textile market despite so many odds. Market insiders had predicted a doomsday following the phase- out of the multi-fibre agreement (MFA) that ensured quota and duty-free entry for RMG from the least-developed countries to the developed markets. But Bangladesh has survived the change and done even better in the post-MFA era. 

But almost everybody has been warning all concerned of the danger of being so much dependent on one export item. Experts and multilateral donors have suggested time and gain export diversification. There is doubt whether the policymakers and also the businesses have listened to such suggestions and acted accordingly as the country is still dependent on a few items, namely, RMG, leather and leather goods and frozen foods that fetch the most part of its export revenue.

All concerned here understand the necessity of diversifying both export basket and markets. But the question that is agitating the minds of many is: Are all concerned doing enough to achieve the much-coveted goal of product and market diversification? Certainly, there is lacking on the part of both the government and businesses. 

The government feels it is doing enough by providing incentives to certain export items. There is no denying that cash incentives to certain sectors do help the exporters concerned to be competitive in the global market. But that does not help much unless the quality of the products is good and prices are competitive. One has to understand the fact that the government does have very limited capacity, in terms of resource allocation for cash incentives. 

The government, according to a media report, has brought some changes in the incentive structure for exports with the objective of raising their overseas sales. It has increased the rate of cash incentives for existing four items and granting the facility to five more sectors. Thus, from now on, a total of 27 sectors would receive cash incentives, ranging from 2.0 per cent to 20 per cent. 

The five new sectors to receive stimulus are: IT-enabled services and hardware, shoes made of synthetic and fabrics, active pharmaceutical ingredients (API), accumulator battery and goods produced from coconut fibres. 

The businesses have been complaining most about one particular factor--the cost of doing business-- as far as their competitiveness in the global market is concerned.  Almost at every stage they are required to spend more than what is fixed officially. The country's ports are not efficient and inefficiency takes a toll on them. The ongoing situation at the country's premier port is a glaring example. International shipping lines have expressed their reluctance to send ships to the Chittagong port. Exporters have been failing to ship their goods by the deadline set by buyers because of severe congestion at the port. 

Transportation of goods from Dhaka to Chittagong and vice-versa remains a problem due to severe traffic congestion. Other physical infrastructures also are in a pitiable condition.  

True, the Bangladesh businesses do enjoy one advantage--- cheap labour. But the supply of unskilled labourers is more than abundant. That is why they are cheap. But the entrepreneurs for long have been facing the shortage of skilled labourers. Even the country's apparel sector is facing the same problem. To meet the shortage, many RMG units have employed skilled foreign workers. A good number of them have been staying in the country illegally. 

The policymakers have been oblivious of the need for creating skilled hands even to meet the requirement of domestic industries. The government has lately embarked on a number of projects and programmes to create skilled workers. But it is not known whether all these initiatives are based on actual need-assessment.  

The latest changes in incentive structures do highlight the government's desire to make our exports competitive in the global market. But another move to suspend gas supply to industries from 5 pm to 11 pm every day runs counter to the positive move. It is just one example. There are many other measures that are considered obstacles to smooth operations of all industries, including the export-oriented ones. So, there has to be a well-coordinated approach as far as helping the export-oriented industries is concerned. 


Editor : A.H.M Moazzem Hossain
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