Hiren Pandit: We need to facilitate more exports to Latin America, Africa, Asia and Middle Eastern countries other than the EU and US. The authorities need to identify the benefits of signing Free Trade Agreements (FTAs) or Preferential Trade Agreements (PTAs) other than just considering the potential revenue gains. At present, Bangladesh earns as much as $1 billion from the jute sector but considering global climate change and increasing international commitment to sustainable development, the industry could fetch as much as $5 billion to $10 billion.
Jute is now used in various products and has become the second most sought-after natural fiber in the world. So, we need to do value addition in this sector to be competitive after graduation. Around 70 percent of the total arable land in Bangladesh is used for rice production, which engages about 47 percent of the country’s labor force. We need to increase technology adaptation, enhance private-sector research and innovation, follow good agricultural practices, and develop the country’s post-harvest capacity and brand.
The Garment is a success model for Bangladesh’s exports but now is the time to focus on other potential sectors like leather,textile, pharmaceuticals, ICT, and light engineering. Bangladesh needs to formulate long-term plans on how to enhance its export basket after graduating from the UN’s Group of Least Developed Countries (LDCs). Related measures could include providing low-cost and easy access to finance, and adequate policy support along with fiscal and non-fiscal incentives for non-garment export sectors while ensuring equal treatment and skills development. We should focus more on non-garment sectors with good export potential as diversifying the country’s export basket would help address the existing and new challenges after graduation in 2026. The garment sector is a success model for us but now is high time to focus on other potential non-garment sectors like agriculture, pharmaceuticals, light engineering, ICT, leather goods, and jute. At present, 70 percent of Bangladesh’s exports get preferential access to certain markets but to continue enjoying such benefits after graduation, compliance will be a major issue.
Enforcing domestic regulations that are WTO compliant as industry readiness is very important. Besides, the Bangladesh Standards and Testing Institution (BSTI) needs to be strengthened to ensure that local products face international standard testing to secure accreditation. The country’s legal capacity should be increased as well since commercial disputes could increase significantly post-graduation. To compete in the international export market after graduation, small and medium-scale industries like jute, agro-processing, leather goods, footwear, pharmaceuticals, light engineering, ICT and other emerging sectors will face all kinds of competition. The geographical diversification and the services sector alongside traditional cash-cow industries.
The local ICT sector earns about 1 billion dollars annually but due to a lack of payment mechanisms such as a digital wallet or PayPal, not everything is reported in time. We have to create a low-cost fund for ensuring non-traditional access to finance to grow this sector. Some 80 percent of the drugs exported from Bangladesh are off-patent. For over two decades, policymakers in Bangladesh have been speaking of export diversification. That is also one of the takeaways from the ‘Bangladesh Trade and Investment Summit’, which reiterated the importance of policy and legal reforms for tapping untapped business potentials at home and abroad. Practically, Bangladesh has been for years dependent on almost a single sector for its export earnings. Nobody knows when the share of the readymade garments, 84 percent of exports now will come down with a healthy growth of other industrial and manufacturing components. Leather and footwear, pharmaceuticals, ceramics, IT and software, jute goods, light engineering products, assembling industry, handicrafts, frozen foods, agro-based items and a few more have been identified as sectors that could have increased Bangladesh’s foreign exchange earnings by this time.
The ideas generated and shared at seminars, workshops and conferences in Bangladesh are not generally tested by research projects at universities and government laboratories. Policymakers, too, look more serious while dealing with issues and ideas during international conferences than showing flexibility to demands from the local stakeholders for bringing changes in the ground reality.
As a result, innumerable policies lose the timeliness of implementation and appeal for adoption. In the meantime, newer issues arise and old ones remain unaddressed as well. The authorities then embark on new policies and initiatives understandably to draw political dividends, just forgetting the records the businesspeople remember. The idea of a Special Economic Zone (SEZ) is an attractive one and the Bangladesh authorities have readied as many as 100 SEZs for attracting investments to use them as a game-changer for the economy. The relevant agencies, however, do not take into account the facilities and environment that are necessary to make investment decisions.
Bangladesh needs to address its investment climate. We love to pocket appreciation from foreigners when they praise our social sector progress and national ambition to become a middle-income country by 2031 and a developed country by 2041. Businesspeople should concentrate on research for the diversification of products and their branding in the field of export and trade. By maintaining the quality of the product, business people can keep the market right and improve. We have to move forward by creating our branding. We need more research in business. In every business, industry owners and entrepreneurs take the initiative to preserve the image of their country by specifically determining the demand and quality of the products and maintaining the quality of the product for export.
The age of technology is advancing in the world. We have also taken steps to create skilled human resources ahead of the 4th Industrial Revolution it should be our goal so that we do not lag. COVID-19 has been credited to everyone from industrial entrepreneurs to employers and workers for taking the economy forward, although in a limited way. To a lesser extent, we have been able to keep it all going, where many countries in the world are facing this problem. The government had been able to increase the growth to 7% in the past and hoped that it would be surpassed in the future.
The current diplomacy as commercial diplomacy is needed for every embassy in the country, including the Ministry of Foreign Affairs, to do the same. Bangladesh has completed a feasibility study on 23 countries for the implementation of bilateral and regional trade agreements, free trade agreements and integrated economic agreements to facilitate trade and commerce. In other words, as a developing country, we are working with a special focus on addressing any challenges that may come our way.
The entrepreneurs involved in the other potential non-garment sectors like agriculture, pharmaceuticals, light engineering, ICT, leather goods and jute sector to diversify their products and find new markets to increase their export earnings. It is very important to diversify textile products in line with the global market. The same thing doesn’t happen all the time. Clothing also has to change its design, colors and everything.
Bangladesh ranks second in the world garment market. It is only 8.40 percent of the world market. So we have to pay attention to this issue. we have to work hard to increase the demand for products in the world market. To achieve this goal, short, medium and long-term plans need to be formulated. The private sector is paramount in the development and growth of the garment industry and especially in the expansion of its international market. Therefore, non-government organizations need to come forward for the diversification of export baskets.
We have to think about product diversification, geographical diversification, intermediate goods diversification, vertical diversification, quality diversification, goods to services diversification. RMG exports are partly shielded from exchange rate movements because of the special import credit system (back-to-back LC) that covers import costs from export proceeds. Non-RMG exports could be hurt by the appreciation of the Real Effective Exchange rate (REER). Emergency Resource Management (ERM) has to be right for them. For export diversification to happen, an anti-export bias of the tariff regime must be eliminated for non-RMG exports to pick up steam. Need to think on 4 dimensions cost, quality, time, and reliability. RMG is ahead of the others in all these factorsGlobally, two commonly used indicators are the World Economic Forum (WEF) Enabling Trade Index (ETI) and World Bank’s Trade Logistics Performance Index (LPI).
In all of the sectors, Bangladesh has a comparative advantage but faces constraints, such as a shortage of skills, the need to upgrade technology, weak infrastructure, or difficulty meeting international standards and compliances.
Bangladesh does poorly on most of the indicators included in this index but scores especially low on transport and power which have emerged as serious constraints to the manufacturing sector. It has been argued that RMG has legs and moves from one location to another depending upon the availability of low-wage unskilled labor.It’s never good for any country to be entirely dependent on a single source for its exports. Competitiveness is a global practice and we should remember it.
Hiren Pandit is a columnist
and a researcher.