More Initiatives Needed for Diversification of Exports

Hiren Pandit : We should focus more on other good sectors other than apparel with export potential. Diversifying the country’s exports to help meet existing and new challenges post-transition to LDCs in 2026. The ready-made garments sector is a successful model for export in Bangladesh but now it is time to focus on other potential sectors like leather, textile, pharmaceuticals, ICT, and light engineering. Bangladesh has started formulating long-term plans on how to increase the scope of its exports after transitioning from the UN Least Developed Countries (LDCs) status. These include low-cost and easy access, adequate policy-friendly support as well as fiscal and non-monetary incentives for the non-apparel export sector as well as ensuring equitable skill development. Concerned agencies should implement domestic regulations which are important for WTO-approved industries to further prepare.

Also, strengthening the Bangladesh Standards and Testing Institute (BSTI) to ensure the quality of local products and to better verify the quality of products that undergo testing for international standards. For this reason, the country’s legal capacity must also be enhanced as commercial disputes may increase significantly during the LDC transition phase. Small and medium industries like jute, agro-processing, leather products, footwear, pharmaceuticals, light engineering, ICT and other emerging sectors have to face all kinds of competition to compete in the international export market. In addition to traditional industries, geographical diversification and service sector development may also come to the fore.

We need to further facilitate the process of exporting to countries in Latin America, Africa, Asia and the Middle East outside of the EU and the US. Authorities should identify and act on the benefits of signing free trade agreements or preferential trade agreements, not just considering potential revenue gains. Bangladesh earns $1 billion from the jute sector, but considering global climate change and increasing international commitments for sustainable development, the industry could grow from $5 billion to $10 billion.

Jute is now used in a variety of products and has become the second most abundant natural fiber in the world. We need to invest more initiatives in this sector to be competitive. About 70 percent of Bangladesh’s total arable land is used for rice production and about 47 percent of the country’s rural labor force is engaged in this work. We need to increase the use of technology, increase private sector research and innovation, follow good agricultural practices, and develop the country’s post-harvest capacity and brand.

The local ICT sector generates about $1 billion a year but due to the lack of a digital wallet or a payment system like PayPal, it is not possible to report everything on time. We need to create a low-cost fund to ensure the growth of this sector and access to finance. About 80 percent of the drugs exported from Bangladesh are off-patent.

Bangladesh’s policymakers have discussed export diversification for over two decades. Bangladesh was one of the topics discussed at the Trade and Investment Summit, which reiterated the importance of policy and legal reforms to harness untapped business potential at home and abroad. In fact, Bangladesh has been dependent on one sector for export earnings for years. Now 84 percent of exports are made-up garments. No one knows when it will catch up with other industrial and manufacturing growth. Leather and footwear, pharmaceuticals, ceramics, IT and software, jute products, light engineering products, handicrafts, frozen food, agro-based items, and several other sectors have been identified which could increase Bangladesh’s foreign exchange earnings.

We like to receive compliments from foreigners, and when they praise and discuss the progress of our social sector, they seem positive to us. As we dream of becoming a middle-income country (without extreme poverty) by 2031 and a developed country by 2041, we need to think and act on these more. Businessmen should focus on product diversification and research for their branding. Traders can improve the market by maintaining the quality of the products to improve export and trade as well. We need to build our branding and move forward. We need more research in business. Industry owners and entrepreneurs in every business can take the initiatives to protect the image of the country by determining the demand and quality of products and maintaining the quality of products for export.

This era of technological excellence is advancing very quickly. We have taken steps to create skilled human resources for the fourth industrial revolution. Where many countries around the world have faced difficulties, we have been able to continue during the pandemic. The government has been able to raise the growth to 8 percent and is expected to surpass it in the future.

A feasibility study has been completed on 23 countries to implement bilateral and regional trade agreements, free trade agreements and integrated economic agreements to facilitating Bangladeshi trade. In other words, as a developing country, we are working with special attention to face any challenges that may come our way. Entrepreneurs involved in other potential non-garment sectors also need 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 may not always be preferred. The design, and color of clothes should be changed according to the new needs of the market.

Bangladesh ranks second in the world clothing market. We need to pay more attention to this. We have to work hard to increase the demand for products in the global market. Short-, medium- and long-term plans should be formulated to achieve this goal. The private sector is at the fore in the development and growth of the apparel industry and especially in the expansion of international markets. Therefore, private companies should come forward to diversify exports.

Thailand, a successful example of export diversification, has adopted a dual strategy of upgrading natural resource-based industries (such as agriculture and fishery products) and promoting labor-intensive manufactured exports, particularly apparel and electronics. All East Asian economies, along with China, have benefited from regional economic integration. The integration of production chain locations through the integration of cross-country production networks has provided Thailand with the advantages multinational companies have sought to produce across national borders at lower costs. We have to think about product diversification, geographical diversification, quality diversification, and product service diversification. Garment exports are partially shielded from exchange rates because of a special import credit system (back-to-back LC) that covers import costs from export earnings. Non-RMG exports are likely to suffer due to the real effective exchange rate. Emergency resource management needs to be done right for them. Diversification of exports requires a move away from an anti-export stance of the tariff system and a focus on how to increase exports other than RMG. We have to think about the four dimensions cost, quality, time, and reliability. RMG sector is ahead of others in all these aspects.

Two commonly used indicators globally are the World Economic Forum’s Enabling Trade Index and the World Bank’s Trade Logistics Performance Index (LPI). In all sectors, Bangladesh has a comparative advantage, but efforts must be made to overcome barriers such as skill shortages, the need for technological upgrading, poor infrastructure, or difficulties in meeting international standards and compliance.

1600 types of products are exported from Bangladesh to different markets of the world, and 85 percent of the total export income comes from 292 types of ready-made garments. Only 15 percent of the income comes from the remaining 13 hundred products. But among these 1,300 products, there are many products, which have a huge market and are constantly increasing in demand. Especially leather and leather products, plastic products, light engineering products and pharmaceuticals are growing markets. Bangladesh’s capacity in these sectors is more than many countries. As a result, there is a great potential to increase the export income from these sectors if the government gets proper policy support.

The economy of Bangladesh has achieved a growth rate of 7.3 to 7.9 percent in the last two years. Bangladesh Bureau of Statistics said that more than 2 million people joined the labor force during this period. The economy of Bangladesh is currently moving forward at a steady pace. The government has taken effective steps to diversify exports. There should be a comprehensive review of tax rates, tax collection methods and various incentives in the export sector. Because there are unnecessary initiatives in many cases. Research should also be emphasized so that new products can be invented.

Cannot proceed depending on one product. Government policy should be changed to promote other sectors of export. Vietnam does not have its own leather. Again, the population is less. But Vietnam exports about $30 billion worth of leather and leather products annually. But despite Bangladesh having its own leather and sufficient manpower, the export is one billion dollars. Demand for plastics is increasing worldwide. This industry has a lot of potentials. However, government policy support should be increased. The global economy is recovering after the impact of Covid. International trade has gained momentum. This is also reflected in the export sector of the country. The statistics of the Bangladesh Export Development Bureau (EPB) have also revealed that the export of goods from Bangladesh to the outside world is more than the government’s expectations. As always, the garment sector is playing a major role in the growth of exports. The pace of export is also positive in several other products including leather and leather products.

The export of goods from Bangladesh to the outside world is 5.65 percent more than the target. On the other hand, exports in the last financial year were 989 crores 68 lakh 40 thousand dollars. Accordingly, compared to the same period last year, exports have increased by 11.37 percent. The top three categories of products exported from Bangladesh are ready-made garments, jute and jute products and leather and leather products.

Initiatives should be taken to export various types of products without restricting the export trade to certain products. Due to the promotion of international standards, the demand for various types of Bangladeshi products has been created in different countries. Some companies in Bangladesh have achieved unprecedented success, especially in the field of export of food and agricultural products. As several brands of Bangladesh products have gained international fame, it has a bright potential for market expansion. Diversification of export products and the creation of new markets should be continued by exploiting that potential.

Hiren Pandit is a columnist and a researcher,

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