On declining export growth

Author: BIGM, Publish Date: 08-Jan-2017


On declining export growth


Md. Monirul Islam

When Bangladesh emerged as an independent country, it was a relatively closed economy with the trade limited to very few products - in terms of volume as well as markets overseas. Over time, merchandise exports have increased significantly. In the early years, the country's exports covered mostly raw jute and a few jute goods items. These accounted for about nine-tenths of the total export revenue of US$377 million during the fiscal year 1972-73. By the end of the 1970s, this ratio stood at about three-quarters of the total export revenue. Export configuration, however, changed dramatically since then. Readymade garments (RMG) comprising knitwear and woven apparel products emerged as the principle export items of the country. The country achieved significant success in export promotion, mostly because of the stellar performance of the apparel industry. A report said that export earnings of the country are now equivalent to 18 per cent of GDP suggesting considerable and growing importance of the export sector in the national economy. The global downturn reduced export demand for Bangladeshi goods. Total export earnings decreased by 1.9 per cent in 2009. But astonishingly, knitwear and woven garments exports withstood the recession well due to their mounting demand in the world market.

Most recent news reports revealed that the overall export growth of the country has fallen considerably in the outgoing fiscal. Export growth of the country in 2016-17 fiscal hit a 15-year low at 1.69 per cent as the earnings from readymade garments witnessed a sluggish growth in the major destinations including the European Union and the United States. Available data shows that export earnings in FY17 stood at $34.83 billion with a shortfall of more than $2 billion from the government-set target of $37 billion. Notwithstanding the prevailing relatively stable political environment and infrastructural development, the failure to meet export target exposes the fact that our economy is not well in terms of export orientation. A news report said that export growth was the lowest since the FY 2001-02 when it was negative - by 7.43 per cent. Export earnings in FY17 fell short of target by 5.85 per cent and amounted to nearly $35 billion with about 2 per cent growth. Export earnings in June 2017 stood at $3.04 billion with a 15.27-per cent negative growth against $3.59 billion in the same month of FY16.

There are both external and internal factors responsible for the downward trend of export growth in the country. First is the shrinking of global demand for apparel products. Many foreign buyers expressed reluctance to procure apparels from Bangladesh as demand has reduced due to global economic recession affecting consumers' purchasing capacity. Secondly, devaluation of currencies is viewed as largely responsible for the sluggish growth.

The negative growth is a signal that the country is losing its competitive edge while other competitors are doing well. In this regard, Bangladesh must pay serious attention to the quality of products to challenge the contenders. Besides, last year Britain and Germany imposed embargo upon cargo operation in most airports of the country due to security concerns.

According to the provisional data, export earnings from RMG products in FY17 stood at $28.15 billion with a minimal growth of 0.20 per cent, which fell short by 7.34 per cent the government-set target of $30.38 billion. Export earnings from knitwear stood at $13.75 billion with 3.01 per cent growth while earnings from woven fell by 2.35 per cent to $14.39 billion in FY17.

Bangladesh is still a supplier of cheap basic apparel items that is profitably produced by unskilled and semi-skilled workers. If it wants to move up the value chain, it will need to improve the quality (productivity) of its workforce and management. It may be a matter of worry that if other RMG producing countries export quality products at low-prices, it is likely to diminish the demand of our cheap basic apparel items of comparatively high price. This is a critical area to be looked into, and appropriate research can only find out the factors responsible.

We need to have policy support ensuring adequate gas and electricity on a priority basis so that the export growth may rebound in the new fiscal. Bangladesh would have to focus on ensuring the quality of products as well as on diversifying markets and products. In this situation, we have to go for productivity-driven growth while making efforts to cut the cost of doing business.

The writer is Assistant Professor, Bangladesh Institute of Governance and Management (BIGM).

Published : 02 Aug 2017, 21:14:08 | Updated : 02 Aug 2017, 21:14:32