Consecutive Failure in Exports Balance Problems and Prospects -By Abdullah Al Mahmud


Bangladesh is the 55th largest export economy in the world. In FY’17 Bangladesh exported $24.02B and imported $32.65B. As a result total net balance is now in a continuation of negative face of $8.6B.In 2015 the GDP of Bangladesh was $195B and GDP per capita was about $3.4K (World Bank Database 2017). Since the FY’95 Bangladesh is at a negative net balance situation. Because of this continuation in export balance failure, going to the balanced exports trade is a common phenomenon for both policy makers and economists. If we talk about our exports failure then a bunch of causes could be seen but here I go with the four major causes why Bangladesh isn’t doing well in Net Exports.

Continuous Failure in
RMG Sector

After the big clash in ‘Rana Plaza’, Though Bangladesh’s share in the global export has continued to increase in recent times, the country is facing tough challenges mainly from internal forces. However global slowdown in apparel business is also a reason. A recent release from Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has informed that continuous price loss of RMG products in UK, USA and European Union (EU) in the context of ‘Brexit’ referendum, US election and price falling of Euro have impacted RMG’s growth of Bangladesh. Recent reports of Export Promotion Bureau (EPB) Bangladesh shows Bangladesh RMG is not being able to achieve export targets which could be a setback in reaching the 2021 goal of the country to reach 50 billion export. EPB shows Bangladesh exported 28.6 billion USD in 2016 though ITC data shows Bangladesh exported 33.45 billion USD in 2016 (table 1). However, latest information from EPB shows that the country is still maintaining a growth in RMG export but the growth rate is going down significantly. In first ten months of the financial year 2016-17, the country exported 23.14 billion USD which is only 2.26 percent higher than the export of the same period of the previous year. It is most likely that the country will miss the target of current fiscal year. In the first ten months of the FY, export quantity was 6.06 percent short of the target. And that’s why BGMEA warns that they are losing their capability in global competition and the dream to attain first position in exporting RMG product in the world is gradually becoming gloomy.

Lack of Export Diversification

As, in the beginning, I briefed that Export is the lifeline of the economy of Bangladesh. The most important contributing sector is the exporting sector in the GDP. But, overdependence on a few products or on a single product is not a wise decision. For sustenance of business, it needs diversification of both export products and export destinations. In the perspective of export performance of Bangladesh, the country is still dependent on ready-made garment (RMG) sector with contribution of nearly 80 percent national export. If the home textile and specialized woven and knitted fabrics are included with knitwear and woven garment items the contribution will reach nearly 85 percent. If I talk in terms of markets analysis, we will see Bangladesh is dependent on few traditional markets including the US, the EU and Canada. Of the total exports of the country 23 percent goes to the US, nearly 60 percent to the EU, 5 percent to Canada and 12 percent to the rest of the countries of the globe. So, it is clear that how much is concentrated of the country’s exports on a few numbers of markets. But, the hope is that, Bangladesh started exploring new export destinations like Japan, Russia, South Africa, Mexico, Brazil, Chile, Malaysia, New Zealand, India, South Korea, China and Australia. The export growth to those countries has been higher over the last few years. Export diversification is a continuous process. The initiatives by both the government and private sector will help expanding both products and markets. Looking for new markets with new products will help increase the export basket. Through export diversification it is possible to minimize the risks in business. Export diversification is needed not only for minimizing risks, but also to create employment with new skills of workers. Full utilization of natural resources is also possible through product diversification. Export diversification itself a very conducive potential to have a greater net balance. Bangladesh can explore lot of opportunities to enter in global markets with new products and industry like Ship building Industry, Pharmaceuticals sector, Light Engineering sector, Cement, Leather and footwear sector.

Losing GSP in USA Market

As Bangladesh lost their GSP privilege in USA markets because of failure to improve the garments condition as well as the requirements of the importer countries, it’s been a big loss for Bangladesh. Generalized System of Preferences (GSP) allows duty-free entry of over 5,000 goods to the US market from least developed countries. The probable financial loss in terms of falling export may be very small, at least in the short run. As RMG products (which make up most of the US import from Bangladesh) are not included in the list of duty-free products in GSP, there will an export fall of about $40 million according to Charles Kernaghan, executive director of Institute for Global Labor and Human Rights. At present, Bangladesh exports about $5 billion worth of goods (mostly RMG products) to the USA every year and hence, so it is about 8% loss of overall markets of Bangladesh in USA. So in long run it will be a miserable thing.

Political Disorder inside and outside the Country

Since 2012-13, Political disorder is been talked about a great tensing site of Exports Balance. Because of this problem Bangladesh already lost lot of foreign investors intention to invest in country. The economic impact of any kind of political or non-political incident can be traced with the help of the lead and lagged economic variables. Lead variables are those that forecast the likely impacts whereas the lagged variables reveal the impacts only after they have been felt. However, there is another kind of economic variable in many developed countries, which is called ‘coincidental variable.’ Coincidental variables reveal the real-time impact of any kind of shock in the economy. It is difficult to identify any coincidental economic variable in developing countries like Bangladesh. No matter who says what, both lead and lagged economic variables are showing deep scars in the economy created by the ongoing unrest. If this situation continues, these scars will become unmanageable. So ultimately this continuation will affect our export module.
Although Bangladesh is on the continuous negative net balance, it has a vast of possibility and lots of opportunity to go forward. It has a big number of less expensive laborers especially a good number of women. So only failure is not a future of Bangladesh’s exports balance rather it has a grooming success in fact a bright aspect. A set of recommendations noted below that I comparatively preferred to any other facts.
1. Bangladesh need to enter in new markets with the newer goods and commodity like leather and footwear, Pharmaceuticals tools, IT items, Shipping Industry and so on.
2. Government should make a stable socio-political condition as the foreign investors get encourage to work with Bangladesh.
3. Imposing more tax on the importing-goods that are available in Bangladesh.
4. By uplifting the current condition of garments, govt. should make a better understanding to get back in GSP privilege.
5. Subsidizing some grooming industry like Pharmaceuticals, Ship industry, old and customary handcraft Industry.
As Bangladesh is now in the cycle of blessing-7(GDP), on the way of this growth stability Bangladesh should emphasize on Export-Import-balance more. Nevertheless overall economic growth and stability will be at stake. n

The writer studies Economics Undergraduate at University of Dhaka.

Leave a Reply