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Boosting exports through immigrants and diaspora

Md Rubaiyath Sarwar | December 10, 2023 00:00:00

Bangladesh needs to expand and diversify its export base. The need is immediate given the declining dollar reserve, the poor balance of payment and the global economic crisis. Our search for a diversified export market base has so far been ineffective. We remain dependent on part of the global ready-made garment (RMG) value chain. As per BGMEA estimate, RMG accounted for 84.58 per cent of the total export from Bangladesh worth US$ 46.99 billion in the fiscal year 2022-2023. Export of leather and leather goods have been a darling of the multilateral agencies working on diversifying Bangladesh's export. The Export Promotion Bureau (EPB) hopes that the sector would earn US$ 10 billion by 2030. However, despite receiving decades of development assistance, leather and leather goods export had been hovering around the US$ 1.0 billion mark for the last 10 years with the latest being US$ 1.12 billion in the fiscal 2022-2023. Shrimp export has been on sharp decline over the last one decade. It is unlikely to see a resurgence as we are observing a declining interest from the development partners, given the environmental hazards the sector poses. There is a rise in Information Technology Enabled Services (ITES) export. The Export Promotion Bureau (EPB) reported an impressive 94.91 per cent growth of ITES in FY22. As per official records, export of ITES stood at US$ 484.40 million in FY 22. The industry experts and stakeholders, however, claim that it has crossed US$ 1.0 billion. Beyond these, we barely have footprints in the global export market. Our only other source of earning dollars is remittance. Earning from remittance stood at US$ 21.6 billion in the fiscal year 2022-2023, according to Bangladesh Bank.

How do we improve these figures for the best outcomes for Bangladesh? I believe we need to be creative and look beyond the factor endowment theories that rely on labour as a comparative advantage for Bangladesh. When it comes to export, we have traditionally been looking at what we have that we can offer to the world. We are barely asking -- what does the world need that we can deliver? And for that matter, what do we need to build?

The strategy for Bangladesh should involve a portfolio approach and a phased approach. The portfolio approach explains what would be the mix in the export basket. The phased approach ensures that we are building momentum by milking immediate prospects while building the pillars for long-term sustainable growth in our export basket.

Traditionally, as I explained earlier, we always have taken cheap labour as the given factor and then looked for sectors that would consume the abundant labour. We then tried to leverage the advantages of tariff exemptions to build on cheap labour to grow our exports. Our economists and policy makers continue to push for avenues through which we can extend different forms of tariff exemptions even after LDC graduation. This to me is like trying to survive in a critical care unit. I would therefore seek to leverage the global trends which suggest that our export portfolio should have the modern services sector as the star and at the centre of our growth strategy. According to the World Trade Organisation (WTO), between 2005-2022, export of commercial services tripled while export of digitally delivered services increased four-fold. With the advances of AI, modern services export will take new routes. Putting modern services at the centre of our export strategy would also ensure that the benefits are translated to growth in the domestic market through efficiency gains across all sectors- finance, legal, education, agriculture, manufacturing, transportation and health. Global modern services trade is dominated by telecommunication services, computer and information services, and business and professional services (BPS). India is a global leader and has comparative advantage. India's Services Promotion Council estimates that services export will hit US$ 375 billion by March 2024. One might automatically assume that this growth will come predominantly from the software export or from business process outsourcing. But a key driver of this growth has been legal and accounting services. A to Nasscom, India houses 45 per cent of the world's global capability centres which have fueled India's expansion through tech enablement, business development, capability development as well as research and development. Professional and management consulting grew at the 29 per cent compounded annual growth rate in recent years as per industry accounts.

India's continued rise in modern services trade explains what the world needs. But can Bangladesh have a leverage? Before I try to answer that question, let me quickly run you through what else shall I put in the export basket. I can't argue that we need sectors that would employ the youth that are entering the labour market in a large number. Recent estimates suggest 2.2 million youths join the labour market in Bangladesh every year. I can't argue that we need sectors that can employ our women. Recent estimates of BBS put female participation in the labour force in Bangladesh at 42.68 per cent. According to the World Bank, 38 per cent of the females aged 15 or above were in the labour force in Bangladesh in 2022. Modern services trade will not be labour-intensive. Given the 4th industrial revolution, manufacturing will employ labour at a decreasing rate. Bangladesh does not have much room to immediately pivot to a skilled-based and tech-enabled manufacturing. Despite recent growth, export of electrical and electronic goods stands at only US$ 115.3 million. However, we are reliant on intermediate goods import and with import restrictions given the current dollar crisis, our growth prospect is chained. This then leads me to the last frontier in my search. How can we earn dollars without dependence on import? I will put my money on tourism to come to the rescue. But instead of looking at foreigners from the East and the West, I would look at my own - the Non- Resident Bangladeshis, the immigrants, the diaspora.

The number of emigrants from Bangladesh stood at 7.4 million as of mid 2021 (UNDESA estimates), This is the 6th largest emigrant population in the world. Speaking from the perspective of both theory and evidence, immigration has a positive effect on trade for both immigrants' home country and host country. Home country benefits from immigrants' network in the host country. Immigrants also improve trusts between host and home countries and this then facilitates trade. Immigrants contribute to the competitiveness of the host country in certain sectors through a distinct set of skills or by changing the factor endowments of the host country. Immigrants also contribute to increased export from home to the host country as the demand for native food and consumer products rises in the host country with the increase in the migrants' number. Beyond these, immigrants also bring back competencies, distinct skills and networks and investment in their home country which allows a shift in comparative advantage from host to home. In my many encounters with my colleagues from around the globe over a coffee cup in cafes around the world, I have had the fortune to learn how immigrants brought back knowledge and skills to their home country which eventually became a trade mark or identity back home. But we have barely observed the same in Bangladesh. In the supermarkets in East London, we can find a fresh stock of fish from the haors of Sunamganj, all the spices that PRAN and Square consumer products have to offer. We have residences styled with Victorian and Roman influences across Bangladesh as the immigrants are in the mood to erect a symbol of pride in the land of their birth, no matter how unproductive the investment is. We need to pivot this drive and energy towards productive investment. I argue that it did not happen as we did not ask for it.

Despite the problems in our economy, the outlook of Bangladesh to our immigrants is to a certain degree positive. This is built on the visible development of infrastructure- the roads and bridges, the rails and expressways. We need to build on this to attract our immigrants and diaspora to visit Bangladesh to see the development. We need to provide incentives through discount tickets, concierge services, discounted travel packages for the cherished visit to their home. Investments in land and infrastructure should come with further rewards that gamifies the investment. As the interest increases, we need to strategically target the diaspora and the skilled migrants for investment in industries where they have built competitiveness and networks that Bangladesh can leverage. This can range from education to health, from legal matters to finance. The pathway to this growth is rather short- in three to four years we are expected to see the result. This opens the window for Bangladesh to bring investment from the diaspora- the population that probably barely remits as they do not have immediate kiln in Bangladesh anymore. As the investment opens doors, this then needs to be channelled towards digitally-enabled manufacturing and modern services trade to pave the pathway towards further growth that should be aimed at exporting high-skilled migrants to the world as the permanent solution to the burden of labour in Bangladesh.

Md Rubaiyath Sarwar is Managing Director of Innovision Consulting.

The author is an economist working to solve the issues of inclusive growth and sustainability of the economies in the Global South.

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