Is export performance quite worrying?

Bangladesh's export growth has hit a 13-year low at 3.35 per cent on a year-on-year (YoY) basis, in the just concluded fiscal year (FY) 2014-15. Looking at it simplistically is sure to stir a sense of frustration, especially when one keeps in view the growth curve in the two preceding years despite the impeding factors both at home and abroad. But at the same time, it should also be kept in mind that with the growth in exports leading to an ever-expanding base, the important issue is sector-wise and market-specific performance rather than overall export achievement. In the past, alarm bell was sounded from various quarters including the media in the event of any down-slide in exports at any point of time in a fiscal year. Much of these fears were proved wrong when stocktaking at the close of the year suggested a sobering note. On some occasions, it was found that the main export products did excellently well despite distortions in the target markets as a result of global recession, such as the Euro-zone crisis and the like.

The situation at present is different. The country's exports have experienced a 'growth crunch' in the just concluded fiscal.  The export earnings in FY 2014-15 stood at $31.19 billion, short by $2.0 billion from the target set at $33.20 billion. The government had set the target with a YoY growth of 10.02 per cent which was the lowest since FY09 when the growth target was 15.50 per cent.

Some observers are of the opinion that setting of the target was faulted by the unrealistic assessment of the key export sector -- readymade garments (RMG), although it was well known that RMG was faced with the most difficult challenges since the past two years, and that the fallout was very likely to take effect in the last fiscal. The target set for RMG was at $26.89 billion for FY15 - a stupendous 9.82 per cent hike over the actual performance of $24.49 billion in FY14.

Political turmoil, decreased value of products in world market, deprecation of the euro, impact of Rana Plaza collapse and the labour rights-related issues are now seen as instrumental in the shortfall in reaching the target. In spite of these, RMG exports amounted to $25.49 billion in FY15 with around 4.0 per cent growth, which is no mean achievement.

Global slump in commodity prices coupled with the depreciation of the euro is viewed as largely responsible for a decline in export remittances, particularly in case of garments. As a result, while the volume of exports has increased substantially, receipts fell below what they should have been by the past years' standards. The same could also be the case with products such as leather and leather goods, footwear, frozen food, jute products etc.

Viewed from this perspective, things do not seem too gloomy. The Export Promotion Bureau (EPB) data show that there has been considerable increase in some of the major and non-traditional export items. Footwear exports have grown by 24 per cent, jute sacks and bags by around 27 per cent, plastic products by 17.33 per cent, bicycle by nearly 12 per cent. The combined export of RMG, including knit and woven products, grew by around 4.0 per cent. Taken apart, knitwear accounted for an increase by 3.31 per cent and woven products by 5.0 per cent. However, the discomforting feature of FY15 is the decline in exports of frozen food.

The fact that RMG has not been able to perform in keeping with the momentum of the previous years clearly explains the less-than-expected performance of the overall export sector. Given the scale of the RMG and its enormous linkages with a whole lot of other economic activities, there is no choice but to look up to this sector as the prime mover of the country's export wheel.  

Export analysts suggest that while recession has surely affected the marketing of our merchandise, a shift in the demand pattern also contributed to the sluggish growth in the last fiscal. This is already being noticed in the export orders being placed, especially in the apparel sector. This shift in demand is mainly from traditional apparel segments of basic shirts and trousers to sportswear and a variety of knitwear products. However, in the current year, exporters, particularly those with specialisation in these products are hopeful of receiving higher volumes of orders from both the European Union (EU) and the US markets.

Lately, this has been complemented by the fact that export orders from US and European buyers are increasing. Another factor that also seems to strike positively for Bangladesh's RMG industry is the fast eroding price competitiveness in China. It has been reported that over the past couple of years, wages in Chinese apparel sector have grown between 12-15 per cent. The wage-hike is expected to cause a sizeable diversion of orders in the near future. Buyers are of the opinion that the key solution to enliven the situation, at least for the foreseeable future, rests with a reasonable stability in the political arena, improved supply of gas and electricity, strengthened relations with the major countries consuming our products and a noticeable improvement in the strife-torn labour situation.

wasiahmed.bd@hotmail.com