The Centre for Policy Dialogue (CPD) in its Independent Review of Bangladesh Economy, attempts to analyze the external sector of Bangladesh economy comprising exports, imports and remittances (migration). The Report observes satisfactory growth in exports, subdued imports and reeling remittances.
To start with, the report identifies the causal factors fuelling exports of Bangladesh in recent times. The export earnings during the first nine months of FY2016 have surpassed the envisaged annual target set for FY2016 adduced to the following reasons reported verbatim. First, according to the Export Promotion Bureau (EPB) data, export receipts registered 9.0 per cent growth during July?March of FY2016 against the annual growth target of 7.3 per cent, thanks mainly to the robust growth in ready?made garments (RMG) export (9.7 per cent). Woven garments posted the strongest growth (12.6 per cent). However, non?RMG export growth was volatile and remained subdued at 5.5 per cent over the first nine months of FY2016. In this context, only engineering products, one of the promising sectors in terms of product diversification, have registered high growth (22.6 per cent).
Second, there was some sign of market diversification - export growth for non?traditional markets (11.3 per cent) was higher than that for the traditional markets (8.2 per cent) during the first nine months of FY2016. Of the major non?traditional destinations, export to Japan (16 per cent), Australia (19.2 per cent) and India (22.9 per cent) posted notable performance. On the flipside, export growth to China during the reported period declined by (?) 3.6 per cent mainly due to poor performance of non?RMG exports. In contrast, export to India posted a 22.9 per cent rise.
Third, among the major traditional markets, export to the US market registered 10.4 per cent growth. Both RMG (11.3 per cent) and non?RMG (22.7 per cent) products fared good growth during July?March of FY2016. However, growth in this market had gradually declined since October 2015 (when the growth was 17.3 per cent).
Fourth, since upturn posted after the first quarter12, export growth in the European Union (EU) market was about 7.5 per cent mainly driven by robust growth in woven (16.8 per cent). However, non?RMG products in the same market faced negative growth (?) 12.8 per cent) during July?March of FY2016 compared to corresponding months of FY2015. Export to Germany and the UK, the two major EU economies, showed positive performance (3.4 per cent and 21.4 per cent growth respectively).
Sixth, Bangladesh's exports may have faced challenges in terms of competitiveness on account of relative exchange rate movements when compared with Vietnam. Over this period, Bangladesh Taka (BDT) and Vietnamese Dong (VND) against United States Dollar (USD) have depreciated by 0.8 per cent and 5.2 per cent respectively on a point to point basis. On the other hand, against Euro, the two aforesaid currencies appreciated by 13.3 per cent and 9.5 per cent respectively. Vietnam has indeed enjoyed some price advantages in both the US (higher depreciation) and the EU (lower appreciation) vis?Ã ?vis Bangladesh.
There is a need for renewed efforts towards increasing competitiveness of Bangladesh's exportables through both product and market diversification. Bangladesh has formulated and announced a new Export Policy Order (EPO) for 2015?18 period to support future development and raise competitiveness of the country's export sector. The policy aspires to project the Bangladesh brand in the global market, diversify the export base, put in place special provisions, and promote incentives for the development of new products and exploration of new markets. It may be noted that the government has recently revised the existing export cash incentive structure to include a number of new exportable products.
While performance in the export sector could be welcome, performance of imports and remittances was apparently pale. During the first eight months of FY2016 (July?February), import payments increased by 6.4 per cent against 11.3 per cent in corresponding period last fiscal. After experiencing negative growth in the first quarter of the current fiscal year, imports have gained some momentum over the subsequent five months. "Import growth was driven by imports of consumer goods which recorded a growth rate of 19.2 per cent. Payments for importing intermediate goods increased by 6.4 per cent. In contrast, import payments for capital machinery, a key item having implications for investment, declined by (?) 7.5 per cent. Curiously, during the reported period, import of petroleum products posted a highly robust growth rate of 41.4 per cent at a time when global prices were at very low levels. Despite a positive upturn in recent months, it is likely that growth of overall import payments may remain subdued in upcoming months of FY2016 due to a higher benchmark and stagnant growth of L/C opening."
Over the first nine months of FY2016, the absolute number of migrants (500,000) going abroad from Bangladesh had surpassed total annual migration 400,6000) in FY2015 registering a phenomenal growth of 53.9 per cent over the corresponding period. Indeed, a significant boost in migration was observed (monthly average being over 45 thousand) since March 2015 followed by a further momentum gained in November 2015 (monthly average being over 60 thousand). During the reported period, migration growth to Middle East rose by 73.3 per cent. The key destinations for migrants were Oman and Qatar followed by the Kingdom of Saudi Arabia (KSA), a destination where in a welcome development after a near?stop migration is picking up. A recent significant boost in female migration has continued in FY2016. About 90 thousand female workers went for overseas employment during this period. The majority of the female workers migrated to KSA, accounting for 44.7 per cent of the total number.
"The picture as regards remittance flow has been discouraging though. Remittances inflow during July?March of FY2015?16 was USD 11.1 billion which was (?) 1.8 per cent lower than the corresponding period of the previous fiscal year. It is hoped that the rising number of migrant workers in recent times will yield higher remittances in subsequent months and years. Indeed, lower amount of remittance inflow was observed in case of eight out of the 18 major markets for Bangladesh during the period".
The writer is a Professor of Economics at Jaahangirnagar University.
abdulbayes@yahoo.com
Mixed development in external sector
Abdul Bayes | Published: May 24, 2016 00:00:00 | Updated: February 01, 2018 00:00:00
Share if you like