For a country of its size, Bangladesh has foreign trade relations with a large number of countries which is gratifying. At present the country is trading with 190 countries in the world through exports. On the import side, it has transactions with 165 countries. No import takes place in the case of 25 countries while export to 60 countries is nominal.
The most important aspect of Bangladesh's foreign trade relations is that it has deficit in balance of payment with 94 for countries. What is more worrying is that the burden of current account deficit is increasing every year. This means that exports of Bangladesh are not adequate to pay for imports. Payment is being made from other sources of foreign exchange income. The foreign exchange reserve is being weighed down by the deficit in balance of payment. Occasional macro-economic instability arises from this imbalance in trade.
For smooth and steady growth of the economy the balance of payment situation has to be kept under close watch. All necessary steps have to be taken to positively strengthen the balance of payment in foreign trade. Failing to do so may impinge on macro-economic stability and growth.
According to sources in Bangladesh Bank and the ministry of commerce, during the first 10 months of the current fiscal (2013-2014) the country has incurred a deficit of US$ 5890.40 million in its foreign trade. In terms of taka this amounts to 4.57 billion.
China has emerged as the country with which Bangladesh has the largest deficit. This is evidenced by the fact that Bangladesh is importing a large number of items from China ranging from consumer goods to capital machinery. The export to China has, on the other hand, remained stagnant, limited to a few items. While imports will continue to rise with China, concerted efforts have to be taken to increase and diversify exports. Potential areas are garments, jute goods, toys, processed food, bicycles etc. There is some room for reducing imports of items like consumer electronics as domestic capacity increases. Walton, a Bangladeshi manufacturer of consumer electronics, can be a big player in global market, given adequate support by the government,
Trade gap with India has remained stubbornly negative with imports surpassing imports. During the first nine months of the current fiscal the deficit amounted to US$ 4170.38 million. In spite of granting of duty-free and quota-free facility export to India has not picked up due to administrative complexities and non-tariff barriers. Trade facilitation is of utmost importance to improve the balance of payment with India.
Bangladesh enjoys surplus in its balance of payment from trade with the US and Germany. For Bangladesh the German market is small, the bulk of German trade takes place within the European Union (EU). There is small scope of enlarging trade, particularly export, to Germany, given the structural constraints. But the possibility of expanding trade with the US is great as the present volume is small. America is a big market for a number of items made in Bangladesh. If GSP (Generalised System of Preferences) can be restored there will be an automatic increase in the volume and value of Bangladesh exports to America. In garments alone there can be an exponential rise in the volume and value of exports. Fulfilling the conditions for the withdrawal of suspension of GSP is therefore of the essence.
Among the items responsible for the rise in import bill are food grains. Food grains import has increased continually over the last few years negating the increase in exports. Food production in Bangladesh has not stagnated nor the demand for food increased suddenly.
The main reason for the import of food items is the higher price of domestically produced food. This, in turn, is due to higher cost of production than in the past and compared to that in other countries. Higher cost of production for food in Bangladesh is due to a number of structural problems. Delay in the supply of inputs, sequestering of subsidy by middlemen and operation of syndicate in the supply chain have all contributed to higher price at the retail end. These are related to governance and not to the innate working of the market. Necessary measures to remove the bottlenecks, therefore, lie within the remit of government. It is a disgrace that the country which attained near self-sufficiency in food grains has to import this commodity in record quantity, year after year.
In some food items like edible oils, Bangladesh, of course, has always been deficient. Its import during the first 10 months of the current fiscal compared to last year has seen 27.17 per cent rise. Increase in mustard oil, produced locally, can somewhat reduce the import requirement as can other types of local edible oils.
Instead of importing edible oil routinely some attention should be paid to increasing production of local edible oils which is lacking at the moment.
To redress the balance in foreign trade attention has to be paid to diversification both in terms of countries and items. Progress in increasing the number of countries as export destination of exportable has been tardy and desultory. The main focus of our diplomacy should be opening up new markets for traditional and non-traditional items. In existing markets the goal should be increasing the volume of exports by removing tariff and non-tariff barriers. Internally, the country should strive to produce more of the goods that can substitute for imports. With this two-pronged strategy the country can turn a corner in foreign trade.
© 2024 - All Rights with The Financial Express
