Lack of proper focus on backward linkage a major impediment

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Shakhawat Hossain
Lack of sufficient focus on backward linkage of the country's major exportable items has been hindering proper utilisation of the generalised system of preference (GSP) facilities offered by the European Union (EU), official source said.
The overall utilisation of GSP by Bangladesh increased to 69 per cent at the end of 2006 from 60 per cent in 2004, said a recent letter sent by the Bangladesh embassy in Brussels to ministry of commerce.
According to EuroStat, the official source of EU's external and internal trade, India and China are the main beneficiaries of the GSP scheme with their average utilisation rate of over 80 per cent.
The growth rate of GSP utilisation on account of the readymade garment (RMG) by both the countries is good.
But for Bangladesh RMG that accounts for the country's 75 per cent export income the EU GSP utilisation growth rate has been less then 2.0 per cent on average.
This happened due to the fact that the country is still depended on imported raw materials to back up the RMG sector. The value addition of the sector is yet to cross 60 per cent.
The letter attributed the stringent EU rules of origin and the lack of necessary focus on establishment of the backward linkage to the unsatisfactory level of GSP utilisation.
"In the short run, given the preponderance of readymade garments in our export basket, our industrial policy needs to focus on investment in producing raw materials for the RMG sector," said the latter.
The RMG export fetched more than 75 per cent of the country's US$ 10 billion plus export income in 2005-06. The EU member countries import almost 70 per cent of the country's total RMG.
The rate of GSP utilisation by the RMG sector, according to the letter, reached at 68.80 per cent in 2006 from 64.50 per cent in 2004.
The GSP utilisation growth rates were higher for footwear (89.20 per cent) and leather and hides and skin (90 per cent). But the income from footwear contributes only 1.30 per cent to the country's total export income in EU.
Long-term strategies are needed for non-RMG exports, which have almost an 80 per cent local value addition, the letter added.