Hurdles in accessing duty-free raw materials, a high tariff structure for domestic import-competing sectors, low quality and a lack of standards in the domestic market, among other factors, have been impeding the country's export diversification to the European Union (EU), according to a study.
Discriminatory export-incentive structures, an information and knowledge gap regarding export opportunities in the EU and inadequate and inefficient logistic facilities are also held responsible in this regard.
Though the majority of the country's exports are destined for the EU, in almost 97 per cent of EU imports, Bangladesh's presence is nearly non-existent.
Out of the $55 billion in Bangladesh's global merchandise exports in 2022-23, some $25 billion (45 per cent) was sourced from the EU. Apparel's import share in the EU is just 2.9 per cent.
The study showed that additional export potential from the top 45 identified products to the EU could range from $8.5 billion to $22.5 billion.
Dr MA Razzaque, chairman of Research and Policy Integration for Development Bangladesh (RAPID), made these observations on Sunday at a joint workshop with the Economic Reporters' Forum (ERF) on 'findings sharing on Bangladesh's export diversification to the EU and data journalism'.
State Minister for Planning Professor Dr Shamsul Alam was present as the chief guest at the event where findings from the joint RAPID and Friedrich-Ebert-Stiftung Bangladesh study were shared.
Explaining the scope of export diversification in the EU, Mr Razzaque said one major area is the garment export category itself.
Bangladesh has been the second-largest apparel exporter to the EU since 2012, gaining a share that shifted from China mainly because of the duty-free facility there.
"Bangladesh is the king of cotton apparel exports to the EU with a 34.7 per cent market share in 2022, while China's is only 14.9 per cent," he said.
In man-made fibre (MMF) and blended or non-cotton apparel market, Bangladesh's share is 12.2 per cent, and China's is 41.2 per cent, showing immense opportunities for Bangladesh to increase its share, he noted.
Bangladesh can do even better if the existing duty-free facility could be extended for some additional years, he said, adding that the EU's current duty regime will continue until 2027, providing a window for Bangladesh to negotiate. RMG exports could reach up to $60 billion by 2030.
More than 40 per cent of export potential in the EU remains unutilised, along with an unutilised export potential of around $2.5 billion for non-apparel items, according to the study.
Non-apparel products with high export potential include footwear, leather goods, home textiles and fish and shrimp.
Most firms, especially SMEs, are not export-ready yet due to a lack of productive capacity, it said, adding that accessing duty-free raw materials remains a challenge that must be addressed.
Facilities, in addition to bonded warehouses, are extremely important, it added, suggesting the attraction of FDI in promoting export diversification, technological improvements for enhancing the productivity and product quality of the non-RMG sectors and access to affordable financing for expanding and achieving economies of scale within Bangladesh's export sectors.
It said the local trade policy regime is creating disincentives for exports and recommended the implementation of the National Tariff Policy (NTP) 2023 and the rationalisation of tariffs for export expansion.
It further stressed ensuring duty-free imports of raw materials for all exporting sectors, saying discriminatory export incentive structures are discouraging exports.
State Minister for Planning Shamsul Alam admitted the need for tariff rationalisation and the slow trend in export diversification.
Terming inflation a "big problem", Mr Alam said the government is trying to control it by cutting public expenditure, among other measures.
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