Bangladesh survives global economy meltdown
Friday, 13 November 2009
M.S. Siddiqui
Over the past few years, a series of riots spread across the Third World countries. Furious mobs have raged against skyrocketing food and energy prices, stagnating wages and unemployment in India, Senegal, Yemen, Indonesia, Morocco, Cameroon, Brazil, Panama, the Philippines, Egypt, Mexico and many other countries. Unrest rocked the streets of China, France, Russia, and elsewhere. People revolted in Greece.
For the most part, those living in wealthier countries took little notice. But now, with the global economy crashing down around us, people in even the wealthy nations are reacting violently to what they view as an inadequate response to the tumbling economies. Even the cries of "burn the shit down!" are being heard in the Western European countries maintaining the highest standards of living in the world - where adequate social safety nets, decent health care, heavily subsidised education, minimum living wages, and a dignified retirement are, in large part, guaranteed. The far ends of the ideological spectrum appear to be gaining currency as the crisis develops, and people grow increasingly hostile toward the politics of the status quo.
For the first time, after the end of the World War II, global gross domestic product (GDP) will contract, by an estimated 1.4 per cent in 2009. The collapse in world trade has been even more striking. Merchandise trade will decline by a magnitude that has not been matched in peacetime since the Great Depression of 1930s.
The global financial markets had been sputtering for more than a year. They are exposed to low-quality mortgage-backed securities leading to several high-profile financial failures in the US and UK.
On the other hand, according to World Bank development indicator, Bangladesh, along with some other countries including Brazil, China and India, has made a miraculous achievement in economic development with a GDP growth of 6.2 per cent in 2008. The other three countries, Brazil, China and India, unlike Bangladesh, have strong industrial base and good international market as well as very good regional export market. They have very good agricultural production. But, Bangladesh has readymade garment-dominated export portfolio having market in the USA and Europe only. Though there was a strong possibility of sharp decline in export market for Bangladesh, these development indicators present Bangladesh, along with Brazil, China and India, with sustainable growth despite global economic meltdown.
Bangladesh began to feel the pinch of the recession in its overseas employment and export sectors by the end of 2008. The garment sector buyers advised the manufacturers to go slow with orders and delayed further orders. Then, most of the garment industries started tough negotiation with buyers on low price of the products. The manufacturers had to accept minimum prices at almost break-even point to survive. According to the statistics of the Bangladesh Export Promotion Bureau (EPB), the country's export earning in December 2008 dropped by over 10 per cent due to the declining demand and prices in global markets.
Bangladesh Bank (BB), the central bank of Bangladesh, expected the foreign exchange reserve to stand over US$ 6.1 billion (610 crore) by April 2009 due mainly to hefty growth in inflow of remittances and export earnings. According to BB statistics, Bangladesh's remittance inflow grew 24.43 per cent to around US$ 7.03 billion (703 crore) in the July 2008-June 2009 fiscal year despite job cuts around the world. The World Bank (WB) reported on 30th July, as published in local newspapers, that Bangladesh is expected to receive remittance worth US$ 10.87 billion (1087 crore) in the current fiscal year if the global oil price does not fall and the local currency is not appreciated.
Bangladesh's exports in the first eight months of the fiscal year, July 2008-June 2009, posted 15.90 per cent growth and stood at around US$ 10.35 billion (1035 crore). The country's Letter of Credits (L/Cs) against imports, worth 1.57 billion (157 crore), were settled in February over that of US$ 1.999 billion (199.9 crore) in January, according to the central bank's provisional statistics.
Bangladesh's frozen food export posted a 7.97 per cent growth in the first five months of fiscal year 2008-09 over the target, despite global market slowdown. According to the Bangladesh Frozen Foods Exporters' Association (BFFEA), the country fetched over US$ 230 million (23 crore) in the July-November period from export of frozen food items to over 40 countries of the world.
Export earning in the July-November period was also 5.28 per cent higher than that in the same period of fiscal year 2007-08 though the financial meltdown hit many developed countries even after a fall in consumption of frozen food items there. Prices of most frozen foods, second largest export item of Bangladesh after garments, also declined to some extent in global market as their consumption fell.
In the current fiscal year 2009-10, rice production is expected to reach the highest level in the history of Bangladesh. Primary forecasts by different public and private organisations show that rice production will stand at 3.21 crore tonnes by the time the country enters the next fiscal, up more than 8.12 per cent from a year ago. The new height in rice production will be more than the country's total estimated demand for 3.0 crore tonnes.
A provisional estimate by the Bangladesh Bureau of Statistics (BBS) shows that the agriculture and forestry sector grew by 4.81 per cent in the current fiscal from 2.93 per cent a year ago, enabling the economy to register a growth of 5.88 per cent, when growth in the manufacturing sector is down.
"It was a very timely decision aimed at providing subsidy for non-urea fertilisers to promote using balanced fertilisers, and to reduce the cost of agricultural production," said Centre for Policy Dialogue (CPD), in its report titled the State of Bangladesh Economy in FY 2008- '09.
"The expected good Boro harvest will have a sobering effect on the food grain market with positive impact on food inflation in the country. If the current trends are maintained, it is more likely that the average inflation will be softened further in the coming months," said Bangladesh Bank in its quarterly publication for January-March 2009.
Bangladesh also experienced a sharp fall of 45.0 per cent in manpower export in January this year due to the declining demand in some Middle East countries, which downsized their development activities amid the financial slowdown.
On the other hand, the ongoing global economic downturn could not hit Bangladesh seriously as its economy mainly depends on the agricultural sector, remittance earning from worker abroad and export of low-end garments to the West.
The writer, a part-time teacher at The Leading University, can be reached at shah@banglachemical.com
Over the past few years, a series of riots spread across the Third World countries. Furious mobs have raged against skyrocketing food and energy prices, stagnating wages and unemployment in India, Senegal, Yemen, Indonesia, Morocco, Cameroon, Brazil, Panama, the Philippines, Egypt, Mexico and many other countries. Unrest rocked the streets of China, France, Russia, and elsewhere. People revolted in Greece.
For the most part, those living in wealthier countries took little notice. But now, with the global economy crashing down around us, people in even the wealthy nations are reacting violently to what they view as an inadequate response to the tumbling economies. Even the cries of "burn the shit down!" are being heard in the Western European countries maintaining the highest standards of living in the world - where adequate social safety nets, decent health care, heavily subsidised education, minimum living wages, and a dignified retirement are, in large part, guaranteed. The far ends of the ideological spectrum appear to be gaining currency as the crisis develops, and people grow increasingly hostile toward the politics of the status quo.
For the first time, after the end of the World War II, global gross domestic product (GDP) will contract, by an estimated 1.4 per cent in 2009. The collapse in world trade has been even more striking. Merchandise trade will decline by a magnitude that has not been matched in peacetime since the Great Depression of 1930s.
The global financial markets had been sputtering for more than a year. They are exposed to low-quality mortgage-backed securities leading to several high-profile financial failures in the US and UK.
On the other hand, according to World Bank development indicator, Bangladesh, along with some other countries including Brazil, China and India, has made a miraculous achievement in economic development with a GDP growth of 6.2 per cent in 2008. The other three countries, Brazil, China and India, unlike Bangladesh, have strong industrial base and good international market as well as very good regional export market. They have very good agricultural production. But, Bangladesh has readymade garment-dominated export portfolio having market in the USA and Europe only. Though there was a strong possibility of sharp decline in export market for Bangladesh, these development indicators present Bangladesh, along with Brazil, China and India, with sustainable growth despite global economic meltdown.
Bangladesh began to feel the pinch of the recession in its overseas employment and export sectors by the end of 2008. The garment sector buyers advised the manufacturers to go slow with orders and delayed further orders. Then, most of the garment industries started tough negotiation with buyers on low price of the products. The manufacturers had to accept minimum prices at almost break-even point to survive. According to the statistics of the Bangladesh Export Promotion Bureau (EPB), the country's export earning in December 2008 dropped by over 10 per cent due to the declining demand and prices in global markets.
Bangladesh Bank (BB), the central bank of Bangladesh, expected the foreign exchange reserve to stand over US$ 6.1 billion (610 crore) by April 2009 due mainly to hefty growth in inflow of remittances and export earnings. According to BB statistics, Bangladesh's remittance inflow grew 24.43 per cent to around US$ 7.03 billion (703 crore) in the July 2008-June 2009 fiscal year despite job cuts around the world. The World Bank (WB) reported on 30th July, as published in local newspapers, that Bangladesh is expected to receive remittance worth US$ 10.87 billion (1087 crore) in the current fiscal year if the global oil price does not fall and the local currency is not appreciated.
Bangladesh's exports in the first eight months of the fiscal year, July 2008-June 2009, posted 15.90 per cent growth and stood at around US$ 10.35 billion (1035 crore). The country's Letter of Credits (L/Cs) against imports, worth 1.57 billion (157 crore), were settled in February over that of US$ 1.999 billion (199.9 crore) in January, according to the central bank's provisional statistics.
Bangladesh's frozen food export posted a 7.97 per cent growth in the first five months of fiscal year 2008-09 over the target, despite global market slowdown. According to the Bangladesh Frozen Foods Exporters' Association (BFFEA), the country fetched over US$ 230 million (23 crore) in the July-November period from export of frozen food items to over 40 countries of the world.
Export earning in the July-November period was also 5.28 per cent higher than that in the same period of fiscal year 2007-08 though the financial meltdown hit many developed countries even after a fall in consumption of frozen food items there. Prices of most frozen foods, second largest export item of Bangladesh after garments, also declined to some extent in global market as their consumption fell.
In the current fiscal year 2009-10, rice production is expected to reach the highest level in the history of Bangladesh. Primary forecasts by different public and private organisations show that rice production will stand at 3.21 crore tonnes by the time the country enters the next fiscal, up more than 8.12 per cent from a year ago. The new height in rice production will be more than the country's total estimated demand for 3.0 crore tonnes.
A provisional estimate by the Bangladesh Bureau of Statistics (BBS) shows that the agriculture and forestry sector grew by 4.81 per cent in the current fiscal from 2.93 per cent a year ago, enabling the economy to register a growth of 5.88 per cent, when growth in the manufacturing sector is down.
"It was a very timely decision aimed at providing subsidy for non-urea fertilisers to promote using balanced fertilisers, and to reduce the cost of agricultural production," said Centre for Policy Dialogue (CPD), in its report titled the State of Bangladesh Economy in FY 2008- '09.
"The expected good Boro harvest will have a sobering effect on the food grain market with positive impact on food inflation in the country. If the current trends are maintained, it is more likely that the average inflation will be softened further in the coming months," said Bangladesh Bank in its quarterly publication for January-March 2009.
Bangladesh also experienced a sharp fall of 45.0 per cent in manpower export in January this year due to the declining demand in some Middle East countries, which downsized their development activities amid the financial slowdown.
On the other hand, the ongoing global economic downturn could not hit Bangladesh seriously as its economy mainly depends on the agricultural sector, remittance earning from worker abroad and export of low-end garments to the West.
The writer, a part-time teacher at The Leading University, can be reached at shah@banglachemical.com