BD may face severe challenges in non-traditional markets

Readymade garment exports to many non-traditional markets, especially India and Japan, would face severe challenges due to high duty obligation to be applicable after the country's graduation from the least developed country status, industry insiders feared.
They thought Bangladesh should immediately decide its post-graduation strategy and apply for the extension of the existing preferential trade regime.
They also urged the government to start negotiations on bilateral agreements with the non-traditional markets to maintain the existing trade concessions, and seek additional time to get prepared for the upcoming challenges.
Like traditional EU and Canadian markets, the country's RMG exports are supposed to face high import duties in some non-traditional markets too.
According to a latest study finding, Bangladeshi made RMG would face as high as 20 per cent duty in India while the rate would be 9.0 per cent for Japan - two most growing markets for the country's apparel items.
Bangladesh would have to face a 6.5 per cent duty on garment exports to China and 5.0-6.0 per cent in Australia, according to the study by the Research and Policy Integration for Development (RAPID).
Talking to the FE, DBL Group Vice Chairman MA Rahim Feroz said there would be serious implications on garment exports to India and Japan for high duty, and the business growth would decline initially in the post-graduation regime.
Former Vice President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Asif Ashraf said the possibilities of graduation time deferment can be considered as economic indicators were inflated during the last decade, and the internal ecosystem has been affected.
Besides, the exception is that 84 per cent of foreign currency earned through garment exports where 72 per cent come from countries that offer duty-free market access.
Also, the country needs further strengthening its backward linkage industry, he noted.
The duty-free market access is one of the main reasons for buyers' sourcing from Bangladesh, he said, adding that the government should apply for graduation time extension to help buyers to make their strategic plan.
When asked, RAPID Chairman Dr MA Razzaque said India and Japan are two important and big markets for Bangladesh and garment exports would face challenges as duty would be high after the country's graduation.
Bangladesh's official graduation from the LDC group is scheduled on 24 November 2026.
The government should first decide the time of LDC graduation and then can request for a deferment of the graduation or seek an extended (delayed) graduation timeline, he said. However, the ultimate outcome will be decided by the UN. A concrete smooth transition strategy and initiating its effective implementation could help secure a timeline extension.
Irrespective of the graduation timeline, preparations for LDC graduation are most critical, he noted, adding that exporters and businesses need a definitive timeline to adapt to new trade rules and market dynamics, and transition to non-preferential market conditions.
A settled graduation date ensures timely implementation of necessary domestic reforms, he said.
He added that firms in Bangladesh also face high costs of doing business stemming from inadequate infrastructure, administrative inefficiencies, slow customs processes, poor logistics, which collectively undermine competitiveness and hinder investment.
The timeline impacts the pace of capacity development initiatives, including trade negotiations, regulatory reforms while it would reduce uncertainty for global buyers as a settled timeline reduces uncertainty for buyers and investors, safeguarding trade relationships.
Talking to the FE, former president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Fazlul Hoque said the government's decision regarding LDC graduation time should be clear as it creates confusion among many.
To sustain the duty benefit after graduation, measures must be initiated immediately, he said, adding that India, Japan, Australia, Chile and China are among the major non-traditional markets that offer duty benefit to Bangladeshi made garments under the LDC category.
"Exports to India would severely be affected after graduation if measures are not taken to continue the benefit," he added.
Industry people said foreign direct investment (FDI) plays a major role in product innovation and enhancing a competitive advantage in global markets, and can ensure a smooth transition journey.
A fixed time could drive positive spillovers in technology transfer, expertise in sustainability, and responsible business conduct, they added.
According to Export Promotion Bureau revised data, in the last fiscal year (FY 2023-24), Bangladesh fetched US$ 548.83 million from India, US$1.08 billion from Japan and US$800 million from Australia by exporting garment items.
The country's garment exports to India rose to US$325.05 million, marking a 16.48-percent growth during the first five month of the current fiscal year (FY 2024-25).
RMG exports to Japan and Australia increased by 3.69 per cent and 7.74 per cent respectively to US$496.20 million and US$ 348.82 million during the July-November period of the current FY.

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