Challenges and prospects of our export to US market
Wednesday, 29 October 2008
Professor Mahfuz R. Chowdhury
We know that Bangladesh started its journey as an independent state in 1971 from a very distressful condition. But the country is a resource-rich one and has remained so even after many years of economic exploitation by many foreign powers. The country is clearly blessed with some key natural resources, such as fertile soil as well as coal and natural gas as mineral resources. It is the major producer of jute, tea, and leather, and its labour force is considered quite competitive. All of these are essential ingredients not only for establishing a strong economic base for the country, but also for achieving further growth through trade and commerce.
Why then, one might ask, has Bangladesh remained poor and failed to achieve its potential in its 37 years of existence? A simple answer to this may be government policy. The government of a country is responsible for steering it in the right direction. Unfortunately, Bangladesh has never had a responsible government, and so the country's potential has never been effectively tapped to improve the condition of the people.
Let us look at some hard facts. Trade plays an important role in the economic growth of a country. While countries like China and India are immensely benefiting from free trade that the United States has been promoting, Bangladesh has failed to take full advantage of such opportunities even though it possesses the necessary resources to do so. Most notably, Bangladesh missed a great opportunity to advance in information technology because the government reportedly rebuffed overtures from the U.S. businesses during the 1980s. Now imagine the situation in Bangladesh if a different course of action had been taken!
It is already a well-established and recognised fact that the main reason why Bangladesh missed its opportunity to forge ahead was primarily because of its corrupt political system. Economists estimate that the massive corruption has cost the country nearly 2.0 to 3.0 per cent of its annual growth. From an economic point of view this is a huge loss over the years. As an example, the U.S. economy has grown at a rate of 3.0 per cent per annum during the past decade. If corruption in Bangladesh, on the other hand, was somehow contained at a reasonable level, instead of 5.0 to 6.0 per cent current annual growth, the country would have been forging ahead as one of the fastest growing economies in the world today.
Let's briefly review the situation.
Industrialisation in Bangladesh: The role of industrialisation is very critical for the economic development of a country. In the case of Bangladesh, instead of progress, many of its core industrial bases continue to dwindle. Take the example of the jute industry, which has been experiencing a steady decline over the years. When petroleum-based synthetic substitute products were introduced in the 1960s, the demand for jute products was somewhat weakened, though it never disappeared. The big irony is that Bangladesh has been gradually losing its jute market to India. Now with the high cost of petroleum, the demand for jute products is on the rise again, and the trend is likely to continue. But looking at the troubled condition of the jute industry in Bangladesh, it would be very hard to nurture any hope that the country would be able to take full advantage of the changed circumstances. The World Bank estimates that Bangladesh has the potential to increase its share of the jute market up to 80 per cent of raw jute and 50 per cent of manufactures.
Leather industry is another example, where Bangladesh could have made a huge inroad, but didn't. There is a big demand for leather products everywhere, including the United States. Bangladesh has failed to fulfil its true obligation of producing and marketing quality leather products. Similar arguments may also be made about other key industries, such as tea, cotton or sugar. The fish industry may be an exception. It has done well, though it too has fallen short of expectation. The circumstances of the fish industry may be somewhat different, yet the government couldn't escape its basic responsibility.
Garment Industry: This is the only area where Bangladesh could claim considerable success. Today garment export is the main source of foreign earnings for the country after remittance. It is a service industry in that almost all of the components of garments are imported except labour. Its success was not necessarily influenced by the government policy but essentially by outside forces. This industry had its origin in the 1970s when the investors of other South East Asian nations ventured to set up garment factories in Bangladesh to work around the export quotas imposed on their native countries by the United States. Later Bangladeshi entrepreneurs rushed to establish their own companies, some with little or no experience. After a period of adjustments, the industry began to stabilise and started to grow, and has eventually earned the world's respect.
Thus, the stabilisation and growth of the garment industry in Bangladesh were achieved largely with the help and intervention of foreign investors who supplied expert technical support for quality control and had an effective marketing plan. Additionally, the country enjoyed a favourable quota system from the United States through the year 2004. As a result, of the more than 3.0 billion dollars of exports Bangladesh made to the U.S. in 2006, the garment sector was the major and biggest contributor. But this situation may now be rapidly changing as other least developing countries gain trade advantage from the United States, and Bangladesh fails to renew its favourable status. The failure to renew favourable status for Bangladesh may also fall on the shoulder of the government emissaries here for their inability to influence the U.S. Congress.
In any case, whether the current status on Bangladesh garment exports changes or not, to maintain the market share of garments in the United States, the country must continue to be competitive in respect of price, quality, and service. It may well be that under the prevailing circumstances, Bangladesh will lose some of its old clientele or will even face stiff competition for its products in the future. But this scribe believes that Bangladeshi entrepreneurs have gained enough experience in garments to stay competitive. What is then needed is an effective marketing plan for their success.
Other possibilities: Bangladesh has clearly demonstrated its skills in the textile sector. The present writer thinks the country should build on the foundation of such strength and strongly believes that this kind of skills that give Bangladesh an advantage in textiles can be easily transformed into an advantage, especially in the manufacture of leather goods. One may even go further and say that the same labour intensive skills can give Bangladesh an edge in all kinds of footwear, sports equipment (Pakistan has a stronghold on this currently), carpet weaving (another Pakistani export), and the labour intensive assembly of small electronic components-which may be imported from China or elsewhere and then assembled in Bangladesh-into electronic goods such as TV sets, personal computers, etc.
Bangladesh does not have to make any of these goods from beginning to end. Instead, it can concentrate on only the part of the manufacturing process that requires assembly by skilled hands.
Food processing may also work, especially if American companies such as Dole, Del Monte, and Chiquita are made aware of Bangladesh's natural resources and skilled labour, and if they are welcomed by the government with appropriate incentives.
Marketing of products: The pre-requisite of success in trade is quality product, and an ongoing process of making improvements on the existing product. As has been noted, Bangladesh has come a long way in producing quality garments. In addition, the country could claim good progress in improving its quality in jute products, leather goods, and handicrafts as well as in the packaging of quality tea. All of these and many other products of Bangladesh have great prospects in the U.S. (One foot note about leather products: my wife who works in the merchandising business in the U.S. recently visited a stall in Dhaka, and saw beautifully crafted leather bags there. But after picking one up, she said she couldn't help noticing a smell from the bag. A problem like this would require correction and could be corrected very easily.)
Anyway, production of quality goods is only half the battle. Marketing is as important as production or distribution. In fact, marketing may be the biggest hurdle Bangladeshi entrepreneurs would face in the United States. Marketing requires both knowledge and skill, and in the U.S. there are business firms which specialize in marketing. It may be advantageous to seek such professional help.
But short of engaging an expensive marketing firm by an individual business or industry, other approaches can be considered. Bangladeshi entrepreneurs should consider creating a workable business consortium, which will then go on to establish a permanent product centre in New York City with possible sub-centres in Atlanta, Chicago and Los Angeles where all the exportable products of Bangladesh will be represented. Each centre will then be equipped to process sale orders in coordination with the central office in New York. For promoting various products, an attractive web site may be created, and national as well as local news media may be utilized. Based on business experience, a central warehouse for keeping certain inventories may also be planned.
Again, the name of the game is competition, and having a plan ready for the competition. Once properly equipped with good quality products, competitive price, and superior service, Bangladeshi goods will have no problem with capturing and maintaining their market share in the U.S. A well thought out plan, which should include building and maintaining strong trade relations with reputable merchandising companies, and its proper execution will be needed.
It can, therefore, be concluded that to reap the benefit of trade with the United States, Bangladeshi entrepreneurs must be prepared to meet the challenge of marketing. The reward will be huge if they succeed.
The author teaches Economics at CW Campus of Long Island University, New York, U.S.A
We know that Bangladesh started its journey as an independent state in 1971 from a very distressful condition. But the country is a resource-rich one and has remained so even after many years of economic exploitation by many foreign powers. The country is clearly blessed with some key natural resources, such as fertile soil as well as coal and natural gas as mineral resources. It is the major producer of jute, tea, and leather, and its labour force is considered quite competitive. All of these are essential ingredients not only for establishing a strong economic base for the country, but also for achieving further growth through trade and commerce.
Why then, one might ask, has Bangladesh remained poor and failed to achieve its potential in its 37 years of existence? A simple answer to this may be government policy. The government of a country is responsible for steering it in the right direction. Unfortunately, Bangladesh has never had a responsible government, and so the country's potential has never been effectively tapped to improve the condition of the people.
Let us look at some hard facts. Trade plays an important role in the economic growth of a country. While countries like China and India are immensely benefiting from free trade that the United States has been promoting, Bangladesh has failed to take full advantage of such opportunities even though it possesses the necessary resources to do so. Most notably, Bangladesh missed a great opportunity to advance in information technology because the government reportedly rebuffed overtures from the U.S. businesses during the 1980s. Now imagine the situation in Bangladesh if a different course of action had been taken!
It is already a well-established and recognised fact that the main reason why Bangladesh missed its opportunity to forge ahead was primarily because of its corrupt political system. Economists estimate that the massive corruption has cost the country nearly 2.0 to 3.0 per cent of its annual growth. From an economic point of view this is a huge loss over the years. As an example, the U.S. economy has grown at a rate of 3.0 per cent per annum during the past decade. If corruption in Bangladesh, on the other hand, was somehow contained at a reasonable level, instead of 5.0 to 6.0 per cent current annual growth, the country would have been forging ahead as one of the fastest growing economies in the world today.
Let's briefly review the situation.
Industrialisation in Bangladesh: The role of industrialisation is very critical for the economic development of a country. In the case of Bangladesh, instead of progress, many of its core industrial bases continue to dwindle. Take the example of the jute industry, which has been experiencing a steady decline over the years. When petroleum-based synthetic substitute products were introduced in the 1960s, the demand for jute products was somewhat weakened, though it never disappeared. The big irony is that Bangladesh has been gradually losing its jute market to India. Now with the high cost of petroleum, the demand for jute products is on the rise again, and the trend is likely to continue. But looking at the troubled condition of the jute industry in Bangladesh, it would be very hard to nurture any hope that the country would be able to take full advantage of the changed circumstances. The World Bank estimates that Bangladesh has the potential to increase its share of the jute market up to 80 per cent of raw jute and 50 per cent of manufactures.
Leather industry is another example, where Bangladesh could have made a huge inroad, but didn't. There is a big demand for leather products everywhere, including the United States. Bangladesh has failed to fulfil its true obligation of producing and marketing quality leather products. Similar arguments may also be made about other key industries, such as tea, cotton or sugar. The fish industry may be an exception. It has done well, though it too has fallen short of expectation. The circumstances of the fish industry may be somewhat different, yet the government couldn't escape its basic responsibility.
Garment Industry: This is the only area where Bangladesh could claim considerable success. Today garment export is the main source of foreign earnings for the country after remittance. It is a service industry in that almost all of the components of garments are imported except labour. Its success was not necessarily influenced by the government policy but essentially by outside forces. This industry had its origin in the 1970s when the investors of other South East Asian nations ventured to set up garment factories in Bangladesh to work around the export quotas imposed on their native countries by the United States. Later Bangladeshi entrepreneurs rushed to establish their own companies, some with little or no experience. After a period of adjustments, the industry began to stabilise and started to grow, and has eventually earned the world's respect.
Thus, the stabilisation and growth of the garment industry in Bangladesh were achieved largely with the help and intervention of foreign investors who supplied expert technical support for quality control and had an effective marketing plan. Additionally, the country enjoyed a favourable quota system from the United States through the year 2004. As a result, of the more than 3.0 billion dollars of exports Bangladesh made to the U.S. in 2006, the garment sector was the major and biggest contributor. But this situation may now be rapidly changing as other least developing countries gain trade advantage from the United States, and Bangladesh fails to renew its favourable status. The failure to renew favourable status for Bangladesh may also fall on the shoulder of the government emissaries here for their inability to influence the U.S. Congress.
In any case, whether the current status on Bangladesh garment exports changes or not, to maintain the market share of garments in the United States, the country must continue to be competitive in respect of price, quality, and service. It may well be that under the prevailing circumstances, Bangladesh will lose some of its old clientele or will even face stiff competition for its products in the future. But this scribe believes that Bangladeshi entrepreneurs have gained enough experience in garments to stay competitive. What is then needed is an effective marketing plan for their success.
Other possibilities: Bangladesh has clearly demonstrated its skills in the textile sector. The present writer thinks the country should build on the foundation of such strength and strongly believes that this kind of skills that give Bangladesh an advantage in textiles can be easily transformed into an advantage, especially in the manufacture of leather goods. One may even go further and say that the same labour intensive skills can give Bangladesh an edge in all kinds of footwear, sports equipment (Pakistan has a stronghold on this currently), carpet weaving (another Pakistani export), and the labour intensive assembly of small electronic components-which may be imported from China or elsewhere and then assembled in Bangladesh-into electronic goods such as TV sets, personal computers, etc.
Bangladesh does not have to make any of these goods from beginning to end. Instead, it can concentrate on only the part of the manufacturing process that requires assembly by skilled hands.
Food processing may also work, especially if American companies such as Dole, Del Monte, and Chiquita are made aware of Bangladesh's natural resources and skilled labour, and if they are welcomed by the government with appropriate incentives.
Marketing of products: The pre-requisite of success in trade is quality product, and an ongoing process of making improvements on the existing product. As has been noted, Bangladesh has come a long way in producing quality garments. In addition, the country could claim good progress in improving its quality in jute products, leather goods, and handicrafts as well as in the packaging of quality tea. All of these and many other products of Bangladesh have great prospects in the U.S. (One foot note about leather products: my wife who works in the merchandising business in the U.S. recently visited a stall in Dhaka, and saw beautifully crafted leather bags there. But after picking one up, she said she couldn't help noticing a smell from the bag. A problem like this would require correction and could be corrected very easily.)
Anyway, production of quality goods is only half the battle. Marketing is as important as production or distribution. In fact, marketing may be the biggest hurdle Bangladeshi entrepreneurs would face in the United States. Marketing requires both knowledge and skill, and in the U.S. there are business firms which specialize in marketing. It may be advantageous to seek such professional help.
But short of engaging an expensive marketing firm by an individual business or industry, other approaches can be considered. Bangladeshi entrepreneurs should consider creating a workable business consortium, which will then go on to establish a permanent product centre in New York City with possible sub-centres in Atlanta, Chicago and Los Angeles where all the exportable products of Bangladesh will be represented. Each centre will then be equipped to process sale orders in coordination with the central office in New York. For promoting various products, an attractive web site may be created, and national as well as local news media may be utilized. Based on business experience, a central warehouse for keeping certain inventories may also be planned.
Again, the name of the game is competition, and having a plan ready for the competition. Once properly equipped with good quality products, competitive price, and superior service, Bangladeshi goods will have no problem with capturing and maintaining their market share in the U.S. A well thought out plan, which should include building and maintaining strong trade relations with reputable merchandising companies, and its proper execution will be needed.
It can, therefore, be concluded that to reap the benefit of trade with the United States, Bangladeshi entrepreneurs must be prepared to meet the challenge of marketing. The reward will be huge if they succeed.
The author teaches Economics at CW Campus of Long Island University, New York, U.S.A