Expanding the export basket
Friday, 10 August 2007
Syed Ishtiaque Reza
BANGLADESH'S flagship export item -- ready made garment sector (RMG) -- is reportedly losing orders from foreign buyers. If it is really a declining earning trend for the RMG sector, then the entire export sector of the country will go through serious challenges. For the last one decade or more, national export policy and many other policies attached top priority to diversifying the country's export base. But in reality little so far has been done. Expanding the export basket is the need of the time.
Accelerated development and diversification of country's exports is needed for easing the pressure on the country's balance of payments. Export diversification is crucial for effective participation in the global trading system. Expanding the country's supply base is central to any export strategy. While removal of constraints and improvements in the incentive structure will enhance export performance of the country in the short to medium term, expansion of production across industries along with adaptation, development and diversification of products to compete in the overseas markets constitutes a medium-to-long-term priority. The export sector has to be dynamic to meet the needs for increased foreign exchange earnings.
It is believed that natural resource-based sectors have the potential for export diversification. Resource-based manufacturing and processing of primary products are not being explored properly as the export diversification remain typically a slow process. Diversification process needs to be sustained by an appropriate and coherent strategy, characterised by a combination of vision and co-ordination.
The constraints faced by exporters in Bangladesh are many. Access to finance is identified as a major constraint. Small and medium sized exporters are found to be more severely affected by this constraint. Infrastructural constraint is another serious bottleneck to the expansion of export and investment-augmenting activities in Bangladesh.
On many occasions, business leaders from abroad have visited Bangladesh for both investing here as well as importing products from this country. Usually the general observation that comes from them is that the official rules and regulations pertaining to exports are complicated and too much paperwork is needed. Valuable time is spent with government officials over interpretations and changes in laws and regulations, in addition to paying speed money.
When the government rules and regulations are usually blamed, the trade bodies themselves are not equipped properly. Most of the enterprises in Bangladesh have neither the in-house capacity to gather necessary trade information nor the networking facility to access information. Market access issues are becoming increasingly complex and diversified.
In many seminars, experts give suggestions that labour intensive export oriented activities, involving agro-processing operations, should be used in the production of shrimps, processed foods and jute products. Pharmaceuticals are emerging as a prospective sector. A number of products such as processed vegetables, toys, jewelry, cane furniture, fragrant rice, electronics, software, data transmission, etc. have otherwise good potential for export.
Subsidies play an important role in promoting exports. Textile products, agricultural products, fruits and vegetables, frozen food, jute products, non-traditional items. handicrafts, etc., are enjoying subsidies at different rates. The supports have resulted in some increase of their exports.
There are reports about dumping of certain products in Bangladesh. The Tariff Commission may conduct investigation into the possible dumping of products. Bangladesh can think of imposing measures like countervailing duties. The business community has to be aware of the rules of anti-dumping and countervailing duty. Their interest may be affected by the unfair price practices of producers and exporters in other countries.
In fact the diversification of export can be achieved through a number of mechanisms. The country needs to identify the areas where it has comparative advantages. Knitwear sector has to establish its supremacy. The potential of agro- processed products has to be exploited. The exotic leather products should get a share of the steadily growing demand in the international market. Export of electronic components is considered to be of potential importance to Bangladesh. The information technology (IT) could be another lucrative export-oriented sector. Software and data transmission export have a good prospects for growing at a faster pace. Bangladesh has comparative advantage in horticulture products. A number of its other products are believed to have high export potential
Meanwhile, the capability of the private sector has been amply demonstrated in the growth of exports. Exports are mainly led by the private sector. Therefore, some of the regulatory functions may be delegated to the private sector. The government should complement the efforts of the private sector.
Financing facilities for export-oriented industries have to be ensured on a priority basis, if efforts for diversification are to be sustained. New items in the priority list may be considered for granting subsidy.
Furthermore, it will be important to cut down the delivery time in shipment particularly for RMG products. Gas and power supply need to be ensured for export oriented industries. Although there are numerous constraints to export diversification and all these cannot be resolved at a time, unrelenting efforts would require to be made to remove them within a specific time-bound framework.
There is a serious lack of research and development (R&D) activities in the country's industrial sector. Industrial enterprises should actively be encouraged through appropriate policy-supports to develop their own capacity for R&D.
BANGLADESH'S flagship export item -- ready made garment sector (RMG) -- is reportedly losing orders from foreign buyers. If it is really a declining earning trend for the RMG sector, then the entire export sector of the country will go through serious challenges. For the last one decade or more, national export policy and many other policies attached top priority to diversifying the country's export base. But in reality little so far has been done. Expanding the export basket is the need of the time.
Accelerated development and diversification of country's exports is needed for easing the pressure on the country's balance of payments. Export diversification is crucial for effective participation in the global trading system. Expanding the country's supply base is central to any export strategy. While removal of constraints and improvements in the incentive structure will enhance export performance of the country in the short to medium term, expansion of production across industries along with adaptation, development and diversification of products to compete in the overseas markets constitutes a medium-to-long-term priority. The export sector has to be dynamic to meet the needs for increased foreign exchange earnings.
It is believed that natural resource-based sectors have the potential for export diversification. Resource-based manufacturing and processing of primary products are not being explored properly as the export diversification remain typically a slow process. Diversification process needs to be sustained by an appropriate and coherent strategy, characterised by a combination of vision and co-ordination.
The constraints faced by exporters in Bangladesh are many. Access to finance is identified as a major constraint. Small and medium sized exporters are found to be more severely affected by this constraint. Infrastructural constraint is another serious bottleneck to the expansion of export and investment-augmenting activities in Bangladesh.
On many occasions, business leaders from abroad have visited Bangladesh for both investing here as well as importing products from this country. Usually the general observation that comes from them is that the official rules and regulations pertaining to exports are complicated and too much paperwork is needed. Valuable time is spent with government officials over interpretations and changes in laws and regulations, in addition to paying speed money.
When the government rules and regulations are usually blamed, the trade bodies themselves are not equipped properly. Most of the enterprises in Bangladesh have neither the in-house capacity to gather necessary trade information nor the networking facility to access information. Market access issues are becoming increasingly complex and diversified.
In many seminars, experts give suggestions that labour intensive export oriented activities, involving agro-processing operations, should be used in the production of shrimps, processed foods and jute products. Pharmaceuticals are emerging as a prospective sector. A number of products such as processed vegetables, toys, jewelry, cane furniture, fragrant rice, electronics, software, data transmission, etc. have otherwise good potential for export.
Subsidies play an important role in promoting exports. Textile products, agricultural products, fruits and vegetables, frozen food, jute products, non-traditional items. handicrafts, etc., are enjoying subsidies at different rates. The supports have resulted in some increase of their exports.
There are reports about dumping of certain products in Bangladesh. The Tariff Commission may conduct investigation into the possible dumping of products. Bangladesh can think of imposing measures like countervailing duties. The business community has to be aware of the rules of anti-dumping and countervailing duty. Their interest may be affected by the unfair price practices of producers and exporters in other countries.
In fact the diversification of export can be achieved through a number of mechanisms. The country needs to identify the areas where it has comparative advantages. Knitwear sector has to establish its supremacy. The potential of agro- processed products has to be exploited. The exotic leather products should get a share of the steadily growing demand in the international market. Export of electronic components is considered to be of potential importance to Bangladesh. The information technology (IT) could be another lucrative export-oriented sector. Software and data transmission export have a good prospects for growing at a faster pace. Bangladesh has comparative advantage in horticulture products. A number of its other products are believed to have high export potential
Meanwhile, the capability of the private sector has been amply demonstrated in the growth of exports. Exports are mainly led by the private sector. Therefore, some of the regulatory functions may be delegated to the private sector. The government should complement the efforts of the private sector.
Financing facilities for export-oriented industries have to be ensured on a priority basis, if efforts for diversification are to be sustained. New items in the priority list may be considered for granting subsidy.
Furthermore, it will be important to cut down the delivery time in shipment particularly for RMG products. Gas and power supply need to be ensured for export oriented industries. Although there are numerous constraints to export diversification and all these cannot be resolved at a time, unrelenting efforts would require to be made to remove them within a specific time-bound framework.
There is a serious lack of research and development (R&D) activities in the country's industrial sector. Industrial enterprises should actively be encouraged through appropriate policy-supports to develop their own capacity for R&D.