Export diversification deludes the country

Years of prolonged efforts by the government for diversification of both export products and their market bases are yet to yield any visible outcome. The country's export earnings are still largely dependent on a few items and also on a very limited number of export markets.
The country is, according to a report in the FE this week, dependent on six items and four markets in its external trade over the years. The failure to effectively implement the plans for diversification of the export basket and overseas market is responsible for this situation.
However, there are promising prospects for a jump in the country's export earnings under the global trading regime. Poor product campaign and lack of market diversification has left a number of its quality products almost unknown to the outside world.
The Export Diversification Project was taken up in 1999 with financial support of the World Bank. This was done to help integrate Bangladesh better in the global economy through promotion and diversification of its exportables. Regrettably, the project failed to perform satisfactorily and was abandoned.
The government did also provide cash subsidy for a number of products and introduced incentives for encouraging exports to the new markets. But again, there was no tangible outcome. Neither the number of exportable items nor that of the export destinations could see the much-needed expansion.
There are as many as 750 products on the list of the country's exportables. Yet 85 to 90 per cent of its annual export receipts continues to come from only six items. These include apparels, frozen foods, jute and jute goods, and leather products. Similarly, the country receives the lion's share of its export earnings from only four destinations, including the European Union (EU) and the United States.
The aggregate export earnings from six products, to mention, stood last fiscal at US$27.49 billion as against the country's total export receipts of $30.17 billion. The receipts from exports of such products were $24.43 billion in the fiscal year (FY), 2012-13. And the country made nearly 85 per cent of its total export shipments to only four global markets in FY 2013-14.
In view of this situation, a plan of action is an urgent need for increasing the competitiveness of the local products and for exploring the untapped markets for such products across the world. The present energy situation and infrastructural deficit in the country merit also a critical attention while drawing up the plan.
The earlier steps taken by the government -- either strategic or operational - were, as the trade analysts suggest, not sufficient to diversify both products and markets. It is high time for the government to provide policy support to the non-readymade garment (RMG) products. Those who are small suppliers need networking, match-making and information-sharing to export their products.
Added to this, aggressive government-to-government (G-2-G) negotiations are important for removal or reduction of tariff barriers, especially in the non-traditional markets that need non-traditional products. Furthermore, there is a need to organise more trade fairs and exchange of missions to various destinations, taking the specific demand factors into consideration.
However, there are some bottlenecks on the way to expansion of exports to the overseas markets. Among them, infrastructural constraint is perhaps the single most important one. This is hindering efforts for expansion of export and investment-augmenting activities in Bangladesh. Problems continue to remain, in spite of the government's effort to help overcome a number of related stumbling blocks.
Transport and freight constitute yet other major bottlenecks to exports. Congestion is a common problem in Chittagong and Mongla ports due to shortage of equipment, inadequate containerisation and lack of transport facilities for the containers.
Inefficient operation of infrastructural facilities does adversely affect enterprises that are involved in export activities. This hampers production activities and leads to delays in delivery of goods. Here, delays in delivery can result in cancellation of the export contracts and the loss of markets, forever. The shortage of power supply, to note, is also another leading infrastructural constraint.
Meanwhile, existing official rules and regulations pertaining to exports are also found to be complicated. Too much paper work is now involved here. Firms that are engaged in export business have to appoint officers for sorting out matters with the government and its other relevant agencies.
A fundamental problem of export diversification is inadequate investment in the country. Bangladesh has been following a private sector-led growth strategy since the 1980s. Public sector investment has come down but private sector investment is yet to pick up. Local entrepreneurs are still shy of making interests. Inflow of foreign capital remains also sluggish.
Some potential products have been identified to help widen the country's export basket. Such products are printing and packaging, furniture, electronics, shipbuilding, plastic and light engineering. Shipbuilding can be a good alternative to any industry including garments because of its backward linkage advantages that can create extra market, if nurtured properly. There is a large market for local auto-parts as well.
Opportunities are otherwise ample in the comparatively new markets. But those have so far remained unexplored for lack of proper knowledge and efforts by both local businesses and the government. The importers of African, Russian and some other countries are reported to be eager to import items like RMG, leather products and jute goods from Bangladesh.
Against this backdrop, the government's effective policy supports are required to change the country's overall export scenario. Such supportive measures need to include opening of new missions, branding of local products and provision of incentives and fiscal props for the potential sectors.
    skhan@dhaka.net