Global export as a prosperity driver

Global export has created a greater opportunity for Bangladesh. According to Export Promotion Bureau, export target for August 2011 in Bangladesh was US$ 2.2 billion and export performance for the month was US$ 2.3 billion approximately, which is 7.28% higher than the target. Export performance of the country in the month of August, 2010 stood at US$ 1.79 billion. Hence export performance over the time period rose about 32.40 per cent. However, dramatic rise in import has been causing chronic deficit of Balance of Trade. With the advent of globalisation, liberalisation of trade, creation of WTO and adoption of information technology have all colluded in bringing the world closer and making it more competitive. All these forces are changing the way business is conducted in the world. Export creates growth Exports have created multi-faced opportunities, but we need to move cautiously to avail the opportunities: According to Singer and Prebisch thesis, while in industrial countries monopolistic market forms are common, the export industries in most of the less developed countries work under competitive condition. The rate of technological progress tends to be higher under monopolistic market condition than under the competitive market condition. Normally, countries like Bangladesh export primary products and price of such products generally decline. And Bangladesh still lags behind in diversified exportable commodities. The lack of backward as well as forward linkage industries is also creating problem for us. After 2004, the MFA was abolished. According to the Uruguay Round agreements and the special privileges enjoyed by the countries like Bangladesh ceased to exist compelling it to compete with countries like India and Thailand. But India and Thailand that had already developed enough backward linkage industries (textile and clothing) have the competitive edge over Bangladesh. As such Bangladesh should have her own backward linkage industry. From 2005, quota-free textile trade regime has been introduced in global trade. Both the government and the private sector must step forward in developing an adequate number of backward and forward linkage industries by framing appropriate policy and making necessary investment for future survival and sustainable growth of the country's export-oriented readymade garment industries. Bangladesh has suffered heavily due to trade liberalisation introduced too fast in too short a time. Many industries have gone out of operation while some have fallen sick resulting in huge loan default, which in turn put pressure on the banking system. The countries relying on import substitution strategies had very low reserves of foreign currencies. They had to cut back their imports drastically. The impact on production, for instance, because of reduced fertiliser supplies was sharp and immediate. Countries that had relied upon promotion of exports were better able to adjust to the new circumstances. They had a better foreign exchange situation to start with, their knowledge of international markets was better, and they could push their exports further to at least offset partially the adverse terms of trade. To prosper in the global context, import should be restricted though in the era of globalisation, it will be difficult. Economies of scale can be reaped more effectively in the context of export promoting policies. In economic terms, markets in Bangladesh remain small. Though the population is large, the purchasing power of the large majority of the population is minimal and around 20 per cent of the total population remains outside the market. Import substitution policies are often motivated by a wish to attain self-reliance. Actually the country should fare well by balancing between export-led and import substitution industrialisation process. Disruption in exchange earnings shall have an immediate impact on development efforts, leading, at the micro level, to partly finished projects standing idle and, at the macro level, to ineffectiveness in planning and difficulties in carrying out the desired programmes of self-sufficiency. To avail the opportunities offered by export, backward industries are required that will aid in employment creation in and industrialisation of the country. Bangladesh should move positively in pushing exports globally to strengthen foreign exchange reserves and to achieve favorable balance of trade. Further coordination between import substitution strategies and export-led growth strategies is required. Financial reform measures need further strengthening so that capital markets can become more efficient. Recent debacle of capital market has created a problem for the country. We should be cautious in handling the foreign exchange reserve. Unutilised foreign exchange reserve is a burden for the country. Moreover, there is every scope to divert capital from Bangladesh. Below in Table 1 is shown the export performance of the country: Table 1 Bangladesh needs to boost up its economy. Products need to be developed in line with the needs of the foreign countries. There need to be more public-private partnerships in the export sector. Trade should play the role of economic diplomacy. Our embassies abroad need to step out of bureaucratic mindset and go about actively in fostering trade links. A survey conducted by Centre for Breakthrough Thinking, Bangladesh on 1,000 non-resident Bangladeshis in countries like USA, UK, Japan, Australia, Thailand, France, Germany and Nepal found that 72 per cent respondents stated that they never found any positive activities by the embassies to increase business in Bangladesh. Most of Bangladesh's export growth was initiated by the private sector. The success in international business depends largely on effective and efficient strategy of diplomacy. Here our relevant embassy functionaries fall short. To thrive in the global economy, import of the country needs to decline and export should be raised. As such export diversification of the country is needed. Monetary, fiscal and exchange rate policy of the country should be more proactive. The present government should be more cautious and it should initiate 6th Five-year Plan without any further delay. The matter is important. (The writer is Head, MH School of Business, Presidency University and can be reached at E-mail: pipulbd@gmail.com)