Increasing production of essentials
Thursday, 23 August 2007
Enayet Rasul
Bangladesh, at present, has become very worryingly dependent on the import of essential consumer goods. This dependence has been growing relentlessly. It imports nearly all of its requirements of baby food and half of its need for milk in powdered form. The country was once self sufficient in onions, garlic, ginger and other spices. Now the greater parts of the demands for these spices are met by imports. This country produced a surplus of peppers once upon a time. But now it takes care of more than 60 per cent of its demand for pepper from imports. 80 per cent of the demand for pulses is also met by import. In recent years, it has been importing 1.5 to 2.0 million tons of foodgrains. 90 per cent of the demand for cooking oil is also met by imports. Even salt is imported in large quantities from time to time. The above figures are indicative of the lack of efficiency of its agriculture when Bangladesh has been renowned for the amazing fertility of its soil and its comparative advantage in growing various food products. Bangladesh was once famous for its abundance of fishes. But now, a big part of its demand for fishes is also met by imports.
The fast growing import activities for meeting basic consumption related needs of people is indeed a cause of concern. When the imports are mainly industrial raw materials or intermediate products, the same can be though of as useful economic activities in view of their value-addition potentials. But surely the same cannot be said about edible goods meant for sheer consumption.
The price-lines of many essential products, specially kitchen items and food products, have soared to unusually high levels in the local markets unlike any other time in memory. Government's various moves to control this price rise is proving to be extremely difficult or impossible because these consumption goods have to be procured from markets outside the country and government has no powers over overseas markets. When these daily consumables are being imported at higher and higher prices by the importers, they cannot be ordered by the government to sell the same at artificially lower prices in local markets. If that has to be done, then the government would be required to give massive subsidies to the importers for each of these items. This course is also not realistic or feasible on the part of the government. Thus, this ' imported inflation' as it is called, continues to ravage our consumers. But this would not happen, if, over the years policies were adopted and pursued sincerely to grow and produce many of these products within the country. In that case, Bangladeshi consumers today would be notably hedged from the imported inflation which is translating into every day painful costs of living anguishes for them.
The foreign currency reserve of Bangladesh only about six years ago was at the point of sliding below the amount of one billion US dollars. It was a very modest reserve and created some apprehension about its macro economic health. The reserve, since then, has moved up notably. The badly needed boost of the reserve has been the outcome of mainly policies that encouraged overseas Bangladeshi workers to send their remittances home through the official channel and not the illegal or underground ones. This sector has still untapped possibilities. It is expertly thought that workers' remittances in increased quantities can arrive in the country on a sustainable basis and schemes are being carried out to ensure this outcome.
However, the forex reserve needs to be substantially further increased and greater export of commodities, increase in the number of unconventional export products, etc., are among the ways to this end. At the same time, the government should be also pursuing policies that would aim at large-scale import substitution. Bangladesh has been following a mainly export led growth strategy for decades. It led to increase in the county's export trade resulting in a reduction in the gap between export earnings and costs incurred for carrying out various import activities. But import-substitution policies will have to be pursued with equal zest like the export led growth strategy to bring about the desired equilibrium between export earnings or import costs, or, preferably the ideal situation of a balance of payment surplus.
Government is seen putting a great deal of emphasis on increasing export activities. But proportionate emphasis is not seen put on import-substituting activities. It is even murmured in some quarters that suggesting import-substitution is anathema to the spirit of globalisation or the free market. They say that Bangladesh is now fully wedded to the principles of free trade and globalisation and import substitution would mean back pedaling in time.
Bangladesh is a signatory to the World Trade Organisation (WTO) rules which expect the signatory nations not to ban import of commodities. But the WTO rules nowhere state that countries cannot encourage legitimate import-substituting activities or declare reasonable tariffs in support of creating a level playing field for their local producers. The WTO rules are specially liberal in these matters in relation to least developed countries (LDCs) like Bangladesh and would find nothing objectionable if the latter embarks on import-substituting activities and practices reasonable raising of tariff against imported goods. The WTO rules, in force, remain particularly relaxed in relation to the LDCs in these areas.
Thus, there is no reason for Bangladesh to be lukewarm about import-substitution. Even Japan, a major player in WTO, is a heavy practitioner of import-substitution. Despite trade liberalisation, it is impossible for many foreign producers to enter successfully into the Japanese markets that produce a wide range of import substituting goods and services.
Ready-made garments (RMG) presently earns 76 per cent of Bangladesh's earnings from export. But nearly two-thirds of the amount of earnings from RMG are lost to the country because of the need to import the raw materials for the RMG industry such as fibre and fabric. Therefore, the need is to go all-out to establish backward linkages for the RMG industry to achieve maximum import substitution in this sector. Cultivation of cotton needs to be specially encouraged to achieve import substitution and value addition in this sector.
A major item in the import list of Bangladesh is petroleum and petroleum based products. But a huge saving could be effected by popularising and facilitating the use of the locally available gas as alternative to imported petroleum and petroleum based products. The country's entire road transportation sector can run on the locally available gas as substitute of petrol, diesel and octane which are refined out of imported petroleum. Work in this direction has started. It should be expedited at full speed. The UK economy experienced a windfall in the eighties when it found North Sea oil. It reduced UK's dependence on imported fuel and this event came as a big boost to its sagging economy or as a crucial support to its balance of payment (BOP). In the same way, Bangladesh can benefit from a major prop up of its BOP by utilising-- as it should -- its gas resources. However, exploration activities to find more gas also have to be accelerated to be at par with rising rate of utilization of gas.
The mining projects at Barapukuria and Madhyapara to produce coal and hard rock respectively, will have to be similarly expedited and completed efficiently to make redundant the use of imported coal and hardrock. Huge savings in these areas are expected if the projects can be completed in good time --ensuring efficient operation of the mines-- and the produced rocks and coal are marketed efficiently foiling all conspiracies.
Bangladesh, at present, has become very worryingly dependent on the import of essential consumer goods. This dependence has been growing relentlessly. It imports nearly all of its requirements of baby food and half of its need for milk in powdered form. The country was once self sufficient in onions, garlic, ginger and other spices. Now the greater parts of the demands for these spices are met by imports. This country produced a surplus of peppers once upon a time. But now it takes care of more than 60 per cent of its demand for pepper from imports. 80 per cent of the demand for pulses is also met by import. In recent years, it has been importing 1.5 to 2.0 million tons of foodgrains. 90 per cent of the demand for cooking oil is also met by imports. Even salt is imported in large quantities from time to time. The above figures are indicative of the lack of efficiency of its agriculture when Bangladesh has been renowned for the amazing fertility of its soil and its comparative advantage in growing various food products. Bangladesh was once famous for its abundance of fishes. But now, a big part of its demand for fishes is also met by imports.
The fast growing import activities for meeting basic consumption related needs of people is indeed a cause of concern. When the imports are mainly industrial raw materials or intermediate products, the same can be though of as useful economic activities in view of their value-addition potentials. But surely the same cannot be said about edible goods meant for sheer consumption.
The price-lines of many essential products, specially kitchen items and food products, have soared to unusually high levels in the local markets unlike any other time in memory. Government's various moves to control this price rise is proving to be extremely difficult or impossible because these consumption goods have to be procured from markets outside the country and government has no powers over overseas markets. When these daily consumables are being imported at higher and higher prices by the importers, they cannot be ordered by the government to sell the same at artificially lower prices in local markets. If that has to be done, then the government would be required to give massive subsidies to the importers for each of these items. This course is also not realistic or feasible on the part of the government. Thus, this ' imported inflation' as it is called, continues to ravage our consumers. But this would not happen, if, over the years policies were adopted and pursued sincerely to grow and produce many of these products within the country. In that case, Bangladeshi consumers today would be notably hedged from the imported inflation which is translating into every day painful costs of living anguishes for them.
The foreign currency reserve of Bangladesh only about six years ago was at the point of sliding below the amount of one billion US dollars. It was a very modest reserve and created some apprehension about its macro economic health. The reserve, since then, has moved up notably. The badly needed boost of the reserve has been the outcome of mainly policies that encouraged overseas Bangladeshi workers to send their remittances home through the official channel and not the illegal or underground ones. This sector has still untapped possibilities. It is expertly thought that workers' remittances in increased quantities can arrive in the country on a sustainable basis and schemes are being carried out to ensure this outcome.
However, the forex reserve needs to be substantially further increased and greater export of commodities, increase in the number of unconventional export products, etc., are among the ways to this end. At the same time, the government should be also pursuing policies that would aim at large-scale import substitution. Bangladesh has been following a mainly export led growth strategy for decades. It led to increase in the county's export trade resulting in a reduction in the gap between export earnings and costs incurred for carrying out various import activities. But import-substitution policies will have to be pursued with equal zest like the export led growth strategy to bring about the desired equilibrium between export earnings or import costs, or, preferably the ideal situation of a balance of payment surplus.
Government is seen putting a great deal of emphasis on increasing export activities. But proportionate emphasis is not seen put on import-substituting activities. It is even murmured in some quarters that suggesting import-substitution is anathema to the spirit of globalisation or the free market. They say that Bangladesh is now fully wedded to the principles of free trade and globalisation and import substitution would mean back pedaling in time.
Bangladesh is a signatory to the World Trade Organisation (WTO) rules which expect the signatory nations not to ban import of commodities. But the WTO rules nowhere state that countries cannot encourage legitimate import-substituting activities or declare reasonable tariffs in support of creating a level playing field for their local producers. The WTO rules are specially liberal in these matters in relation to least developed countries (LDCs) like Bangladesh and would find nothing objectionable if the latter embarks on import-substituting activities and practices reasonable raising of tariff against imported goods. The WTO rules, in force, remain particularly relaxed in relation to the LDCs in these areas.
Thus, there is no reason for Bangladesh to be lukewarm about import-substitution. Even Japan, a major player in WTO, is a heavy practitioner of import-substitution. Despite trade liberalisation, it is impossible for many foreign producers to enter successfully into the Japanese markets that produce a wide range of import substituting goods and services.
Ready-made garments (RMG) presently earns 76 per cent of Bangladesh's earnings from export. But nearly two-thirds of the amount of earnings from RMG are lost to the country because of the need to import the raw materials for the RMG industry such as fibre and fabric. Therefore, the need is to go all-out to establish backward linkages for the RMG industry to achieve maximum import substitution in this sector. Cultivation of cotton needs to be specially encouraged to achieve import substitution and value addition in this sector.
A major item in the import list of Bangladesh is petroleum and petroleum based products. But a huge saving could be effected by popularising and facilitating the use of the locally available gas as alternative to imported petroleum and petroleum based products. The country's entire road transportation sector can run on the locally available gas as substitute of petrol, diesel and octane which are refined out of imported petroleum. Work in this direction has started. It should be expedited at full speed. The UK economy experienced a windfall in the eighties when it found North Sea oil. It reduced UK's dependence on imported fuel and this event came as a big boost to its sagging economy or as a crucial support to its balance of payment (BOP). In the same way, Bangladesh can benefit from a major prop up of its BOP by utilising-- as it should -- its gas resources. However, exploration activities to find more gas also have to be accelerated to be at par with rising rate of utilization of gas.
The mining projects at Barapukuria and Madhyapara to produce coal and hard rock respectively, will have to be similarly expedited and completed efficiently to make redundant the use of imported coal and hardrock. Huge savings in these areas are expected if the projects can be completed in good time --ensuring efficient operation of the mines-- and the produced rocks and coal are marketed efficiently foiling all conspiracies.