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Bangladesh needs to diversify export basket: Experts

Post-LDC era challenges

FE Report | November 25, 2019 12:00:00

Bangladesh needs to diversify its export basket and comply with the rules of the World Trade Organisation (WTO) to overcome challenges that would emerge after the country's graduation from the group of Least Developed Countries (LDCs), experts said on Sunday.

They also called for providing policy support towards creating a more business-friendly environment and improving competitiveness and for better negotiation with trading partners in order to achieve sustainable growth in export.

The experts made the observations at a discussion session marking the launching of the 'Bangladesh Trade Policy and Negotiation Capacity Building Support Project', organised by the Policy Research Institute of Bangladesh (PRI) at a city hotel.

Funded by the Trade and Advocacy Fund (TAF2+) of UKaid, the project aims to build capacity of the government officials.

The Ministry of Commerce (MoC), the Overseas Development Institute (ODI) of the UK and Policy Research Institute (PRI) will jointly implement the project.

Bangladesh Tariff Commission Member Dr Mostofa Abid Khan, PRI Chairman Dr Zaidi Sattar, ODI Senior Research Fellow Dr Maximiliano Mendez-Parra and PRI research director Dr Abdur Razzaque spoke at the discussion, with Additional Secretary of MoC Sharifa Khan in the chair.

Giving a presentation on 'Addressing policy challenges and identifying products for export diversification and promoting their competitiveness', Dr Zaidi Sattar said Bangladesh requires increased volume of export in coming days to create more jobs and maintain its high economic growth.

Noting that the country's high economic growth at over 8.0 per cent is mostly possible due to its expanding domestic market, he said there is no alternative to enlarging the export market for future economic sustainability and fulfilling the target of becoming a middle-income country by 2030.

Following the country's graduation from the LDC group, the businesses may have to pay higher duties for their products exported to developed countries such as the USA, Australia, Canada and the countries in European Union (EU), he said.

Dr Zaidi Sattar also stressed the need for product diversification to reduce dependency on the ready-made garment sector, which accounts for over 80 per cent of the country's total exports, in order to ensure sustainable export growth.

Referring to the exchange rate appreciation in the last five to six years, he said, "The management of real effective exchange rate should be flexible, as further appreciation may make the export non-competitive in the global market."

Terming direct subsidy to exportable products contradictory to WTO rules, he said a balance in the policies for export and the domestic market should be ensured.

It has been observed that the subsidy to exportable products other than RMG items hasn't been effective; so there are scopes for rethinking the issue, he added.

The PRI chairman also said Bangladesh would be benefitted from export in the post-LDC era if it complies with multilateral rules of the WTO.

In another presentation on 'Options for Trade Relationship with the EU after Bangladesh's LDC Graduation', Dr Mendez-Parra said Bangladesh would graduate from everything but arms (EBA) facility in 2027, landing in the EU Standard GSP regime when tariffs on 98.5 per cent of the exports to the EU will rise to almost over 9.0 per cent.

To benefit from GSP+, the EU will need to modify the thresholds to allow Bangladesh eligibility while the country must ratify the convention concerning the minimum age for admission to employment, he said.

A free trade agreement (FTA) with the EU will require limited reciprocity and a longer implementation period from Bangladesh. It should also be ready to negotiate and implement additional disciplines, he added.

Additional Secretary Sharifa Khan said it is not politically possible to remove subsidy on exportable products within a short period.

Rather, policymakers should explore other options to make the export growth sustainable, she added.

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