Export earning is one of the major contributors to the GDP of Bangladesh. To keep the economy growing the government should implement effective policies to revive this sector
A few months back people throughout the world moved freely from one place to another, travelling to their desired places without restrictions, living peacefully, doing their jobs with no fear and panic. All of a sudden, an invisible enemy named Covid-19 brought a dramatic change in the life of people all over the world, and Bangladesh is one of the worst sufferers.
Since Europe is one of the epicentres of this deadly virus, a country like Bangladesh, which economically depends on exports has experienced a sharp decline in export earnings. According to data, the country's single month merchandise shipment showed 82.85 percent negative growth in April this year with only $520.01 million, the lowest in the fiscal year 2019-20.
The total export earnings have come down by 16.93 percent. The RMG sector holds the lion's share of all exports in Bangladesh. It accounts for about 83 percent of the country's export worth $27.95 billion in the FY2019-20. The slump in the most prominent sector of the country with the outbreak of the pandemic raises concern on meeting the export target of $45.5 billion in FY2019-20.
The RMG sector registered a negative growth of 14.08 percent during July-April of FY2019-20 in comparison with the same period of the previous fiscal year. Leather goods, the second-highest foreign currency earning sector in Bangladesh (4th in 2020) registered negative growth by 18.12 percent in FY2019-20. The contribution of the leather industry to overall export fell by 0.15 percent in FY2019-20.
Jute has been called the golden fibre of Bangladesh. The export of jute and jute goods have grown by 8.10 percent in July-June 2019-20. Jute exports are now a light of hope when other sectors have posted downtrends in export earnings.
Pharmaceuticals exports have recorded a positive growth of 4.49 percent. The export of agro-products has fallen by 5.16 percent. Frozen and live fish exports have also experienced negative growth by 8.84 percent in the FY2019-20.
The overall export earnings of FY2018-19 were $40535.04 million, in which the RMG sector contributed 84.21 percent. It might become a huge challenge to keep the export basket intact as our export mainly depends on this sector. The government, along with entrepreneurs, should come up with strategic steps to revive this sector.
First, after graduation to the level of the middle-income country, Bangladesh will no longer enjoy the benefits of duty-free and quota-free access. Free trade agreements could be a crucial instrument that will reduce the trade barriers. Second, the government should simplify signing the contract with major cotton exporting countries to ensure uninterrupted supply of cotton and necessary step should be taken to promote domestic cotton production.
Third, duty-free import facilities should be given to RMG exporters for buying environment-friendly and cost-effective machinery that helps to boost the export of RMG products. Fourth, as Bangladesh has the lowest productivity among competing countries, specialised institutes should be established to make sure the supply of skilled manpower that accelerates production. Fifth, both product and market diversification would require a provision of special funds so that design centres can be established and R&D activities can be conducted.
The second highest foreign currency earning sectors – leather and leather goods – require innovative, implementable and environment-friendly long term policy support to boost one of the major growth sectors in the country. First, the government has to ensure full use of the Central Effluent Treatment Plant to ensure sustainability that facilitates revival of our market share in the global market.
Second, the leather industry should focus on exporting more finished leather products than crust and finished leathers. Third, the government should concentrate on the establishment of modern slaughtering house that facilitates proper waste management by not allowing the slaughter of animal out of the house. Fourth, Bangladesh is facing difficulties due to its distended lead time when the competitor countries take less time to execute the order.
Fourth, the government needs to establish a technical centre for footwear that elevates the quality of our product and also promotes fashion and design quality to attract foreign buyers.
The third highest export earning sector, jute, posted positive growth where all other export earning sectors returned negative growth. The government should take necessary steps to keep up the pace of positive growth.
The demand for jute and jute products in the international market is increasing since it is environment friendly. Bangladesh can capitalise on this to capture a sizable portion of international jute market through increasing production. The government should concentrate on the establishment of a college for providing degree and diploma courses on industrial jute engineering that would facilitate the development of skilled manpower.
The government should emphasise installing latest technology at both state-owned jute mills and private sectors to promote the diversification of jute products. The government should take initiative to allow jute mills to operate and function autonomously under a public-private partnership.
Export earning is one of the major contributors to the GDP of Bangladesh. To keep the economy growing the government should implement effective policies to revive this sector. The world is passing through hard times with the Covid-19 pandemic, which has had a negative impact on this sector. The government has already announced stimulus packages to revive the export-oriented sectors amid the pandemic. More funds are needed to keep the sector free from the devastating impact of the virus.
Golam Sarowar, Department of Finance, University of Chittagong