Economy of Bangladesh

Diversification of export basket for uninterrupted export earnings

Diversification of export basket for uninterrupted export earnings

Md. Joynal Abdin

The Financial Express on May 7, 2012

Bangladesh is considered to have the maximum growth potential among the least developed countries (LDC). Currently, the official size of Bangladesh GDP is US$100 billion (though the real size should be higher than this due to a significant amount of undisclosed wealth in the economy). Bangladesh GDP is growing at 6.0 to 6.5 per cent per year. A remarkable contribution comes from export earnings. Bangladesh earned about $23 billion last year with only one sector i.e. ready-made garments (RMG) contributing more than $18 billion. That means more than 78 per cent of our export earnings come from a single sector. Hong Kong, Singapore and Korea were dependable RMG exporters, but they failed to cope with the quota system and lost international market to Bangladesh, India and China. If such unfavourable situation is faced by Bangladeshi RMG exporters what will then be the total export earnings of Bangladesh? Which sector can replace the largest dependable RMG sector in our country? The workforce in this sector will become unemployed and the government has to think of relocating them in another sector. Otherwise, social unrest may lead to total economic collapse in the country.

Do we have any other sector that can help rescue Bangladesh economy, if the RMG sector faces an adverse situation in the global market? Till now there is none. A look at the sectoral contribution to the export earnings makes the situation clear: 78 per cent comes from RMG (knit 41 per cent and woven 38 per cent), frozen food 2.92 per cent, chemical products 1.8 per cent, jute goods 1.73 per cent, leather 1.13 per cent and all other products 12.04 per cent.

Let’s see the gap between the first 78 per cent and second 2.92 per cent. What an unstable export basket it is? Now is the time to make an alternative arrangement with the introduction of at least two to three other products in the export basket.

Potential exportable sectors may be shipbuilding, skilled human resources, electrical products, furniture, sub-contracting, jute and jute goods, leather and leather goods, handicraft, pharmaceuticals etc. Bangladeshi ship-builders have proved their worth by exporting large ocean-going ships to the European market. Now they need government help to execute large number of orders for quick growth of this sector. It is a capital- as well as labour-intensive sector. The government should support this sector with adequate capital and skilled manpower.

Secondly, Bangladesh can earn more remittance if it can export qualified and skilled manpower. Every year two million youth with higher education are entering the job market. But the government and the private sector can ensure jobs for how many of them? Sometimes educated people are under-employed, as job opportunities are limited compared to the total demand. So the government can think of exporting higher educated manpower to the global job market. The government needs to empower Bangladesh Overseas Employment and Services Limited (BOESL) for ensuring proper placement of higher educated Bangladeshis in the international job market. It will ensure maximum foreign currency earning.

For example, the Indian professionals are spreading out throughout North America, Europe and even in Africa. NRI professionals are playing a vital role in remittance earning as well as technology transfer to India. Bangladesh can have the same benefit if it takes proper measures to export professionals abroad.

The BOESL may be given a target to place at least half a million Bangladeshi professionals each year. If the government can send professionals abroad for five years than the migrants will help friends, dependents, and relatives to seek overseas jobs. It will not only increase remittances but also ensure more FDI and technology transfer and transfer of managerial efficiency etc.

Currently, some Bangladeshi companies are exporting a few electrical products to the foreign markets. This can be expanded into a wide variety of products, if the government supports them by setting up an electrical testing laboratory in Bangladesh. The government may also ensure earning standard certification like “CE marks” for increasing acceptability of Bangladeshi electrical products especially in the European markets.

Furniture can be another alternative sector for export. There are about 70,000 furniture-making enterprises in the country. They are exporting furniture worth about $3.0 million per year. The main markets are the USA, France, UK, Canada, Japan, Russia, Italy, Sweden, Australia, Denmark and UAE. The major furniture exporting countries are Vietnam, China, Germany, Mexico and Thailand. Most of these countries are allowing duty free import of furniture’s and others are charging about 5.0 per cent to 29 per cent duty on furniture. It is a labour intensive sector and can ensure employment to illiterate people too. If the government takes proper initiative to promote this sector then large furniture companies like Otobi, Hatil, Akhter, among other, can export and other small furniture companies can get orders through sub-contracting system.

Sub-contracting itself is a very rapidly growing sector around the world. The government may develop mechanism for Bangladeshi entrepreneurs to get orders from the international outsourcing market. The global size of outsourcing market grew from $1,184 billion in 2002 to $1,322 billion in 2003 and is expected to reach $33,991 billion by 2012. Bangladesh can earn $339 billion by grabbing only 1.0 per cent of this market per year which is three times larger than our existing GDP. The United States alone spent $120 billion in 2008 on outsourcing.

Major outsourcing activities are website design and development, marketing outsourcing, graphic design, presentations and multimedia, programming, software and database, game design and development, implementation, networking, hardware and telephony outsourcing, writing, editing and translation, business consultation, management outsourcing, finance and accounting, sales and marketing, administrative support (legal, medical and accounting), advertising and broadcasting, illustration and art, photography and video, fashion and interior design, customer support service, technical support service, telemarketing service, employee IT help-desk services, insurance processing, new business/promotion, policy maintenance/management, software development, web development, data entry, and call centre etc.

Each of these broad sections of outsourcing may have many subsections. Current major players in the global outsourcing market are India, China, Malaysia, Czech Republic, Singapore, the Philippines, Brazil, Canada and Chile. Bangladesh may look into this market seriously to utilise this rapidly growing opportunity and earn more foreign exchange.

Jute and jute goods, leather and leather goods, handicraft, pharmaceuticals etc., can be dependable export sectors for Bangladesh, if these products are marketed internationally. Global marketing Guru Philip Kotler came to Bangladesh twice last year. He emphasised on branding Bangladesh for increasing our potentials in the international market. Because brand image increases acceptability of products even at a higher price, “Branding Bangladesh” movement shall not get tired too quickly. Finally, we have no alternative to diversifying our exportable products to ensure uninterrupted export earnings. This will lead to a positive balance of payment and give us a developed Bangladesh.

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