• Tuesday, Oct 27, 2020
  • Last Update : 02:47 am

Does Bangladesh need an export bank?

  • Published at 12:46 am July 16th, 2018
We need to diversify our export basket Bigstock

The future of Bangladesh lies in how soon we can build a large platform for exports

Bangladesh has recorded export earnings of $36.6 billion in fiscal 2018, out of which earnings from 28 countries in Europe consisted approximately $21.3bn. In other words, 58.18% of our exports came from Europe. The value for the same was marked at 55.53% in the previous fiscal year.

The US still stands as the top export destination for Bangladeshi products (followed by Germany), and even though volume increased, export earnings from the nation has dropped from 16.85% in fiscal 2017 to 16.31% in the last fiscal year (approximately $5.98bn).

As a whole, there are nine countries that provide export earnings over $1bn. While export earnings are rising rapidly from potential markets like India and Japan, there have been a fall in earnings from China and Turkey. Exports to Australia and Russia are also increasing.

There has been an aggregate hike of 5.81% in exports during last fiscal, out of which 83.49% comes from RMG. The top export destination has, however, shifted from the US to Germany.

This is backed by the fact that the composition of RMG export earnings out of the total earnings from the US and Germany stands at 89% and 95% respectively (according to Export Promotion Bureau).

These two countries are followed by the UK, France, Spain, Italy, Netherlands, Japan, Canada, and Belgium; among which, Belgium is the sole country from which export earnings have depressed.

Recently, Japan has managed to secure the eighth position among top 10 export destinations for Bangladesh, owing to a sturdy rise of 12% in export earnings from the country over the past fiscal year.

Earnings from India are also catching up, with a rise of 30% ($870m) from previous fiscal year’s export earnings. Such a rise in earnings from India has been observed for the past year only, although India had granted duty-free access to all products from Bangladesh (excluding weapons and tobacco) since 2011.

Export earnings from China, the largest import market of Bangladesh, has dropped by 27% to $695m from the previous fiscal year.

The above shows that the prime destinations of Bangladesh’s exports are Europe, America, and Canada. This, as a result, provides healthy indication of rising exports in the markets.

Analysts, however felt that it is more beneficial for Bangladesh to develop new export markets and further diversify its export basket.

Though BGMEA wants to see apparel exports to rise to at least to $50bn in the year 2021 from that of $30bn+ in last fiscal year and the government eyes a massive export increase to catch up with Vietnam, reality says we have not been able to build a strong platform for sustainable export growth.

Despite Accord and Alliance inspection, ILO’s support, and a lot of hand-holding from the government itself, productivity in our apparel sector, product packaging, and safety issues in other sectors, technology solution building is not helping us to write a check for exponential growth in our exports like that of Vietnam or Indonesia.

The exporting community feels that there is not adequate policy support from the government. On the other hand, the government feels that the private sector is not doing enough to improve productivity, create diversity, or create a responsible work environment.

Yes, Bangladesh, despite challenges, have done well with exports. But we have a long way to go. New markets, new products, getting in to new high street brands, and letting our workers produce more with a given price in relation to Chinese and Vietnamese workers have become the critical success factors along with further liberalization of the export related import regime.

There has been a discussion flowing around the corridors with regards to establishing an export bank or, as such, an export credit agency. We are aware of some World Bank initiatives in that direction.

We are also aware of recent World Bank initiatives along with our commerce ministry to diversify our export basket with an increase of exports from plastic, leather, and light engineering.

An ADB led-economic corridor project along with World Bank-sponsored domestic logistics and supply chain improvement project are all geared towards sustainable export growth.

We have recently seen how India Exim backed financing for Bharat Heavy Electric, US Exim backed guarantee and financing scheme for Boeing and China Exim backed support for Huawei have helped exports from each of their countries.

Hence, along with policy reform for export growth, time has possibly come for us to think of establishing an export bank or credit agency to facilitate large export growth from Bangladesh.

The above mentioned agencies or ECGD, OPIC, Hermes, KfW, SACE, COFACE, DEG, or FMO type export credit or guarantee agencies may also join hand. The future of Bangladesh lies in how soon we can build a large platform for exports.

Mamun Rashid is a leading banker and economic analyst in Bangladesh.

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