Bangladeshi exports to Asian countries are still low due to absence of proper preferential trade agreements and quality products, even though there are huge trade opportunities in the region.
Exporters and trade analysts say that removing non-tariff barriers, signing trade-friendly bilateral agreements and proper usage of preferential trade deals can boost Bangladesh’s exports to the region.
They also said that high dependency on developed countries in North America and Europe could risk export earnings.
According to Export Promotion Bureau (EPB) data, Bangladesh's exports to Asian countries were worth $4.16bn in FY2016-17, which is 12% of total exports.
At the same time, European Union (EU) imported 55.83% ($19.35bn) of Bangladesh’s total exports and the United States 21.19% ($7.34bn).
For a developing country, Bangladesh has made remarkable progress as an exporter of manufactured goods, especially readymade garments, but it’s highly reliant on the markets of developed countries.
The export basket is dominated by the readymade garment (RMG) sector, which accounts for over 80% of total exports, followed by several other products including agricultural products, frozen food, jute and jute goods, and leather.
In the last fiscal year, against a target of $37bn, Bangladesh’s overall export earnings stood at $34.83bn, which is 1.68% higher than the previous year’s $34.25bn. Of the amount, the RMG sector alone earned $28.15bn.
Bangladesh has set an export target of $37.5bn for the current FY2017-18, which is a 1.35% rise from last year.
“Since there is an economic meltdown in traditional export destinations like Europe and the US, Bangladesh will have to find new markets. Grabbing more Asian markets can help reduce dependency on the developed countries or a certain region,” AB Mirza Azizul Islam, former finance adviser to a caretaker government, told the Dhaka Tribune.
“With the similarities in culture and taste, the markets of some of the Asian nations can help Bangladesh boost its export sector,” he added.
Asia’s population is 4.47 billion, which is 59.6% of the global total. China is the most populous nation in Asia with about 1.38 billion followed by India with 1.32 billion.
“Bangladeshi apparel products are sold in China, Japan, Indonesia and some other countries, but not all of that is exported directly. International buyers buy and import from us and then sell the products in these countries with their brand,” Exporters Association of Bangladesh President Abdus Salam Murshedy told the Dhaka Tribune.
Since there are non-tariff barriers in the way of exporting to these countries, the government should take initiatives to sign deals to remove them, said Salam, also managing director of Envoy Group.
Even though over $1bn worth of products were exported to Japan in the last FY, the market there is yet to be tapped fully as the island nation is a market for high-end products, a level Bangladesh has not reached yet, he said.
But, Salam added, the exporters would enter the high-end markets soon and Bangladeshi exports in the Japanese and other South Asian markets will increase in near future.
Moreover, non-tariff barriers, location issues, countervailing duty and anti-dumping duty on jute and jute goods by Indian government are also major obstacles for Bangladeshi exporters.
“Bangladesh's geographical location is not favourable for tapping the emerging Asian markets' potentiality as it has to use a third country to ship products,” Centre for Policy Dialogue’s (CPD) Research Director Khondaker Golam Moazzem told the Dhaka Tribune.
Bangladesh exports products to many Asian countries, but it is not as well connected with all the nations of the region as it should be and trade cost is higher because of that, said Moazzem.
Regional connectivity will have to be enhanced for better export opportunities, he added.
The emerging economies of Asia could become a great opportunity for Bangladesh as these economies are witnessing higher growth based on manufacturing, Moazzem said. “But to increase export rate to these countries, manufacturers will have to improve product quality.”
Many Asian countries have their own strong manufacturing base for most of the Bangladeshi products they import and their domestic manufacturers sell similar products in local markets, said Moazzem.
“So, quality products and improvement in comparative advantages are must to penetrate these markets,” he said, stressing products diversification.
Bangladesh government should take steps to make the sub-regional and regional trade and connectivity initiatives such as BBIN, BCIM, Safta, Bimstec and Saarc Motor Vehicles Agreement (Saarc MVA) effective and functional, he added.
Policy Research Institute Executive Director Ahsan H Mansur told the Dhaka Tribune: “Bangladesh will have to attract more investment from Asian countries, especially from Japan and China, to increase export in the region and sign more preferential trade agreements.”
Investment from these countries will help to improve the quality of products through knowledge sharing, said Ahsan.
Commerce Minister Tofail Ahmed said: “Bangladesh's export earnings, especially from apparel products, have witnessed a sluggish growth recently due to price fall and devaluation of euro and pound sterling.”
“To maintain export growth, we have decided to focus on the Asian markets. As part of market diversification, the government will cooperate fully to expand the market in the region,” he told the Dhaka Tribune.
On the other hand, product development will be prioritised to increase earnings from high-end buyers, the minister added.
Experts said that Bangladesh will have to improve product standards and institutional capacity at domestic level first, particularly through strengthening the Bangladesh Standards and Testing Institution operation, in order to overcome the export barriers.
Since the preferential market access to a number of Asian countries is not being utilised fully yet, the government and export-oriented businesses need to concentrate more on using preferential trade opportunities, they said.