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Brexit affects Bangladesh exports

  • Published at 03:46 pm July 11th, 2017
  • Last updated at 06:20 pm July 11th, 2017
Brexit affects Bangladesh exports
Political changeover in the West, Brexit, and devaluation of currencies have adversely affected growth in Bangladesh exports, especially in the clothing sector that solely contributes over 82% to overall export earnings. As per the provisional data of Export Promotion Bureau for FY2017, Bangladesh’s overall export earnings stood at $34.83 billion with 1.69% growth, the lowest in the last 15 years. Export earnings from the apparel industry, the lifeline of foreign currency earners, have seen only a 0.20% rise to $28.15 billion, also the lowest in the last 15 years. “Beyond the devaluation of euro against the US dollar and slow demands from European buyers, and possible Brexit effects adversely impacted Bangladesh exports,” Khondaker Golam Moazzem, Centre for Policy Dialogue (CPD) Research Director, told the Dhaka Tribune. The country's businesspeople were in uncertainty about the trade benefits for the Bangladeshi products which lowered the export volumes, said Moazzem. EU countries like Germany, France, Spain and Italy, however, posted positive growths. On the other hand, there was also uncertainty in the US market about the election, which caused slower demand. In the face of slower demands, the buyers cut prices, he added. Former finance adviser to the caretaker government AB Mirza Azizul Islam said the economic recession and slow demand of products were also responsible. [caption id="attachment_74138" align="alignright" width="637"]Export growth Fact Sheet Export growth Fact Sheet[/caption] “Possible Brexit effects left the traders in uncertainty. As a result, Bangladesh has seen less work orders compared to previous year. This is considered as probable reason behind the sluggish growth in overall export,” he said. According to the EPB data, export earnings from the UK declined by 6.31% to $3.57 billion in the just concluded fiscal year. It was $3.8 billion in the FY2015-16. In the FY 2016-17, Bangladesh export earnings from the US, the single largest export destination, have also seen over 6% fall to $5.85 billion from $6.22 billion in the previous year. “The main reason behind the flat growth is the declining prices of clothing products,” said BGMEA Senior Vice-President Faruq Hassan. The non-tradition export market is very promising for Bangladesh but unfortunately it did not perform well in the last fiscal year, he said. According to the data, Bangladesh exports to Japan declined by 6.17%, followed by India 2.50%, Turkey by 4.57%, Australia by 6.73%, Canada by 3%, which are among major non-traditional markets. The production cost went up due to new investments in safety standards improvement. As a result, the manufacturers are losing competitiveness in the global markets. It is very “alarming”, Hassan said. Beyond the RMG sector, the other major sectors did not perform up to the expected level. The leather sector, especially processed leather, witnessed a negative growth. “Export earnings growth in the leather and leather goods is good, but it is not up to the expected level,” said Engr M Abu Taher, chairman of Fortuna Leather Craft Ltd. He said the production capacity falls short due to relocation process of tanneries from Hazaribagh to Savar, leading to negative growth in exports of the processed leather. “Since the relocation is very close to end, export earnings from the sector will see sharp rise in the current fiscal year,” Abu Taher said.

What to do to boost exports

The government and the sector people will have to explore new markets and put emphasis on central Asian markets, said former finance adviser to the caretaker government AB Mirza Azizul Islam. He said the focus should also be on product diversification in order to reduce dependency on the apparel sector. “Due to factory closure, the production capacity came down. To increase the production capacity, the government has to come up with attractive packages to attract new investment,” former European Union trade adviser Zillul Hye Razi said. In addition, the government has to ensure necessary infrastructure and utility services, including gas and electricity connections, he said. Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, said Bangladesh has to develop competitive edge by increasing workers’ productivity as there are pressures ahead over hike in workers wage. He suggested the country should focus on the diversification of RMG products, and to do that, the businessmen, as well as the government, need to give more efforts, he added.