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Dhaka Tribune

PRI: Bangladesh's exports can rise more than 7% if logistics costs go down

Exports in every sector can be improved if the bureaucratic complexities reformed, says Salman F Rahman

Update : 31 Aug 2022, 09:37 PM

By reducing domestic logistics costs by 17% it is possible to increase Bangladesh's exports by 7.4%, however, 35% of products get damaged in ports due to infrastructural deficiencies, experts said on Wednesday.

They were speaking at a roundtable “Improving trade facilitation for export competitiveness: Progress, Lessons and policy priorities for Bangladesh” organized by Policy Research Institute of Bangladesh (PRI).

Salman Fazlur Rahman, adviser to the prime minister for private industry and investment, was present as chief guest.

On export diversification, Salman F Rahman said that although the readymade garment (RMG) sector is successful in exporting, other sectors were facing many hurdles. 

Export from every sector of the country could increase if bureaucratic complexities were reformed. There have been changes in the bureaucratic mindset at the top level, but prevailed at the ground level, he also said.

“The prime minister (Sheikh Hasina) asked several times why other export sectors were not as successful as the RMG industry. That is because people from other sectors say that they are not getting benefits like RMG. We have to seriously focus on other sectors like we have on RMG exports," Rahman also said.

“To increase exports, port facilities should be increased. The capacity of Chittagong Port will be increased further. Work is underway on the proposed deep sea port in Matarbari. Once these are done, exports can be further increased. Now I am working on how to bring more investment in the local private and foreign private sector,” he informed.

In his keynote presentation Policy Exchange Bangladesh (PEB) chairman Masrur Reaz said that gains from trade were highly relevant to Bangladesh's development trajectory and aspirations. 

High-quality products, services and input results in good exposure and improves technical capacity.  Having access to a larger market incentivizes firms to invest in R&D and foster innovation, he also said. 

Trade Facilitation (TF) emerges as a critical driver of trade competitiveness. It helps ensure predictability of operations and thus contribute to the competitiveness of a country, he also said. 

“Lower middle and developing countries stand to benefit more. Vietnam’s spectacular export-led growth success hugely benefited from its improvements in TF, Reaz also pointed out.

“Boosting TF will be crucial to attaining Bangladesh’s development priorities and growth aspirations. We are doing well in RMG, but when it comes to the non-RMG sectors then we have lots of opportunities to boost our export income," the PEB chairman also said.

“If we look upon the share of non-RMG exports against other Asian Countries then we see that in agriculture and ICT sectors our growth is very low," he observed.

Zaidi Sattar, PRI chairman, said that after losing two decades to prevarication and lack of direction in trade policy, in the 1990s Bangladesh chose to pursue the development policy of export-oriented trade.

This was done by switching from overwhelmingly inward-looking import-substituting trade policy to outward-looking export-oriented trade policy by liberalizing trade, rationalizing and reducing tariffs and quantitative restrictions, moving from fixed to flexible exchange rates, adopting partial convertibility of current account, together with supporting market-oriented reforms like de-regulation of investment and the like, the economist also pointed out. 

As a result of the switch to trade openness Bangladesh was described as a “globalizer” among developing economies. 

Trade-GDP ratio shot up from 19% in FY90 to 38% in the next 15 years, peaking at 49% in FY11. 

However, trade growth did not keep up with growth of nominal GDP; consequently, trade-GDP ratio has been sliding down reaching 30% in FY21, said Sattar. 

“Make no mistake, Bangladesh’s global integration is not just limited to trade in goods. A big chunk of our trade lies in export of factor services, such as services of our migrant workers, under the auspices of WTO’s general agreement on trade in services (GATS)," he also said. 

That brings in copious amounts of remittance income in foreign exchange to finance our bulging import bill. Trade facilitation improvement therefore must cover not only goods trade, but also the rising trade in non-factor services, such as ICT, financial services including digital and electronic transactions, and factor services, i.e. generating remittance of migrant workers, he added. 

Abdul Mannan Shikder, member VAT (Implementation and IT) at the National Board of Revenue, said: "We have many projects in hand, in which the World Bank is supporting us. There are bond management projects that are taking off very well.”

Asif Ibrahim, director of BGMEA and chairman of Chittagong Stock Exchange, said: “We are facing many problems in customs when it comes to bonded warehouse issues. When we want to introduce a new product in bonded warehouses, we always face problems.”

Ahsan H Mansur, executive director, PRI, Selma Rasavac, manager, Creating Markets Advisory, IFC, Md Hafizur Rahman, additional secretary (director general), WTO Cell Ministry of Commerce, Habibullah N Karim, vice president, MCCI, MD & CEO, Technohaven Company Ltd, and others were also present.

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