Finance Minister AMA Muhith hoped Bangladesh’s exports would reach $75bn within the next five years. This year our exports should be exceeding $30bn. We need 20% plus year on year exports. It is tough, but not impossible. A large foreign exchange reserve may provide comfort in terms of import cover, but this alone is not enough for export growth.
We need further liberalisation of the trade. Maybe we need further relaxation of the import trade in order to push exports significantly higher. If we want 20% year on year growth, Dhaka-Chittagong roads/highways must be upgraded to international standards to handle the increasing traffic. Dedicated trade corridors or four lanes may also need continuous upgrading. In the same way, our goods need to be brought into the ports from northern districts and the south-western ports need to be more operational.
Electricity problems have been solved to a great extent, though many entrepreneurs are still depending on in-house power generation. Bangladesh boasts of having attained 10,000 megawatts power generation with a highest throughput of 6,801 megawatts into the national grid recently. We need more, maybe 15,000 megawatts, and the demand is increasing annually at almost 10%.
Frankly speaking, our entrepreneurs and exporters now desperately need gas to run their industries. Chittagong’s entrepreneurs are weeping, if not crying, for want of gas. We need an integrated solution and our government needs to gear up on that front.
We need effective ports in Chittagong and Mongla. Maybe we need a third seaport at Ramnabad channel in Patuakhali and a deep-sea port at Sonadia soon in order to ensure transport ease and better connectivity. More automation at the ports should also help to get rid of ongoing corruption.
We won’t achieve our dream of reaching $75bn in exports unless our garments exporters shift into more specialised zones. Shared buildings, factories in shopping malls, all have to become a thing of the past. In order to tackle contingency, each factory or plant must have a proper exit or evacuation policy in place. The private sector alone can’t do this. We need the government, development partners, buyers, or even other stakeholders to come forward to ensure implementation of the clusters for our manufacturing plant, thereby ensure an integrated solution for our producers.
The exchange rate and interest rate have played a significant role in many countries, leading to a sharp rise in exports. If nothing drastic is done here in view of the cascading effect, the government must look at attractive incentive packages. Similar packages should also be thought for other export-boosting industries like leather, frozen food, and jute. Newer products also have a better chance to grab the international markets at better prices.
In view of the growing disturbances in Bangladesh and its apparel factories, the Indian government has been quite loud in making out their performance gap on apparel exports and is ready to consider further incentives for relevant exporters. A falling rupee is likely to work as a booster here. Even in the near and distant past, we have seen Reserve Bank of India (RBI) coming up with various incentive packages to “pull up” its various industry segments so they remain afloat or prosper amidst various global market threats.
Though there has been longstanding debate regarding the ingenuity of the entrepreneurs versus policy support of the government as the reason for the success for our apparel export, the government in recent days could not come up with any integrated approach with regard to its support for the apparel industry. While “bonded warehouse facility” remains a major policy support till today, we have seen continuous reductions in cash incentives and increases in tax at source (except some recent reductions and few incentives to cover up for the recent losses), since the apparel industries were historically paying low taxes.
While Pakistan even came up with extraordinary packages for its exporters like “exchange rate gap support,” or paying a little extra for each dollar exported, Bangladesh left it with the market forces for the last several years. While the government could not meet its fiscal year 2013 target for exports, it is eyeing 12% plus growth in its exports for the fiscal year 2014 from $28bn to more than $30bn.
Though our exports have increased by more than 14 % during the eight months of the current fiscal, despite no dramatic upside in US economy or a cloudy European economy, increasing this by more than 20% year on year without any specific stimulus could be a daunting task.
Bangladesh Bank is seen continuously buying US dollars from banks to support our exports and inward remittances with a resultant rise in its foreign exchange reserve to almost $20bn. However, this may not be enough in view of falling imports and increasing inward remittances.
We need more initiatives like interim packages, interest subsidies, tax breaks, or tariff reductions for the major export-related imports for our exporting friends. Along with these we must develop a dynamic process to immediately react to any policy changes in our competing countries, especially India, with regard to their readymade garment exports, if not other exports too.
