One of the key transformations in our history is that Bangladesh has evolved from a debt-dependent economy to a trade-dependent economy since the 1990s. In 1990, our country’s annual foreign trade income was equal to its external debt, but now its income from exports and remittances is about eight times its external borrowings, a ratio that has increased from 1:1 to 8:1. are doing.
Despite a lack of natural resources and food insecurity for 75 million people after independence, Bangladesh has overcome numerous challenges. Compared to post-independence, foreign trade plays a vital role in promoting Bangladesh’s development.
After effectively addressing the first challenges in the development process, we are now facing the second generation of challenges. Overcoming these challenges is our primary responsibility, but there are notable deficiencies in our preparation for this challenge.
Among the challenges of the first generation was the dilemma of identifying exportable goods due to the lack of natural resources. This predicament has led to the entry of Korean entrepreneurs, especially in the ready-made garment (RMG) industry. During this period, strict export quotas were set across major markets, including the United States.
In response, these Korean entrepreneurs took advantage of Bangladeshi quotas to manufacture clothing locally. But we are smart people, so soon he learned the RMG business.
Even though we do not produce cotton, we have demonstrated strategic business acumen to turn our comparative advantage into a competitive advantage by importing cotton and providing added value in our ready-made garment business.
Government’s significant contribution to our achievements often goes unnoticed. Vital to our economic growth, ready-to-wear entrepreneurs have benefited from unique advantages. With the introduction of Master LC (Letter of Credit), imported materials were paid in arrears and only labor costs were paid.
Duty-free facilities with bonded warehouses and 60% import duty exemption on fabric imports have made it easy to do RMG business with minimal capital. Although the use of bonded warehouses was controversial, they played an important role in fostering entrepreneurship, especially in the apparel industry.
Government policies such as incentives for local materials and fabrics, initially 25% but later reduced to 4%, contributed to the emergence of an export-oriented clothing industry.
While emphasizing the need for export diversification, it is important to recognize our strength in the $700 billion global apparel market. Our competitive advantage lies in his $700 billion sector, even though there is potential in other sectors with a combined market size of less than $100 billion.
Although it currently holds a 7% share of the global apparel market, compared to 31% in China, there is still a lot of room for growth within and outside the RMG industry. Addressing the dominance of cotton in our apparel exports and increasing our RMG share from 7% to 15% presents great opportunities in this lucrative global market.
Anti-FDI (foreign direct investment) sentiment in Bangladesh is contributing to limiting export diversity. Promoting foreign direct investment, especially in technology-intensive sectors, is critical to employment and export growth.
Foreign investment in the RMG sector in areas outside export processing zones faced restraint until recent years. Although not completely limited, there were various obstacles such as the declaration of utility.
There are also opportunities in leather, pharmaceuticals, assembly plants, and API (active pharmaceutical ingredients) production. Despite planning an API Park in Ghazalia (Munshiganj area, near Dhaka) since 2012, challenges remain. The potential of the pharmaceutical industry remains untapped.
Political and economic factors have hindered efforts, reflected in missed opportunities such as establishing ETPs (effluent treatment plants) in API Park in Gazaria and the leather industrial zone in Savar. Concerns about harm to beneficiaries could prevent needed investments and require a reassessment of political and economic dynamics.
The multitrillion-dollar global pharmaceutical industry is comparable in size to the clothing industry, textiles, and other subsectors combined. Bangladesh has immense potential in her three markets, each of which is at least comparable to its peers. 100 other product markets.
By taking advantage of these opportunities, we can expand employment, increase incomes, and promote competitiveness in the labor market.
Ensuring fair wages is critical, in line with the Sustainable Development Goals (SDGs), which emphasize quality employment. The idea that workers cannot meet their basic needs with an eight-hour day conflicts with entrepreneurs’ interests in a stable workforce.
Competitiveness does not develop simply through low labor wages. Improving wages, creating new employment opportunities, and strengthening competitiveness are linked. Imports of labor-replacement technologies pose risks and reflect historical patterns of employment growth and decline, particularly affecting the ready-made garment industry. Gender implications are occurring as the female workforce in this sector declines from 90% to 62%, requiring a focus on training, promotion and management roles for women.
In the midst of infrastructure development, Bangladesh has a unique opportunity to turn its comparative advantage into a competitive advantage.only during that time 12% of total export earnings With many participants from South Asia, East Asia, and ASEAN countries, the Asian Century offers strategic possibilities for investment, communication, and trade, with a focus on infrastructure.
Implement effective A one-stop service in SEZs could be a game-changer by reducing delays in various approvals. Improved transport corridors like the Padma Bridge have the potential to develop into economic corridors, with maintenance costs sustained through vehicle tolls.
While external debt issues arise, infrastructure investment is expected to stimulate private sector investment and ease debt concerns. However, care must be taken to avoid problems seen in other countries where debt servicing is a major issue.
With foreign exchange reserves of less than $20 billion, careful management is essential to meet debt and import demands. Despite challenges, existing infrastructure offers significant business growth opportunities, particularly with neighboring countries such as Nepal, Bhutan, and the western and eastern regions of India, highlighting the potential for sub-regional cooperation. Masu.
Bangladesh’s strategic decision to join the Least Developed Countries (LDC) group in 1975, inspired by Bangabandhu’s vision, proved to be a game changer. Despite concerns, the measure provided tariff exemptions and access to technical support, promoting economic benefits and export opportunities. This decision, which officially came into force in December 1975, contributed significantly to the growth of Bangladesh’s exports, offsetting slightly higher production costs with the benefit of duty-free facilities.
Increased foreign investment before graduating from LDC status from Although you will receive tax-free and quota-free benefits, there will be compliance issues to meet the European Union’s GSP Plus requirements after graduation. Beyond purchasing country governments, consumers, brands and buyers impose different conditions on exports to the EU, including carbon emissions considerations.
Addressing anti-dumping and countervailing duties exposes poor accounting practices in a variety of areas. New challenges include tackling carbon emissions, ensuring fair wages, and adhering to environmental standards. Collaboration with the WTO is extremely important for LDCs to utilize existing facilities and seek expanded benefits after graduation, and is likely to be discussed at the 13th Ministerial Meeting in Abu Dhabi.
As a developing country, navigating complex trade rules requires consideration of subsidies, credit, and compliance standards. The trading system is increasingly recognized as a political extension, with developed countries adopting protectionist measures in times of crisis, such as restricting vaccine exports and raw materials during the coronavirus pandemic. It is clear from the fact that
Countries are issuing warnings about labor and trade union rights that cannot be ignored. Ignoring these can lead to serious problems, especially from a re-export perspective. To address these concerns, it is essential to proactively address them rather than dismiss them as unimportant.
While some may argue that these issues are not substantive, it is important to recognize that they are issues that require careful consideration. For example, trade union rights are an ongoing process, including decisions about overtime pay and maternity leave.
Staying involved in these issues is a wise approach. It is not enough to simply claim there are no problems, as unexpected sanctions could have a serious impact on the country’s economy. The example of the US-China trade war, where heavy tariffs were imposed on imports from China, provides a lesson.
It is recommended that these problems be accepted and dealt with systematically, showing progress step by step. Rather than treating these simply as market access issues, the focus should be on protecting workers’ rights.
The economy has reached a point where it has to deal with daily challenges on a daily basis. There is no room for procrastination. Some reforms are needed, but they are very painful.
A lot of money is being siphoned off from our banking sector. If current bankruptcy laws are applied, many criminals could be brought to justice. While the visibly sick industrialists are dealt with, those who abuse the system must be discovered and dealt with. Zero tolerance is vital, even though governments struggle to collect revenue from these illegal activities, taking away our reserves.
The macroeconomy faces clear pressures from inflation, declining reserves, and import capacity. Overcoming these challenges requires the implementation of reform programs. There is an urgent need to not only respond to the IMF’s advice, but to pursue reforms in our country’s interests.
Political leadership is essential to address the challenges of the second generation, requiring collective initiative and acceptance of necessary reforms, even if they involve immediate discomfort.
Professor Mustafizur Rahman Special Research Fellow at the Center for Policy Dialogue (CPD). This article is based on a conversation with a TBS senior correspondent. Jahidul Islam.