Page 60 - ICE BUSINESS TIMES January 2020

BANGLADESH
ECONOMY

and of course moving towards a the matter is Bangladesh has our exports made up of RMG. It is
trade oriented, outward oriented been exporting large numbers of not going to fall, unless the
policy that gave this accelerated products alongside RMG non-garment exports really grow
growth. That was one critical garments. If you look at the much faster. In the last 10 years
factor. Of course it had to come export basket of fiscal year 2018, we have seen the concentration
with all the other things like we exported 1392 non-garment going up from 75% to 84%.
macroeconomic stability, along products. That’s a lot, but only In my view and after much

Time and Trade development and poverty million dollars. That is about 97% to the conclusion that it’s not the

research in this area, I have come
292 of them were higher than 1
with other strategies for human

competitiveness issue, it’s not the

of the 6 billion dollars of non
reduction. Alongside the high

infrastructure alone. Those are
garment exports that we did in
growth during these three decades,

problems for both exports and
2018. The remaining 1100 export
there was a very high rate of

wait for None poverty reduction; as a result we products, -- I am talking HS code import substitute industries we

have here. The problem that

at 6-digit level . At HS-6 digit
are at a stage now that our poverty

prevents exporters from really
level is how you identify each
level is down to about 21% of the

trying to become proactive and

traded product. The 1100
population, with extreme poverty

down to about 12-13%. This

non-garment sector is the policy

small, less than 1 million dollars.
growth is not just growth in products I mentioned were really expanding their exports in the

In a conversation with Marjiya Baktyer wealth of the economy, but it also What is worse is that we have environment. The policy

environment that creates a

been exporting 1200, 1300
Ahmed, Dr. Zaidi Sattar expounds on the has had a substantial impact on products since 2000 or even negative incentive for exporting, a
reducing poverty.
importance of trade openness, and the before. The number of export policy that overwhelmingly favors

crucial need to properly equip our products is huge, and some of the import substituting production for

demographic dividend to reap the benefits of these were part of the changing We rely on our RMG, and it products may be similar but they sale in the domestic market. This
z the ongoing industrial revolution. direction of economic strategy. has contributed are not the same. RMG is not one happens because of high tariffs.
significantly to our GDP

That created a spurt in economic growth. But haven’t we product, it covers 215 products You have high tariffs to protect the
growth. In the previous 20 years, reached the peak of RMG, that we have exported. domestic industries and restrict

import and import competition.
People will say our infrastructure
Bangladesh economy Asian Tigers – Korea, Taiwan, 1990’s Bangladesh changed there were three 5-year plans and isn’t it time to diversify is bad, our transport is bad and The non-garment sector is not a
has experienced growth Hong Kong, Singapore. – its trade orientation. Not just which all targeted 5% GDP growth, our products. Which is the ports are not functioning, there is 100% export oriented sector
acceleration for the past These countries showed the in trade orientation, but also but never got anywhere close. For next sector poised to power shortage, customs is whereas RMG is 100% export 100% which artificially raises the but the world market is 80 trillio
three decades. Was the world that there was a new in the domestic economy, the first time Bangladesh achieved become as vastly significant incompetent. All of that might be oriented – they can’t sell in the price of the product in the dollars. India is ten times
change in its trade paradigm of growth -- Bangladesh went in for 5% growth on average in the 90’s as our RMG sectors? true, but RMG is being exported domestic market even if they domestic market. Bangladesh Bangladesh’s economy, China is
orientation during the export-led growth which is deregulation, privatization, decade. The growth rate kept going Just about everybody in town has from within this environment, so wanted to. They are meant for middle class is growing. It’s 30 times our economy and the
1990s that sparked the dependent on trade openness trade openness, trade up 1 % every decade. In fact in the been asking this question. In the why can’t other products do it? exports, but the others like growing, and it’s buying, apart world market is several hundred
uptick in GDP growth and integration with the world liberalization, import last 10 years it has been going up first half of the 1990’s when RMG Everybody will tell you that they footwear, leather goods, plastic from food and shelter you are times bigger. So once you are able
and poverty reduction? economy. The new paradigm liberalization, exchange rate 1 % every five years. exports became the predominant are perhaps not competitive. We industry, agro processing industry, buying so many other consumer to get a foothold in that larger

One can ask what is it that was

To answer and clarify the showed that open trade, flexibility, and so on. All of different during this period. The export of Bangladesh, it have researched the ceramic industry – they export and goods. All of these consumer market, you can create jobs here.
context we need to go back a exporting and exploiting the one big difference is we followed superseded the earlier export competitiveness aspect, and also sell in the domestic market. goods are priced at 50-100% above You don’t export just for forei
little bit, before the 1990’s. We world market through exports the trade orientation of the East dominance of jute and jute goods. found that we are competitive in When they sell in the domestic international prices, that’s what exchange, you export to create
had spent two decades in allows faster growth and also Asian economies relying on export We used to have jute as our about 40% of those export market, their profit margins are at our consumers are paying. It’s a jobs. RMG has shown us that yo
which we just followed reduces poverty much faster push and export promotion leading export. Everybody knows products that are non-garment. least 2-3 times the profit margins question of incentives – why create a huge number of jobs
economic policies, and than the old paradigm of through which we achieved we need to diversify our export We are competitive with 30 other from exports because in exports would they produce for exports if through exports and then it’s not
particularly policies of trade import-substituting Alongside the high growth success, not necessarily in so basket, but why are we unable to countries, who also export to the margins are very thin. If you get the domestic market is so just the direct jobs, there are
and industrialization that industrialization where you during these three decades, many sectors, but in one sector do it? Why is it that RMG exports same destinations. 5% or 7% it’s great, but in the profitable? indirect jobs like those who live on
were essentially legacies of tried to produce things at there was a very high rate which is the Readymade Garment continue to grow and grow faster Competitiveness is measured by domestic market you have to do But what we are missing out is the profit and income and salaries
the past. We didn’t really get home, by raising barriers to sector. We did really well in that than the non-RMG exports? Is it some standard measure of 20% or 25%, otherwise you won’t that our economy is growing that come from the RMG sector.
into any new approach to import competition. At the end of poverty reduction; as a one sector. It’s a textbook case of that we don’t have any other competitiveness that economists be able to pay the loans that you because of our exports. The impact is greater than the 35
industrial development or to a of the day you do have some result we are at a stage now where Bangladesh competitive product to export? That is illogical. use. If we are competitive, then take out at 12-15% interest. The Bangladesh economy cannot grow billion dollars’ worth of RMG
new approach to trade industries, but they are not that our poverty level is advantage lies, because in RMG If we could succeed in RMG export, how come we are not increasing fact of the matter is, it is much more than 8% without additional exports that we do. It is a lesso
orientation. In the 1990s we competitive in the world down to about 21% of the the final process of assembly, of it is because we exploited our the exports of these non-garment more profitable to sell in the export success. No country in on what export does. We talked
made the course correction market. population, with extreme fabricating the apparel, is a labor comparative advantage in low products. Year after year you find domestic market, because you history has grown at 8%, 9% or about this growth acceleration
that was essential to bring India for instance realized poverty down to about intensive process and Bangladesh skilled, unskilled labor which is RMG export growing faster than need much less effort to get high 10%, without really integrating which came from our trade
dynamism into the economy. that, but it took India 50 years 12-13%. This growth is not took advantage of its cheap cheap in Bangladesh, though non-garment products. If RMG returns. with the world market, because orientation and export success. If
The change in policy direction to reach that conclusion. just growth in wealth of the unskilled and low skilled labor productivity is not that great. Is exports are growing faster than Bottom line: (a) Gaining a foothold the world market is huge. Once that is not maintained, and we
was inspired by the new Thankfully Bangladesh took force and we know the result. there no other labor intensive non-garments, what will happen in the export market is not easy you get a foothold there the world cannot continue to be an export
paradigm of growth coming about 20 years to realize the economy, but it also has I would argue strongly that it was product in which we also have to the export basket? It will get (b) margins are very thin. And market opens up for you. Domestic success then this growth could
out of East Asian countries. folly of an inward-looking had a substantial impact this radical change in the direction comparative advantage? There are more and more concentrated with then in the domestic market, you market has a scale problem. We slow down. That is the historical
They were called the East closed economy strategy. In on reducing poverty. of Bangladesh’s economic policy numerous items, and the fact of RMG. Right now we have 84% of have protective tariffs of 85% or have a 300 billion dollar economy, evidence.
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