Export Import Condition Of Bangladesh 4g3j4a

Introduction: Bangladeshi international trade is extremely small relative to the size of its population, although it experienced accelerated growth during the last decade. It is not very diversified and depends on the fluctuations of the international market. The Bangladeshi government struggles to attract export-oriented industries, removing red tape and introducing various financial and tax initiatives. Between 1990 and 1995 Bangladesh doubled its exports from US$1.671 billion in 1990 to US$3.173 billion in 1995 and then almost doubled them again from US$3.173 billion in 1995 to US$5.523 billion in 1999.During the 1990s, the United States has been the largest trading partner for Bangladesh, with its exports to the United States reaching 35.7 percent in 1998-99. This percentage consisted mainly of Ready-Made Garments (RMG). is the secondlargest export market, with the proportion of goods reaching 10.4 percent; and the United Kingdom is in third place at 8.3 percent. Other export destinations are , Italy, the Netherlands, Belgium, and Japan. Trade (expressed in billions of US$): Bangladesh

Exports

Imports

1975

.327

1.321

1980

.793

2.599

1985

.999

2.772

1990

1.671

3.598

1995

3.173

6.497

1998

3.831

7.042

1999

3.83

7.04

SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.

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Comparative Performance of Bangladesh’s Exports: The performance of Bangladesh’s export sector in recent years is quite impressive especially in the 1990s when we compare it with that of world and SAARC countries. The average annual growth rate of Bangladesh export (11.91%) is higher than those of the world (9.48%) and SAARC countries (10.69%) during 1990-2003. Because of the lower export performance in the 1980s, annual average growth rate of this sector during 1980-2003 is not as impressive compared to other Asian countries and the world, though this sector shows competitiveness compared to other SAARC countries (IMF various years). Over the period of 1980-2003 Bangladesh’s exports as a percentage of the world’s exports remain around 0.11% to 0.12% with the exception of 1984, when it was 0.14%, and 1990-1994, when the ratio was around 0.09%. Bangladesh’s exports as a percentage of SAARC countries’ exports show slightly increased trend especially in 2000 and 2001. For these two years Bangladesh’s exports are 11% and 12% of the SAARC countries’ exports respectively. Bangladesh’s share of SAARC country’s’ exports was the lowest, 7.72%, in 1983. Bangladesh’s exports share in the Asian developing countries, however, shows a decreasing trend in the 1990s compared to the1980s though the ratio is slightly higher in 1998 and 1999 compared to immediate earlier years. The ratio dropped to 0.59% in 2003 from 1.46% in 1980 though it was 0.75% in 2001 (IMF various years).

Export Shares to GDP: The contribution of the export sector to Bangladesh’s GDP has been gradually increasing over the years. While export share in GDP was 4.52% in 1980, this share has reached to 13.45% in 1999, reflecting 197.56% increase in GDP contribution in nineteen years (World Bank 2004). This ratio further increased in 2000, 2001 and 2002. The ratio was 15.38% in 2001. The trade openness (trade/GDP ratio) was around 14% to 16% till 1989. After that the ratio increased to 28% in 1995. In 2001 the ratio has increased to 36.88% which implies that trade has been liberalized in Bangladesh to a great extent since 1980. Over the years trade deficits ranged from 2.23% to 7.37% of GDP (World Bank 2004).

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Export Earnings and Export Growth: The export sector performed rather well throughout the 1990s. This sector achieved a growth rate of 37.04% in the FY 1994-95. During the twelve years, 1991-92 to 20022003, Bangladesh experienced negative export growth (-7.44%) only in FY 2001-2002. The terrorist incident of September 11, 2001 in USA and subsequent events may be blamed for this unexpected suffering of the export sector in the particular fiscal year. However, the export sector achieved a 9.39% growth rate, an increase of US$ 562.35 million, during 2002-2003, with total export earnings amounting to US$ 6,548.44 million compared to US$ 5,986.09 million in 2001-2002. Charts 1 and 2 provide comparative year-wise export earnings and export growth rates for twelve years.

Exports Performance Compared to Imports: The export earnings also continuously increased over the years with increased import payments. Though import payments are always higher than the export earnings in absolute , the percentage of Bangladesh’s export to imports is improving gradually and in recent years has been quite impressive. In FY 1983-84 the value of Bangladesh’s exports was US$ 811 million and the corresponding figure for Bangladesh’s imports was US$ 2073 million that represents export/import ratio of 39.12%. The export-import ratio increased to 70.09% and 67.80%, respectively, in FY2001-02 and FY 2002-03 (EPB 2004).

A Review of Trade Balance: During the last decade, Bangladeshi exports shifted from the sale of agricultural products and raw and processed natural resources to labor-intensive manufactured goods (including clothing, footwear, and textiles), but the country, unlike neighboring India, could not catch up with the exporters of skill-intensive products. The problem of balance of trade in Bangladesh is well known: ever since the independence of the country, export earnings have persistently fallen behind import payments. Consequently, every year the country incurs a huge trade deficit.

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Bangladesh has a long history of maintaining a negative trade balance, importing more goods than it exports. In the 1970s and 1980s it imported goods and services twice and sometimes 3 times as much as it exported. Even during the relatively successful 1999 financial year, the country exported just US$5.523 billion worth of products while it imported US$8.381 billion worth of products, leaving a large trade shortfall of US$2.858 billion. Bangladesh: Trade Balance and Export-Import Price Indices Year a

1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00c

Exports 2,983 3,136 5,552 6,670 7,178 9,632 10,997 11,484 12,387 18,016 20,136 26,225 27,396 33,682 41,161 42,686 41,515 60,272 74,198 88,215 98,739 136,970 144,521 171,554 229,408 245,620 289,383

Value (Tk. Million) Importsa Trade Balancea 7,320 -4,337 10,842 -7,706 14,703 -9,151 13,993 -7,323 18,216 -11,038 22,073 -12,441 30,525 -19,528 37,288 -25,804 38,729 -26,342 45,265 -27,249 50,874 -30,738 68,263 -42,038 62,929 -35,533 68,496 -34,814 91,588 -50,427 95,075 -52,389 113,305 -71,790 111,877 -51,605 132,756 -58,558 138,198 -49,983 137,540 -38,801 218,564 -81,594 254,646 -110,125 290,187 -118,633 318,916 -89,508 341,016 -95,396 422,755 -133,372

Price Indices (1984/85 = 100) Exportsb Importsb 46.8 49.0 57.9 64.2 50.7 58.2 56.1 57.7 64.4 59.1 80.4 68.7 97.0 87.4 80.0 102.6 68.7 107.1 69.9 101.5 82.5 100.1 100.0 100.0 72.5 88.9 75.2 81.1 88.0 82.5 85.1 87.7 87.9 93.0 93.7 96.9 92.3 94.2 98.6 97.3 104.1 100.0 111.0 108.9 118.5 116.9 124.1 120.4 128.9 124.5 129.2 130.9 129.9 142.6

Sources: a. BBS, Foreign Trade Statistics (various issues) b. Bangladesh Economic Survey (various issues) c. Bangladesh Economic Survey, 2001

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Exports of Bangladesh to Industrial and Developing Countries: While developing countries were the major destinations during the 1970s and early 1980s, this direction reversed from the middle of 1980s and the trend continued throughout the 1990s and thereafter. Now industrial countries are the main destinations of Bangladesh’s exports. The industrial countries used to represent 41.4% share of Bangladesh exports in 1978 and developing countries used to represent 45.8%. In 2002 these figures stood at 88.3% and 11.7% respectively for industrial and developing countries. Among the developing countries, the Asian countries import more than others from Bangladesh. It is also observed that the annual growth rate of Bangladesh’s exports to the world is positive since the 1990s; it is found very impressive in 1990 and 1994 being 28.1% and 16.3% respectively. However, the corresponding figures are better for industrial countries: 40.6% and 18.7%. The export growth rate to developing countries in 1998 and 2002 are negative, -15.9% and –2.9% respectively though these rates were positive in 1990 and 1994.

Trade Policy Reforms: During the past three decades, Bangladesh carried out extensive trade policy reforms. In particular, the country has been pursuing a liberal trade policy since the beginning of the 1990s, which is consistent with the trends in the global market economy, Uruguay Round Accord and agreement with the World Trade Organization. The government formulated a five-year export policy along with a more liberal five-year import policy in 1997/98 with the objective of attaining a favorable trade balance and gradual improvement in the foreign exchange reserve situation (GOB 2002). The governments in 1990s really wanted to promote rapid export growth by reducing and eliminating the anti-export bias prevalent in the economy. Keeping this goal in mind, the government has been pursuing a limited protective policy only in consideration of several important issues like public health, security and religious restrictions. Also, the government has been adopting more liberal import and export policies and programs including reduction and harmonization in tariff rates, and elimination of many quantitative restrictions on imports (GOB 2002, CSB 2003).

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Export Products of Bangladesh:

Garments

Vegitable

Jute Products

Handicrafts

Woven Garments

Frozen Fish

Food Products

ICT Products

Knitwear

Potteries

Ceramics Products

Bicycle

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Growth of Exports: Bangladesh’s total exports got a significant boost with an annual trend growth rate of 14.24 percent during 1985/86 to 1999/00, compared to an annual trend growth rate of below 10 percent (in nominal US dollar ) over the earlier period of 1972/73 through 1984/85. Such a pattern of export growth over time largely reflects the effects of progress in Bangladesh’s policy reforms over the period. Export products during the earlier period (e.g. jute and jute goods) did have a significant effect in limiting the overall export growth, especially starting with the mid-1980s. The export upturn in the latter period also reflects the fact that the export setback in jute and jute goods was more than recouped by remarkable growth in the export of a new product group, ready-made garments.

Jute goods: Among jute and jute goods, only jute goods had a statistically significant low annual trend growth rate of more than 6 percent during the early period and around 1 percent for the entire period. In the latter period, (1985/86 to 1999/00), it had no significant growth trend. Raw jute exports, on the other hand, had statistically significant negative growth trends for the whole period as well as for the second period. The reasons for the decline were the growth of jute manufacturing industry in the country and falling demand for raw jute in developed countries due to extensive use of synthetic fibers (Hessian, 1996).

Frozen food:

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Frozen food (mainly frozen shrimps) was one of the major product groups, which had a highly satisfactory trend growth rate of 16.11 percent for the whole period. However, its growth remained uneven, a spectacularly high rate of 31 percent during the period till 1984/85 along with a sharp drop to about 8.4 percent during 1985/86 to 1999/00. The drop in the growth rate in the later period may be attributed to a fall in demand in the EU markets in the late 1980s and early 1990s, which recovered only during the second half of the 1990s. The dwindling growth of frozen foods in the later period may also be attributed to supply constraints.

Tea: Tea falls in the category of an exceptional export product since it had a significant growth of 13 percent during the early period up to 1984/85. However, its growth was so low and erratic subsequently that it showed a negative growth trend during the later period. While Bangladesh successfully recouped the loss of tea export earnings caused by the dislocation during the country’s war of Independence, it lost the momentum in its race with India and Sri Lanka in the late 1980s and early 1990s.

Leather and leather products: Bangladesh’s exports of hides, skins, and leather, and leather products have increased since the early 1970s. The product group, included in the traditional export category, had a trend growth rate of about 9 percent during the entire period, which was close to the average growth for all exports. Its growth rate was more than 13 percent during the first period but the rate slowed to 5 percent during the second period .

Readymade garments: Starting from a virtually zero base during the late 1970s, readymade garments exports grew at a very rapid rate of about 95 percent during the early period up to 1984/85, and, from a sizeable base, at a moderate but fairly high rate of 20.37 percent during the later period.

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Knitwear products newly entered the export market with some significance only in 1989/90 and since then its export grew very rapidly – at a much faster rate than other readymade garments. The very fast growth of the RMG product group as a major export earner (in gross ) was the most remarkable development for Bangladesh, and without this phenomenal growth, Bangladesh’s total exports which had a setback in the traditionally important exports of jute and jute goods, could not have grown at double digit in the late 1980s and 1990s.

Annual Growth Trends of Exports by Commodity Groups Commodity Group

1972/73 – 1999/00

1972/73 – 1984/85

Raw Jute -1.75 0.71 Jute Manufactures 1.22 6.49 Frozen Foods 16.11 30.58 Tea 1.75 13.23 Leather 8.86 13.2 Readymade Garments* 57.10 94.91 Others 19.02 23.18 Total Exports 10.91 8.6 Source: Author’s estimation based on Bangladesh Bank data.

1985/86 – 1999/00 -2.13 1.01 8.4 -0.95 4.88 20.37 24.39 14.24

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Growth in Exports Millio

ns

7000

Million $

6000 5000 4000 3000 2000 1000 0 1990-91

1991-92

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

years

Composition of Exports 1999-00

12% Woven Garments

6%

Kintwear

6% 54%

Frozen Food Jute and Jute goods

22%

others

Trend of growth in export of Bangladesh among 1980-90 to 1990-99s: During 1990s, Bangladesh’s total exports in Current US $ value grew at an annual compound rate of 14.4 per cent. In fact, Bangladesh experienced double digit export growth in most of the years during the 1990s.The Gap between Export and Import widened from-US$1791 million in 1990/91 to -$2814 million in 1990/00,although the share of export earnings in import payments steadily rose from 31 per cent in 1980/81 to 67 per cent in 1999/00.The openness of the economy as measured by total external trade as a proportion of GDP went up from around 22 percent in 1990/91 to nearly 30 percent 10

in 1990/00 with the share of export in GDP rising from 7 per cent to 12 percent during the same period. Trend of growth in export among 1980-90 to 1990-00 Description

1980/81

1990/91

1999/00

Annual compound

Annual

Growth rate %

compound

1980s

Growth rate %

Export(millions $)

710

1718

5752

9.2

1990s 14.4

Import(millions $)

2282

3510

8566

4.4

10.4

Trade Deficit

1572

1792

2814

1.3

5.1

(million $) Export as % of

31.1

48.9

67.1

import Export as % GDP

5

7.3

12.1

import As of GDP

16

15

17.9

Openness of the

21

22.3

30

economy %

Source: Export Promotion Bureau and World Bank

Changes in Composition of Exports and Imports:

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Exports of traditional goods (composed of jute, jute goods, tea and leather), constituted most of Bangladesh’s total exports, around 97 percent in 1972/73. These exports precipitously fell to less than 10 percent in 1999/00. At present the dominance of raw jute and jute goods in the export trade of Bangladesh has weakened considerably, and some non-traditional items have made inroads. For example, the share of raw jute in export earnings has declined from about 38 percent in 1972/73 to a meager 1 percent in 1999/00. Over the same period, the share of jute goods declined from 52 percent to less than 5 percent. Another traditional exports item, tea, declined from 2.7 percent to 0.3 percent during the period. Tea’s relative export share did increase in some of the years in the 1980s but it declined sharply in later years. Leather’s share in total exports showed a significant increase from 4.6 percent in 1972/73 to more than 10 percent in the late 1980s but declined to a level of 3.4 percent in 1999/00. On the other hand, nontraditional exports (i.e., exports of goods other than traditional ones) dramatically grew in importance from 3 percent of total exports in 1972/73 to more than 90 percent in 1999/00. Among the nontraditional exports, RMG including knitwear rose to 54 percent during 1999/00 from an insignificant level in the early 1980s. The share of frozen food increased from less than 1 percent to 6 percent during the years. Frozen food’s share in total exports was higher in the 1980s but its later decline reflected a deceleration in its growth performance in recent years. Residual export category showed a big jump in export importance from 1.8 percent in 1972/73 to 31 percent in 1999/00.

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Composition of Exports by Commodity Groups (% of Total Export Earnings) Year 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00

Raw Jute

Jute Goods

7.56 8.18 6.07 4.29 3.14 2.26 2.08 2.32 2.63 2.09 1.35 1.25

18.92 18.69 10.41 14.71 12.26 11.21 9.21 8.49 7.20 5.43 5.71 4.62

Frozen Foods 10.99 9.05 8.26 6.40 6.93 8.34 8.63 8.10 7.28 5.76 5.15 5.98

Tea

Leather

3.10 2.59 2.52 1.62 1.73 1.50 0.95 0.86 0.87 0.91 0.73 0.31

10.65 11.74 7.82 7.25 6.25 6.66 5.83 5.45 4.41 3.67 3.16 3.39

Readymade Garments 36.63 39.97 42.83 53.36 52.05 50.97 52.98 50.23 50.62 54.97 56.07 53.60

Others 12.13 9.78 22.10 12.37 17.62 19.06 20.32 24.55 26.99 27.17 27.84 30.84

Source: Author’s calculation based on Bangladesh Bank data

Some Graphical Statistics over Last Two Decades:

Figure 4.1.2 shows that: During 1983-84 to 1989-90, the average trade deficit was 7.3% of GDP. This deficit decreased to 6.7% on average in the last five years.

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Figure 4.2.1 shows that: The growth in exports has fluctuated considerably from an average low of 7% in 19811985 period to an average high of in excess of 17% in 1991-1995 and 2006-2008 periods.

Figure 4.2.2 shows that:

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The share of primary commodities to total exports decreased from 17.5% in 1980-81 to 7% in 2007-08.On the other hand, the share of manufactured goods to total exports increased from 44% in 1980- 81 to 93% in 2007-08.

Figure 4.4.4 shows that: � there has a dramatic increase in the number of expatriate workers since 2005, rising from about 2.50 lakh to 8.75 lakh. � However, the impact of the global financial crisis may lead to a decline over the coming months.

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Trend of Export Earnings: At present, Bangladesh faces growing economic competition from India, Pakistan, and Indonesia, countries which could offer better infrastructure and larger and growing domestic markets. The exports of Bangladesh have been experiencing a steady rise since the late 80s of which apparels constitute approximately 75% of the total exports. Other items include frozen foods, jute & jute products, leather & leather products, handicrafts, vegetables, chemical products etc. Major export markets for Bangladeshi exporters are North America (33%) and EU (52%) while other regions constitute the rest. In Fiscal Year 2006-07, total exports earnings of Bangladesh exceeded US$ 12 billion. The trend of Bangladeshi exports from FY 1972-72 to 2006-07 iis shown below.

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Conclusion: Bangladesh economy has ed through a heightened pace of global integration in the 1990s. The degree of openness of the Bangladesh economy is now higher than many developing countries – exports and imports of goods and services currently for about a-third of the country’s GDP. Thus, by definition, the state of the global economy is likely to have a stronger impact on the Bangladesh economy now than at any time in the past. The impact of the state of the global economy would continue to be increasingly felt in of the country’s macroeconomic performance, GDP growth rate, external sector performance, foreign exchange reserves, and health of the financial institutions. This is perhaps one of the most important legacies that the Bangladesh economy has inherited through its developmental practice and reforms of the 1990s. Bangladesh’s export sector ed double-digit real growth rate throughout the 1990s. As a matter of fact, real export sector growth rate was almost three times the real GDP growth rate during this period. Even during FY 1990 and FY 1991, a period which coincided with the last major global recession, Bangladesh’s export sector posted robust growth rates of 17.9% and 12.7% respectively. The structure of export was different, though, at the time. Raw jute, jute goods and leather were some of the major export commodities in the early 1990s, their combined share being equal to the share of RMG in total exports of Bangladesh. A relatively diversified base and market provided some sort of a cushion against sudden fluctuations of the global market. Exporters

and

trade

experts

attribute

Bangladesh’s

export

success

to

the

‘competitiveness’ of the country’s readymade garment sector and availability of cheap labor, although exports of frozen food, leather and jute fell. Garment manufacturers produced lower-end products whose demand did not fall significantly in global markets. Remaining competitive in these days of difficulties since the quota system was withdrawn and the ongoing lingering economic slide worldwide is rewarding for Bangladesh.

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Bangladesh maintains export trends YEAR

1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

EXPORT IN (MILLION US$) Export (M US$) CURRENT CUMULATIVE 0.16 0.16 4.45 4.61 7.59 12.21 15.27 27.47 13.93 41.40 16.08 57.48 34.21 91.69 47.99 139.67 76.99 216.67 127.05 343.71 145.60 489.32 228.26 717.58 337.02 1054.60 462.77 1517.36 636.05 2153.41 711.69 2865.10 890.82 3755.92 1067.87 4823.79 1077.03 5900.81 1200.22 7101.03

2003-04

1353.91

8454.94

2004-05

1548.68

10003.62

2005-06

1836.18

11839.80

2006-07

2063.67

2063.67

2007-08

2429.58

16333.04

2008-09

2581.70

18914.74

2009-10

2822.54

21737.28

2010-11 (January, 2011)

1940.01

23677.28

Growth (2009-10)

9.33%

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.References: • Bakht, Z. (2001): “Trade Liberalisation, Exports and Growth of Manufacturing Industries in Bangladesh” in M. M. Huq and Love (eds.) Strategies for Industrialisation: The Case of Bangladesh, University Press Ltd., Dhaka. • Rab, A. (1997): “Export Trends and Policies in Bangladesh: Some Lessons of Past Performance for Future Policies”, paper presented to a Workshop organized by the Institutional to the Ministry of Finance Project (ISMOF) ed by the Asian Development Bank, March, Dhaka. • Rahman, S. H. (1979): “The Determinants of Change in Trade Balance: Some Estimates for Bangladesh, 1959/60 – 1974/75”, Bangladesh Development Studies, vol. 7, pp. 71 – 84. • Ahmed, S. and Sattar, Z. (2004). “Trade Liberalization, Growth and Poverty Reduction: The Case of Bangladesh,” Working Paper, World Bank, South Asian Region. May 01, 2004. The paper was also presented in the ABCDE Bangalore Conference in May, 2003. • Bangladesh Bank. (2002-2003). Annual Report 2002-2003, Dhaka, Bangladesh. • Bangladesh Bank. (2007). Quoted in www.banglaembassy.com.bh/FDI%20in %20Bangladesh.htm. ed on 31 October 2007. • BBS. (2000). Statistical Pocketbook of Bangladesh, Bangladesh Bureau of Statistics, Dhaka, Bangladesh. • D. (1997). Growth or Stagnation? A Review of Bangladesh’s Development 1996, Centre for Policy Dialogue/University Press Limited, Dhaka. • CSB. (2003). Country Study of Bangladesh, A Paper Presented at the Country Studies Workshop on ‘Trade Cooperation and Economic Policy Reform in South Asia’, Bangladesh Institute of Development Studies, Dhaka, Bangladesh, March 30. • EPB (Export Promotion Bureau). (2004). Bangladesh Export Statistics 2002-2003. Export Promotion Bureau, Dhaka, Bangladesh. www.epbbd.com/ExportStat.html • GOB. (2002). ‘Foreign Trade, Exchange Rate Management and External Sector’, Bangladesh Economic Review, Finance Division, Ministry of Finance, the Government of Bangladesh, Dhaka. • GOB. (2003). Export Policy 2003-2006, Ministry of Commerce, Government of Bangladesh, December, 2003. • GOB. (2006). Trade Policy Review by Bangladesh, World Trade Organization, Report No. 06-3754. ed on 10/9/07. • World Bank. (1999). World Development Indicators Database, World Bank, Washington, D. C. • World Bank. (2000). World Development Indicators Database, World Bank, Washington, D. C. • Bangladesh International trade, Information about International trade in Bangladesh http://www.nationsencyclopedia.com/economies/Asia-and-thePacific/Bangladesh-INTERNATIONAL-TRADE.html#ixzz1GOf4e1tc • Bangladesh Export Promotion Bureau

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