The Coronavirus pandemic had a very devastating impact on the Bangladesh garment industry. Mass order cancellations by global buyers, payment defaults, closing down of retail chains in the West for prolonged periods owing to Covid-19 outbreaks, supply chain disruptions, countrywide shutdowns imposed in Bangladesh leading to factory closures, the latest of which was very recently, all combined to bring immense hardships to the apparel sector of the country.
However, after a protracted pandemic-induced downturn, Bangladesh seems to be on the path of returning to normalcy with its exports raking in US $ 38.75 billion in FY ’21, recording a growth rate of 15.10 per cent, riding high on RMG export recovery, which earned US $ 31.45 billion showing a 12.55 per cent growth, according to the figures of the country’s Export Promotion Bureau or the EPB.
This is no mean feat considering the fallouts of the pandemic, when many economies in the world faced challenges of Coronavirus shutdowns and trade disruptions. However, on the other hand, as per the EPB data, only a handful of countries are found to be Bangladesh’s main export destinations even as with over 72 per cent of all Bangladeshi exports landing in only five markets in 2020-21, it’s evident in itself that Bangladesh’s exports are too concentrated in a handful of markets.
As per reports, of the total export earnings of US $ 38.76 billion, Bangladesh earned US $ 28.06 billion from just five markets—the European Union, United States, India, Japan and Canada and, as per market observers and experts, further expansion, diversification and finding and exploring new markets might be key for Bangladesh to see its exports get its next big jump even as if countries within the EU market are tallied separately, there are at least 16 countries (European and Non-European together) where Bangladesh, managed to export goods worth anything above half a billion, and where perhaps lies the opportunities, which if exploited, could very well give the impetus that Bangladesh has been looking for to increase its exports.
Meanwhile, the United States of America, Germany, the United Kingdom, and Spain came among the top four countries where Bangladeshi goods worth over US $ 2 billion or more were exported in 2020-21 even as amongst the next seven countries, France, Poland, Italy, India, Netherlands, Japan and Canada are the markets where goods worth anything in the range of US $ 1 to 2 billion were exported.
However, in contrast to the above-mentioned names, Australia, Belgium, China, Russia and Turkey are the five countries where Bangladesh exported goods worth only over half a billion dollars but below a billion dollars with Russia registering the biggest surge in terms of year-on-year increase in its import volume from Bangladesh with Bangladesh’s export to Russia hitting an over 36 per cent increase between 2019-20 and 2020-21 financial years and Australia nearly seeing 23 per cent rise.
Russia in particular has long been considered a promising export destination which could help Bangladesh garment exporters reap rich dividends. Such are the prospects of the Russian market, that a year or so earlier, the apex garment makers’ bodies of Bangladesh – the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) proposed the Commerce Ministry to set up warehouses and display centres in Russia to promote Bangladesh’s exports.
If reports are to be believed, it is the Commonwealth of Independent States-Bangladesh Chamber of Commerce and Industry (CIS-BCCI), which first made the proposal to set up warehouses and display centres in different cities of Russia, including in St. Petersburg and Moscow, to particularly promote exports by SMEs.
Following the requests from the business community and recommendation from Bangladesh embassy in Moscow, Bangladesh Government was reportedly assessing options of establishing warehouses and display centres in the Russian Federation.
Additionally, it was in January this year that media reports maintained the Bangladesh Bank had taken an initiative to enter into a bilateral currency swap agreement with the Central Bank of Russia, to strengthen its trade ties with Russia even as the currency swap deal will enable both the countries to exchange their local currencies against any third currency except the US dollar between them and there will be no need for introducing correspondent banking between the two countries for export and import activities.
“We want the signing of the swap deal with Russia as soon as possible. Our export potential to Russia is higher than in many European countries,” reportedly maintained the Senior Vice-President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem interacting with the media, while adding, “the Russians also have more purchasing power than in many European countries. If the swap deal is signed, it will be possible to increase Bangladesh’s exports to one of the world’s largest markets several times in a few years.”
According to reports, there is considerable demand for Bangladeshi knitwear in the Russian market apart from other products like leather, medicines and shrimp even as in this context, Bangladesh reportedly took various initiatives to increase bilateral trade with Russia and as part of the same, Bangladesh has struck an agreement with Russia similar to the Trade and Investment Cooperation Forum Agreement (TICFA) signed with the US. A couple of years ago Bangladesh also signed an agreement with the Russian-led Eurasian Economic Commission.
Meanwhile, as far as China is concerned, a recent research conducted by a team of three researchers headed by the Chairman of the Research and Policy Integration for Development (RAPID) Dr. MA Razzaque, showed Bangladesh’s exports to China should be at least US $ 4 billion even if it underlined that Bangladesh could not harness even 30 per cent of its export potential in the Chinese market.
So, why is Bangladesh unable to exploit the potential in China, which notwithstanding the fact being the world’s top exporting country, also imports more than US $ 2.5 trillion worth of goods a year. Looking at 2020-21 fiscal year, Bangladesh reportedly exported only US $ 680 million worth of goods to the country, of which 40 per cent was readymade garments. And this despite the fact that China has been providing duty-free access to most of Bangladesh’s products under LDC since 2011 and, from 1st July last year, this zero-tariff facility has been extended to a total of 8,256 products.
Now, if exporters and experts are to be believed, the kind of public-private initiative needed to capture the Chinese market is simply not there, who further added that the BKMEA attended a fair in China in 2005, but there was no more participation after that.
Meanwhile, citing the example of one of his own buyers, Mohammad Hatem said a buyer had spoken to him about an order for garments made of a combination of nylon and polyester, but he could not take it because they did not make that type of garment even as Bangladesh’s former Ambassador to China and former Chairman of the Bangladesh Institute of International and Strategic Studies (BIISS), Munshi Faiz Ahmad, reportedly told media that China has given Bangladesh many opportunities.
But if we can’t make what they need, then exports can’t be increased, reportedly maintained Munshi Faiz Ahmad while adding that Bangladesh also does not have an organised study on how to increase exports to China.
Besides, the obligation to add 40 per cent value to local products for exports to the Chinese market is one of the obstacles to increasing exports to the country, underlined Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem. Besides, the gradual reduction in tariffs for other exporters to China under MFN (Most Favoured Nations) has created more competition for Bangladesh, said Dr. Mostafa Abid Khan, an international trade expert and former member of the Tariff Commission.
In 2011 when most of Bangladesh’s products enjoyed duty-free access to the Chinese market, other countries had to pay 16 per cent duty; but under the MFN, China has gradually reduced tariffs for those countries to about 6 per cent in 2018, which means Bangladesh’s preference margin in the Chinese market has decreased, exposing the country to stiff competition, observed Dr. Mostafa Abid Khan.
If these issues can be addressed, experts feel Bangladesh stands a decent chance to exploit the export potentials that exist in the Chinse market.
Apart from Russia and China, Australia, too, is coming up strongly in terms of importing ‘Made in Bangladesh’ products, especially apparels as is evidenced by the EPB data which clearly maintained that Russia registered the biggest surge in terms of year-on-year increase in its import volume from Bangladesh with Bangladesh’s export to Russia hitting an over 36 per cent increase between 2019-20 and 2020-21 financial years while that for Australia stood at nearly 23 per cent, which is rather substantial.
It may be mentioned here that as a least-developed country, Bangladesh enjoys duty-and quota-free (DFQF) market access to Australia. But, despite this, Bangladesh’s annual export to the 14th-largest economy could not cross a billion-dollar mark so far.
In fiscal year 2019-20 Bangladesh exported goods worth US $ 678 million to Australia and US $ 805 million in the previous year, while on the other hand, Bangladesh’s imports from Australia were around US $ 649 million in FY 2019-20, up from what was US $ 597 million in the previous fiscal even as Bangladesh’s major export items included apparels, textiles, footwear and articles of leather, apart from ceramics, jute, frozen fish and pharmaceuticals.
However, things are apparently all set to change now after Bangladesh and Australia are now set to sign Trade and Investment Framework Agreement (TIFA) aimed at bolstering bilateral trade by way of removing barriers and tapping potential.
Media reports maintained this while adding both the sides have completed the spadework and taken approval for signing the umbrella agreement, possibly in mid-September, citing concerned officials and went on to add Bangladesh’s Commerce Minister Tipu Munshi and Australian Trade Minister Dan Tehan would sign the deal virtually on behalf of their Governments respectively even as under the agreement, a working group will be formed which will meet annually discussing issues to facilitate bilateral trade and investment by removing the bottlenecks.
We have taken required approval according to the rules of business for signing the pact, reportedly maintained a senior Commerce Ministry official speaking to the media while adding both the parties concerned has agreed to sign the deal on 15 September.
The official further reportedly added the aim of deal signing is to boost trade and investment through bilateral cooperation in mutually agreed areas with sectors like garments and textiles among the top-listed areas to get priority in bilateral cooperation along with manufacturing, information and communications technology, skills development, and education.
It may be mentioned here that in last December, Bangladesh High Commissioner to Australia in a letter to the Ministry of Commerce maintained bilateral trade between the two countries may reach US$ 5.0 billion once the TIFA deal is signed and both sides start to extend cooperation.
Further, as Bangladesh will lose duty-free- and quota-free market access to Australia once the country graduated from the poor- country club in 2026, if TIFA is signed, Bangladesh will request Australia to extend the duty-and quota-free market-access facility further.
Meanwhile, speaking to the media, Research Director of the Centre for Policy Dialogue (CPD) Dr Khondaker Golam Moazzem said a number of countries in the Indo-Pacific region are in discussion for signing TIFA, while adding such agreements have strategic perspectives, too, which may surpass economic perspectives, even as he added: “The focus of the proposed TIFA with Australia should be exclusively confined to economic issues.”
Considering the facts and figures while also taking into account the views and opinions by experts and stakeholders, Bangladesh would do well to try bolster its exports in the abovementioned markets while also scout for new markets so as to diversify markets and increase exports further in the days to come.