Compliance, new markets, diversification – EPB finds key to $80b export

From expansion of the export basket with potential items to exploring new markets to environmental compliance in manufacturing goods are all that the Export Promotion Bureau (EPB) thinks will help Bangladesh go the extra mile in achieving its target to export $80 billion by 2024.

The EPB also suggests introducing a cold chain warehouse service at the third terminal of Hazrat Shahjalal International Airport to boost agriculture exports that are limited to only ethnic markets.

The to-do list that the state-owned export facilitator has prepared also gives importance to providing policy support to fuelling services exports.

Besides, the EPB feels urgency to put the Common Effluent Treatment Plant in Savar Tannery Estate into complete effect so the leather industry gets compliant globally.

 

After having pinpointed different problems in the export sector, the bureau in a letter to the commerce ministry has made such recommendations and wants those to be featured in the next meeting of the national committee on exports, headed by Prime Minister Sheikh Hasina. 

Bangladesh's exports will surge to $58 billion in the current fiscal year with a 30% year-on-year growth as per data provided by the EPB to the commerce ministry.

In the letter of recommendations, EPB Vice-Chairman AHM Ahsan said there is no alternative to enhancing product quality, marketing efficiency and competitiveness to strengthen the country's foothold in the ever-changing competitive export market.

The EPB put an utmost importance on fuelling exports in large global markets, such as China, Russia, Latin America and East Europe. 

Trade relations with those major export destinations should be developed side by side branding Bangladeshi products there, it said.

At present, Bangladesh exports are mainly limited to the United States, European Union and a few of their nearby countries.

A need for eco-friendly export sector

To build an environmentally-friendly export sector, the agency said policies should be formulated to discourage the setting up of polluter industries. Besides, compliant factories should be given incentives or policy support.

The EPB has recommended closely monitoring activities of exporters – whether they are compliant with environmental issues in the manufacture of export products.

"A variety of environmental compliance issues can pose challenges to the expansion of our exports as future trade will not be limited to only tariff benefits, rather may revolve around climate change," the EPB said.

Developed countries are moving towards introducing trade benefits for those manufacturing in compliance with environmental protection, it pointed out, suggesting that Bangladesh starts negotiations from now on. 

Mohammad Hatem, acting president at Bangladesh Knitwear Manufacturers and Exporters Association, told The Business Standard, "We must explore new markets, diversify products and achieve environmental compliance."

But it will be difficult to achieve the export target unless the government adopts a business-friendly policy, including resolving the complexities relating to opening back-to-back LCs, he said.

Gaining more capacity, reaching out agro products

There is a high rate of incentives on agriculture exports, but there are not many to capitalise on it. Bangladesh's agriculture exports, limited to ethnic markets, now amount to $1 billion a year. 

The EPB has identified a lack of air cargo services and proper cold storage facility as the main reasons for agro exports not growing as expected.

Many agricultural goods are left in an open space with no cold storage facility at the airport, resulting in degradation of product quality and subsequent losses for exporters, the bureau noted.

To increase exports of agricultural products, the country should be divided into several zones to ensure field-level packing facilities and cold chain management, the EPB said, adding that there is also a need for setting up a warehouse at the airport to maintain cold chain while exporting vegetables and fruits.

Besides, it has recommended establishing a processing zone for crab and eel exports and increasing testing facilities at lower costs and providing reports within a short time.

SM Jahangir Hossain, president at Bangladesh Fruits, Vegetables and Allied Products Exporters Association, "The main obstacle we face is failure to export products at competitive prices because of high air freight costs."

He told TBS that the cost of sending Bangladeshi vegetables by air is Tk250 per kg, which is much less in India.

Highlighting the fact that Biman Bangladesh Airlines does not have any separate air cargo to send these goods from Bangladesh, he also said although the airlines of other countries operate 20 to 25 air cargoes per week, Biman does not have a single one.

If the existing challenges in sending goods abroad at competitive prices are resolved, agriculture exports will go up, he pointed out.

Service export yet far from fitting the bill

Recommending development of the service sector to boost export earnings, the EPB said Bangladesh's earnings from services exports only account for $8 billion, while the global market size stands at $9.6 trillion.

The EPB has recommended that the government provide policy support to attract investment in the country's service export sector 

Emphasising formulating an effective action plan in collaboration with the EPB, Bangladesh Association of Software and Information Services (BASIS) and other agencies to boost service exports, the agency said issues related to service exports are very complex. So, entrepreneurs need to be trained on the nitty-gritty of international service trade.

Former BASIS president AKM Fahim Mashroor, thinks a lack of quality human resources is one of the major obstacles to exporting services, especially software.

Fresh graduates, who are trained up by companies, leave jobs or go abroad once they gain expertise. That is why the companies are reluctant to spend on training, he said.

In this case, if the government bears the salary expenses of new recruits during their training period of six-months or one year, the human resource in this sector will increase, he noted.

He also emphasised branding Bangladeshi software abroad to generate demand.

No CETP barrier to leather export

The EPB thinks no operation of the common effluent treatment plant set up by the government in Savar tannery village has led to a fall in exports of leather and leather goods.

The bureau said factories that currently export leather goods have kept on their production by importing leathers from abroad under bond facilities. As there is no demand for domestic leather in export-oriented factories, there is little effort to make the CETP in Savar operational. As a result, the sector as a whole is not moving forward.

Mohammad Abu Taher, former president of Bangladesh Finished Leather Leathergoods & Footwear Exporters Association, thinks tanneries should be compliant as well. But the tannery owners do not have the financial capacity required for this. 

So, the government should take initiatives to provide them with soft loans, he noted. 

The whole process of making leather goods needs to be made environment-friendly, which also should be promoted positively in the international arena. In this way, the leather sector will see export growth, he said.

How to deal with post-LDC challenges

Duty-free market access to different countries is a facility that played a big role in boosting Bangladesh's exports. After the LDC graduation in 2026, Bangladesh will face many challenges to stay eligible for the benefit. There will be many conditions, such as labour law, environmental issues, good governance and WTO policies that Bangladesh will have to conform to, according to the EPB. 

So, the country needs to expand backward linkage industries and fulfil rules of origin conditions in manufacturing export goods, it said.

While formulating policies, the government should give priority to issues related to building internal capacity and transfer of technology in increasing exports of non-conventional sectors, the EPB added. 

Giving special benefits to domestic and foreign investment in the identified unconventional export sectors will play a significant role in the expansion of the export sector, the agency said.

Exporters differ with 20% export growth forecast for FY23

The finance ministry and the EPB have projected a 20% growth in exports for the fiscal 2022-23, with earnings reaching around $69 billion. 

However, exporters say it is not possible to achieve this growth as there is a downturn in Bangladesh's main export destinations - the United States and the European Union - because of the Russia-Ukraine war. As a result, both export orders and prices will fall in the future.

Apparel entrepreneurs think that the export growth in the next fiscal year will not be more than 7-8%. 

Md Shahidullah Azim, vice-president, vice-president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), "We think considering the current situation, there is no possibility of more than 7-8% growth in the next fiscal year. If the situation gets worse, even this rate will not be achieved."

On the other hand, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) thinks knitwear garment exports can grow at less than 7%.

BKMEA vice-president Fazlee Shamim Ehsan said the current financial year's growth is about 35%. Naturally, the growth in the following year slows down after such a massive growth.

Prices of raw materials went up in the current fiscal year, and consumers also released their pent-up demand after the pandemic situation normalised, he noted. 

"Now, demand in our main export destinations may drop because of soaring inflation caused by the Russia-Ukraine war," Fazlee Shamim Ehsan also said.

But entrepreneurs in the home textile sector, a major export-earner after readymade garments, are expecting big growth in the next fiscal year as well.

Shahadat Hossain Sohel, president at Bangladesh Terry Towel and Linen Manufacturers and Exporters Association, told TBS, "The growth may continue next year as we are getting good response from global buyers. In the last 11 months, home textile exports saw 41% growth."

The government had set a target to earn $43.5 billion from exports for the current fiscal year, having projected an about 12% growth over FY21. 

The exports exceeded that target and raked in more than $47 billion with a 34% growth in the first 11 months of the fiscal year.

In a meeting with the EPB last year, the BGMEA had projected growth in RMG exports at 7% and the BKMEA at around 15%. The growth in apparel exports in the last 11 months stood at about 35%.