Leather, plastics and light engineering can diversify exports

The International Finance Corporation (IFC) has identified three sectors – leather, plastics and light engineering – for export diversification beyond readymade garments (RMG).

IFC – a member of the World Bank Group – said the sectors have the potential to create greater access to international markets for Bangladeshi products.

The global lender made the observations in a report called "Building Competitive Sectors for Export Diversification: Opportunities and Policy Priorities for Bangladesh," which was launched on Sunday at hotel Amari in the capital.

The report on export diversification was co-authored by Hosna Ferdous Sumi, IFC private sector specialist, and Dr Masrur Reaz, IFC senior economist. 

The IFC report stressed the need for Bangladesh to diversify its export baskets in order to sustain accelerated economic growth, increase investment opportunities, and create more jobs – particularly for women. 

The International Finance Corporation also gave recommendations for policymakers on strategy development to integrate priority sectors with the global value chain.

Taking to The Business Standard on the side-lines of the event, Sumi and Reaz said they had wanted to identify some potential sectors in Bangladesh, ones capable of developing a diversified export portfolio.

"Initially, we started with 15 potential sectors, which we downsized to 12 sectors; then we prioritised seven sectors, and finally selected three sectors, after ranking them," they added.

"We are not saying that just these three sectors have high potential, but that seven sectors have the same capabilities," said Hosna Ferdous Sumi.

"We selected these three sectors based on specific methodology," added M Masrur Reaz.

"It is a very tough job to develop a single sector as the earner of above $10billion. We have developed only the RMG sector over the last 40 years, but we are hopeful about these three sectors," said Senior Economist M Reaz.  

"It is a very easy job to reform policies aiming at diversifying export baskets. It does not require an extra financial cost," he added.

M Reaz said the World Bank has been closely working with the government to diversify the country's exports.  

"To sustain its growth trajectory and reduce over-dependence on a single item, Bangladesh needs to build a strong manufacturing ecosystem and develop new products, while paving the way for large scale job creation and poverty reduction," said Wendy Werner, IFC Country Manager for Bangladesh, Bhutan and Nepal. 

The IFC publication compared Bangladesh's exports performance to several competitor countries – including Vietnam, Cambodia, Malaysia, China and India – to identify where Bangladesh can improve. 

It considered economic factors – like employment generation, women's employment, growth of small and medium enterprises, and foreign direct investment needed – in seven potential sectors for exports diversification. 

"Bangladesh's economy is moving forward at a stable pace. The government has launched a concerted effort to diversify its exports and we sincerely hope this pioneering publication will help inform the policy discourse on sustainable export-led growth," said Dr Mashiur Rahman, economic affairs adviser to the prime minister.

He said institutional capacity is a major challenge for diversifying Bangladesh's exports.  

Expressing his concern over a multi-slab tax on exports, he said, "Why would tax rates be different on different exports when the government wants to diversify exports?"    

Commerce Secretary Dr Mohammad Jafar Uddin said, "Exporting is one pathway to leveraging the dynamic potentials of the global economy. We strongly believe that trade is a powerful engine of growth, not just for the world economy, but also very much so for the developing economy of Bangladesh."

"We, the Ministry of Commerce, have a project with the World Bank Group named EC4J aiming to diversify the export baskets. We have also focused on diversifying export destinations," he added.

The commerce secretary said the government officials should change them by changing their work style, skills and attitude to fulfil the government's such targets. 

At the launch event – organised in cooperation with the Policy Research Institute – its Chairman Dr Zaidi Sattar cautioned that most new products introduced by exporters are not sustained beyond the first year.

He stressed the need to prioritise export sustainability because it is a critical challenge for maintaining diversification.

Participating in a discussion, former finance minister M Syeduzzaman said ensuring good governance, plus building institutional capacity and making it free of corruption, are very important in Bangladesh – for the diversification and expansion of exports. 

Bangladesh Plastic Goods Manufacturers and Exporters Association President Md Jashim Uddin said, " Transferring our knowledge of success from the RMG to other sectors requires the government's policy support."

Despite the huge potential of the plastic and leather sectors, they do not receive policy support like for garments, he added.

Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh President Md Saiful Islam said, "We are facing challenges because we do not have Leather Working Group (LWG) certification for the Savar Leather Industrial Park."

He expressed his doubt over whether the central effluent treatment plant of the leather industrial park will fulfil about 30 percent of the LWG's requirements.

Dr PRI Executive Director Ahsan H Mansur delivered the welcome speech at the event.