Looking for export boost riding on trade deals
The trade agreements and memoranda of understanding that Bangladesh signed with 42 countries remain only on paper
Bangladesh first struck a bilateral trade deal with Russia, then Soviet Union, within two months of its independence in 1971. Many years down the line, in 2017, both countries formed an intergovernmental commission intending to forge trade and economic cooperation.
Over the last four decades, the country has only signed deals with Russia to buy warplanes and weapons, plus construct the nuclear power plant in Rooppur.
In addition, Bangladesh's exports to the vast market have hit a stumbling block with no direct banking channels for financial transactions established between both countries as yet.
The result is that exports to Russia remain below $500 million and the country continues to miss out on a huge business opportunity.
Bangladesh, at different times, has signed bilateral trade agreements and memoranda of understanding on trade with 42 countries, including Russia, but no initiative had been taken so far to explore those markets.
Last year, Commerce Minister Tipu Munshi signed a memorandum of understanding with a Russia-led Euro-Asia commission to enhance exports to Russia and introduce a direct banking channel with it.
Despite these efforts, Bangladesh could only export apparel amounting to $440 million to the country in the fiscal year 2019-2020 – which was 9.76 percent lower than in the previous year.
Russia can be a big garment destination
Russia imports $50 billion worth of ready-made garment (RMG) items from China, Turkey, Vietnam, and other countries annually. Moreover, there is a huge demand for Bangladeshi freshwater fish and sea fish, shrimp, jute, and jute goods in the country.
After Russia's annexation of Crimea from Ukraine, the country came forward with a proposal to import various products, including potatoes, from Bangladesh – in the light of sanctions from the United States and the European Union – but Bangladesh did not capitalise on it.
The trade agreements and memoranda of understanding that Bangladesh has signed with all those countries remain only on paper. Nothing has been done yet on determining demand for goods in the countries and what kind of steps can be taken to increase exports to those countries under the agreements.
However, with export earnings falling due to the pandemic fallout, the commerce ministry has taken a few initiatives to increase exports to those countries in recent days.
Despite positive growth in the first month of the last fiscal year, Bangladesh's exports maintained a declining trend in the following months. When the novel coronavirus spread quickly in China and Europe in January-February, Bangladesh's export earnings suffered a steep fall.
Later, exports came to a standstill when most garment factories and export-oriented industries were closed during the 66-day nationwide shutdown.
As a result, the export growth declined by 14.80 percent to $33.67 billion in the fiscal year 2019-20 compared to that in the fiscal year 2018-19.
This dismal performance in exports has prompted the government to explore all the trade avenues to reach the export target of $48 billion set for the current fiscal year.
The commerce ministry has engaged a joint secretary to analyse the bilateral trade agreements and determine export potential to those countries.
Commerce Minister Tipu Munshi and secretary Jafar Uddin have paid trade visits to seven countries to explore more export markets. The ministry will send a letter to the foreign ministry to implement the decisions taken through those visits.
As part of its measures to diversify the export basket the government is looking at new products and ensuring quality control of the exportables.
The commerce ministry is also working on formulating a separate action plan to increase the export of various unconventional products – including those of the light engineering, leather and jute sectors.
Additionally, the ministry has written to ambassadors and commercial counsellors of Bangladesh in various countries to explore the market that will be created in those countries in the post-Covid-19 situation and sought recommendations from them on how to utilise the export opportunities.
The commerce, agriculture, fisheries, and livestock ministries held a virtual meeting with the Import and Export Food Safety Bureau of General Administration of China Customs to resume exports of food products – including fish, crab, shrimp, and eel – to the country after the end of Covid-19.
Measures taken to issue health certificates and export halal fashion
Bangladesh's apparel makers mainly export modern western wear. However, there are also opportunities to export Islamic clothing for Muslim buyers living in the Middle East as well as the western world.
So, the commerce ministry wants to increase halal fashion exports through various fashion houses and small and medium-sized enterprises (SMEs) in the country.
Additionally, the ministry is focusing on the export of non-conventional products, including those of the medical textile, light engineering, leather, and jute sectors.
The issue was discussed at a recent meeting chaired by Commerce Secretary Zafar Uddin. The ministry will decide on ways to increase traditional fashion exports in a meeting with small and SMEs and the Federation of Bangladesh Chambers of Commerce and Industries.
The ministry will meet with the exporters of light engineering products and address their existing problems.
A commerce ministry official told The Business Standard that traditional clothing is gaining popularity among Muslim women worldwide. Pakistan, Turkey and India are exporting a significant portion to meet demand for: big kurtis, loose shalwar kameez, hijabs, burqas, etc.
If SMEs and fashion houses are given the necessary support, Bangladesh will be able to earn billions of dollars from halal fashion exports.
According to officials at the commerce ministry, a major obstacle to the export of vegetables, powdered spices, fish, and processed food is not being able to meet the standards set by different countries.
Although exporters send these products to different countries based on quality certificates obtained from various private labs, in many cases, the importers are returning the consignments because of failing quality tests there.
Against this backdrop, the commerce ministry has taken the initiative to issue health certificates for exporting halal food. To this end, a meeting was held with Deputy Secretary to the commerce ministry Nargis Murshid in the chair on August 12.
She told The Business Standard that an inspector from the agriculture extension department's plant quarantine wing tests vegetables and fruits going abroad. In the case of exporting processed food, either the plant quarantine wing or the Bangladesh Standards and Testing Institution will be tasked to issue health certificates.
Indian and ASEAN markets still untapped fully
In March 1972, Bangladesh signed a bilateral trade agreement with India. After making several amendments to it at different times, India has begun importing and exporting goods using Bangladesh's territory and ports under the deal.
However, Bangladesh's exports to the country with over 1.2 billion people have not increased to the desired level. Despite having duty-free access to all but 25 products under the South Asian Free Trade Agreement, Bangladesh's export earnings from India reached only $1 billion last year.
If non-tariff barriers are removed, Bangladesh will have the potential to export more goods to the country, said commerce ministry officials.
Bangladesh inked a trade agreement with the ASEAN country Thailand in 1997. As a least-developed country (LDC), it was granted a duty-free export facility for about 5,000 products.
However, Bangladesh did not utilise this facility. In 2018, the bilateral trade volume between the countries was $1.25 billion, but Bangladesh imported most of it. In that year, its exports to Thailand amounted to $59.24 million.
Similarly, Bangladesh signed a trade deal with Azerbaijan in 1973. In the last financial year, Bangladesh raked in only $5.9 million while it imported $90.79 million worth of goods. Alongside ready-made garments, there is huge demand for jute and leather products, tobacco, and furniture in the country.
Initiatives to boost exports to 49 countries
Commerce Secretary Jafar Uddin told The Business Standard that no work has been done on exploring export opportunities in the countries that Bangladesh signed bilateral agreements with.
"We have started reviewing all the agreements and memoranda of understanding. Initiatives will be taken to increase exports to those countries through the ministries concerned after analysing what is in the agreements and demand for products in the countries," he said.
"We do not want to miss out on even the slightest of export opportunities at this time of the pandemic. We will analyse domestic markets and demand in the 49 countries. If there is an opportunity to export agricultural products to any country, we will request the agriculture ministry to grab it. At the same time, we will assist the relevant sector's businessmen. We are holding a meeting every week after forming a task force to determine what needs to be done to boost exports," Jafar Uddin said.
Exporters for diversified export basket
Noting that the number of products that Bangladesh exports is very low, exporters said it is necessary to increase the number of exportable items first for diversifying the export basket.
They also suggested setting up regional desks in different countries to assess demand for goods and take initiatives to export those through Bangladeshi embassies.
Anwar-Ul-Alam Chowdhury Parvez, a garment exporter and former president of BGMEA, said the focus should be on small and cottage industries to increase exports. Proper support will create many exporters in the industries.
"Demand for light engineering is increasing daily – globally. We need training institutes and funds to cash in on this opportunity. We have to begin from now on even if it is time-consuming. Otherwise, Bangladesh will plunge into a major crisis when there will be no duty-free export facilities for the country after LDC graduation," he added.
Mentioning the government also needs to focus on the country's agro food processing industry, he said, "We have been unable to reap any benefit from the blue economy. The government should not only provide funds to the sector, but also take initiatives to build skilled human resources."
Abdus Salam Murshedy, president of the Exporters Association of Bangladesh, told The Business Standard that the Taka needs to be devalued, in line with what competitor countries do, to increase the exports of conventional goods – including readymade garments. At the same time, initiatives should be taken to increase the number of non-conventional products to boost exports."