Bangladesh's total exported goods represent 5.5% of its overall GDP for 2019 (PPP basis). A gradually depreciating taka is giving a fillip to our competitiveness.
After rising from $33.66 billion in 2017-18 to $38.53 in 2018-19, exports fell to $33.60 during the latest fiscal year (2019-20), no doubt hit by the pandemic. But there is good news.
During the six months ending December 2020, Bangladesh exported goods and services worth $19.23 billion, and little changed from the corresponding period last year. Furthermore, no less than twelve categories show very healthy growth - more than 30%-in the latest six months.
About 80% of our exports comprise clothing. So, during the last fiscal year (2019-20) exports of clothing were in the vicinity of $26.88. If we assume 25% value addition, garments worth $6.72 were actually exported.
From this perspective, we have exported a net amount of $15 billion in the latest fiscal year. Of course, many export items of ours have varying amounts of imported inputs. This is the whole idea behind the GVC-global value chain.
Among a number of initiatives taken by the GoB ministry of commerce to increase exports, is the Export Competitiveness for Jobs (EC4J) project. It was taken up in December 2017.
This project has been funded by the soft loan arm of the World Bank, IDA, to the tune of USD 100 million. The duration of this USD 119 million project is six years.
EC4J is meant to boost Bangladesh's annual exports to USD 60 billion by 2021 (four years after project initiation) by means of sectoral diversification. This figure seems overly ambitious in hindsight.
EC4J will work in stages. The first stage-ESQ-represents environment, social, and quality aspects that are important to international buyers. In this connection, 400 firms have already completed their studies showing where they stand.
EC4J will reimburse those firms whose surveys meet agreed-upon standards. The amount of the subsidy is generous, up to USD 20,000 each.
In the second stage, GoB will set up four technology centres. The largest one is being developed at the Mirsarai Economic Zone on ten acres of land.
Three others will sprout up around Dhaka. Bangladesh suffers from an acute shortage of moulds of every kind.
To alleviate this problem, businessmen have to travel far and wide, besides spending lots of money. The technology centres are meant to design and manufacture moulds and other needed tools and equipment.
Four promising sectors have been identified by EC4J: leather and leather goods, footwear, light engineering, and plastics. Most likely another promising sector, PPE, will shortly make the list. Beximco has shown the way recently.
In the near future, the EC4J will roll out other components, namely, market development and branding, training, and addressing infrastructure gaps.
Exports can be viewed as a complex system with many moving parts. Therefore, we cannot pin all (or a majority of) our hopes on a particular intervention.
EC4J has a steep price tag, BDT 10 billion. Another concern is that of late, global growth has been flagging, made worse by the pandemic.
Interventions in the arena of exports involve fiscal, trade, and monetary policies. A welcome example of trade policy change is the recent GoB policy of letting exporters issue their own certificates of origin.
The involvement of different GoB bodies is bound to generate conflicts among principal stakeholders-companies and trade bodies along with think tanks and taxpayers.
The existing reduced corporate tax benefits for garments and knitwear sectors have recently been extended for two years up to 2022. Does not doling out such benefits to only a handful of sectors seem overly partial?
These sectors already enjoy bonded warehouses and back-to-back L/C facilities. Why single them out for additional financial props?
Think for a moment about the alternative uses for BDT 10 billion. No doubt there will be spillover effects that will benefit other export sectors.
But spending such a huge sum to ostensibly support four narrow sectors does not seem fair to other sectors, pharmaceuticals or IT services for instance. Rather, we should go all out to improve our Doing Business scorecard. This is sure to lift all boats.
The author Raihan Amin is an ex-banker.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.