The government's efforts to incentivise the exporters reaching out to new markets beyond the traditional export destinations are paying off, people familiar with the matter have told the FE.
The proceeds from exports to those new markets beyond the traditional destinations like the USA, Canada and the European Union have been on the upswing over the last several years, which is attributed to the incentive package.
The package was launched sometime in 2010 soon after the global recession for finding alternative export markets for products from Bangladesh.
The receipts from the new markets accounted for more than 16 per cent of the total clothing exports or around US$ 5.0 billion per year over the last several years, shows data of the Export Promotion Bureau (EPB).
During the July-December period of 2018, the exports to the non-traditional markets hit nearly 45 per cent of the total receipts from clothing shipments, compared to the corresponding period of the previous fiscal year.
One of the objectives of the incentive package was also to aid diversification of products remaining largely missing in the export basket.
But in reality, the product diversification did not happen. Instead, the same old ready-made garment (RMG) sector dominated that sphere too, the people closely watching the developments said.
The median size of the subsidy given to the RMG makers in three years to the fiscal year 2017-2018 was worth Tk 4.6 billion per year.
Since the inception of the incentive package, mainly clothing exporters have been making shipments to the new markets like India, China, Russia, Brazil and South Africa.
People familiar with the developments told the FE that the access to the new export destinations was fraught with hurdles, as the exporters were facing many tariff, non-tariff and other barriers.
American-born Forrest E Cookson, an expert on Bangladesh's RMG sector, told the FE the 'new markets' were defined as export destinations [countries], but one should also think of new markets based on product types.
"The expansion of product types is now more important than the markets in new countries," said Mr Cookson, a long-time researcher on the country's clothing sector.
He said the history of Bangladesh's RMG sector is production of large volumes of low-value garments for markets in high-income countries.
"As the industry developed, it sought to produce higher value garments that are more complex to sew, stronger demand for quality control, and greater buyer concern for factory safety and labour rights," he noted.
Factories that had been supplying low-value garments to the Organisation for Economic Cooperation and Development (OECD) markets were finding their exports squeezed due to the safety costs and wage pressure.
"Selling to new non-OECD markets permits avoidance of excessive safety regulations and less demanding compliance with worker standards," Mr Cookson said.
Md Abdur Rouf, director (commodity) at the EPB, told the FE the incentive had been working well as an additional amount of around $5.0 billion had been added to the export receipts.
"There is a growth in new market and it is similar to that of the traditional market of clothing," he said.
"If there is an abnormal growth in the new market, then we can say the alternative market is growing fast…., but it is not happening," he added.
Mr Rouf, however, told the FE they had been working with the new markets for further deepening trade ties by sending different delegations.
"We're trying to sign free trade agreements with many countries including Japan," he disclosed.
Experts said the incentive helped augment shipments to some new destinations.
But some say this is high time to come up with a more specified definition of a new market for the RMG manufacturers to stop abuse of the subsidy money.
Dr Zaidi Sattar, chairman at the Policy Research Institute of Bangladesh (PRI), said the current 4.0 per cent cash incentive for exporting to new destinations was fine to incentivise geographical diversification.
"But the product diversification is not happening…" he added.
Dr Nazneen Ahmed, a senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told the FE that a market could not remain new for long. "There is a need for definition of a new market."
"Suppose, the exporter 'A' has been sending goods to the country 'J' for years, so the country cannot be new to the exporter," said Ms Ahmed, who conducted a number of studies on the RMG sector.
"To my view, there should have been a time limit, e.g., 10 years," Ms Ahmed added.
This correspondent turned to a Chinese professor to learn about their experience in incentivising exports.
The Chinese government pursuing the 'Belt and Road Initiative' is currently offering approximately RMB 5000 in subsidies per container for exporters using express train to ship goods to Belt and Road countries, said Professor Liu Baocheng, when contacted through e-mail.
He is one of the experts on the issue and teaches at the Centre for International Business Ethics under the University of International Business and Economics, Beijing.
Dr M Masrur Reaz, senior economist at the International Finance Corporation (IFC) of the World Bank Group, told the FE that they had been working with the Ministry of Commerce (MoC) on how to diversify the products.
"We've identified three highly-potential sectors -- leather and footwear, plastic and recycling, and light manufacturing."
Dr Masrur said they had been preparing an "export road map" for the three sectors.
"We believe these products have high potentials and may grab a significant portion of the export receipts."
Siddiqur Rahman, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told the FE that the incentive had helped find a niche in the new markets.
"The 16 per cent share is not small, it would expand further," he commented.
Salam Murshedy, former chief of the BGMEA, the clothing apex body in Bangladesh, said there were many problems with the new markets, including lack of common bank services.
He said the government raised the incentive by 1.0 percentage point from the current fiscal year.
It would further boost exports to the new markets, he added.
