Sanjay Kathuria, the World Bank lead economist for South Asia, has said the right thing. He said Bangladesh needs to think beyond the apparel sector as a part of its efforts for attaining the next phase of growth and poverty reduction.
Though Bangladesh's export performance in the apparel sector is impressive, WB economist Sanjay Kathuria wrote in the Bank's South Asia Region blog that the next phase of growth and poverty reduction is harder since the more obvious sources of growth have largely been exploited.
Bangladesh is now the world's second largest apparel exporter, next only to China. It employs about 4.0 million workers, 75 per cent of whom are female. About 80 per cent export earnings come from the ready-made garments, which means the country's over-reliance on this sector.
There is no denying that the country is failing to diversify its export market. It has miserably failed to penetrate into two fastest growing regions in the world - South Asia and East Asia. Only around 2.0 and 9.0 per cent of its exports are going to these regions.
Years of prolonged efforts by the government to diversify both its products and market bases have failed to yield any visible outcome. So many years have passed since the country's liberation, its export earnings are still dependent largely on limited items and export destinations.
The government had taken up Export Diversification Project in 1999 with financial support of the WB in order to integrate Bangladesh in the global economy through promotion and diversification of exportable. Regrettably, the project failed to perform satisfactorily and was abandoned.
The earlier steps taken by the government -- either strategic or operational -- were not sufficient to diversify products and markets. Now it is time for the government to provide policy support to the non-RMG products. Those who are small suppliers need networking, match making, information sharing to popularise their products to the world.
Some potential products have been identified to promote abroad to widen the export basket. Such products are printing and packaging, furniture, electronics, shipbuilding, plastic and light engineering. Shipbuilding can be a good alternative to any industry, including garments, because it has a link with backward linkage industry that can create extra market if nurtured properly. There is a large market for local auto parts as well.
Opportunities are galore in the comparatively new markets but for lack of proper knowledge and efforts both from the local businesses and the government, those have so far remained unexplored. It has been found that the importers of African, Russian and some other countries are eager to import items like RMG, leather products and jute goods from Bangladesh.
In fact, the government's policy support is needed to change the entire export scenario, including opening new missions, branding the local products, and giving cash support for the potential sectors.
The WB economist has suggested that Bangladesh needs to deepen trade and investment linkages with South and East Asian economies in order to go beyond garments. Added to this, there should be adequate efforts to diversify to other promising sectors in manufacturing and services.
For the next phase of jobs and export growth, there are some vital areas that need reform. Creating a neutral trade regime by reducing tariffs, ensuring the level-playing field for all exporters, attracting high quality Foreign Direct Investment (FDI) in goods and services and improving logistics and trade facilitation are some of the areas that require keen attention.
On this point, the WB economist has said the implementation will involve overcoming likely resistance from those who benefit from the status quo, and empowering those who will champion this forward-looking agenda. The government has to be more careful about implementing such agenda.
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