In the past 2022, the whole world was engulfed in crisis. The Russia-Ukraine war started in the second month of the year. Consequently, inflationary pressure increased in different countries of the world, and people’s purchasing ability decreased. As a result of this, the orders of Bangladesh’s export sector started to decrease, and in the middle of the year, the gas and electricity crisis became evident in the country. Due to the temporary electricity crisis, production was disrupted in factories for a large part of the day. As a result of which, the country’s export earnings were hindered, and remittances were decreased.
However, amid such a crisis, Bangladesh’s export income has increased by over 10% during the first six months of the current fiscal year 2022-23, i.e. last July to December. In the recently concluded month of December, the export income was 537 million dollars, which is the highest in the country’s history as a month’s export income. However, experts say that it will be challenging for Bangladesh to maintain this growth in export earnings in such a global crisis.
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Among the products exported from Bangladesh, the highest income comes from RMG. This is followed by home textiles, leather products, pharmaceuticals, agricultural products, jute, jute-made products, engineering products, plastic products, etc. Despite the good export of apparel, the export of other products does not bring equally significant profit due partly to a lack of planning and management. So far, over half of the total export income comes from garments export alone. Therefore, if there is a tumble in RMG exports, the whole export may come to a standstill.
Then, there is also an impact of the export markets, which the country does not have many. Rather, Bangladesh’s exports are limited to a small number of destinations – mainly two to say the least – the United States (US) and Europe. As a result, the export market remains vulnerable, which has been exacerbated by the pandemic and the subsequent war. These two markets are very significant in the context of Bangladesh, but the reality is that if the country depends on these two markets only, there remains a huge risk.
Experts, therefore, have suggested looking out for more dominant markets. And, this luxury cannot be achieved only through garments export. Although Bangladesh has seen appreciable success in garments export, the country has competitors like China and Vietnam in this regard. Export markets of these countries are also extensive and covered by diplomatic shields. Even if Bangladesh can increase its export market through proper diplomacy and diversification of its export basket, it will not be so easy to maintain.
Moreover, economists fear that if the global recession deepens in the coming months, we may see lower export growth next year. Meanwhile, the government also fears that 2023 is going to be a ‘crisis year’. Accordingly, instructions have been given from the top of the government to prepare for the ensuing crisis. Thus, the challenges will be immense for this country. Especially since Bangladesh has been moving from the list of least developed countries (LDC) to the ranks of developing countries by 2026, duty-free facilities available in many countries will no longer exist, and no special quota will be available. Thus, there will be tough hurdles to increasing export income.
What do experts say?
Experts are of the view that it won’t be possible to solve this problem without emphasizing multi-faceted exports. In this regard, the professor of Dhaka University and the executive director of the research institute SANEM Dr. Salim Raihan said, “Most of Bangladesh’s export trade depends on the economic conditions of its two major markets, Europe and the US or specifically North America. Because these two markets account for the bulk of Bangladesh’s export earnings.” Dr. Salim Raihan added, “There is no denying that central banks are raising interest rates to reduce the impact of inflation.
The way central banks, including the Federal Reserve, raise their interest rates has a big impact on consumers. But the impact ultimately comes down to us and on the countries whose exports are highly dependent on these countries. If their customers reduce their purchases, our exports will also decrease. Because the kind of products we export are mainly dependent on these consumers.”
Therefore, rising inflation has increased the cost of living for people in those countries, resulting in reduced consumer interest in new fashions. And Bangladesh’s exports are facing a huge threat of being heavily dependent on these countries and garment products.
What do traders think?
According to trade analysts, 85% of Bangladesh’s foreign exchange earnings from the export sector come from the garment sector. Garment factory owners say, “Due to the post-Covid mandate, there was a huge export last year. But this year, due to the impact of the Ukraine-Russia conflict, the economic crisis across the world has affected the country’s main export product. This has made the entire export fragile.” Exporters further said, “The main markets of Bangladesh are the US and Europe. After the pandemic, Bangladesh has received a large number of orders from these two areas. As a result, our export volume has increased last year compared to other years. But due to the scarcity of orders from here now, there emerged a huge gap.”
One thing is pretty clear it is now necessary to maintain the progress that Bangladesh has already achieved in exporting to these two markets, the US and Europe. Otherwise, Bangladesh will not be able to make progress in export earnings. To increase the export in these markets, it is essential to maintain the quality of the goods and to deliver the goods swiftly. For this, experts suggest avoiding external vendors and maintaining time.
Syed Nazrul Islam, first Vice President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) mentioned that the export growth is not as expected. Due to the economic recession, the orders have decreased by about 20% until next January-February. As a result, even after the export growth this month, there is no guarantee that this trend will continue later.”
“On the other hand, the depreciation of the Euro and Pound against the Dollar has increased their import costs, so the imports have been falling in those countries,” he added. He further said, “We are now most afraid that even if the situation is good in Europe and America, production costs are increasing due to the crisis. Also, there is some instability in the country as the elections is ahead. Our buyers are also monitoring the situation. If the situation turns bad they are likely to move to other countries to import.”
The government of Bangladesh wants to increase export earnings and various initiatives have been taken for this. Still, the government gives incentives on top of export earnings. But the amount of export depends on the demand for the product in other countries and some other factors. But the factors like global recession, and the Ukraine-Russia war is not in Bangladesh’s hands. However, Bangladesh has the potential to influence the demand for products and manufacture, it just needs proper management and goodwill.