Bangladesh has achieved a significant milestone in its trade with the United Kingdom, surpassing the $5 billion mark in exports. As per the latest commerce ministry data, during the fiscal year 2022-23, the country’s merchandise exports to the UK reached an impressive $5.3 billion, showing substantial growth from the previous year’s $4.8 billion. The figures are doubled from a decade ago when it amounted to $2.7 billion.
You can also read: June Witnesses Unprecedented Surge in Remittance Inflow during FY23
This achievement is attributed to the robust performance of key export items, including ready-made garments (RMG), frozen food, IT engineering, leather and jute goods, and bicycles.
From rags to riches
In terms of imports, the trade between Bangladesh and the UK reached a value of $380 million in the initial 11 months of FY23, specifically from April 2022 to May 2023. The commerce ministry projected this figure to reach approximately $450 million by the end of the fiscal year on 30 June.
The overall exports of Bangladesh saw a year-on-year growth rate of 6.67%, reaching a total of $55.55 billion in the last fiscal year. The apparel sector played a significant role in driving this growth, according to data from the Export Promotion Bureau.
Currently, the UK stands as the third-largest export destination for Bangladesh, following the European Union and the United States. This achievement signifies the continued growth and importance of trade relations between the two countries.
Trade graph shows upward trend
The United Kingdom (UK) and Bangladesh have experienced a remarkable surge in trade volume last year too, with the total trade reaching a record £4.7 billion ($5.83 billion) in 2022, according to the UK’s Department for Business and Trade. This represents a significant increase of 50.4% compared to the year of 2021.
Bangladesh enjoyed a significant trade surplus with the UK, largely attributed to its flourishing readymade garments (RMG) industry, which played a dominant role in the trade relationship. In 2022, UK imports from Bangladesh experienced a notable surge of 54.0%, reaching a value of £3.8 billion. Simultaneously, UK exports to Bangladesh also grew by 36.7%, amounting to £897 million within the same timeframe.
The strengthening bilateral ties between the UK and Bangladesh are reflected in the increased trade volumes. Many countries are seeking to enhance their business relationships with Bangladesh due to the high quality of its products. Additionally, the Bangladesh government’s policies for international trade over the past 14 years have been highly commendable.
The growth in trade between Bangladesh and the UK was predominantly propelled by the clothing sector, which accounted for an impressive £3.3 billion or 91.9% of all UK imports from Bangladesh. Additionally, other notable goods imported from Bangladesh included textile fabrics (£74.7 million or 2.1%), fish and shellfish (£45.7 million or 1.3%), mechanical power generators (£38.7 million or 1.1%), and road vehicles other than cars (£33.9 million or 1.0%).
On the export side, in 2022, the UK’s top exports to Bangladesh included metal ores & scrap, valued at £317.2 million or 57.0% of all UK goods imported by Bangladesh. This was followed by mechanical power generators (intermediate) at £32.5 million or 5.8%, aircraft (£29.1 million or 5.2%), general industrial machinery (capital) (£23.3 million or 4.2%), and electric motors (capital) (£22.4 million or 4.0%).
Bangladesh’s growing prominence in the UK’s trade landscape is evident as the nation became the UK’s 50th largest trading partner in 2022. This strong economic partnership between Bangladesh and the UK, reflected by their thriving trade in various sectors, constitutes a notable contribution of 0.3% to the overall UK trade. This mutually beneficial relationship underscores the advantages enjoyed by both countries as they continue to foster and strengthen their economic ties.
Foreign Direct Investment (FDI) is booming
In addition to trade, foreign direct investment (FDI) between the two nations has also been noteworthy. In 2021, the UK’s outward stock of FDI in Bangladesh reached a substantial £816 million, demonstrating the confidence of British investors in the country’s potential. However, information regarding the inward stock of FDI from Bangladesh to the UK in 2021 remains unavailable due to data disclosure limitations.
In 2021, the total UK FDI abroad amounted to £1.8 trillion, with the United States being the top destination, accounting for 26.1% of the total UK outward FDI stock, followed by the Netherlands (8.8%) and Luxembourg (7.2%).
In 2021, the UK’s market share in Bangladesh for both goods and services stood at 1.1%, indicating a decrease of 0.2% compared to the previous year, 2020. For goods only, the UK’s market share in Bangladesh was 0.8% in 2021, showing an increase of 0.2% from 2020. In terms of services only, the UK’s market share in Bangladesh was 2.6% in 2021, indicating a decrease of 2.5% from 2020. In 2021, approximately 1,000 UK VAT-registered businesses exported goods to Bangladesh, while around 1,100 UK VAT-registered businesses imported goods from Bangladesh.
According to a report by the UK’s Department for Business and Trade, the trade balance between Bangladesh and the UK experienced fluctuations over the years. In 2013, the trade balance stood at £2.4 billion, which slightly decreased to £2.2 billion in 2014. However, it rebounded in the following two years, reaching £2.6 billion and £2.9 billion in 2015 and 2016, respectively. In 2017, the trade value surpassed £3 billion, reaching £3.6 billion.
From 2018 to 2021, the trade volume consistently remained above £3 billion. The figures for these years were £3.5 billion, £4.0 billion, £3.1 billion, and £3.1 billion, respectively. In 2022, there was a significant jump in trade volume, reaching a record high of £4.7 billion.
A recent study conducted by Research and Policy Integration for Development (RAPID) predicts that by 2030, UK apparel exports will be worth $4.5 billion. Additionally, exports of non-apparel products are expected to increase from $0.7 billion to $1.3 billion during the same period. These findings indicate the potential for further growth and diversification in trade between Bangladesh and the UK.
RMG sector showing more hopes
Bangladesh has the potential to significantly increase its export earnings from the readymade garment (RMG) sector to the UK. According to projections by Research and Policy Integration for Development (RAPID), Bangladesh’s RMG exports to the UK could reach $11 billion by 2030, compared to the $4.5 billion earned in the last fiscal year.
Dr. MA Razzaque, Chairman of RAPID, highlighted that while it is uncertain whether Bangladesh’s garment exports will continue to receive duty-free market access in the European Union (EU) after its least developed country (LDC) graduation, the UK’s Developed Countries Trading Scheme (DCTS) ensures duty-free access for Bangladesh’s apparel exports to the UK.
The UK has committed to providing the existing duty benefits to LDCs, including Bangladesh, until 2029, with a three-year transition period. Additionally, the enhanced DCTS preferences in the UK remove the requirement for ratification and implementation of 32 international conventions, which is mandatory to sustain the Generalized System of Preferences (GSP) plus facility in the EU.
Dr. Razzaque also highlighted the potential for growth in non-RMG exports to the UK. The current non-RMG exports of $700 million could reach $1.3 billion by 2030, indicating a significant opportunity for expansion in this sector.
