Bangladesh : Foreign Trade

• Introduction
• Export Earnings
• Strategies

Introduction

Foreign trade is of vital importance to the economic development of Bangladesh. The country's import needs are large and the imperative to increase exports is immediate. In order to finance those imports and also to reduce the country's dependence on foreign aid grants, the government, since liberation, has been trying to enhance foreign exchange earnings through planned and increased exports. The significance of foreign trade to the economy is manifest in a number of facts and figures.

In 1991-92, foreign trade's contribution to government revenue was more than 37 percent; export-oriented industries' contribution to industrial value-addition was 56 percent; export industries' share of employment in the manufacturing sector was 60 percent, and the growth of export earnings was 16.09 percent. During the last decade export earnings at current dollar prices increased by 14 percent per annum.

Export GDP ratio rose to 8.3 percent in 1991-92 from 4.1 percent in 1973-74, and 6 percent in 1985-86. Similarly, import GDP ratio declined from 18 percent in 1985-86 to 14.6 percent in 1991-92. Export-import ratio rose from 33 percent in 1985-86 to 57.7 percent in 1991-92. At present, major exports are raw jute, jute goods, tea, leather, frozen fish and read-made garments, while major imports are capital goods, food grains, petroleum and oil, yarn and textiles.

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Export Earnings

Export growth is one of the corner stones of development strategy of the present government. In 1991 total export earning was US$ 1,718 million; it increased by over 47 percent and was more than US$ 2,533 million in 1993-94; during 1994-95 fiscal year the export target has been fixed at US$ 3,100 million. This along with higher remittances from abroad has helped reduce the country's debt service ratio from over 20 percent in I991, to less than 13 percent in the fiscal year 1993-94. The continued improvement in export trade was accompanied by the benign structural shift in composition of exports with non traditional items contributing increasingly higher share of total exports. The share of non-traditional items in the country's total exports which stood at 75 percent in 1990-91 increased to 86 percent in 1993-94. In respect of economic classification of export commodities, the primary as well as the manufactured items and export commodities recorded a balanced growth with their respective shares in total exports remaining more or less at the same levels. Recently a trend of increased price of raw jute is being observed in the international market. The government is determmed that restructuring of jute manufacturing industry should move apace for much needed viability and external competitiveness. There is need for requisite technological inputs to adequately exploit the potentials of this fibre. New opportunities have emerged to produce pulp from jute through chemical process. Steps are underway for production of 25,000 MT of pulp for industrial grade paper during the current jute season.

Total import payments increased by 21 percent from US$ 3,470 million in 1990-91 to US$4,191 million in 1993-94. Structure of import now reflects a significant pick up of overall economic activities. Imports of intermediate goods, industrial raw materials and capital and miscellaneous machinery recorded increases during 1993-94 fiscal year. Industrial raw materials which constituted 29 percent of total imports in 1990-91 increase to over 38 percent in 1993-94.

Despite satisfactory performance of the export sector the balance of trade experienced some fluctuations owing mainly to fluctuations in the import levels. However the trade gap which had stood at US$ 1,800 million in 1990-91 has declined to US$ 1,650 million in 1993-94. Export earnings as percentage to import payment which was about 50 percent in 1990-91, reached over 60 percent in 1993-94.

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Strategies

The government has taken following strategie to boost export:

• Simplification of export procedures and strengthening export-led co-operation through reducing regulatory role of the government;
• Rationalization of the value of Taka to make the export trade more attractive;
• Creation of an Export Promotion Fund (EPF) for strengthening the export activities;
• Encouraging establishment of backward linkage industries through utilization of locally available raw materials;
• Participation in international trade fairs, single country exhibitions and specialized fairs and sending business delegations abroad for expansion and consolidation of existing markets and creation of new markets;
• Expediting BMRE of existing wet-blue producing tanneries and converting them into finished leather producing and exporting units;
• Accelerating expansion of improved traditional and semi-intensive methods of shrimp cultivation for enhancing export off
• Allowing import of high quality foundation-tea for blending and establishing the brand name of Bangladesh tea through marketing;
• Taking measures to improve quality, increase production and expand market of exportable agricultural products;
• Undertaking activities for increasing export of computer software, engineering consultancy and services;
• Expediting steps for export of labour intensive electronic and engineering products keeping in view the market requirements in the USA and other developed countries;
• Promoting export of electronic components and engineering items to various countries;
• Providing appropriate financing facilities for production of components of electronic and engineering items for marketing on consignment basis;
• Expanding the list of products under crash programme beyond 4 products (toys, luggage and fashion items electronic and leather goods) and including 8 more items such as diamond cutting and polishing, jewelleries making, stationery articles, silk, gift items, cut artificial flower & orchid, vegetables, engineering consultancy & services for export;
• Organizing commodity-wise trade fairs of international standard in the country;
• Developing and expanding infrastructural facilities for export trade; and
• Creating product-development councils for important products.

References :

1. Bangladesh Handbook 1995
2. Bangladesh At A Glance, Dec. 1994

Acknowledgements:
The author, Shabbir A Bashar gratefully acknowledges the un-precedented help and co-operation of the Bangladesh High Commission, London, UK in preparation of this document. He particularly thanks Mr Shihabuddin Ahmed, Minister Press Division, Bangladesh High Commission, London, and late Mr Mizanur Rahman, Senior Vice President and Representative, Arab-Bangladesh Bank Ltd., London Representative Office, for their support.

Dedication:In fond memory of late Mizanur Rahman, a friend who died pre-maturely.

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