$1b export rise proves doomsayers wrong |
$8.58b earned in FY05 despite IMF, WB's post-MFA warning
Monjur Mahmud and Azfar Aziz
The country's exporters have put the post-MFA doomsayers to shame by fetching approximately $8.58 billion in fiscal year (FY) 2004-05 or nearly $1 billion more than $7.60 billion in FY04.
"Exports saw a tremendous surge last fiscal, fetching around one billion dollars more than the previous fiscal. It proved wrong the fear and predictions at home and abroad that our exports might stumble in the second half of FY05, suffering a major setback due to elimination of the MFA [Multi-fibre Agreement] quotas," said a top official of the commerce ministry.
According to Export Promotion Bureau (EPB), the total export earning in the first 11 months of FY05 was $7.785 billion. The EPB is yet to finish calculating June's export figure but estimates it to be more than $800 million, which puts the annual earning at $8.585 billion, slightly more than the targeted $8.565 billion.
"The target was considered ambitious as there had been fears that export would plummet in the changed global situation after the quota phase-out. But the sectors [textiles and apparel] have been performing beyond our expectation in the recent months," said an EPB official.
"We were prepared to see some setbacks in the second half but it didn't happen," he observed.
The MFA reached in 1974 as part of the General Agreement on Tariffs and Trade (Gatt) and its successor the Agreement on Textiles and Clothing had governed international trade in textiles and clothing through a system of import quotas set on a country-by-country basis till December 31, 2004.
As a huge 78 percent of the country's export earnings came from textiles and apparels and as Bangladesh's quota to export those to the US was about to go, trade experts and international agencies ahead of the open trade regime predicted a drastic export plummet.
Among the prominent doomsayers, International Monetary Fund (IMF) had forewarned of Bangladesh losing a quarter of its exports and a huge number of jobs in 2005 due to quota elimination. While World Trade Organisation (WTO) had forecast that Bangladesh might see up to 50 percent of its US market share go out of its pocket.
These warnings, especially as they came from the IMF and the WTO, were not taken lightly by any quarter at home or abroad.
The country's exports did feel the initial shock of the quota phase-out, with earnings from woven garments falling by 21 percent in January 2005 from those of January 2004.
But after that, the exports swung back to previous status and continued climbing up beyond.
One reason for the recovery is the fact that Bangladesh has become well known in the global apparel market as a reliable source of cheap garments. Unit cost of apparel in Bangladesh is the cheapest in the South Asian region. For Bangladesh the unit cost of shirts comes to 11 cents, which is 26 cents for India, 43 cents for Pakistan and 79 cents for Sri Lanka.
Its labour force is also 'skilled' for the low-end products, which comprise the bulk of its exports.
But the really important reason is that China was unable to immediately cash in on the open market system because of the special safeguard clause the US imposed on its exports.
"Our garment sales in the US market are now increasing because of the safeguard measures against Chinese exports," Annisul Huq, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The Daily Star.
In October 2004, producers from 51 developing countries backed a petition filed by the US textiles industry to limit US imports of Chinese textiles and apparels in nine categories, including socks, cotton and synthetic trousers, woollen trousers, cotton and synthetic knit shirts, and underwear.
Looking at the situation from another angle, Centre for Policy Dialogue Research Director Professor Mustafizur Rahman observed, "The recent depreciation of taka against US dollar will improve the market competitiveness of Bangladeshi products, which will help increase exports in the coming days."