Export diversification: A way to sustainable overseas trade
Export is the lifeline of the economy of Bangladesh. The most important contributing sector is the exporting sector in the GDP.
But, overdependence on a few products or on a single product is not a wise decision. For sustenance of business, it needs diversification of both export products and export destinations.
In the perspective of export performance of Bangladesh, the country is still dependent on ready-made garment (RMG) sector with contribution of nearly 80 percent national export.
If the home textile and specialised woven and knitted fabrics are included with knitwear and woven garment items the contribution will reach nearly 85 percent.
So, it is clearly noticed that the country is dependent on apparel sector. If we analyse markets, we will see Bangladesh is dependent on few traditional markets including the US, the EU and Canada.
Of the total exports of the country 23 percent goes to the US, nearly 60 percent to the EU, 5 percent to Canada and 12 percent to the rest of the countries of the globe. So, it is clear that how much is concentrated of the country's exports on a few numbers of markets.
But, the hope is that, Bangladesh started exploring new export destinations like Japan, Russia, South Africa, Mexico, Brazil, Chile, Malaysia, New Zealand, India, South Korea, China and Australia. The export growth to those countries has been higher over the last few years.
Export diversification is a continuous process. The initiatives by both the government and private sector will help expanding both products and markets.
Looking for new markets with new products will help increase the export basket. Through export diversification it is possible to minimise the risks in business.
Export diversification is needed not only for minimising risks, but also to create employment with new skills of workers. Full utilization of natural resources is also possible through product diversification.
Ready-made garment (RMG) sector
RMG is the highest contributing sector in the export market. Bangladesh has a lot of scope to diversify its garment products.
Bangladesh mainly produces basic garment items, although the country has a scope to avail benefit of upscale market through diversification of garment products.
Bangladesh should focus more on high-end products while the country produces 30 percent high-end products of the total RMG exportable garment annually.
As the rate of high-end production is increasing some internationally renowned buyers are also coming to the country with higher volume.
Hugo Boss, Adidas, Puma, Tommy Hilfiger, G-Star, Diesel, Ralph Lauren, Calvin Klein, DKNY, Nike, Benetton and Mango have firm footing in Bangladesh now.
A few non-traditional products also have great potentials of export globally as having higher demand. Some sectors are given below.
Ship building industry
Ocean going ships or small vessels are an emerging sector for Bangladesh. Two or three companies have already exported ships to some countries like Germany, Denmark and Mozambique.
This industry is labour intensive ones, as a result, the unemployment problem could also be solved through increasing export of ships.
Globally, the annual market size of ship building industry is around $1600 billion annually, but the market size of small ships is $400 billion worldwide.
If Bangladesh can even avail single percent of small ships, the country will be able to export $4 billion in a year. Bangladesh exported small ships and vessels worth $45.95 million in 2011-12 fiscal, according to data from the state-owned Export Promotion Bureau (EPB).
Pharmaceuticals sector
Pharmaceuticals sector is the most promising one as the country is very strong in this industry. Currently, the $1billion pharmaceuticals can meet 97 percent demand for the local market.
The country has 270 registered pharmaceuticals companies across the country. Bangladesh exports pharmaceuticals items to more than 90 countries.
Brighter side of the industry is able to export its products to some developed countries like the UK, Germany, Singapore, France, Kenya, Nigeria, Sri Lanka and Vietnam. In 2011-2012 fiscal year, Bangladesh exported pharmaceuticals products worth $48.25 million.
Jute and jute goods
Exports of jute and jute goods are regaining its previous shine. After a long time, the jute and jute goods crossed one billion dollar mark export in last fiscal year.
Jute and jute goods became the second largest export items in the last fiscal year after the RMG. Jute and jute goods have higher demand particularly in Turkey and in some middle-east countries and African countries.
Light engineering sector
Light engineering products have immense potentials for export. The demand for light engineering products of Bangladesh is very high particularly in North-Eastern sides of India. Bangladesh can use this potential.
Cement
Cement sector is an emerging industry in Bangladesh. A good number of cement factories are in operation with the growing construction sector.
The local cement manufacturing factories can meet almost the entire demand for cement in Bangladesh. Moreover, some factories are exporting cement to neighbouring countries.
ICT sector
Since Bangladesh has huge skilled manpower at cheap cost the ICT industry can take this opportunity. Bangladesh has already started exporting ICT and IT enabled services to many countries.
We have already been recognized by globally renowned magazine GARTNER as one of the leading ICT and IT enabled services country.
Bangladesh exported ICT and IT enabled services worth $70.81 million in the last fiscal year. More than 150 companies are exporting ICT and IT enabled services to different countries.
Bangladesh has been exporting ICT and IT enabled services to Denmark, the US, Japan and other developed countries. The companies are also meeting demands for the domestic market.
Agricultural and agro-processed food industry
Agricultural and agro-processed food industries have become a major exporting item for Bangladesh now.
The demand for Bangladeshi vegetables, fruits and agro-processed food items is higher among the non-resident Bangladeshis residing in different countries.
Bangladeshi exporters can take this opportunity to grab more market share. The popularity of some agro-processed items like Papadum is higher among the European consumers.
A good number of people are now exporting Papadum from Dinajpur district to England and other European countries. Some farmers are exporting Agor Atar from Sylhet area at higher prices in the Middle-East countries.
Potentials for ready-to-eat food items are also very high globally. Bangladesh has been exporting vegetables to many countries like the US, the EU, Middle-East, Japan and Malaysia for years. The domestic value addition is very high in the business of agricultural and agro-processed food industries.
Leather and footwear sector
Bangladesh has already become a popular country for exporting quality leather, leather goods and footwear Bangladesh exported $335.51 million worth of leather goods and footwear in last fiscal year. Bangladesh is exporting leather, leather goods and footwear to Germany, England, The Netherlands, the US and other destinations. Having cheap labour and raw materials a good number of footwear and leather goods manufacturers are exporting quality products globally.
Bangladesh has great potentials in exports of ceramics, tiles and earthen tallies, fisheries and crabs, plastic goods and furniture as well.
It needs government and private sector joint initiatives to diversify the exportable products and market diversification. The government should incentivise the nascent industries so that these can become stronger and capable of exporting goods. The government should provide policy supports to the new export sectors. Both the government and private sectors should continue research on exportable products and markets for higher export from the country. Bangladesh exports nearly 695 to 192 countries, but more than 90 percent exports constitute only six to seven products. So the country has immense potentials in export, only needs goods initiatives.
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The writer is Senior Business Reporter, The Daily Star.
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