No economy should count on one commodity

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Bangladesh has been experiencing robust growth in global integration over modern times. The factors which have contributed to the include both domestic policy changes (in the varieties of trade liberalisation, market-oriented reforms, removal of an anti-export bias and the pursuance of an export-oriented development strategy) and a demonstrated capacity to take benefit of emerging global market opportunities. As Bangladesh graduates right into a developing country with among the highest GDP growth rates on the globe at 7.9 percent (2018), the true challenge for the government is to maintain growth and tackle external shocks by taking up precautionary measurements, different development strategies and policies.

The primary drivers for economic growth for Bangladesh are export and remittance. Export may be the lifeline of the economy as the best contributing sector to GDP. However, our economy enjoys a concentrated export basket in comparison to other Asian markets. Recently, roughly 84 percent of Bangladesh's total exports rely upon the ready-made garments (RMG) sector. Fiscal and financial incentives and strengthening of institutional support services contributed drastically to removing an anti-export bias and provided a favourable environment for the growth of export-oriented industries. However, as the global market becomes increasingly competitive, searching the markets for other products ought to be given the best priority.

Bangladesh faces strong competition from established producers in countries like China, Turkey, Vietnam, Myanmar and India, furthermore to emerging manufacturing hubs in countries like Ethiopia and Cambodia. Diversifying exports beyond garments may be a remedy to Bangladesh's employment problem. Broadening comparative advantage in the global export market hasn't only generated economical growth but also ensured structural transformations, as observed in many Asian developing economies like Taiwan, South Korea and China. Bangladesh, like other developing economies, has made substantial progress as an exporter, nonetheless it has yet to diversify its export basket because of limited comparative advantage. You will find a huge prospect for RMG exports to improve many folds given the expected growth of global apparel demand later on. This however, raises some potential issues about the sustainability and volatility of export growth.

No economy should depend on one commodity. To sustain monetary growth within the existing global landscape, we need to improve competitiveness of varied other promising sectors to diversify the export basket. In line with the private industry and investment adviser to the Prime Minister, Salman F Rahman, exports of non-apparel items will dsicover an increase if the government gives the same level of attention and incentives it provides to the garment sector. But before entering a new market or a new country, or exporting services, it is vital to analyse which of the export items enjoy a comparative advantage along with the price offered, the degrees of demand and consumption, and political stability.

Export concentration may be the real issue for Bangladesh. For many decades before the emergence of RMG exports, jute and jute goods dominated the export sector, creating 70 percent in 1981. According to practitioners, as a way to improve economic growth, they advised the development of non-traditional exports, which became the best solution of export policy.

Increasing the portfolio for both product and market diversification is vital. Nonetheless, export diversification has proven to be a challenging task for Bangladesh. Actually, export concentration of RMG has increased even further. Bangladesh's export base is four times more concentrated in a few individual product lines compared to the average of a developing country. China, India, Indonesia, Malaysia, Sri Lanka, Thailand and Vietnam are Asian rivals for Bangladesh, most of whom have more expanded export structures.

Many assume that non-RMG exports cannot grow because of policy support given to this type of sector. However, a strategy of export diversification is usually to be complemented by an insurance plan of maximising overall exports rather than ceasing the policy assistance provided to the RMG sector.

In an optimistic scenario, if RMG exports expand at a rate of 10 percent per annum for the next a decade roughly and the non-RMG sector also moves at the same pace, Bangladesh's total exports in 2030 will be USD 100 billion. However, if RMG export growth will probably be five percent per annum, overall export performance will be less impressive. Therefore, RMG will have to play a pivotal role in rapid export expansion. Additionally it is important to identify whether promising opportunities exist for producing exports in services within the RMG sector. Strategies need to be constructed for export expansion with diversification to ease the adverse consequences faced by exporters because of poor performances in institutions, poor infrastructure, insufficient technological readiness, financial market developments, etc.

If a country specialises in mere a couple of commodities, any external shock for instance a sudden decline in either world demand or domestic supply, could have a huge influence on export revenue, and finally on the total amount of payments, which in turn might lead to undesirable macroeconomic consequences. However, if the export basket contains various commodities, then your probability of suffering a detrimental shock will be minimised, thus reducing the effect on export earnings and balance of payments. Export diversification will not only reduce export instability but also move the united states to a higher growth trajectory.

The recent US-China trade war could have helped Bangladesh to expand its product diversification, yet we're able to not reap the benefits of it because of various reasons-bulk investments on only five items, the Bangladesh taka being strong against US dollars and inefficiency in product development and marketing.

Bangladesh has grabbed a large share in RMG exports but according to experts, the government has to add more products to the country's export basket. Focusing on non-RMG sectors and expanding RMG product lines would ensure that not merely export volume, but also the number of export items, increase. Although the federal government has been providing cash incentive for different products to encourage traders to improve the export earnings of the country, this is inadequate to support local businesses in fighting global competitors.

Industries such as for example pharmaceuticals, leather, ICT, petroleum bi-products and chemical products are emerging as possible sectors and have resulted in a surge in exports, but on a tiny scale. However, further local and foreign investment can increase the situation. Other prospective sectors that the government can tap for export potential include the plastic industry, flower industry, tourism sector, cement industry, manpower industry etc.

As a least developed country, Bangladesh enjoys duty-free usage of the European Union and some other countries. However, once Bangladesh gets established as a developing nation, it will lose this preferential market access. To tackle the situation, diversification of the export basket is vital, along with identify potential sectors for exports along with value addition to products. Enhancing efficiency, an experienced workforce and government support will ensure the sustainability of financial growth of the united states, irrespective of any external shocks.
Source: https://www.thedailystar.net

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