Address high import tariffs to sustain export-led growth: Experts

Economists have warned that following Bangladesh's graduation from the least developed country (LDC) status, it will face significant challenges in sustaining the export-driven growth, unless it particularly addresses the high import tariffs.

While the potential benefits of import liberalisation are clear, they cautioned that this should not happen before strengthening the nation's institutional capacity.

As Bangladesh approaches its LDC graduation, they agree that a strategic overhaul, coupled with sound policy reforms and a stronger institutional framework, is essential for the country's continued economic progress.

Their observations came during a discussion titled "Conference on Recommendations by the Taskforce on Reshaping the Economy" and organised by the Centre for Policy Dialogue (CPD) on Monday.

CPD's Distinguished Fellow Dr Mustafizur Rahman highlighted the contrasting experiences of import liberalisation in Singapore and Haiti as examples.

"Singapore, with its strong export and institutional capacity, has benefitted from liberal imports, while Haiti's lack of such capacity has led to economic challenges," he explained.

He emphasised that Bangladesh still faces significant institutional capacity gaps, particularly in areas of revenue collection, policy formulation, and implementation.

"Without addressing these weaknesses, import liberalisation could pose risks to the economy," Dr Mustafizur warned.

He also noted that while average import tariffs in the US and Europe are below 4 per cent, they still impose tariffs ranging from 11-18 per cent on apparel imports.

Since Bangladesh primarily exports lower-value products, he argued that the country needs to strengthen its export strategy rather than rely on tariff reductions from foreign markets.

Dr Selim Raihan, executive director of the South Asian Network on Economic Modelling (SANEM), pointed out that Bangladesh lacks a coordinated industrialisation strategy and has struggled to attract significant investment.

He noted that the country's fragmented policies have hindered its ability to capitalise on its economic potential.

Former commerce minister Amir Khasru Mahmud Chowdhury said Bangladesh must recalibrate its economy. He noted that the government has pursued policies focused solely on revenue generation, often at the expense of long-term growth.

"Revenue should come from a developed private sector and large-scale businesses, not just from VAT and regulatory duties," he said.

He also emphasised that without liberalising imports, export incentives would only push exports so far, thus limiting future growth.

Commerce Adviser Sk Bashir Uddin outlined the challenges of Bangladesh's macroeconomy, including corruption in the banking sector and money laundering during the previous government's term.

He stressed the need for continued improvements in energy supply, labour productivity, and logistics to strengthen the economy and move forward.

Dr Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), expressed concern about the impacts of the least developed country (LDC) graduation on the readymade garment sector, which has long benefitted from duty-free access to global markets.

"After 2027, this benefit will no longer apply. So it is urgent to negotiate with the European Union to maintain these privileges," he said.

He also criticised Bangladesh's failure to establish bilateral free trade agreements, calling for immediate action to sign a free trade agreement (FTA) with Japan.

Dr Razzaque noted that 75 per cent of Bangladesh's exports currently depend on LDC benefits, which will no longer be available after graduation, while subsidies for exports will also end.

He emphasised the need for reforms in trade policy, noting that since the 1990s, there have been no significant changes in that domain.

"Urgent reforms and actions are needed to navigate the challenges ahead," he added.

Foreign Investors' Chamber of Commerce and Industry President Mohammad Zaved Akhtar, who is also the Unilever Bangladesh chairman and managing director, highlighted a key challenge for investors, citing Unilever's global ambition to achieve net-zero emissions.

"However, the current energy mix in Bangladesh makes this goal unachievable, forcing companies like ours to find alternative solutions, which increases our costs," he said.

He also pointed out that while Bangladesh faces these challenges, countries with government support to address similar issues are giving their industries a competitive edge.

Zaved noted that even a struggling economy like Myanmar remains attractive to multinational companies due to its access to the Association of Southeast Asian Nations (ASEAN) market.

Abdullah Hil Rakib, managing director of Team Group, concluded the discussion by stressing the importance of a comprehensive strategy that aligns Bangladesh's export goals with global market demands.

"Top exporters like our company will follow such a roadmap, but the government must create the conditions for private sector investment to thrive," he said.

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