The Financial Express

Get policy right to develop non-apparel sectors

Economists tell IFC-PRI event

| Updated: January 20, 2020 11:25:31

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Leather and footwear, plastics and light engineering have been identified as the potential sectors, which can help diversify the country's export basket.

The sectors will also create greater access to the international markets for local products, according to a new report launched on Sunday.

The report highlighted the need for diversifying Bangladesh's export basket in order to sustain accelerated economic growth, increase investment opportunities, and create more jobs, particularly for women.

The International Finance Corporation of the World Bank launched the diagnostic report titled "Building Competitive Sectors for Export Diversification: Opportunities and Policy Priorities for Bangladesh" at a programme, jointly organised by the IFC and Policy Research Institute of Bangladesh in Dhaka.

Prime Minister's economic affairs advisor Dr Mashiur Rahman was present as the chief guest at the launching event, chaired by PRI chairman Dr Zaidi Sattar.

"Bangladesh's economy is moving forward at a stable pace," Dr Rahman said.

"The government has launched a concerted effort to diversify its exports and we sincerely hope this pioneering publication will help inform the policy discourse on sustainable export-led growth," he added.

Dr Rahman, however, recommended reviewing the the government's cash incentive programme, saying that 'golpata' and bricks exporters are receiving high percentage of cash support and they are destroying the Sundarbans and agricultural land respectively.

Commerce secretary Dr Mohammad Jafar Uddin said export is one pathway to leveraging the dynamic potentials of the global economy.

"We strongly believe that trade is a powerful engine of growth, not just for the world economy, but very much so for the developing economy of Bangladesh," he said.

To sustain the growth trajectory and reduce overdependence on any single item, IFC country manager Wendy Werner said Bangladesh needs to build a strong manufacturing ecosystem and develop new products, while paving the way for large-scale job creation and poverty reduction.

Bangladesh has "serious problem" with export concentration as the bulk of export income comes from the readymade garment sector, said PRI executive director Ahsan H Mansur.

He underlined the need for diversifying of both products and markets.

Echoing Mr Mansur, Dr Sattar suggested selecting potential sectors and the development of right policy to increase export earnings of non-apparel products.

He warned that most new products introduced by exporters were not sustained beyond the first year.

He, however, stressed the need for addressing export sustainability on a priority basis as it is a critical challenge for maintaining diversification.

The report identified the lack of environmental and social compliance, poor handling of raw materials, the shortage of skilled workforce, the delay in relocating tanneries, poor access to finance, technological constraints, limited availability of accessories and components, and limited product and markets as the major constraints on the leather sector.

It made short-medium-long term recommendations for policymakers on strategy development to integrate priority sectors with the global value chain.

Speaking at the programme, Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh president Saiful Islam said only three local leather and leather goods companies have the Leather Working Group (LWG) certification.

The export earnings target of $5.0billion from leather and leather goods by 2021 might not be possible, he warned.

Currently leather is the second-largest export sector after apparels and the sector's export is $1.02 billion.

The government should facilitate quick completion of the Central Effluent Treatment Plant of the Savar Tannery Industrial Estate for ensuring better prices of locally-made leather and leather goods.

"We must do something for value addition. Bangladesh has the comparative advantage of having own raw materials in the leather and leather goods sector," he said.

The country's export earnings grew negatively in the first half of current fiscal year, speakers said, suggesting diversification of both products and markets.

They also stressed the need for equal policy support to non-RMG sector as given to the RMG sector.

PRI research director MA Razzaque suggested that cement, steel and pharmaceutical exports should be boosted for the diversification of the export basket as these sectors have the potential to earn a lot.

Higher demand for some goods in the local markets can also encourage higher investment and higher export, he added.

Some $600 million worth of plastic goods are exported from Bangladesh in a year mainly as deemed export items like shipment with garment items as hanger and other goods, he said, adding plastic has good potential both for the local and international markets.

"It does not make any sense if the government deprives the companies, which manufacture both for the domestic and international markets, of bond facility. This is really a challenge for some sectors," he added.

The IFC publication compares Bangladesh's export performance to several comparator countries, including Vietnam, Cambodia, Malaysia, China and India, to identify where Bangladesh can improve.

It said economic factors like employment generation, women's employment, growth of small and medium enterprises, and foreign direct investment are needed in seven potential sectors for export diversification.


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