Bangladesh is experiencing an era of growth fuelled by strong customer demand at home and increase in exports. Time and time again the country has proved itself capable of facing uncertainties and adapting to changing market conditions, which is essential for survival in the global arena. The manufacturing sector which is heavily reliant on the export of ready-made, garments (RMG), has had to weather several storms. The RMG sector has come a long way since the expiry MFA (Multifiber Arrangement) and more recently the Rana Plaza tragedy and that too with flying colours. The lapse of quotas proved to be a boon for the country and the Rana Plaza tragedy played a pivotal role in the shift of the RMG sector to incorporate sustainable growth and has paved the way for the establishment of world class factories which are now a norm in the industry.
However, in order to sustain the level of economic growth that the country is experiencing, it is vital to rectify this situation of single-product dependency. Eighty-six per cent of the export earnings of Bangladesh comes from the RMG sector with the value of US$46 billion. In order to protect itself from market volatility as well as high risk exposure associated with single-product dependency, it is important for the country to nurture and develop other industrial sectors which have growth potentials. A number of industrial sectors have undergone significant expansion and development over the last decade and should be earmarked for special support to facilitate further growth. These sectors are: pharmaceuticals, leather, agro-based products, ICT firms and bicycle manufacturing.
The pharmaceuticals sector has had a phenomenal growth over the last decade. Bangladesh is the only least developed country (LDC) in the world to meet 97 per cent of its local demand for pharmaceutical products with a market size of Tk 200 billion. Bangladeshi pharmaceutical (medicinal) products are being exported to 144 countries and have generated over $103.46 million in 2016-2017 fiscal year. Fuelled by strong investment in new technology, existence of state-of-the art factories and availability of skilled management workforce, the industry is poised to become a significant hub for high quality and low-cost generic medicine manufacturing.
The ICT (information and communications technology) sector is an integral part of the government's vision 2021, keeping in line with the initiative of 'Digital Bangladesh'. According to a recent survey conducted by UNCTAD (United Nations Conference on Trade and Development), Bangladesh's ICT sector grows 40 per cent annually. In the fiscal year 2016-17, the ICT sector of the country registered export earnings of US $0.8 billion and generated revenues of US$1.54 billion from the local market. The ICT sector has generated three hundred thousand jobs so far and given the demography of the country, it has the potential to generate considerable number of jobs in the future.
Last but not least, the leather sector in Bangladesh is the currently the second largest export earner for the country. The leather sector earns US$1.21 billion and produces high value-added products as considerable amount of raw material is available locally. Bangladesh ranks 20th in footwear exports and has the potential to scale up the export volume especially with the opportunities arising from the US-China trade dispute. The sector has the potential to become a multi-billion-dollar industry provided that the environmental issues pertaining the shifting of the tanneries to the allocated area is addressed and rectified for the long term. This sector has significant employment prospects as it is highly labour-intensive, and provides an opportunity for image building for the country as the products are high valued.
Considering the export-led economic prosperity that the country is enjoying, the timing is crucial to focus on export diversification. Moreover, internationally, the trade climate is just right for Bangladesh to become a focal point for FDI (foreign direct investment) as a number of manufacturers are looking for relocation. It is crucially important to provide the right kind of policy support and provide a fertile investment climate in order to attract potential investors to invest in these emerging sectors. Unless a significant strategy towards product diversification is undertaken, the country will remain susceptible to volatility and uncertainty pertaining to single-product dependency which is disastrous for a growing economy. Equal policy support for all emerging export sectors, and a favourable business environment which encourages investment and joint ventures, will enable Bangladesh to achieve more robust and diversified export earnings which will enable the country to achieve long-term, sustainable economic growth.
Amrita Makin Islam is Deputy Managing Director of Picard Bangladesh Ltd.